<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC 20549

                                      FORM 10-K

/X/      Annual report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934
         For the fiscal year ended December 31, 1997, or
/ /      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934
         For the transition period from ________ to _________.

                             COMMISSION FILE NUMBER
                                     0-24516

                         HEFTEL BROADCASTING CORPORATION
             (Exact name of registrant as specified in its charter)

        Delaware                                        99-0113417
(State of Incorporation)                   (I.R.S. Employer Identification No.)

                         100 Crescent Court, Suite 1777
                               Dallas, Texas 75201
                            Telephone (214) 855-8882
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES  X   NO
                                       -----    -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ___

On March 20, 1998, the aggregate market price of the Class A Common Stock
held by non-affiliates of the Company was approximately $1,330.4 million.
(For purposes hereof, directors, executive officers and 10% or greater
shareholders have been deemed affiliates).

On March 20, 1998, there were 35,160,497 outstanding shares of Class A Common
Stock, $.001 par value per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1998 Annual Meeting, expected to be
filed within 120 days from the Company's fiscal year-end, are incorporated by
reference into Part III.

                                       1

<PAGE>

                         HEFTEL BROADCASTING CORPORATION
                               INDEX TO FORM 10-K

<TABLE>
                                                                           Page
                                                                         Number
                                                                         ------
<S>                                                                      <C>
PART I.

Item 1.  Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

Item 2.  Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Item 3.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 18

Item 4.  Submission of Matters to a Vote of Security Holders  . . . . . . . 19

PART II.

Item 5.  Market for Registrant's Class A Common Stock and Related
         Stockholder Matters  . . . . . . . . . . . . . . . . . . . . . . . 20

Item 6.  Selected Financial Data  . . . . . . . . . . . . . . . . . . . . . 21

Item 7.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations  . . . . . . . . . . . . . 22

Item 8.  Financial Statements and Supplementary Data  . . . . . . . . . . . 27

Item 9.  Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure  . . . . . . . . . . . . . 50

PART III.

Item 10.  Directors and Executive Officers of the Registrant  . . . . . . . 51

Item 11.  Executive Compensation  . . . . . . . . . . . . . . . . . . . . . 51

Item 12.  Security Ownership of Certain Beneficial Owners and Management  . 51

Item 13.  Certain Relationships and Related Transactions  . . . . . . . . . 51

PART IV.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>

                                       2

<PAGE>

                                        PART I.
ITEM 1.  BUSINESS

GENERAL

     Heftel Broadcasting Corporation (the "Company") is the largest Spanish
language radio broadcasting company in the United States and currently owns
or programs 36 radio stations in 11 markets.  The Company's stations are
located in ten of the top fifteen Hispanic markets in the United States,
including Los Angeles, New York, Miami, San Francisco/San Jose, Chicago,
Houston, San Antonio, McAllen/Brownsville/Harlingen, Dallas/Fort Worth and
El Paso.

     The Company's strategy is to own and program top performing Spanish
language radio stations, principally in the fifteen largest Spanish language
radio markets in the United States.  The top fifteen Hispanic markets account
for approximately 21.6 million Hispanics, representing approximately 71.0% of
the total Hispanic population in the United States.  The Company currently has
the leading Spanish language radio station, as measured by audience share, in
eight of the eleven markets in which the Company operates.  The Company intends
to acquire or develop additional Spanish language radio stations in the leading
Hispanic markets.

     The Company frequently evaluates strategic opportunities both within and
outside its existing line of business which closely relate to serving the
Hispanic market, including opportunities outside of the United States.  The
Company expects from time to time to pursue additional acquisitions and may
decide to dispose of certain businesses.  Such acquisitions or dispositions
could be material.

     The following table sets forth certain information regarding the Company's
radio stations owned or programmed as of December 31, 1997:

<TABLE>
     Ranking of                                                          No. of
     Market by                                                          Stations
     Hispanic                                                         --------------
    Population (1)                    Market                           AM      FM
--------------------------------------------------------------------- ------  ------
    <C>              <C>                                              <C>     <C>
        1            Los Angeles                                        1       2
        2            New York                                           2       0
        3            Miami                                              2       2
        4            San Francisco/San Jose                             0       2
        5            Chicago                                            2       1
        6            Houston                                            2       4
        7            San Antonio                                        2       2
        8            McAllen/Brownsville/Harlingen                      1       2
        9            Dallas/Fort Worth                                  2       3
       13            El Paso                                            2       1
       30            Las Vegas                                          1       0
                                                                     ----    ----
                        Total                                          17      19
</TABLE>

(1)  Ranking of the principal radio market served by the Company's station(s)
among all U.S. radio markets by Hispanic population as reported by Strategy
Research Corporation - 1998 U.S. Hispanic Market Study.

                                       3

<PAGE>

     The Company believes Spanish language radio broadcasting has significant
growth potential for the following reasons:

-    THE U.S. HISPANIC POPULATION IS GROWING RAPIDLY.  The U.S. Hispanic
     population is expected to grow from an estimated 27.2 million
     (approximately 10.3% of the total United States population) at the end of
     1995 to an estimated 31.4 million (approximately 11.4% of the total United
     States population) by the year 2000.  These estimates imply a growth rate
     of approximately three times the expected growth rate for the total United
     States population during the same period.

-    THE U.S. HISPANIC POPULATION IS CONCENTRATED IN 15 MARKETS.  Approximately
     71.0%, or approximately 21.6 million, of all U.S. Hispanics live in these
     markets.  The U.S. Hispanic population in the top fifteen markets, as a
     percentage of the total population in such markets, has increased from
     approximately 17.0% in 1980 to approximately 26.0% in 1998.  The percentage
     concentration of Hispanics in the top fifteen markets is more than twice
     the percentage of Hispanics in the U.S. as a whole.  Since 1980, the
     Hispanic population growth has represented approximately 51.1% of the total
     population growth in the top fifteen Hispanic markets.

-    U.S. HISPANICS REPRESENT AN ATTRACTIVE CONSUMER MARKET.  Advertisers target
     Hispanics because, on average, they are younger, their households are
     larger in size and they routinely spend a greater percentage of their
     income on many different kinds of goods and services than do non-Hispanic
     households.  The Company believes that as a result advertisers have
     substantially increased their use of Spanish media.  Total Spanish language
     advertising revenues have increased from approximately $721.5 million in
     1993 to an estimated $1.4 billion in 1997.  This represents a compound
     annual growth rate of approximately 18.0%, which is substantially greater
     than the estimated growth rate for total advertising for the comparable
     period.


     The Company was incorporated under the laws of the State of Delaware in
1992.  The Company's principal executive offices are located at 100 Crescent
Court, Suite 1777, Dallas, Texas 75201 and the telephone number is (214)
855-8882.

RECENT DEVELOPMENTS

     KKPN-FM ACQUISITION.  On March 25, 1998, the Company announced that it had
entered into an agreement with Capstar Broadcasting Corporation to acquire the
assets of radio station KKPN-FM, serving the Houston, Texas market, for $54.0
million in cash (the "KKPN-FM Acquisition"). Following the consummation of the
KKPN-FM Acquisition, the Company plans to convert the format to a Spanish
language format.  The Company expects to incur operating losses associated with
the launch of KKPN-FM in 1998, and anticipates financing the KKPN-FM Acquisition
out of the proceeds of its recent equity offering.

     The KKPN-FM Acquisition is subject to the approval of the Federal
Communications Commission (the "FCC") and the approval of certain federal
antitrust regulatory authorities. In addition to obtaining all required
governmental approvals, the KKPN-FM Acquisition is subject to numerous other
conditions and there can be no assurance that the KKPN-FM Acquisition will be
consummated in a timely manner or on the terms described herein, if at all.

                                       4

<PAGE>

      WNWK-FM ACQUISITION.  On December 1, 1997, the Company announced that it
entered into an agreement with Multicultural Radio Broadcasting, Inc. to
exchange WPAT-AM, the Company's AM station serving the New York City market, and
$115.0 million in cash for the assets of WNWK-FM, an FM station also serving the
New York City market (the "WNWK-FM Acquisition"). WNWK-FM broadcasts on 105.9
MHz from a transmitter site located on the Empire State Building. Following the
consummation of the WNWK-FM Acquisition, the Company plans to convert the
station's programming to a Spanish language format. The Company expects the
station to incur operating losses in 1998 associated with the launch of the
station.

     The WNWK-FM Acquisition is subject to the approval of the Federal
Communications Commission (the "FCC") and other closing conditions. Application
was made to the FCC on December 2, 1997, seeking the approval of the WNWK-FM
Acquisition.  A Petition To Deny the WNWK-FM assignment application (the
"Petition"), dated January 10, 1998, was filed with the FCC.  The Petition
raised, among other matters, programming objections, technical violations, and
multiple-ownership rule concerns.  Based upon the information which is currently
available, the Company does not believe that the filing of the Petition will
lead the FCC to disapprove the WNWK-FM Acquisition.  The FCC staff has denied
the Petition and has granted both the WNWK-FM and the WPAT-AM assignment
applications.  The petitioner, however, has filed for review with the FCC and
the U.S. Court of Appeals for the District of Columbia Circuit and final FCC
approval of the assignment applications has not been granted.  There can be no
assurance that the closing of the WNWK-FM Acquisition will not be delayed
pending the outcome of such appeal or grant of final approval of the assignment
applications by the FCC. The WNWK-FM Acquisition also is subject to the
expiration or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended (the "HSR
Act"). On December 29, 1997, the Company filed the required information and
materials with the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and the Federal Trade Commission (the "FTC").  In
early January, the Company was informed that early termination of the applicable
waiting period under the HSR Act had been granted.  In addition to obtaining all
required governmental approvals, the WNWK-FM Acquisition is subject to numerous
other conditions, including obtaining consents from various third parties, and
there can be no assurance that the WNWK-FM Acquisition will be consummated in a
timely manner or on the terms described above, if at all.

     THE TICHENOR MERGER.  On February 14, 1997, the Company completed its
acquisition of Tichenor Media System, Inc. ("Tichenor"), a national radio
broadcasting company engaged in the business of acquiring, developing and
programming Spanish language radio stations (the "Tichenor Merger"). At the time
of the Tichenor Merger, Tichenor owned or programmed 20 radio stations in six of
the ten largest Hispanic markets in the United States. Pursuant to the Tichenor
Merger, the former Tichenor shareholders and warrant holders received an
aggregate of 11,379,756 shares of Common Stock. Because of the FCC's multiple
ownership rules and related policies (see "Regulation of Company's Business"),
Clear Channel Communications, Inc. (together with its subsidiaries, "Clear
Channel"), which prior to the Tichenor Merger owned approximately 63% of the
outstanding Class A Common Stock, converted all of its shares of Class A Common
Stock and common stock of Tichenor into 14,156,470 shares of Class B Common
Stock, which then represented approximately 32% of all outstanding Class A and
Class B Common Stock (collectively, the "Common Stock"). See "--Control by
Certain Shareholders--Relationship Between the Company and Clear Channel" for a
further description of the voting rights of the Class B Common Stock.  At the
time of the Tichenor Merger, Tichenor had approximately $72.0 million of
long-term debt, which was subsequently refinanced by the Company. In addition,
all of Tichenor's outstanding shares of 14% Senior Redeemable Cumulative
Preferred Stock were redeemed for approximately $3.4 million.


                                       5

<PAGE>

     KSCA OPTION.  On January 2, 1997, the Company acquired an option to
purchase all of the assets used in connection with the operation of KSCA-FM,
Glendale, California (the "KSCA Option"). In connection with the acquisition
of the KSCA Option, the Company entered into the KSCA Time Brokerage
Agreement, pursuant to which the Company began providing programming to KSCA
on February 5, 1997 (the "KSCA Time Brokerage Agreement"). The KSCA Option,
which is exercisable only upon the death of Gene Autry, the indirect
principal stockholder of the seller, had an initial term which expired on
December 31, 1997. The KSCA Option is renewable for additional one-year terms
during the lifetime of Mr. Autry upon payment by the Company of $3.0 million
on or before the then scheduled expiration date of the KSCA Option.  On
February 4, 1997, after receiving notice of early termination of the waiting
period under the HSR Act, the Company made an initial payment of $10.0
million in order to continue the KSCA Option, as required under the option
agreement.  On December 29, 1997, the Company renewed the KSCA Option through
December 31, 1998. All such payments will be credited against the cash to be
paid at closing for the KSCA assets if the KSCA Option is exercised.

     The purchase price for the KSCA assets is the greater of (a) $112.5 million
or (b) the sum of (i) $105.0 million, plus (ii) an amount equal to $13,698.63
per day during the term of the KSCA Time Brokerage Agreement, which daily amount
is subject to reduction if the Company is unable to broadcast its programming on
KSCA under the KSCA Time Brokerage Agreement. Consummation of the purchase will
be subject to a number of conditions, including approval by the FCC of the
transfer of the FCC licenses for the station to the Company.  There can be no
assurance that the Company will exercise its option or that all the conditions
will be met.

SALES OF CLASS A COMMON STOCK

     On February 10, 1997, the Company completed the issuance and sale of
4,830,000 (pre-split) shares of Class A Common Stock in an underwritten
public offering for a total of $176.4 million in proceeds (the "February 1997
Offering").  On January 22, 1998, the Company completed the issuance and sale
of 5,175,000 shares of Class A Common Stock in an underwritten public
offering for a total of $205.3 million in proceeds (the "1998 Offering").
The proceeds from the February 1997 Offering were used to repay borrowings
outstanding under the Company's credit facility.  The proceeds from the 1998
Offering were used to repay borrowings under the Company's credit facility,
and will be used to finance future acquisitions and for general corporate
purposes.

SPANISH LANGUAGE RADIO INDUSTRY

     Due to differences in origin, Hispanics are not a homogeneous group. The
music, culture, customs and Spanish dialects vary from one radio market to
another. Consequently, the Company programs its stations in a manner responsive
to the local preferences of a target demographic audience in each of the markets
it serves. A well-researched mix of music and on-air programming at an
individual station can attract a wide audience targeted by Spanish language
advertisers. Programming is continuously monitored to maintain its quality and
relevance to the target audience. Most music formats are primarily variations of
Regional Mexican, Tropical, Tejano and Contemporary music styles. The local
program director will select music from the various music styles that best
reflect the music preferences of the local Hispanic audiences. A brief
description of the Company's programming follows:

PROGRAMMING

     REGIONAL MEXICAN.  Regional Mexican consists of various types of music
played in different regions of Mexico. Ranchera music, originating in Jalisco,
Mexico, is a traditional folkloric sound commonly referred to as Mariachi music.
Mariachi music features acoustical instruments and is considered the music
indigenous to Mexicans who have lived in the country towns. Nortena means
northern, and is representative of Northern Mexico. Featuring an accordion,
Nortena has a Polka sound


                                       6

<PAGE>

with a distinct Mexican flavor. Banda is a regional format from the state of
Sinaloa, Mexico and is popular in California. Banda resembles up-tempo
marching band music with synthesizers. Regional Mexican also includes Cumbia
music, which originates in Colombia.

     TROPICAL.  The Tropical format primarily consists of Salsa, Merengue, and
Cumbia music. Salsa is dance music combining Latin Caribbean rhythms with jazz.
Salsa symbolizes music from Puerto Rico, Cuba, and the Dominican Republic and is
popular with Hispanics living in New York, Miami and Chicago. Merengue music is
up-tempo dance music originating in the Dominican Republic.

      TEJANO.  Tejano music originated in Texas and is based on Mexican themes
but is indigenous to Texas. It is a combination of contemporary rock, Ranchera,
and country music. The lyrics are primarily sung in Spanish. The on-air talent
speak in Spanish and English.

     CONTEMPORARY.  The Contemporary format includes pop, Latin rock, and
ballads. This format is similar to English adult contemporary and contemporary
hit radio stations.

     FULL SERVICE.  The Full Service format includes all the traditional radio
services: music, news, sports, traffic reports, special information programs and
weather.

     NEWS/TALK.  News includes local, national, international reports and
weather, business, traffic and sports. Talk includes commentary, analysis,
discussion, interviews, call-ins and information shows.


                                       7

<PAGE>

 COMPANY'S STATIONS

     The following table sets forth information regarding the radio stations
owned or programmed by the Company as of December 31, 1997:
<TABLE>
<CAPTION>
  RANKING OF
   MARKET BY                                                                                       PRIMARY
   HISPANIC                                                                                      DEMOGRAPHIC
  POPULATION               MARKET(1)             STATION             STATION FORMAT(2)             TARGET
  -----------              ---------             -------             -----------------           -----------
  <S>                      <C>                   <C>                 <C>                         <C>
       1       Los Angeles                       KLVE-FM               Contemporary               A 25-54
                                                 KTNQ-AM                 News/Talk                A 25-54
                                                 KSCA-FM(3)            Regional Mexican           A 25-54

       2       New York                          WADO-AM                 News/Talk                 A 25+
                                                 WPAT-AM(4)(5)           Brokered                   n/a

       3       Miami                             WAMR-FM               Contemporary               A 25-54
                                                 WRTO-FM                  Tropical                A 18-34
                                                 WAQI-AM                 News/Talk                 A 35+
                                                 WQBA-AM               News/Talk/Sports            A 35+

       4       San Francisco/San Jose            KSOL-FM               Regional Mexican           A 25-54
                                                 KZOL-FM               Regional Mexican           A 25-54

       5       Chicago                           WOJO-FM               Regional Mexican           A 25-54
                                                 WIND-AM                 Full Service              A 35+
                                                 WLXX-AM                   Tropical               A 18-49

       6       Houston(6)                        KLTN-FM               Regional Mexican           A 18-49
                                                 KLTO-FM               Regional Mexican           A 18-49
                                                 KLTP-FM               Regional Mexican           A 18-49
                                                 KOVE-FM                 Contemporary             A 25-54
                                                 KLAT-AM                 Full Service             A 25-54
                                                 KRTX-AM                 Contemporary             A 25-54

       7       San Antonio                       KXTN-FM                    Tejano                A 25-54
                                                 KPOZ-AM(4)                Brokered                 n/a
                                                 KROM-FM               Regional Mexican           A 25-54
                                                 KCOR-AM               Regional Mexican            A 35+

       8       McAllen/Brownsville/Harlingen     KGBT-FM               Regional Mexican           A 25-54
                                                 KGBT-AM               Regional Mexican           A 25-54
                                                 KIWW-FM                    Tejano                A 25-24

       9       Dallas/Fort Worth                 KESS-AM                 Full Service              A 18+
                                                 KHCK-FM                    Tejano                A 18-49
                                                 KMRT-FM                 Contemporary             A 18-49
                                                 KDXX-FM                    Tejano                A 18-49
                                                 KDXX-AM                 Contemporary             A 18-49

      13       El Paso                           KBNA-FM               Regional Mexican           A 25-54
                                                 KBNA-AM               Regional Mexican           A 25-54
                                                 KAMA-AM                    Tejano                A 25-54

      30       Las Vegas                         KLSQ-AM               Regional Mexican           A 18-49
</TABLE>


                                       8

<PAGE>

(1)  Actual city of license may differ from the metropolitan market served.
(2)  See "--Programming."
(3)  The Company operates this station pursuant to the KSCA Time Brokerage
     Agreement.
(4)  The Company sells airtime on this station to third parties for broadcast of
     specialty programming.
(5)  On December 1, 1997, the Company announced the WNWK-FM Acquisition,
     pursuant to which the Company will exchange WPAT-AM and pay $115.0 million
     in cash for the assets of WNWK-FM, an FM station serving the New York
     market.  See "--Recent Developments" above for a discussion of the WNWK-FM
     Acquisition.
(6)  On March 25, 1998, the Company announced the KKPN-FM Acquisition, pursuant
     to which the Company will pay $54.0 million in cash for the assets of
     KKPN-FM, an FM station serving the Houston market.  See "--Recent
     Developments" for a discussion of the KKPN-FM Acquisition, including
     conditions to closing.

     The following table sets forth selected information with regard to Company
owned radio stations:
<TABLE>
<CAPTION>
                                                      LICENSE
                                          DATE      EXPIRATION          BROADCAST
            STATION/LOCATION             ACQUIRED      DATE             FREQUENCY
            ----------------            ---------   -----------        ----------
 <S>                                    <C>         <C>                <C>
 KTNQ-AM, Los Angeles, CA                 10/85      12/1/97(1)         1020 kHz
 KLVE-FM, Los Angeles, CA                 10/85      12/1/05           107.5 MHz
 WADO-AM, New York, NY                     8/94       6/1/98(1)         1280 kHz
 WPAT-AM, New York, NY                     3/96       6/1/98(1)          930 kHz
 WAQI-AM, Miami, FL                       10/89       2/1/03             710 kHz
 WRTO-FM, Miami, FL                       10/89       2/1/03            98.3 MHz
 WQBA-AM, Miami, FL                        8/94       2/1/03            1140 kHz
 WAMR-FM, Miami, FL                        8/94       2/1/03           107.5 MHz
 KSOL-FM, San Francisco/San Jose, CA       2/97      12/1/05            98.9 MHz
 KZOL-FM, San Francisco/San Jose, CA       2/97      12/1/05            99.1 MHz
 WOJO-FM, Chicago, IL                      2/97      12/1/04           105.1 MHz
 WIND-AM, Chicago, IL                      2/97      12/1/04             560 kHz
 WLXX-AM, Chicago, IL                      7/95      12/1/04            1200 kHz
 KLTN-FM, Houston, TX                      2/97       8/1/05            93.3 MHz
 KLTO-FM, Houston, TX                      2/97       8/1/05           104.9 MHz
 KLTP-FM, Houston, TX                      2/97       8/1/05           104.9 MHz
 KOVE-FM, Houston, TX                      2/97       8/1/05           100.7 MHz
 KLAT-AM, Houston, TX                      2/97       8/1/05            1010 kHz
 KRTX-AM, Houston, TX                      2/97       8/1/05             980 kHz
 KXTN-FM, San Antonio, TX                  2/97       8/1/05           107.5 MHz
 KPOZ-AM, San Antonio, TX                  2/97       8/1/05            1310 kHz
 KROM-FM, San Antonio, TX                  2/97       8/1/05            92.9 MHz
 KCOR-AM, San Antonio, TX                  2/97       8/1/05            1350 kHz
 KGBT-FM, McAllen/Brownsville/
   Harlingen, TX                           2/97       8/1/05            98.5 MHz
 KGBT-AM, McAllen/Brownsville/
   Harlingen, TX                           2/97       8/1/05            1530 kHz
 KIWW-FM, McAllen/Brownsville/
   Harlingen, TX                           2/97       8/1/05            96.1 MHz

                                       9

<PAGE>
                                                      LICENSE
                                          DATE      EXPIRATION          BROADCAST
            STATION/LOCATION             ACQUIRED      DATE             FREQUENCY
            ----------------            ---------   -----------        ----------
 KESS-AM, Dallas/Ft. Worth, TX            8/94        8/1/05            1270 kHz
 KDXX-AM, Dallas/Ft. Worth, TX           12/94        8/1/05            1480 kHz
 KDXX-FM, Corsicana, TX                   4/95        8/1/05           107.9 MHz
 KMRT-FM, Dallas/Ft. Worth, TX            6/95        8/1/05           106.7 MHz
 KHCK-FM, Dallas/Ft. Worth, TX            7/95        8/1/05            99.1 MHz
 KBNA-FM, El Paso, TX                     2/97        8/1/05            97.5 MHz
 KBNA-AM, El Paso, TX                     2/97        8/1/05             920 kHz
 KAMA-AM, El Paso, TX                     2/97        8/1/05             750 kHz
 KLSQ-AM, Las Vegas, NV                   8/95       10/1/97(1)          870 kHz
</TABLE>
(1)  An application for license renewal is currently pending with the FCC.
     Regulations permit continuing operation of the station during the period
     the renewal application is pending.

     Statistical information contained herein regarding the radio industry,
population, consumer spending and advertising expenditures are taken from the
Arbitron Company 1995-1997 radio metro ratings and national data base (the
Company's station rankings were based upon the Arbitron Adults 25-54 category
1997 Fall Book); 1990 U.S. Census; Strategy Research Corporation--1996 and
1998 U.S. Hispanic Market Study; Duncan's Radio Market Guide (1997 Edition);
Hispanic Business (December 1993-1997); The M Street Journal; and Katz Hispanic
Media.

COMPETITION

     Broadcasting is a highly competitive business. The Company's radio stations
compete for audiences and advertising revenues with other radio stations of all
formats, as well as with other media, such as newspapers, magazines, television,
cable television, outdoor advertising and direct mail, within their respective
markets. Audience ratings and market shares are subject to change and any
adverse change in a particular market would have a material adverse effect on
the revenue of stations located in that market. Future operations are further
subject to many variables which could have an adverse effect upon the Company's
financial performance. These variables include economic conditions, both general
and relative to the broadcasting industry; shifts in population and other
demographics; the level of competition for advertising dollars with other radio
stations and other entertainment and communications media; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies, including the FCC, the FTC, and the Antitrust
Division. Although the Company believes that each of its stations is or will be
able to compete effectively in its respective market, there can be no assurance
that any such station will be able to maintain or increase its current audience
ratings and advertising revenues. Radio stations can quickly change formats. Any
radio station could shift its format to duplicate the format of any of the
Company's stations. If a station converted its programming to a format similar
to that of a station owned by the Company, the ratings and broadcast cash flow
of the Company's station could be adversely affected.

REGULATION OF THE COMPANY'S BUSINESS

EXISTING REGULATION AND LEGISLATION.

     Radio broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act prohibits the operation of a

                                      10

<PAGE>

radio broadcasting station except under a license issued by the FCC and
empowers the FCC, among other things, to issue, renew, revoke and modify
broadcasting licenses; assign frequency bands; determine stations'
frequencies, locations and power; regulate the equipment used by stations;
adopt other regulations to carry out the provisions of the Communications
Act; impose penalties for violation of such regulations; and impose fees for
processing applications and other administrative functions. The
Communications Act prohibits the assignment of a license or the transfer of
control of a licensee without prior approval of the FCC.

     The Telecommunications Act of 1996 (the "1996 Act") represents the most
comprehensive overhaul of the country's telecommunications laws in more than
60 years. The 1996 Act significantly changes both the broadcast ownership
rules and the process for renewal of broadcast station licenses. The 1996 Act
also relaxes local radio ownership restrictions. The FCC has already
implemented some of these changes through Commission Orders. The 1996 Act
establishes a "two-step" renewal process that limits the FCC's discretion to
consider applications filed in competition with an incumbent's renewal
application. Additionally, the 1996 Act substantially liberalizes the
broadcast ownership rules, eliminating the national radio limits.

     This new regulatory flexibility has engendered aggressive local, regional,
and/or national acquisition campaigns. Removal of previous station ownership
limitations on leading incumbents (i.e., existing networks and major station
groups) has increased sharply the competition for, and the prices of, attractive
stations.

MULTIPLE OWNERSHIP RESTRICTIONS.

     The FCC has promulgated rules that, among other things, limit the ability
of individuals and entities to own or have an official position or ownership
interest above a certain level (an "attributable" interest, as defined more
fully below) in broadcast stations, as well as other specified mass media
entities. Prior to the passage of the 1996 Act, these rules included limits on
the number of radio stations that could be owned on both a national and local
basis. On a national basis, the rules generally precluded any individual or
entity from having an attributable interest in more than 20 AM radio stations
and 20 FM radio stations.

     The 1996 Act substantially relaxed the radio ownership limitations. The FCC
began its implementation of the 1996 Act with several orders issued on March 8,
1996. The Act and the FCC's subsequently issued rule changes eliminated the
national ownership restriction, allowing a single entity to own nationally any
number of AM or FM broadcast stations. The Act and the FCC's new rules also
greatly eased local radio ownership restrictions. As with the old rules, the
maximum number of radio stations in which a person or entity is allowed to have
an attributable interest varies depending on the number of radio stations within
a defined market. In markets with more than 45 stations, one company may own,
operate or control eight stations, with no more than five in either service (AM
or FM). In markets of 30-44 stations, one company may own seven stations, with
no more than four in either service; in markets with 15- 29 stations, one entity
may own six stations, with no more than four in either service. In markets with
14 commercial stations or less, one company may own up to five stations or 50%
of all of the stations, whichever is less, with no more than three in either
service. It should be noted, however, that the Department of Justice recently
has precluded certain entities from acquiring the maximum number of radio
stations allowed in a market under the 1996 Act because of concerns that
antitrust laws would be violated. Thus, it is possible that the Company would,
in certain instances, be unable to acquire the maximum number of stations
allowed in a market under the 1996 Act.


                                      11

<PAGE>

     In 1992, the FCC placed limitations on time brokerage (local marketing)
agreements ("LMA") through which the licensee of one radio station provides the
programming for another licensee's station in the same market. Stations
operating in the same service (e.g., where both stations are AM) and in the same
market are prohibited from simulcasting more than 25% of their programming.
Moreover, in determining the number of stations that a single entity may
control, an entity programming a station pursuant to an LMA is required, under
certain circumstances, to count that station toward its maximum even though it
does not own the station.

     A number of cross-ownership rules pertain to licensees of television and
radio stations. FCC rules, the Communications Act, or both, generally prohibit
an individual or entity from having an attributable interest in both a
television station and a radio station, daily newspaper or cable television
system that is located in the same local market area served by the television
station. The FCC has employed a liberal waiver policy with respect to the
TV/radio cross-ownership restriction (the so-called "one-to-a-market" rule),
generally permitting common ownership of one AM, one FM, and one TV station in
any of the 25 largest markets, provided there are at least 30 separately owned
stations in the market. The 1996 Act directed the Commission to extend its
one-to-a-market waiver policy to the top 50 markets, consistent with the public
interest, convenience and necessity. On November 7, 1996, the FCC released a
Second Further Notice of Proposed Rulemaking seeking comment on a number of
issues relating to the local television ownership rules, including its tentative
conclusion that it should extend the presumptive waiver of the one-to-a-market
rule to the top 50 markets. The Commission also requested further comment on
whether there is a continued need for the rule and, if there is, whether the
rule should be further modified. In addition, on September 27, 1996, the FCC
released a Notice of Inquiry seeking comment on whether it should relax its
policy of granting waivers of the radio/newspaper cross-ownership restriction.

     Expansion of the Company's broadcast operations in particular areas and
nationwide will continue to be subject to the FCC's ownership rules and any
further changes the FCC or Congress may adopt. Significantly, the 1996 Act
requires the Commission to review its remaining ownership rules biennially -- as
part of its regulatory reform obligations -- to determine whether its various
rules are still necessary.  On March 13, 1998, the FCC initiated its first
biennial review of its broadcast ownership rules and solicited comment on
matters including the effect which the relaxation of the local radio ownership
limitations pursuant to the 1996 Act has had on competition in the local
advertising markets and in programming.  The Company cannot predict the impact
of the biennial review process or any other agency or legislative initiatives
upon the FCC's broadcast rules. Further, the 1996 Act's relaxation of the FCC's
ownership rules may increase the level of competition in one or more of the
markets in which the Company's stations are located, particularly to the extent
that any of the Company's competitors may have greater resources and thereby be
in a better position to capitalize on such changes.

     Under the FCC's ownership rules, a direct or indirect purchaser of certain
types of securities of the Company could violate FCC regulations if that
purchaser owned or acquired an "attributable" or "meaningful" interest in other
media properties in the same areas as stations owned by the Company or in a
manner otherwise prohibited by the FCC. All officers and directors of a
licensee, as well as general partners, limited partners who are not properly
"insulated" from management activities, and stockholders who own five percent or
more of the outstanding voting stock of a licensee (either directly or
indirectly), generally will be deemed to have an attributable interest in the
license. Certain institutional investors who exert no control or influence over
a licensee may own up to ten percent of such outstanding voting stock without
being considered "attributable". Under current FCC regulations, debt
instruments, non-voting stock, properly insulated limited partnership interests
(as to which the licensee certifies that the limited partners are not
"materially involved" in the management and operation of the subject media
property) and voting stock held by minority stockholders in cases in which there
is a single majority


                                      12

<PAGE>

stockholder generally are not attributable. The FCC's "cross-interest"
policy, which precludes an individual or entity from having a "meaningful"
(even though not attributable) interest in one media property and an
attributable interest in a broadcast, cable or newspaper property in the same
area, may be invoked in certain circumstances to reach interests not
expressly covered by the multiple ownership rules.  See "--Recent
Developments--Tichenor Merger" and "--Control by Certain
Shareholders--Relationship Between the Company and Clear Channel."

     In January 1995, the FCC initiated a rulemaking proceeding designed to
permit a "thorough review of [its] broadcast media attribution rules." Among the
issues on which comment was sought were (i) whether to change the voting stock
attribution benchmarks from five percent to ten percent and, for passive
investors, from ten percent to twenty percent; (ii) whether there are any
circumstances in which non-voting stock interests, which are currently
considered non-attributable, should be considered attributable; (iii) whether
the FCC should eliminate its single majority shareholder exception (pursuant to
which voting interests in excess of five percent are not considered cognizable
if a single shareholder owns more than fifty percent of the voting power); (iv)
whether to relax insulation standards for business development companies and
other widely-held limited partnerships; (v) how to treat limited liability
companies and other new business forms for attribution purposes; (vi) whether to
eliminate, modify or codify the cross-interest policy; and (vii) whether to
adopt a new policy which would consider whether multiple cross interests or
other significant business relationships (such as time brokerage agreements,
debt relationships or holdings of nonattributable interests), which individually
do not raise concerns, raise issues with respect to diversity and competition.
On November 7, 1996, the FCC released a Further Notice of Proposed Rulemaking in
order to elicit further comment on several issues concerning its review of the
broadcast attribution rules. In general, the FCC seeks comment as to whether the
recent relaxation of the multiple ownership rules resulting from passage of the
1996 Act should affect the Commission's review of the rules, including whether a
combination of debt and equity exceeding a certain threshold should be
considered to be an attributable interest. The Company cannot predict with
certainty when this proceeding will be concluded or whether any of these
standards will be changed. Should the attribution rules be changed, the Company
is unable to predict what effect, if any, such changes would have on the Company
or its activities.

LICENSE GRANT AND RENEWAL.

     Prior to the passage of the 1996 Act, radio broadcasting licenses generally
were granted or renewed for a period of seven years upon a finding by the FCC
that the "public interest, convenience, and necessity" had been served thereby.
At the time an application was made for renewal of a radio license, parties in
interest could file petitions to deny the application, and such parties,
including members of the public, could comment upon the service the station had
provided during the preceding license term. In addition, prior to passage of the
1996 Act, any person was permitted to file a competing application for authority
to operate on the station's channel and replace the incumbent licensee. Renewal
applications were granted without a hearing if there were no competing
applications or if issues raised by petitioners to deny such applications were
not serious enough to cause the FCC to order a hearing. If competing
applications were filed, a full comparative hearing was required.

     Under the 1996 Act, the statutory restriction on the length of broadcast
licenses has been amended to allow the FCC to grant broadcast licenses for terms
of up to eight years. The 1996 Act also requires renewal of a broadcast license
if the FCC finds that (1) the station has served the public interest,
convenience, and necessity; (2) there have been no serious violations of either
the Communications Act or the FCC's rules and regulations by the licensee; and
(3) there have been no other serious violations which taken together constitute
a pattern of abuse. In making its determination, the FCC may still consider
petitions to deny but cannot consider whether the public interest would be
better served by a


                                      13

<PAGE>

person other than the renewal applicant. Instead, under the 1996 Act,
competing applications for the same frequency may be accepted only after the
Commission has denied an incumbent's application for renewal of license.

     Although in the vast majority of cases broadcast licenses are granted by
the FCC even when petitions to deny are filed against them, there can be no
assurance that any of the Company's stations' licenses will be renewed.

ALIEN OWNERSHIP RESTRICTIONS.

     The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S. citizens,
representatives of non-U.S. citizens, and corporations or partnerships organized
under the laws of a foreign nation are barred from holding broadcast licenses.
Non-U.S. citizens, collectively, may directly or indirectly own or vote up to
twenty percent of the capital stock of a licensee. In addition, a broadcast
license may not be granted to or held by any corporation that is controlled,
directly or indirectly, by any other corporation more than one-fourth of whose
capital stock is owned or voted by non-U.S. citizens or their representatives,
by foreign governments or their representatives, or by non-U.S. corporations, if
the FCC finds that the public interest will be served by the refusal or
revocation of such license. The FCC has interpreted this provision of the
Communications Act to require an affirmative public interest finding before a
broadcast license may be granted to or held by any such corporation, and the FCC
has made such an affirmative finding only in limited circumstances. The Company,
which serves as a holding company for subsidiaries that serve as licensees for
the stations, therefore may be restricted from having more than one-fourth of
its stock owned or voted directly or indirectly by non-U.S. citizens, foreign
governments, representatives of non-U.S. citizens or foreign governments, or
foreign corporations. The Communications Act previously prohibited granting of a
broadcast station license (i) to any corporation with an alien officer or
director, or (ii) to any corporation controlled by another corporation with any
alien officers or more than one-fourth alien directors. The restrictions on
non-U.S. citizens serving as officers or directors of licensees and their parent
corporations have been eliminated, however, by the 1996 Act.

OTHER REGULATIONS AFFECTING RADIO BROADCASTING STATIONS.

     The FCC has significantly reduced its past regulation of broadcast
stations, including elimination of formal ascertainment requirements and
guidelines concerning amounts of certain types of programming and commercial
matter that may be broadcast. In 1990, the U.S. Supreme Court refused to review
a lower court decision that upheld the FCC's 1987 action invalidating most
aspects of the Fairness Doctrine, which had required broadcasters to present
contrasting views on controversial issues of public importance. The FCC has,
however, continued to regulate other aspects of fairness obligations in
connection with certain types of broadcasts. In addition, there are FCC rules
and policies, and rules and policies of other federal agencies, that regulate
matters such as political advertising practices, equal employment opportunities,
application procedures and other areas affecting the business or operations of
broadcast stations.

ANTITRUST MATTERS.

     An important element of the Company's growth strategy involves the
acquisition of additional radio stations, many of which are likely to require
preacquisition antitrust review by the FTC and the Antitrust Division.
Following passage of the 1996 Act, the Antitrust Division has become more
aggressive in reviewing proposed acquisitions of radio stations and radio
station networks, particularly in


                                      14

<PAGE>

instances where the proposed acquirer already owns one or more radio stations
in a particular market and the acquisition involves another radio station in
the same market.  Recently, the Antitrust Division has obtained consent
decrees requiring an acquirer to dispose of at least one radio station in a
particular market where the acquisition otherwise would have resulted in an
undue concentration of market share by the acquirer. There can be no
assurance that the Antitrust Division or the FTC will not seek to bar the
Company from acquiring additional radio stations in a market where the
Company's existing stations already have a significant market share of the
overall radio market or the Spanish language market segment.

ENVIRONMENTAL MATTERS.

     As the owner, lessee or operator of various real properties and facilities,
the Company is subject to various federal, state and local environmental laws
and regulations.  Historically, compliance with such laws and regulations has
not had a material adverse effect on the Company's business.  There can be no
assurance, however, that compliance with existing or new environmental laws or
regulations will not require the Company to make significant expenditures in the
future.

RECENT DEVELOPMENTS, PROPOSED LEGISLATION AND REGULATION.

     The FCC is considering ways to introduce new technologies to the radio
broadcasting industry, including terrestrial delivery of digital audio
broadcasting on both the AM and FM bands. In 1997, the FCC granted two licenses
for national, satellite-delivered digital audio broadcasting services. These
services will be capable of delivering multiple, high-quality channels of audio.
The Company is unable to predict the effect any such new technology will have on
the Company's financial condition or results of operations. In addition, cable
television operators and direct satellite broadcast television companies market
service commonly referred to as "cable radio" which provides their subscribers
with several high-quality channels of music, news and other information.
Technical considerations currently limit this technology to fixed locations.

     The FCC presently is seeking comment on its policies designed to increase
minority ownership of mass media facilities. Congress, however, has enacted
legislation that eliminated the minority tax certificate program of the FCC,
which gave favorable tax treatment to entities selling broadcast stations to
entities controlled by an ethnic minority. In addition, a Supreme Court decision
has cast into doubt the continued validity of other FCC programs designed to
increase minority ownership of mass media facilities.

     Congress and the FCC currently have under consideration, and may in the
future adopt, new laws, regulations and policies regarding a wide variety of
matters that could affect, directly or indirectly, the operation and ownership
of the Company's broadcast properties. In addition to the changes and proposed
changes noted above, such matters include, for example, the license renewal
process, spectrum use fees, political advertising rates, potential restrictions
on the advertising of certain products (liquor, beer and wine, for example) and
the rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry.

     The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, or the 1996 Act, nor of the regulations
and policies of the FCC thereunder. The 1996 Act also covers satellite and
terrestrial delivery of digital audio radio service, and direct broadcast
satellite systems. Proposals for additional or revised regulations and
requirements are pending before and


                                      15

<PAGE>

are being considered by Congress and federal regulatory agencies from time to
time. Also, various of the foregoing matters are now, or may become, the
subject of court litigation, and the Company cannot predict the outcome of
any such litigation or the impact on its broadcast business.

CONCENTRATION OF CASH FLOW FROM LOS ANGELES STATIONS.

     Broadcast cash flow generated by the Company's Los Angeles stations
accounted for approximately 36.2% of the Company's broadcast cash flow for the
year ended December 31, 1997.  Increased competition for advertising dollars
with other radio stations and communications media in the Los Angeles
metropolitan area, both generally and relative to the broadcasting industry,
increased competition from a new format competitor and other competitive and
economic factors could cause a decline in revenue generated by the Company's Los
Angeles stations.  A significant decline in the revenue of the Los Angeles
stations could have a material adverse effect on the Company's overall results
of operations and broadcast cash flow.

CONTROL BY CERTAIN STOCKHOLDERS

CONTROL BY THE TICHENOR FAMILY.

     McHenry T. Tichenor, Jr., the Company's Chairman, President and Chief
Executive Officer, McHenry T. Tichenor, Sr., the David T. Tichenor Trust, Warren
W. Tichenor, William E. Tichenor and Jean T. Russell (collectively, the
"Tichenor Family") are parties to a Voting Agreement with one another, dated as
of July 1, 1996 (the "Voting Agreement"). As of January 15, 1998, the Tichenor
Family had voting control over approximately 22.1% of the shares of Class A
Common Stock. This enables the Tichenor Family to exert significant influence
over all matters submitted to the stockholders. Such ownership and control by
the Tichenor Family could have the effect of delaying or preventing a change in
control of the Company, thereby possibly having the effect of depriving
stockholders of the opportunity to receive a premium for their shares. Such
ownership and control could also have the effect of making the Company less
attractive to a potential acquirer and could result in holders of Class A Common
Stock receiving less consideration upon a sale of their shares than might
otherwise be available in the event of a takeover attempt.

RELATIONSHIP BETWEEN THE COMPANY AND CLEAR CHANNEL.

     As of January 15, 1998, Clear Channel owned no shares of Class A Common
Stock and thus was not entitled to vote in the election of the Company's
directors. However, Clear Channel owned all of the outstanding shares of the
Company's Class B Common Stock, which accounted for approximately a 29.1%
interest in the Common Stock of the Company.  As long as Clear Channel owns at
least 20.0% of the Company's Common Stock, Clear Channel will have a class vote
on certain matters, including the sale of all or substantially all of the assets
of the Company, any merger or consolidation involving the Company where the
stockholders of the Company immediately prior to the transaction would not own
at least 50.0% of the capital stock of the surviving entity, any
reclassification, capitalization, dissolution, liquidation or winding up of the
Company, the issuance of any shares of Preferred Stock by the Company, the
amendment of the Company's Restated Certificate of Incorporation in a manner
that adversely affects the rights of the holders of Class B Common Stock, the
declaration or payment of any non-cash dividends on the Company's Common Stock,
or any amendment to the Company's Certificate of Incorporation concerning the
Company's capital stock. Furthermore, shares of Class B Common Stock are
convertible into shares of Class A Common Stock, at the holder's option, subject
to any necessary governmental consents, including the consent of the FCC.
Because of the FCC's cross interest policy, which bars a party that holds an
attributable relationship in one or more radio stations in a market from


                                      16

<PAGE>

having a "meaningful relationship" with another radio station in that market,
Clear Channel may not presently convert its shares of Class B Common Stock
into shares of Class A Common Stock. The provisions of the Class B Common
Stock could have the effect of delaying or preventing a change in control of
the Company, thereby possibly having the effect of depriving stockholders of
the opportunity to receive a premium for their shares. Such provisions could
also have the effect of making the Company less attractive to a potential
acquirer and could result in holders of Class A Common Stock receiving less
consideration upon a sale of their shares than might otherwise be available
in the event of a takeover attempt.

     The nature of the respective businesses of the Company and Clear Channel
gives rise to potential conflicts of interest between the two companies. The
Company and Clear Channel are each engaged in the radio broadcasting business in
certain markets, and as a result, they are competing with each other for
advertising revenues. As of March 12, 1998, Clear Channel owned or programmed
173 radio stations in 37 domestic markets, as well as radio stations in a number
of foreign countries. Clear Channel also owned or programmed 18 television
stations and was one of the largest domestic outdoor advertising companies based
on its total inventory of advertising display faces. Clear Channel's television
and outdoor advertising operations may also be deemed to compete with the
Company's business. In addition, conflicts could arise with respect to
transactions involving the purchase or sale of radio broadcasting companies,
particularly Spanish language radio broadcasting companies, the issuance of
shares of Common Stock or Preferred Stock, or the payment of dividends by the
Company.

     Although Clear Channel does not currently engage in the domestic Spanish
language radio broadcasting business, other than through its ownership of shares
in the Company, circumstances could arise that would cause Clear Channel to
engage in the domestic Spanish language radio broadcasting business. There can
be no assurance that Clear Channel will not engage in the domestic Spanish
language radio broadcasting business. In addition, as part of Clear Channel's
overall acquisition strategy, Clear Channel may from time to time acquire
Spanish language radio broadcasting companies individually or as part of a
larger group and thereafter engage in the Spanish language radio broadcasting
business. Such activities could directly or indirectly compete with the
Company's business. In addition, Clear Channel may from time to time make
international acquisitions of or investments in companies engaged in the Spanish
language radio broadcasting business outside the United States and the Company
and Clear Channel may compete for such acquisition or investment opportunities.
To the extent the Company enters new lines of business, it may be deemed to
compete directly or indirectly with Clear Channel, and the Company and Clear
Channel may compete in the future with respect to acquisitions and investment
opportunities in these areas.

FORWARD-LOOKING STATEMENTS

     Certain statements contained herein are not based upon historical facts,
but are forward-looking statements based upon numerous assumptions made as of
the date hereof.  When used in the preceding and following discussions, the
words "believes," "intends," "expects," "anticipates" and similar expressions
are intended to identify such forward-looking statements, which are subject to
various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements.  Such risks
and uncertainties include, but are not limited to, industrywide market factors
and regulatory developments affecting the Company's operations, acquisitions and
dispositions of broadcast properties, the financial performance of start-up
stations, and efforts by the Company's management to integrate its operating
philosophies and practices at the station level.  The Company disclaims any
obligation to update the forward-looking statements contained herein.


                                      17

<PAGE>

INDUSTRY SEGMENTS

     The Company considers radio broadcasting to be its only business segment.

EMPLOYEES

     As of February 25, 1998, the Company employed 609 persons on a full-time
basis, including corporate employees and 16 employees (at WADO-AM, New York)
who are subject to two collective bargaining agreements. The Company
considers its employee relations to be good.

ITEM 2.  PROPERTIES

     The Company's corporate headquarters is in Dallas, Texas.  The lease
agreement for the approximately 7,000 square feet of office space in Dallas
expires on August 14, 1998. The Company's corporate offices will be moved from
their current location at 100 Crescent Court in Dallas, Texas, to 3102 Oak Lawn
Avenue in Dallas, Texas, where the Company has leased approximately 11,000
square feet.  The initial term of this lease expires in 2013, and the Company
has one option to extend the lease for one additional five-year term.

     The types of properties required to support each of the Company's radio
stations listed in Item 1 above includes offices, studios, transmitter sites and
antenna sites.  A radio station's studios are generally housed with its offices
in downtown or business districts.  A radio station's transmitter sites and
antenna sites generally are located in a manner that provides maximum market
coverage subject to the station's FCC license and FCC rules and regulations.

     The studios and offices of the Company's radio stations are located in
leased or owned facilities.  These leases generally have expiration dates that
range from three to sixteen years.  The Company either owns or leases its
transmitter and antenna sites.  These leases generally have expiration dates
that range from five to thirty years.  The Company does not anticipate any
difficulties in renewing those leases that expire within the next several years
or in leasing other space, if required.

     A substantial amount of the Company's broadcast cash flow was generated by
the Company's Los Angeles stations during 1997.  Accordingly, the offices,
studios, transmitter sites and antenna sites used in the operation of the
Company's Los Angeles stations may be material to the Company's overall
operations.

     As noted in Item 1 above, as of December 31, 1997, the Company owns or
programs 36 radio stations in 11 markets throughout the United States.
Therefore, except as set forth above, no one property is material to the
Company's overall operations. The Company believes that its properties are in
good condition and suitable for its operations.  The Company owns substantially
all of the equipment used in its radio broadcasting business.

ITEM 3.  LEGAL PROCEEDINGS


     On June 14, 1996, a purported class action lawsuit entitled LEVINE V. CECIL
HEFTEL, H. CARL PARMER, MADISON GRAVES, RICHARD HEFTEL, JOHN MASON, HEFTEL
BROADCASTING CORPORATION AND CLEAR CHANNEL COMMUNICATIONS, INC. (Case No. 15066)
was  filed in the Court of Chancery of the State of Delaware in the County of
New Castle.  The complaint sought to enjoin the Company and the other


                                      18

<PAGE>

defendants from completing the then-pending tender offer by Clear Channel for
the Company's outstanding Class A Common Stock ("Tender Offer"), and also
alleged that Cecil Heftel and H. Carl Parmer, each a former director and
executive officer of the Company, had breached their fiduciary duties to the
Company and its shareholders by negotiating certain amounts that would be
paid to them pursuant to their respective employment agreements upon
termination thereof at the consummation of the Tender Offer.  The Company and
the other defendants believed that the claims were meritless, and filed a
motion to   dismiss the lawsuit and requested the plaintiffs to dismiss the
lawsuit voluntarily.  The lawsuit was subsequently dismissed without
prejudice pursuant to a Stipulation of Dismissal, which was approved by the
Court of Chancery on March 5, 1998.

     In the ordinary course of business, the Company becomes involved in certain
other legal claims and litigation. In the opinion of management, based upon
consultations with legal counsel, the disposition of such litigation pending
against the Company will not have a materially adverse effect on its
consolidated financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.






                                      19

<PAGE>

                                   PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

PRICE RANGE OF CLASS A COMMON STOCK

     The Class A Common Stock is traded on the Nasdaq National Market under the
symbol "HBCCA." The following table sets forth for each of the periods presented
below, the high and low closing sale prices per share as reported by the Nasdaq
National Market.

<TABLE>
                                                                 HIGH     LOW
                                                                 ----     ---
<S>                                                             <C>      <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1996
      First Quarter                                             $  9.75  $  7.38
      Second Quarter                                              10.50     7.63
      Third Quarter                                               14.94     9.75
      Fourth Quarter                                              21.82    14.13

OCTOBER 1, 1996 TO DECEMBER 31, 1996                            $ 23.88  $ 15.38

FISCAL YEAR ENDED DECEMBER 31, 1997
      First Quarter                                             $ 23.31  $ 15.88
      Second Quarter                                              27.75    22.13
      Third Quarter                                               38.06    27.00
      Fourth Quarter                                              46.75    32.50
</TABLE>

     As of December 31, 1997, there were approximately 68 holders of the
Class A Common Stock.  This figure does not include an estimate of the
indeterminate number of beneficial holders whose shares may be held of record
by brokerage firms and clearing agencies.

DIVIDEND POLICY

The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
intends to retain any earnings for use in the growth of its business. The
Company currently is restricted from paying any cash dividends on its capital
stock under the Credit Agreement.

                                      20

<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

     The following table presents selected consolidated financial data for
Heftel Broadcasting Corporation and its subsidiaries for the year ended
December 31, 1997, the three months ended December 31, 1996, and the four
years ended September 30, 1996 (in thousands, except per share data):
<TABLE>
                                                            Three Months
                                                Year Ended     Ended             Year Ended September 30,
                                               December 31, December 31,  ----------------------------------------
                                                  1997          1996        1996       1995      1994      1993
                                                --------      --------    --------   --------  --------  --------
<S>                                            <C>          <C>           <C>        <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
Net revenues                                    $136,584      $ 18,309    $ 71,732   $ 64,160  $ 27,433  $ 21,331
Operating expenses                                82,065        11,207      48,896     43,643    15,345    11,949
Depreciation and amortization                     14,928         1,747       5,140      3,344     1,906     1,760
                                                --------      --------    --------   --------  --------  --------
Operating income before corporate expenses        39,591         5,355      17,696     17,173    10,182     7,622
Corporate expenses                                 4,579           368       5,072      4,720     3,454     2,530
                                                --------      --------    --------   --------  --------  --------
Operating income                                  35,012         4,987      12,624     12,453     6,728     5,092
                                                --------      --------    --------   --------  --------  --------
OTHER EXPENSE (INCOME):
     Interest expense, net                         3,541         2,841      11,034      6,389     2,997     2,312
     Income (loss) in equity of joint
       venture(a)                                      -             -           -          -      (616)     (746)
     Restructuring charges(b)                          -             -      29,011          -         -         -
     Other, net                                       82           (18)      1,671        428     1,407       533
                                                --------      --------    --------   --------  --------  --------
                                                   3,623         2,823      41,716      6,817     3,788     2,099
                                                --------      --------    --------   --------  --------  --------
Income (loss) before minority interest and
income tax                                        31,389         2,164     (29,092)     5,636     2,940     2,993
Minority interest(a)                                   -             -           -      1,167       351         -
Income tax                                        12,617           100          65        150       100       272
                                                --------      --------    --------   --------  --------  --------
Income (loss) from continuing operations          18,772         2,064     (29,157)     4,319     2,489     2,721
Loss on discontinued operations of CRC(b)              -             -       9,988        626       285         -
                                                --------      --------    --------   --------  --------  --------
Income (loss) before extraordinary item           18,772         2,064     (39,145)     3,693     2,204     2,721
Extraordinary item - loss on retirement of debt        -             -       7,461          -     1,738         -
                                                --------      --------    --------   --------  --------  --------
Net income (loss)                               $ 18,772      $  2,064    $(46,606)  $  3,693  $    466  $  2,721
                                                --------      --------    --------   --------  --------  --------
                                                --------      --------    --------   --------  --------  --------
Net income (loss) per common share(c):

     Basic:
     Continuing operations                      $   0.45      $   0.09    $  (1.41)  $   0.21  $   0.25  $   0.32
     Discontinued operations                           -             -       (0.49)     (0.03)    (0.03)        -
     Extraordinary loss                                -             -       (0.36)         -     (0.19)        -
                                                --------      --------    --------   --------  --------  --------
     Net income (loss)                          $   0.45      $   0.09    $  (2.26)  $   0.18  $   0.03  $   0.32
                                                --------      --------    --------   --------  --------  --------
                                                --------      --------    --------   --------  --------  --------

     Diluted:
     Continuing operations                      $   0.45      $   0.09    $  (1.41)  $   0.20  $   0.22  $   0.27
     Discontinued operations                           -             -       (0.49)     (0.03)    (0.03)        -
     Extraordinary loss                                -             -       (0.36)         -     (0.16)        -
                                                --------      --------    --------   --------  --------  --------
     Net income (loss)                          $   0.45      $   0.09    $  (2.26)  $   0.17  $   0.03  $   0.27
                                                --------      --------    --------   --------  --------  --------
                                                --------      --------    --------   --------  --------  --------

WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
     Basic                                        41,671        23,095      20,590     20,021     9,137     7,934
     Diluted                                      41,792        23,095      20,590     21,611    10,769     9,276

OTHER OPERATING DATA:
Broadcast cash flow                             $ 54,519      $  7,102    $ 22,836   $ 20,517  $ 12,088  $  9,382
EBITDA                                            49,940         6,734      17,764     15,797     8,634     6,852

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital                                 $ 10,970      $  8,429    $  7,168   $ 14,967  $ 18,366  $    715
Net intangible assets                            423,530       120,592     121,742    109,253    70,528     8,727
Total assets                                     512,249       163,725     165,751    151,637   113,353    25,770
Long-term debt, less current portion              14,122       135,504     137,659     97,516    59,898    27,046
Stockholders' equity (deficiency)                389,960        14,166      12,101     43,581    44,436   (10,164)
</TABLE>
(a) See Note 1 to consolidated financial statements.
(b) See Note 4 to consolidated financial statements.
(c) All common share and per-common-share amounts have been adjusted
retroactively for a two-for-one common stock split effective December 1, 1997

                                      21
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

     The following discussion of the consolidated results of operations and
cash flows of the Company for the year ended December 31, 1997, the three
months ended December 31, 1996 and each of the two years in the period ended
September 30, 1996 and consolidated financial condition as of December 31,
1997 and 1996 should be read in conjunction with the consolidated financial
statements of the Company and the related notes included elsewhere in this
report.

GENERAL

     The performance of a radio station group is customarily measured by its
ability to generate broadcast cash flow.  The two components of broadcast
cash flow are net revenues (gross revenues net of agency commissions) and
operating expenses (excluding depreciation and amortization and corporate
general and administrative expense).  The primary source of revenues is the
sale of broadcasting time for advertising.  The Company's most significant
operating expenses for purposes of the computation of broadcast cash flow are
employee salaries and commissions, programming expenses, and advertising and
promotion expenses.  The Company strives to control these expenses by working
closely with local station management.  The Company's revenues vary
throughout the year.  As is typical in the radio broadcasting industry, the
Company's first calendar quarter generally produces the lowest revenues.  The
second and third quarters generally produce the highest revenues.

     Broadcast cash flow is not calculated in accordance with generally
accepted accounting principles.  This measure should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities or any other measure for determining the Company's operating
performance or liquidity that is calculated in accordance with generally
accepted accounting principles. Broadcast cash flow does not take into
account the Company's debt service requirements and other commitments and,
accordingly, broadcast cash flow is not necessarily indicative of amounts
that may be available for dividends, reinvestment in the Company's business
or other discretionary uses.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE
YEAR ENDED SEPTEMBER 30, 1996.

     During 1997, the Company completed the Tichenor Merger and entered into
the KSCA Option.  The results of operations for 1997 do not reflect a full
year of operations of Tichenor or KSCA and 1996 results of operations exclude
the financial results of these transactions.  Consequently, the results of
operations for 1997 and 1996 are not entirely comparable.

     For the year ended December 31, 1997, net revenues increased by $64.9
million, or 90.5% to $136.6 million compared to $71.7 million for the year
ended September 30, 1996.  Operating expenses increased by $33.2 million, or
67.9%, to $82.1 million for the year ended December 31, 1997 compared to
$48.9 million for the year ended September 30, 1996.  Broadcast cash flow
increased $31.7 million, or 139.0% to $54.5 million for the year ended
December 31, 1997 compared to $22.8 million for the year ended September 30,
1996.  The improved operating performance was due to contributions from the
radio stations acquired in the Tichenor Merger, improved performance from
start-up stations, and same station revenue growth.

     Corporate expenses for the year ended December 31, 1997 were $4.6
million compared to $5.1 million for the year ended September 30, 1996.
Following the Tichenor Merger, the Company shut down duplicative corporate
headquarters in Las Vegas, Nevada, and consolidated the corporate
headquarters in Dallas, Texas.  As a result, EBITDA increased $32.2 million,
or 181.1% to $49.9 million.

     Depreciation and amortization increased $9.8 million, or 192.2% to $14.9
million for the year ended December 31, 1997 compared to $5.1 million for the
year ended September 30, 1996.  The increase is primarily attributable to
depreciation and amortization arising from the Tichenor Merger.

                                      22
<PAGE>

     Interest expense, net of interest income, decreased by $7.5 million, or
67.9% for the year ended December 31, 1997 compared to $11.0 million for the
year ended September 30, 1996.  The decrease in interest expense was due to a
$97.0 million reduction in outstanding debt through the February 1997
Offering and through repayments in debt from the Company's cash flow.

     Other expenses declined from $41.7 million for the year ended September
30, 1996 to $3.6 million for the year ended December 31, 1997.  During fiscal
1996, the Company incurred $29.0 million of restructuring charges and $1.4
million of costs relating to unconsummated acquisitions.  The Company did not
incur these expenses in 1997.

     Income tax expense increased from $65,000 for the year ended September
30, 1996 to $12.7 million for the year ended December 31, 1997.  The increase
was primarily due to an improvement in earnings before taxes from a loss for
the year ended September 30, 1996 of $29.1 million to income of $31.4 million
for the year ended December 31, 1997.

     The results of operations for the year ended December 31, 1997 did not
include any loss on discontinued operations or any extraordinary loss on the
retirement of debt.  In 1996, the loss on discontinued operations due to the
shut down of CRC was $10.0 million and the extraordinary loss on the
retirement of debt was $7.5 million.

     The Company generated net income of $18.8 million for the year ended
December 31, 1997 compared to a net loss of $46.6 for the year ended
September 30, 1996.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1996 COMPARED TO THE
QUARTER ENDED DECEMBER 31, 1995.

     On February 14, 1997, the Board of Directors of the Company voted to
change the Company's fiscal year from September 30 to December 31.  The
quarter ended December 31, 1996 represents the transition period.

     For the quarter ended December 31, 1996, net revenues increased by $0.8
million, or 4.6% to $18.3 million compared to $17.5 million for the quarter
ended December 31, 1995.  Income from continuing operations increased by $0.8
million, or 58.5%, to $2.1 million for the quarter ended December 31, 1996
compared to $1.3 million for the quarter ended December 31, 1995.  A loss on
discontinued operations of $0.4 million was recognized in the quarter ended
December 31, 1995.  The Company generated net income of $2.1 and $0.9 million
for the quarters ended December 31, 1996 and 1995, respectively.

RESULTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO THE
YEAR ENDED SEPTEMBER 30, 1995.

     During fiscal 1995, the Company completed several radio station
acquisitions.  Due to the financial effects of these transactions, the
results of operations for fiscal 1996 reflect a full year of operations for
these radio stations compared to a partial year in fiscal 1995.
Consequently, the results of operations for the years ended September 30,
1996 and 1995 are not entirely comparable.

     Net revenues increased by $7.5 million, or 11.7%, to $71.7 million in
the year ended September 30, 1996 from $64.2 million in the same period of
1995. Operating expenses increased by $5.3 million, or 12.2% to $48.9 million
in the year ended September 30, 1996 from $43.6 million in the same period of
1995. These increases were due primarily to the results of operations of
additional radio stations acquired during fiscal 1995 which contributed for a
partial year in fiscal 1995 and a full year in fiscal 1996.

                                      23
<PAGE>

     Interest expense, net of interest income, increased by $4.6 million, or
71.9%, to $11.0 million in the year ended September 30, 1996 from $6.4
million in the same period of 1995 primarily due to increased borrowings
totaling approximately $42.0 million resulting from radio station asset
acquisitions and certain transaction costs related to the Clear Channel
Tender Offer Agreement ("Tender Offer").

      Other expenses increased by $34.9 million to $41.7 million during the
year ended September 30, 1996 as compared to $6.8 million for the same period
in 1995.  In fiscal 1996, the Company incurred a loss of $29.0 million
relating to certain one-time restructuring charges related to the change in
control as described further in the following paragraph.  During fiscal 1996,
the Company incurred $1.4 million in cost related to unconsummated
acquisitions as compared to $142,000 for fiscal 1995.  In fiscal 1995, the
Company recorded $1.2 million in minority interest relating to Viva Media.
In fiscal 1996, the Company owned 100% of Viva Media therefore no minority
interest was recognized.

     In connection with the Tender Offer, the Company incurred certain
one-time restructuring charges totaling approximately $29.0 million during
the quarter ended September 30, 1996.  The material components of the
restructuring charges are $18.8 million in payments to former senior
executives relating to employment contract settlements, $4.7 million in
broker commissions and transaction costs, $2.6 million in costs relating to
the planned closing of duplicate facilities, plus $1.8 million in severance
relating to employee terminations resulting from the restructuring.

     Effective August 5, 1996, the Company's Board of Directors approved a
plan to discontinue the operations of the radio network owned by CRC.  The
total loss relating to the discontinued operations of CRC for fiscal 1996 was
$10.0 million.  The charge to operations for the disposal of CRC for the year
ended September 30, 1996 was $8.1 million, of which $6.2 million relates to
non-cash charges resulting from the write-off of goodwill.  No income tax
benefit was realized due to the Company's net operating loss carryforwards.
The charge to operations for the loss  from operations of CRC was $1.9
million.  This amount reflects the operating losses from the measurement
date, August 5, 1996, through the disposal date, December 31, 1996.  CRC
fulfilled its contractual program obligations and ceased operating on
December 31, 1996.

     For the year ended September 30, 1996, the Company incurred a non-cash
extraordinary loss of $7.5 million as a result of refinanced debt.  No income
tax benefit was realized due to the Company's net operating loss
carryforwards.

     During fiscal 1996, the Company incurred a net loss of $46.6 million
compared to net income of $3.7 million in the same period of fiscal 1995.
The change from net income in fiscal 1995 to the net loss in fiscal 1996 of
$50.3 million is due to the restructuring charges related to the change in
control, the discontinued operations of CRC, the loss on retirement of debt,
and the increase in interest expense, as described above.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities for the year ended December
31, 1997 was $43.8 million compared to net cash used in operating activities
for the year ended September 30, 1996 of $20.1 million.  Generally, capital
expenditures are financed with cash provided by operations and long-term
borrowings.  For the year ended December 31, 1997, the Company's capital
expenditures were $4.0 million compared to $3.7 million for the year ended
September 30, 1996.  The increase in capital expenditures was due primarily
to the Tichenor Merger. During 1997, the Company spent $1.1 million ($3.2
million to acquire KLTO(FM) net of approximately $2.1 million of cash and
cash equivalents acquired in the Tichenor Merger), to acquire radio stations.
In 1996, the Company spent $20.2 million to acquire the assets of WPAT(AM)
(New York City market).  During 1997, the Company made two KSCA Option
payments which aggregated $13 million.  The option payments will be credited
against the

                                      24
<PAGE>

cash to be paid at closing for the KSCA(FM) assets if the KSCA Option is
exercised.  See the "Recent Developments" section.

STOCKHOLDERS' EQUITY

     On February 10, 1997, the Company completed the February 1997 Offering
selling 4,830,000 (pre-split) shares of its Class A Common Stock for $36.80
(pre-split) per share, after underwriters' discounts and commissions.  The
net proceeds of the offering were approximately $176.4 million.

      On January 22, 1998, the Company completed the 1998 Offering, selling
5,750,000 shares of Class A Common Stock for $39.75 per share, after
underwriters' discounts and commissions.  The net proceeds of the offering
were approximately $205.3 million.

LONG-TERM DEBT

     On February 12, 1997, the Company repaid borrowings of $143.0 million
outstanding under an existing $155 million credit facility with a portion of
the proceeds from the Offering.

     On February 14, 1997, the Company entered into a new $300 million credit
facility (the "Credit Facility"), replacing the existing credit facility and
initially borrowed $46.0 million.  The Company used advances under the Credit
Facility and a portion of the proceeds from the Offering to retire the
outstanding debt and senior preferred stock of Tichenor assumed on the date
of the Merger.  The Company repaid $34.0 million under the Credit Facility
from cash provided by operations.  At December 31, 1997, the Company had
outstanding borrowings of $12.0 million under the Credit Facility.  The
Company's ability to make additional borrowings under the Credit Facility is
subject to compliance with certain financial ratios and other conditions set
forth in the Credit Facility.  The Company may elect under the terms of the
Credit Facility to increase the facility by $150.0 million.  The Credit
Facility is secured by the stock of the Company's subsidiaries.

     Borrowings under the Credit Facility bear interest at a rate based on
LIBOR plus an applicable margin as determined by the Company's leverage
ratio.  The interest rate on the borrowings outstanding under the Credit
Facility at December 31, 1997 was 6.38%.  Availability under the Credit
Facility reduces quarterly commencing September 30, 1999 and ending December
31, 2004.

     Available cash on hand plus cash provided by operations were sufficient
to pay interest due under the Credit Facility and fund capital expenditures
during the year ended December 31, 1997.  The Company's management believes
that it will have sufficient cash flow to finance its operations and satisfy
its debt service requirements.  The Company regularly reviews potential
acquisitions. Future acquisitions are expected to be made from available cash
balances, additional borrowings under the Credit Facility, or from cash
provided by operations.

ACCOUNTING PRONOUNCEMENTS

     In 1998, the Company will adopt Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME, and Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION, which become effective in 1998.  In 1999, the Company
will adopt Statement of Financial Accounting Standards No. 132, EMPLOYER'S
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS which becomes
effective in 1999.  The adoption of these new accounting standards is not
expected to have a material impact on the Company.

                                      25
<PAGE>

YEAR 2000

     The Company has been replacing its software as part of its long-term
technological plans.  The new software being implemented functions properly
with respect to dates in the year 2000 and thereafter.  The Company does not
expect that the implementation of the new software will materially effect
future financial results.

















                                      26
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                                           Page
                                                                                          Number
                                                                                          ------
<S>                                                                                       <C>
Reports of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . .       28-29

Consolidated Balance Sheets as of December 31, 1997 and 1996  . . . . . . . . . . . .       30

Consolidated Statements of Operations for the Year Ended December 31, 1997,
    the Three Months Ended December 31, 1996, and the Years Ended
    September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . .       31

Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1997,
    the Three Months Ended December 31, 1996, and the Years Ended
    September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . .       32

Consolidated Statements of Cash Flows for the Year Ended December 31, 1997,
    the Three Months Ended December 31, 1996, and the Years Ended
    September 30, 1996 and 1995   . . . . . . . . . . . . . . . . . . . . . . . . . .       33

Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . . . . . .       34
</TABLE>








                                               27

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Heftel Broadcasting Corporation:

We have audited the accompanying consolidated balance sheet of Heftel
Broadcasting Corporation and subsidiaries as of December 31, 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. In connection with our audit of the
consolidated financial statements, we also have audited the financial
statement schedule for the year ended December 31, 1997. These consolidated
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsiblity is to express an opinion on
these consolidated financial statements and financial statement schedule
based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Heftel
Broadcasting Corporation and subsidiaries as of December 31, 1997, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule for the year ended
December 31, 1997, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.


                                           /s/ KPMG Peat Marwick LLP

Dallas, Texas
March 9, 1998

                                      28
<PAGE>

                          REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Heftel Broadcasting Corporation

   We have audited the accompanying consolidated balance sheet of Heftel
Broadcasting Corporation as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows
for the three months ended December 31, 1996 and each of the two years in the
period ended September 30, 1996. Our audits also included the financial
statement schedule included in Item 14(a).  These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements  and
schedule based on our audits.

   We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the consolidated financials statements referred to above
present fairly, in all material respects, the consolidated financial position
of Heftel Broadcasting Corporation at December 31, 1996, and the consolidated
results of its operations and its cash flows for the three months ended
December 31, 1996 and each of the two years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.  Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present farily
in all material respects the information set forth therein.

                                             /s/ ERNST & YOUNG LLP

Los Angeles, California
July 2, 1997


                                      29
<PAGE>

                 HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS


<TABLE>
<CAPTION>
                                                                                                             December 31,
                                                                                                       1997              1996
                                                                                                   ------------      ------------
<S>                                                                                                <C>               <C>
Current assets:
     Cash and cash equivalents                                                                     $  6,553,271      $  4,787,652
     Accounts receivable, net of allowance of $2,612,847 in 1997 and $1,128,158 in 1996              29,324,324        16,995,571
     Prepaid expenses and other current assets                                                          817,456           631,791
                                                                                                   ------------      ------------
               Total current assets                                                                  36,695,051        22,415,014
                                                                                                   ------------      ------------
Property and equipment, at cost:
     Land                                                                                            11,046,486         6,662,690
     Buildings and improvements                                                                       7,034,799         4,856,071
     Broadcast and other equipment                                                                   20,663,573        12,740,683
     Furniture and fixtures                                                                           5,705,226         2,996,850
                                                                                                   ------------      ------------
                                                                                                     44,450,084        27,256,294
     Less accumulated depreciation                                                                   11,150,167         7,590,009
                                                                                                   ------------      ------------
                                                                                                     33,299,917        19,666,285
                                                                                                   ------------      ------------
Intangible assets:
     Broadcast licenses                                                                             334,821,684        98,725,706
     Cost in excess of fair value of net assets acquired                                             95,308,112        24,135,219
     Other intangible assets                                                                         14,351,232         7,505,000
                                                                                                   ------------      ------------
                                                                                                    444,481,028       130,365,925
     Less accumulated amortization                                                                   20,951,102         9,773,591
                                                                                                   ------------      ------------
                                                                                                    423,529,926       120,592,334
                                                                                                   ------------      ------------
Deferred charges and other assets, net                                                               18,723,785         1,051,462
                                                                                                   ------------      ------------
          Total assets                                                                             $512,248,679   $163,725,095
                                                                                                   ------------      ------------
                                                                                                   ------------      ------------
                                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                                                $2,103,419          $366,269
     Accrued expenses                                                                                19,832,802        11,759,653
     Income taxes payable                                                                             3,349,161                 -
     Current portion of long-term obligations                                                           440,097         1,860,237
                                                                                                   ------------      ------------
               Total current liabilities                                                             25,725,479        13,986,159
                                                                                                   ------------      ------------
Long-term obligations, less current portion                                                          14,122,019       135,504,232
                                                                                                   ------------      ------------
Deferred income taxes                                                                                82,441,601            69,000
                                                                                                   ------------      ------------
Commitments and contingencies

Stockholders' equity:
     Preferred Stock, cumulative, $.001 par value; authorized 5,000,000 shares;
          no shares issued or outstanding                                                                     -                 -
     Class A Common Stock, $.001 par value; authorized 50,000,000 shares in 1997 and
          30,000,000 shares in 1996; issued and outstanding 29,978,748 shares in 1997
          and 23,095,462 shares in 1996                                                                  29,979            11,548
     Class B Common Stock, $.001 par value; authorized 50,000,000 shares in 1997 and
          7,000,000 shares in 1996; issued and outstanding 14,156,470 shares in 1997
          and none in 1996                                                                               14,156                 -
     Additional paid-in capital                                                                     459,567,282       102,578,149
     Accumulated deficit                                                                            (69,651,837)      (88,423,993)
                                                                                                   ------------      ------------
          Total stockholders' equity                                                                389,959,580        14,165,704
                                                                                                   ------------      ------------
          Total liabilities and stockholders' equity                                               $512,248,679      $163,725,095
                                                                                                   ------------      ------------
                                                                                                   ------------      ------------
</TABLE>


                     See accompanying notes to consolidated financial statements


                                                 30

<PAGE>

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                Three Months
                                                  Year Ended       Ended           Year Ended September 30,
                                                 December 31,   December 31,    -----------------------------
                                                    1997            1996            1996              1995
                                                -------------   ------------    ------------      -----------
<S>                                             <C>             <C>             <C>               <C>
Revenues                                        $154,869,079    $20,850,616     $ 81,242,695      $72,577,882
Agency commissions                                18,285,224      2,541,648        9,510,663        8,418,340
                                                ------------    -----------     ------------      -----------
Net revenues                                     136,583,855     18,308,968       71,732,032       64,159,542
Operating expenses                                82,064,446     11,207,309       48,896,256       43,642,509
Depreciation and amortization                     14,928,326      1,746,732        5,140,131        3,344,419
                                                ------------    -----------     ------------      -----------
Operating income before corporate expenses        39,591,083      5,354,927       17,695,645       17,172,614
Corporate expenses                                 4,579,270        368,074        5,071,859        4,720,380
                                                ------------    -----------     ------------      -----------
Operating income                                  35,011,813      4,986,853       12,623,786       12,452,234
                                                ------------    -----------     ------------      -----------
Other expense (income):
    Interest income                                 (406,241)       (26,290)        (206,605)        (217,830)
    Interest expense                               3,947,092      2,866,872       11,240,835        6,607,180
    Costs relating to unconsummated
      acquisitions                                         -              -        1,383,187          141,988
    Restructuring charges                                  -              -       29,011,237                -
    Other, net                                        81,973        (18,044)         287,140          285,568
                                                ------------    -----------     ------------      -----------
                                                   3,622,824      2,822,538       41,715,794        6,816,906
                                                ------------    -----------     ------------      -----------
Income (loss) before minority interest and
    income tax                                    31,388,989      2,164,315      (29,092,008)       5,635,328
Minority interest                                          -              -                -        1,166,780
Income tax                                        12,616,833        100,000           65,000          150,000
                                                ------------    -----------     ------------      -----------
Income (loss) from continuing operations          18,772,156      2,064,315      (29,157,008)       4,318,548
                                                ------------    -----------     ------------      -----------
Discontinued operations:
    Loss from operations of CRC                            -              -        1,844,939          625,970
    Loss on disposal of CRC                                -              -        8,142,598                -
                                                ------------    -----------     ------------      -----------
Total loss on discontinued operations                      -              -        9,987,537          625,970
                                                ------------    -----------     ------------      -----------
Income (loss) before extraordinary item           18,772,156      2,064,315      (39,144,545)       3,692,578
Extraordinary item - loss on retirement of
    debt                                                   -              -        7,461,267                -
                                                ------------    -----------     ------------      -----------
Net income (loss)                               $ 18,772,156    $ 2,064,315     $(46,605,812)     $ 3,692,578
                                                ------------    -----------     ------------      -----------
                                                ------------    -----------     ------------      -----------
Net income (loss) per common share:

    Basic:
    Continuing operations                       $       0.45    $      0.09     $      (1.41)     $      0.21
    Discontinued operations                                -              -            (0.49)           (0.03)
    Extraordinary loss                                     -              -            (0.36)               -
                                                ------------    -----------     ------------      -----------
    Net income (loss)                           $       0.45    $      0.09     $      (2.26)     $      0.18
                                                ------------    -----------     ------------      -----------
                                                ------------    -----------     ------------      -----------
    Diluted:
    Continuing operations                       $       0.45    $      0.09     $      (1.41)     $      0.20
    Discontinued operations                                -              -            (0.49)           (0.03)
    Extraordinary loss                                     -              -            (0.36)               -
                                                ------------    -----------     ------------      -----------
    Net income (loss)                           $       0.45    $      0.09     $      (2.26)     $      0.17
                                                ------------    -----------     ------------      -----------
                                                ------------    -----------     ------------      -----------
Weighted average common shares outstanding:
    Basic                                         41,671,026     23,095,462       20,589,934       20,021,128
    Diluted                                       41,792,191     23,095,462       20,589,934       21,610,692
</TABLE>


                    See accompanying notes to consolidated financial statements.


                                                31

<PAGE>

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
                                                    Common Stock        Additional                                   Receivables
                                  Preferred     -------------------      paid-in      Accumulated      Treasury       for stock
                                    stock       Class A     Class B      capital        deficit         stock         purchases
                                  ---------     -------     -------    -----------   ------------    -----------     -----------
<S>                               <C>           <C>         <C>        <C>           <C>             <C>             <C>
Balance at September 30, 1994     $  2,296      $ 6,032     $ 4,680   $ 95,698,105  $ (44,670,835)   $(4,019,735)    $(2,584,052)
Repurchase of preferred stock      (1,960)            -           -     (1,958,330)             -              -               -
Preferred stock dividends               -             -           -              -     (2,861,278)             -               -
Common stock issued in
     connection with exercise
     of warrants                        -           160           -      1,679,840              -              -      (1,680,000)
Issuance of stock options               -             -           -        273,654              -              -               -
Net income                              -             -           -              -      3,692,578              -               -
                                  -------       -------     -------   ------------   ------------    -----------     -----------
Balance at September 30, 1995         336         6,192       4,680     95,693,269    (43,839,535)    (4,019,735)     (4,264,052)
Repurchase of preferred stock        (336)            -           -       (335,298)             -              -               -
Preferred stock dividends               -             -           -              -        (42,961)             -               -
Retirement of treasury stock            -             -        (811)    (4,018,924)             -      4,019,735               -
Payment on stockholder notes            -             -           -              -              -              -       4,264,052
Common stock issued in
     connection with:
     Conversion of Class B to
          Class A Common Stock          -         3,869      (3,869)             -              -              -               -
     Exercise of warrants and
          options                       -         1,442           -     10,546,817              -              -               -
     Business acquisition               -            45           -        692,285              -              -               -
Net loss                                -             -           -              -    (46,605,812)             -               -
                                  -------       -------     -------   ------------   ------------    -----------     -----------
Balance at September 30, 1996           -        11,548           -    102,578,149    (90,488,308)             -               -
Net income                              -             -           -              -      2,064,315              -               -
                                  -------       -------     -------   ------------   ------------    -----------     -----------
Balance at December 31, 1996            -        11,548           -    102,578,149    (88,423,993)             -               -
Net proceeds from issuance
     of 4,830,000 shares of
     Class A Common Stock               -         4,830           -    176,363,259              -              -               -
Common Stock issued for
     Tichenor acquisition               -         5,560         130    180,647,941              -              -               -
Conversion of Class A
     Common Stock into
     Class B Common Stock               -        (6,948)      6,948              -              -              -               -
Two-for-one stock split                 -        14,989       7,078        (22,067)             -              -               -
Net income                              -             -           -              -     18,772,156              -               -
                                  -------       -------     -------   ------------   ------------    -----------     -----------
Balance at December 31, 1997      $     -       $29,979     $14,156   $459,567,282   $(69,651,837)   $         -     $         -
                                  -------       -------     -------   ------------   ------------    -----------     -----------
                                  -------       -------     -------   ------------   ------------    -----------     -----------
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      32
<PAGE>

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                                                Three Months
                                                                 Year Ended          Ended          Year Ended September 30,
                                                                December 31,      December 31,  -------------------------------
                                                                    1997             1996            1996              1995
                                                                -------------     -----------   -------------      ------------
<S>                                                             <C>               <C>           <C>                <C>
Cash flows from operating activities:
     Net income (loss)                                          $  18,772,156     $ 2,064,315   $ (46,605,812)     $  3,692,578
     Adjustments to reconcile net income (loss) to net cash
          provided by (used in) operating activities:
          Loss on discontinued operations                                   -               -       9,987,537           625,970
          Extraordinary loss on debt retirement                             -               -       7,461,267                 -
          Provision for bad debts                                   2,756,605         722,691       2,871,700         1,522,235
          Depreciation and amortization                            14,928,326       1,746,732       5,140,131         3,587,341
          Amortization of debt facility fee included
               in interest expense                                    133,200         360,000         993,674           925,740
          Deferred income taxes                                     8,106,930               -               -                 -
          Non-cash restructuring charges                                    -               -       1,219,048                 -
          Changes in operating assets and liabilities:
               Accounts receivable, net                            (4,996,984)       (702,939)     (4,711,197)       (3,545,065)
               Prepaid expenses and other current assets              360,381         380,441       1,175,118          (327,714)
               Accounts payable                                    (4,770,977)       (341,698)       (421,251)       (1,331,888)
               Accrued expenses                                     2,788,673      (1,595,238)      4,087,219         2,433,390
               Income taxes payable                                 5,506,696               -               -                 -
               Other, net                                             206,987         (27,122)        297,960          (393,245)
                                                                -------------     -----------   -------------      ------------
                    Net cash provided by (used in)
                         activities of continuing operations       43,791,993       2,607,182     (18,504,606)        7,189,342
                    Net cash used in discontinued operations                -               -      (1,594,006)         (909,355)
                                                                -------------     -----------   -------------      ------------
                    Net cash provided by (used in) operating
                         activities                                43,791,993       2,607,182     (20,098,612)        6,279,987
                                                                -------------     -----------   -------------      ------------

Cash flows from investing activities:
     Payments received on notes receivable                                  -               -               -           222,586
     Acquisitions of radio stations                                (1,096,424)              -     (20,150,000)      (37,600,000)
     Property and equipment acquisitions                           (4,010,775)       (400,396)     (3,687,780)       (4,011,331)
     Payment of noncompete agreements                                       -               -      (7,000,000)                -
     Additions to intangible assets                                (2,777,245)              -               -                 -
     Collection (funding) of loans to related parties                       -               -       2,357,932          (623,838)
     Increase in other noncurrent assets                          (15,134,257)       (397,684)              -                 -
                                                                -------------     -----------   -------------      ------------
                    Net cash used in investing activities         (23,018,701)       (798,080)    (28,479,848)      (42,012,583)
                                                                -------------     -----------   -------------      ------------

Cash flows from financing activities:
     Borrowings on long-term obligations                           56,000,000               -     163,459,267        36,475,000
     Payments on long-term obligations                           (250,826,404)     (2,153,410)   (123,752,057)         (653,026)
     Payment of deferred financing costs                           (1,232,061)              -      (5,799,878)          (82,411)
     Proceeds from stock issuances                                177,050,792               -      10,548,259                 -
     Repurchase of preferred and common stock                               -               -        (335,634)       (1,960,290)
     Dividends on preferred stock                                           -               -         (42,961)       (2,861,278)
     Note payments from stockholders                                        -               -       4,229,114                 -
                                                                -------------     -----------   -------------      ------------
                    Net cash provided by (used in)
                         financing activities                     (19,007,673)     (2,153,410)     48,306,110        30,917,995
                                                                -------------     -----------   -------------      ------------

Net increase (decrease) in cash and cash equivalents                1,765,619        (344,308)       (272,350)       (4,814,601)
Cash and cash equivalents at beginning of period                    4,787,652       5,131,960       5,404,310        10,218,911
                                                                -------------     -----------   -------------      ------------
Cash and cash equivalents at end of period                      $   6,553,271     $ 4,787,652   $   5,131,960      $  5,404,310
                                                                -------------     -----------   -------------      ------------
                                                                -------------     -----------   -------------      ------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                      33
<PAGE>

       HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     Heftel Broadcasting Corporation (the "Company"), through its
subsidiaries, owns and/or operates 36 Spanish language broadcast radio
stations serving 11 markets throughout the United States (Los Angeles, New
York City, Miami, San Francisco/San Jose, Chicago, Houston, San Antonio,
McAllen/Brownsville/Harlingen, Dallas/Fort Worth, El Paso and Las Vegas).

     CHANGE IN YEAR-END

     On February 14 1997, the Board of Directors of the Company voted to
change the Company's fiscal year-end from September 30 to December 31,
beginning with the fiscal year ended December 31, 1997.

     BASIS OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts
of Heftel Broadcasting Corporation and its wholly-owned subsidiaries.  The
Company consolidates the accounts of subsidiaries when it has a controlling
financial interest (over 50%) in the outstanding voting shares of the
subsidiary.

     Until August 19, 1994, the Company's investment in its joint venture was
accounted for using the equity method of accounting. In connection with
certain agreements entered into between the Company and its joint venture
partner, management considered it appropriate to consolidate the accounts of
the joint venture and therefore such accounts and results of operations have
been consolidated and are included in the accompanying consolidated financial
statements effective August 20, 1994. On September 7, 1995, the Company,
through a subsidiary, acquired the remaining 51% interest in this joint
venture.

     All significant intercompany accounts and transactions have been
eliminated in consolidation.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the amounts reported in the consolidated
financial statements and related notes to financial statements.  Actual
results could differ from those estimates.

     CASH EQUIVALENTS

     Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less.

     INVESTMENT

     The Company uses the equity method to account for investments when it
does not have a controlling interest but has the ability to exercise
significant influence over the operating and/or financial decisions of the
investee. Investments where the Company does not exert significant influence
are accounted for using the cost method.  Investments at December 31, 1997
are comprised primarily of a 50% interest in a general partnership which owns
a transmission tower that is leased to the Company.

     PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost.  Expenditures for
significant renewals and betterments are capitalized.  Repairs and
maintenance are charged to expense as incurred.

                                 34

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

      Depreciation is provided in amounts sufficient to relate the asset cost
to operations over the estimated useful lives (three to forty years) on a
straight-line basis.  Leasehold improvements are depreciated over the life of
the lease or the estimated service life of the asset, whichever is shorter.
Gains or losses from disposition of property and equipment are recognized in
the statement of operations.

     INTANGIBLE ASSETS

     Intangible assets are recorded at cost.  Amortization of intangible
assets is provided in amounts sufficient to relate the asset cost to
operations over the estimated useful lives on a straight-line basis.
Intangible assets consist primarily of broadcast licenses and other
identifiable intangible assets.  The estimated useful lives are as follows:

        Broadcast licenses        40 years
        Goodwill                  40 years
        Other intangibles     2 - 40 years

     The Company evaluates periodically the propriety of the carrying amount
of intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or revised estimates of useful lives.  This evaluation consists of the
projection of undiscounted operating income before depreciation,
amortization, nonrecurring charges and interest for each of the Company's
radio stations over the remaining amortization periods of the related
intangible assets.  If such projections indicate that undiscounted operating
income is not expected to be adequate to recover the carrying amounts of the
related intangible assets, a loss is recognized to the extent the carrying
amount of the asset exceeds its fair value.  At this time, the Company
believes that no significant impairment of goodwill and other intangible
assets has occurred and that no reduction of the estimated useful lives is
warranted.

     REVENUE RECOGNITION

     Revenue is derived primarily from the sale of commercial announcements
to local and national advertisers.  Revenue is recognized as commercials are
broadcast.

     ADVERTISING COSTS

     The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are charged to expense in the year
incurred and totaled approximately $4.0, $0.3, $2.4 and $1.3 million for the
year ended December 31, 1997, the three months ended December 31, 1996, and
the years ended September 30, 1996 and 1995.

     BARTER TRANSACTIONS

     Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services.  Barter transactions
are recorded at the estimated fair value of the goods or services received.
Revenues from barter transactions are recognized as income when
advertisements are broadcast.  Expenses are recognized when goods or services
are received or used.  Barter amounts are not significant to the Company's
consolidated financial statements.

     INCOME TAXES

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards.  Deferred tax assets
and liabilities are measured using enacted tax rates

                                 35

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.

     EARNINGS PER SHARE

     In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE.  Basic earnings per common share is based on net
earnings after preferred stock dividend requirements, if any, and the
weighted-average number of Class A and Class B common shares outstanding
during each year.  Diluted earnings per common share assumes conversion of
dilutive convertible securities into common stock at the later of the
beginning of the year or date of issuance and includes the add-back of
related interest expense and/or dividends, as required.  The adoption of this
new accounting standard, which required the restatement of all presented
periods' earnings (loss) per share data, did not have a material impact on
previously reported earnings (loss) per share.

     DERIVATIVE FINANCIAL INSTRUMENTS

     The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes.  They are used, from
time to time, to manage well-defined interest rate risks related to interest
on the Company's outstanding debt.  There were no outstanding swap agreements
at December 31, 1997.

     As interest rates change under interest rate swap and cap agreements,
the differential to be paid or received is recognized as an adjustment to
interest expense.

     FINANCIAL INSTRUMENTS

     The carrying amounts of financial instruments, including cash and cash
equivalents, trade receivables and accounts payable, approximate fair value due
to the relatively short maturity of these instruments.  The carrying amount of
long-term obligations, including the current portion, approximates fair value
based upon quoted interest rates for the same or similar debt issues.

     CREDIT RISK

     In the opinion of management, credit risk with respect to trade
receivables is limited due to the large number of diversified customers and
the geographic diversification of the Company's customer base.  The Company
performs ongoing credit evaluations of its customers and believes that
adequate allowances for uncollectible trade receivables are maintained.

     STOCK BASED COMPENSATION

     The Company accounts for stock options using the intrinsic-value method
as outlined under Accounting Principles Board Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES ("APB 25") and related interpretations.  In
accordance with Statement No. 123, "Accounting for Stock-Based Compensation,"
the Company has disclosed pro forma net earnings and net earnings per share
as if the fair-value method had been applied.

     RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform with the
current year presentation.

                                 36

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2.   ACQUISITIONS AND DISPOSITIONS

     1997 ACQUISITIONS AND DISPOSITIONS

     On February 14, 1997, the Company completed its acquisition of Tichenor
Media System, Inc. ("Tichenor"), a national radio broadcasting company
engaged in the business of acquiring, developing and programming Spanish
language radio stations (the "Tichenor Merger").  At the time of the Tichenor
Merger, Tichenor owned or programmed 20 radio stations in six of the ten
largest Hispanic markets in the United States. The merger was effected
through the merger of a wholly-owned subsidiary of the Company with and into
Tichenor.  In connection with the merger, management of Tichenor assumed
management responsibilities of the Company.  Pursuant to the Tichenor Merger,
the former Tichenor shareholders and warrant holders received an aggregate of
11,379,756 shares of Common Stock. At the time of the Tichenor Merger,
Tichenor had outstanding approximately $72.0 million of long-term debt, which
was subsequently refinanced by the Company.  In addition, all of Tichenor's
outstanding shares of 14% Senior Redeemable Cumulative Preferred Stock were
redeemed for approximately $3.4 million.  The total purchase price, including
closing costs, allocated to net assets acquired, was approximately $181.2
million.

     On August 13, 1997, the Company sold the assets of KINF(AM) which is
licensed in Denton, Texas.  The sales price net of selling expenses was $0.6
million, which approximated the book value of the assets.

     The Company closed on the purchase of the assets of KLTO(FM) in
Rosenberg-Richmond (Houston), Texas on September 22, 1997.  The purchase
price was $3.2 million and was funded from operations.  The final purchase
price is contingent on an upgrade of the station's broadcast authorization
from the FCC prior to April 1, 2004.  Depending on whether the signal is
fully or partially upgraded, the purchase price could increase to $14.0
million.

     1996 ACQUISITION

     On March 25, 1996, the Company acquired the assets of radio station
WPAT(AM) which serves the New York City market for approximately $19.5
million. The asset acquisition was financed through additional borrowings
under the Company's credit agreement.

     1995 ACQUISITIONS

     In December 1994, the Company acquired station KMRT(AM), which serves
the Dallas/Ft. Worth market, for approximately $1.5 million.  From August
1994 through the date of acquisition, the Company programmed KMRT(AM) under a
Local Marketing Agreement ("LMA").  The LMA provided that the Company retain
all revenues associated with advertising time and pay certain operating
expenses.

     In April 1995, the Company acquired station KICI(FM), which serves the
Dallas/Ft. Worth market, in exchange for cancellation of a note for $0.9
million payable by the seller to a subsidiary of the Company.  From August
1994 through the date of acquisition, the Company programmed KICI(FM) under
an LMA.

                                 37

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In June 1995, the Company acquired the assets of radio station KMRT(FM)
(formerly KCYT(FM), serving the Dallas/Ft. Worth market) for approximately
$2.0 million.  The acquisition was financed through additional borrowings
under the Company's credit agreement and the issuance of notes payable to the
sellers. From February 1995 through the date of acquisition, the Company
programmed KMRT(FM) under an LMA.

     In July 1995, the Company acquired the assets of radio station KHCK(FM)
(formerly KDZR(FM)), which serves the Dallas/Ft. Worth market, for
approximately $4.7 million.  This acquisition was financed through additional
borrowings under the Company's credit agreement.  From February 1995 through
the date of acquisition, the Company programmed KHCK(FM) under an LMA.

     In July 1995, the Company acquired the assets of radio station WLXX(AM)
(formerly WOPA(AM)), which serves the Chicago market, for approximately $4.5
million plus 44,811 shares of Class A Common Stock with a fair value of
approximately $0.7 million.  This acquisition was financed through additional
borrowings under the Company's credit agreement.

     In August 1995, the Company acquired the assets of radio station
KLSQ(AM) (formerly KOWA(AM)), which serves the Las Vegas market, for
approximately $0.9 million.  The acquisition was financed through additional
borrowings under the Company's credit agreement.

     On September 7, 1995, the Company acquired the remaining 51% interest in
Viva America Media Group ("Viva Media"), a partnership that owns WAQI(AM) and
WRTO(FM), which serve the Miami market, for $19.8 million in cash.  The
acquisition was financed through additional borrowings under the Company's
credit agreement.  Under the terms of an Amended and Restated Agreement and
Plan of Reorganization, and in connection with this transaction, the
following contractual arrangements were terminated for no additional
consideration: (i) a warrant to purchase up to 237,600 shares of Class B
Common Stock held by a former officer of the Company and the employment
relationship between the Company and that officer and (ii) certain agreements
regarding the management of the Miami stations.

     PENDING TRANSACTIONS

     On January 2, 1997, the Company acquired an option to purchase all of
the assets used in connection with the operation of KSCA(FM), Glendale,
California (the "KSCA Option").  In connection with the acquisition of the
KSCA Option, the Company began providing programming to KSCA(FM) under a time
brokerage agreement on February 5, 1997.  The KSCA Option, which is
exercisable only upon the death of Gene Autry, the indirect principal
stockholder of the seller, had an initial term which expired on December 31,
1997.  The KSCA Option is renewable for additional one-year terms during the
lifetime of Mr. Autry upon payment by the Company of $3.0 million on or
before the then scheduled expiration date of the KSCA Option. On February 4,
1997, the Company made an initial payment of $10.0 million, as required under
the option agreement.  On December 29, 1997, the Company renewed the KSCA
Option through December 31, 1998.  All such payments will be credited against
the purchase price for the KSCA(FM) assets if the KSCA Option is exercised.
If the KSCA Option is not exercised or renewed, all amounts paid will be
charged to expense.  The purchase price for the KSCA(FM) assets is the
greater of (a) $112.5 million, or (b) the sum of (i) $105.0 million, plus
(ii) an amount equal to $13,699 per day during the term of the time brokerage
agreement.  Consummation of the purchase will be subject to a number of
conditions, including approval by the FCC of the transfer of the FCC
licenses.

                                 38

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

      On December 1, 1997, the Company entered into an asset exchange
agreement to exchange WPAT(AM), serving the New York City market, and $115.0
million in cash for the assets of WNWK(FM), serving the New York City market
(the "WNWK(FM) Acquisition").  Following the consummation of the WNWK(FM)
Acquisition, the Company plans to convert the station's programming to a
Spanish language format. The WNWK(FM) Acquisition has been approved by the
FCC but is subject to other closing conditions.

     Unaudited consolidated condensed pro forma results of operations as if
all completed acquisitions occurred as of the beginning of the periods
presented are as follows:
<TABLE>
                                             YEAR ENDED DECEMBER 31,
                                          ----------------------------
                                              1997                1996
                                          ------------        ------------
        <S>                               <C>                 <C>
        Net revenues                      $141,036,000        $122,171,000
        Operating income                    33,865,000          10,636,000
        Net income (loss)                   15,796,000        (53,292,000)
        Net income (loss) per
             share - basic and diluted            0.37              (1.65)
</TABLE>

     All of the business acquisitions discussed above were accounted for
using the purchase method of accounting.  Accordingly, the accompanying
financial statements include the accounts of the acquired businesses since
the respective dates of acquisition.

3.   CHANGE IN CONTROL OF COMPANY

     On August 5, 1996, Clear Channel Communications, Inc. ("Clear Channel")
completed the purchase of 9,345,092 shares of the Company's Class A and Class
B common stock for $23 per share pursuant to a Stockholder Purchase Agreement
dated June 1, 1996 between Clear Channel and two executive officers and other
related parties.  On the same date, Clear Channel also purchased a total of
936,952 shares of the Company's Class A common stock from certain public
shareholders and from employees of the Company upon the exercise of their
stock purchase options.  As a result of these transactions, Clear Channel's
ownership of the Company was increased from 21% to 63%.

     In connection with the change in control of the Company, the employment
of two executive officers was terminated pursuant to employment contract
settlement agreements which provided for a lump sum payment upon their
termination.  Also, the two executive officers entered into five-year
noncompete agreements with the Company in exchange for the aggregate payment
of $7.0 million.

     As a result of the Tichenor acquisition and the January 1998 common
stock offering, Clear Channel's ownership in the Company was reduced to
approximately 29%.

4.   DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES

     The Company's Board of Directors approved a plan to discontinue the
operations of the radio network owned by the Company's wholly owned
subsidiary Spanish Coast-to-Coast, Ltd., dba Cadena Radio Centro ("CRC")
effective August 5, 1996.  The charge to operations during the year ended
September 30, 1996 was approximately $8.1 million, of which $6.2 million
relates to non-cash charges resulting from the write-off of goodwill.  No
income tax benefit was recognized due to the Company's net operating loss
carryforwards.  During 1997, approximately $0.4 million was charged against
the accrual primarily for operating losses and severance payments.  The
majority of the remaining accrued balance of approximately $0.6 million at
December 31, 1997 is for severance payments to be paid to a former employee
through 2000.

                                 39

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In connection with the change in control, the Company incurred certain
restructuring charges totaling approximately $29.0 million during the year
ended September 30, 1996.  The material components of the restructuring
charges were $18.8 million in payments to two executive officers relating to
employment contract settlement agreements, $4.7 million in broker commissions
and transaction costs, $2.6 million in costs relating to the planned closing
of duplicate facilities, and $1.8 million in severance relating to employee
terminations resulting from the restructuring.  During 1997, approximately
$2.5 million was charged against the accrual primarily for severance
payments.  The majority of the remaining accrued balance of approximately
$1.9 million at December 31, 1997 consists of accruals for severance payments
and expenditures to be incurred relating to the closing of duplicate
facilities.  The majority of such costs are expected to be incurred and
charged against the accrual in 1998.

5.   LONG-TERM OBLIGATIONS

     The following is a summary of long-term obligations outstanding as of
December 31, 1997 and 1996:
<TABLE>
                                                    1997           1996
                                                ------------   ------------
<S>                                             <C>            <C>
Revolving credit facility payable to
banks; aggregate commitment of $300.0
million; interest rate based on LIBOR
plus an applicable margin as
determined by the Company's leverage
ratio; interest rate of 6.38% at
December 31, 1997; interest rates
ranged from 5.75% to 6.38% during
1997; payable through December 2004;
secured by 100% of the common stock
of the Company's wholly-owned
subsidiaries; the Company is required
to comply with certain financial and
nonfinancial covenants                          $12,000,000    $          -

Old Credit Agreement, variable
interest rate (7.44% at December 31,
1996), interest payable monthly,
principal repaid in February 1997                         -     133,000,000

Non-interest bearing note payable to
former Viva Media partners due February 1997              -       1,499,250

Various loans, interest ranging from
7.2% to 9.38%, payable in varying
installments through 2015                         1,055,820       1,359,565

Prize awards net of imputed interest
(10% to 12%), payable in varying
annual installments through 2044                  1,506,296       1,505,654
                                                -----------    ------------
                                                 14,562,116     137,364,469
Less current portion                               (440,097)     (1,860,237)
                                                -----------    ------------
                                                $14,122,019    $135,504,232
                                                -----------    ------------
                                                -----------    ------------
</TABLE>

                                 40

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     NEW CREDIT AGREEMENT

     On February 14, 1997, the Company entered into a new $300 million credit
facility (the "Credit Facility"), replacing the existing credit facility.
The Company used a $46 million advance under the Credit Facility and a
portion of the proceeds from the common stock offering to retire the
outstanding debt and senior preferred stock of Tichenor assumed on the date
of the Merger.  The Company's ability to make additional borrowings under the
Credit Facility is subject to compliance with certain financial ratios and
other conditions set forth in the Credit Facility.  The Credit Facility is
secured by the capital stock of the Company's subsidiaries.

     The Credit Facility principal balance begins reducing on September 30,
1999 and continues quarterly through December 31, 2004, when the principal
must be paid in full.

     OLD CREDIT AGREEMENT

     On August 5, 1996, the Company borrowed $135.0 million under a Credit
Agreement with new lenders ("Old Credit Agreement") which provided a total
credit facility of $155.0 million.  The proceeds were used to retire all of
the outstanding debt under the Company's August 1994 Credit Agreement and to
pay certain noncompete and employment contract settlements plus certain
transaction and other costs relating to the Clear Channel transaction
previously discussed.

     On February 4, 1997, the Company borrowed $10.0 million under its Old
Credit Agreement with the proceeds used to purchase an option to acquire all
of the assets of KSCA-FM in Los Angeles from Golden West Broadcasters.

     Maturities of long-term obligations for the five years subsequent to
December 31, 1997 are as follows:
<TABLE>
                 YEAR                            AMOUNT
                 ----                            ------
                 <S>                             <C>
                 1998                          $   440,097
                 1999                              306,129
                 2000                              278,026
                 2001                              112,639
                 2002 and thereafter            13,425,225
</TABLE>

     Interest paid for the year ended December 31, 1997, the three months
ended December 31, 1996 and the years ended September 30, 1996 and 1995
amounted to $3.9, $2.9, $11.2 and $6.6 million, respectively.

                                 41

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

6.   COMMITMENTS AND CONTINGENCIES

     The Company leases office space and other property under noncancellable
operating leases.  Terms of the leases vary from three to thirty years.
Certain leases have contingent rent clauses whereby rent is increased based
on a change in the Consumer Price Index.  Various leases have renewal options
of five to ten years.  Future minimum rental payments under noncancellable
operating leases in effect at December 31, 1997 are summarized as follows:
<TABLE>
                YEAR                          AMOUNT
                ----                          ------
                <S>                         <C>
                1998                        $3,119,758
                1999                         3,006,646
                2000                         2,412,291
                2001                         2,173,389
                2002                         1,894,133
                Thereafter                   5,497,886
</TABLE>
     Rent expense for the year ended December 31, 1997, the three months
ended December 31, 1996, and the years ended September 30, 1996 and 1995 was
$2.6, $0.3, $1.7 and $1.3 million, respectively.

     The Company is subject to legal proceedings and other claims which have
arisen in the ordinary course of its business and have not been fully
adjudicated.  These actions, when ultimately concluded, will not, in the
opinion of management, have a material adverse effect upon the financial
position or results of operations of the Company.

7.   STOCKHOLDERS' EQUITY

     COMMON STOCK

     On February 10, 1997, the Company completed a secondary public stock
offering selling 4,830,000 (pre-split) shares of its Class A Common Stock for
$36.80 (pre-split) per share, net of underwriters' discounts and commissions.
The net proceeds of the offering were approximately $176.4 million.

     Immediately prior to the consummation of the Tichenor Merger, the
Company filed a Second Amended and Restated Certificate of Incorporation
("Second Amended Certificate").  This increased the total number of
authorized shares of the Company to 105,000,000 shares consisting of three
classes of capital stock as follows; (i) 50,000,000 shares of Class A Common
Stock, par value $.001 per share; (ii) 50,000,000 shares of Class B Common
Stock, par value $.001 per share; and (iii) 5,000,000 shares of Preferred
Stock, par value $.001 per share. The rights of the Class A and Class B
Common Stock are identical except that the Class B Common Stock has no voting
rights, except in certain matters.

     On February 14, 1997, all of the outstanding shares of Heftel Common
Stock owned by Clear Channel (7,078,000 shares on a pre-split basis) were
converted to Class B Common Stock.

     On November 6, 1997, the Board of Directors of the Company authorized a
two-for-one stock split payable in the form of a stock dividend of one share
of common stock for each issued and outstanding share of common stock.  The
dividend was paid on December 1, 1997 to all holders of common stock at the
close of business on November 18, 1997.  In connection with the stock
dividend, $22,067 was transferred to common stock from additional paid-in
capital.  All financial information related to number of shares, per share
amounts, stock option data and market prices of the Company's common stock
have been restated to give effect to the split, unless otherwise noted.

                                 42

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     On January 2, 1996 the Company issued 89,622 shares of common stock to
one of the parties to the acquisition of WLXX(AM) in Chicago in accordance
with the terms of the purchase agreement.

     On January 22, 1998, the Company completed a secondary stock offering of
5,175,000 shares of Class A Common Stock at $39.75 per share, net of
underwriters' discounts and commissions.

     TREASURY STOCK

     In December 1993, the Company repurchased 1,621,174 shares of its Class
B Common Stock from certain stockholders for $4.0 million.  In September
1996, the 1,621,174 shares held as treasury stock were retired.

     PREFERRED STOCK

     The Company is authorized to issue 5,000,000 shares of $.001 par value
Preferred Stock.

     Series A Preferred Stock dividends are payable quarterly and have a
cumulative annual rate of $.04 per share.  As of December 31, 1997, there
were no issued or outstanding shares of Series A Preferred Stock.  The Series
A Preferred Stock is superior to common stock in liquidation in the amount of
$.50 per share plus cumulative unpaid dividends and is redeemable at the
option of the Company at $.50 per share plus cumulative unpaid dividends.

     In August 1996, the Company redeemed all of the outstanding Series A
Preferred Stock and paid cumulative unpaid dividends through the redemption
date of $2,685.

     In January 1995, the Company redeemed and retired 3,920,580 shares of
its outstanding Series A Preferred stock owned by the Company's then current
Chairman and Co-Chief Executive Officer and certain of his children.  The
redemption price was equal to $.50 per share plus cumulative unpaid dividends
through the date of redemption of $2.9 million.

     In April 1995, the Company paid approximately $0.3 million in cumulative
unpaid dividends on its outstanding Series A Preferred Stock held by the
daughter of the Company's then current Chairman and Co-Chief Executive
Officer.


                                 43


<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

8.   INCOME TAXES

     The provision for income taxes on income (loss) from continuing operations
consists of the following:

<TABLE>
<CAPTION>
                                              THREE MONTHS
                                 YEAR ENDED      ENDED      YEAR ENDED SEPTEMBER 30,
                                DECEMBER 31,  DECEMBER 31,  ------------------------
                                    1997          1996          1996        1995
                                -----------   ------------    -------     --------
<S>                             <C>           <C>           <C>           <C>
Current:
  Federal                       $ 3,144,449     $      -      $     -     $100,000
  State                           1,365,454      100,000       65,000       50,000
                                -----------     --------      -------     --------
Total current tax                 4,509,903      100,000       65,000      150,000
                                -----------     --------      -------     --------
Deferred:
  Federal                         7,782,653            -            -            -
  State                             324,277            -            -            -
                                -----------     --------      -------     --------
Total deferred tax                8,106,930            -            -            -
                                -----------     --------      -------     --------
Total income tax                $12,616,833     $100,000      $65,000     $150,000
                                -----------     --------      -------     --------
                                -----------     --------      -------     --------
</TABLE>

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
1996 are as follows:

<TABLE>
                                                     1997           1996
                                                  -----------   ------------
<S>                                               <C>           <C>
Deferred tax assets:
  Net operating losses                            $12,987,833   $ 16,797,000
  Other intangible assets                           1,668,659              -
  Long-term obligations - prize awards                587,455        602,000
  Allowance for doubtful accounts receivable        1,019,010        545,000
  Other                                               869,649      3,383,000
                                                  -----------   ------------
Total deferred tax assets                          17,132,606     21,327,000
Valuation allowance                                         -    (13,693,000)
                                                  -----------   ------------
Net deferred tax assets                            17,132,606      7,634,000
                                                  -----------   ------------
Deferred tax liabilities:
  Broadcast licenses                               91,668,629              -
  Property and equipment                            1,139,937              -
  Restructuring charges                             6,585,218      7,521,000
  Other                                               180,423        182,000
                                                  -----------   ------------
Total deferred tax liabilities                     99,574,207      7,703,000
                                                  -----------   ------------
Net deferred tax liabilities                      $82,441,601   $     69,000
                                                  -----------   ------------
                                                  -----------   ------------
</TABLE>

     The valuation allowance decreased $13.7 million for the year ended
December 31, 1997 due in part to a reassessment of the Company's ability to
realize its deferred tax asset primarily as a result of the Tichenor Merger.
Future reversals of taxable temporary differences created by the Tichenor
Merger are sufficient to absorb the benefits of the deferred tax assets.  The
$0.7 million decrease in the valuation allowance for the three months ended
December 31, 1996 is due to a decrease in other accrued liabilities and is
partially offset by an increase in net operating loss carryforwards.  For the
year ended September

                                     44
<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

30, 1996, the valuation allowance increased $8.9 million due to an increase in
net operating loss carryforwards and restructuring charges not deductible for
tax purposes.  The $1.1 million decrease in the valuation allowance for the
year ended September 30, 1995 is due to a decrease in net operating loss
carryforwards.

     The reconciliation of income tax expense (benefit) computed at the federal
statutory tax rate to the Company's actual income tax expense attributable to
continuing operations is as follows:

<TABLE>
<CAPTION>
                                                                  THREE MONTHS
                                                    YEAR ENDED        ENDED         YEAR ENDED SEPTEMBER 30,
                                                    DECEMBER 31,   DECEMBER 31,   ---------------------------
                                                        1997           1996           1996           1995
                                                    -----------   -------------   -----------     -----------
<S>                                                 <C>           <C>             <C>             <C>
Federal income tax (benefit) at statutory rate      $10,986,146     $ 735,867     $(9,891,283)    $ 1,519,306
State income taxes, net of federal benefit              941,674        66,000          42,900          33,000
Nondeductible and non-taxable items, net                689,013       (46,629)      8,490,286         258,400
Net operating loss carryforward not benefited                 -             -       1,423,097               -
Use of net operating loss carryforwards                       -      (655,238)              -      (1,660,706)
                                                    -----------     ---------     -----------     -----------
                                                    $12,616,833     $ 100,000     $    65,000     $   150,000
                                                    -----------     ---------     -----------     -----------
                                                    -----------     ---------     -----------     -----------
</TABLE>

     As of December 31, 1997, the Company had tax net operating loss
carryforwards for federal and state tax purposes of approximately $32.9 and
$5.7 million, respectively.  The net operating losses expire in the year 2010
if not used.

     Income taxes paid for the year ended December 31, 1997, the three months
ended December 31, 1996, and the years ended September 30, 1996 and 1995
amounted to $2.2 million, $0, $65,000 and $78,800, respectively.

                                     45
<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9.  EARNINGS (LOSS) PER SHARE

     The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for income (loss) from
continuing operations:

<TABLE>
<CAPTION>
                                                    THREE MONTHS
                                       YEAR ENDED       ENDED          YEAR ENDED SEPTEMBER 30
                                      DECEMBER 31,   DECEMBER 31,     ---------------------------
                                          1997           1996             1996            1995
                                      -----------   -------------     ------------     ----------
<S>                                   <C>           <C>               <C>              <C>
Numerator:
  Income (loss) from continuing
   operations                         $18,772,156     $2,064,315      $(29,157,008)    $4,318,548
  Preferred stock dividends                     -              -            22,823         26,850
                                      -----------     ----------      ------------     ----------
  Numerator for basic and
   diluted earnings per share         $18,772,156     $2,064,315      $(29,179,831)    $4,291,698
                                      -----------     ----------      ------------     ----------
                                      -----------     ----------      ------------     ----------
Denominator:
  Weighted average common shares       41,671,026     23,095,462        20,589,934     20,021,128
  Effect of dilutive securities -
   stock options                          120,466              -                 -      1,589,564
                                      -----------     ----------      ------------     ----------
  Denominator for diluted
   earnings per share                  41,791,492     23,095,462        20,589,934     21,610,692
                                      -----------     ----------      ------------     ----------
                                      -----------     ----------      ------------     ----------
</TABLE>

10.  STOCK OPTIONS

     In December 1995, the Company issued 1,048,678 stock options to various
employees of the Company under its (1994 adopted) Stock Option Plan.  The
exercise price ranged from $7.63 to $9.31 per share, the market price at the
date of issuance.  The options vest over a period ranging from two to three
years.

     On August 5, 1996, all unexercised and outstanding employee stock options
were tendered in connection with the Clear Channel tender offer, as previously
described.  Other fully vested options and warrants were exercised during the
months of June and July 1996.

     In December 1996, the Company issued 6,084 options at $16.44 per share to a
key employee.  The options vest ratably over a three year period.

     In  March 1997, the Company adopted a stock incentive plan ("Stock
Incentive Plan"), to be administered by the Board of Directors or by a committee
(two or more directors) or sub-committee of the Board of Directors.  The maximum
number of shares of  Class A Common Stock  that may be the subject of awards at
any one time shall be five percent of the total number of shares of Class A
Common Stock outstanding.  Options granted under the Stock Incentive Plan vest
ratably over the last three years of a five year period.

     In June 1997, the Company issued 753,000 stock options to various employees
of the Company under its Stock Incentive Plan.  The exercise prices ranged from
$23.50 to $36.19 per share, the market prices at dates of issuance.

                                     46

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


      Following is a summary of management incentive stock options granted,
exercised and outstanding for the three years ended December 31, 1997:

<TABLE>
                                                    Number    Weighted Average
                                                  Of Shares    Exercise Price
                                                 ----------    ---------------
<S>                                              <C>           <C>
Options outstanding at September 30, 1994         2,087,012         $0.964
     Granted                                        474,200         $5.027
     Exercised                                     (320,000)         $5.25
     Cancelled                                     (396,000)        $2.255
                                                 ----------         ------
Options outstanding at September 30, 1995         1,845,212          $1.90
     Granted                                      1,048,678         $7.645
     Exercised                                   (2,883,890)         $3.39
     Cancelled                                      (10,000)         $5.00
                                                 ----------         ------
Options outstanding at September 30, 1996                 -           -
     Granted                                          6,084         $16.44
                                                 ----------         ------
Options outstanding at December 31, 1996              6,084         $16.44
     Granted                                        753,000         $23.88
     Cancelled                                      (36,000)        $23.50
                                                 ----------         ------
Options outstanding at December 31, 1997            723,084         $23.84
                                                 ----------         ------
                                                 ----------         ------
</TABLE>

     At December 31, 1997, 2,028 options were exercisable at $16.44 per share.

     No compensation expense related to stock option grants was recorded in
1997 or 1996.  In 1995, compensation expense of  $273,654 was recorded
representing stock options issued to two individuals at a price below market
value at the date of the grant.

     Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement.  The fair values for these options were estimated at the dates of
grant using a Black-Scholes option pricing model and were $13.17, $6.51,
$2.77 and $3.10 during the year ended December 31, 1997, the three months
ended December 31, 1996, and the years ended September 30, 1996 and 1995,
respectively, with the following weighted average assumptions:

<TABLE>
                                      1997      1996      1995
                                    -------   -------   --------
<S>                                 <C>       <C>       <C>
Risk-free interest rate               6.55%     5.73%      5.41%
Dividend yield                        0.00%     0.00%      0.00%
Volatility factor                    50.00%    51.00%   44 - 50%
Weighted average expected life      6 years   3 years    3 years
</TABLE>


                                     47
<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

      For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.  The
Company's historical and pro forma net earnings and earnings per share were
as follows:

<TABLE>
                                           THREE MONTHS            YEAR ENDED
                              YEAR ENDED      ENDED               SEPTEMBER 30
                             DECEMBER 31,   DECEMBER 31,  ---------------------------
                                1997           1996            1996           1995
                             -----------   ----------     -------------    ----------
<S>                          <C>           <C>            <C>              <C>
Net earnings - as reported   $18,772,157   $2,064,315     $(46,605,812)    $3,692,578
Net earnings - pro forma      18,147,081    2,063,644      (48,509,974)     3,680,759
Basic earnings per share -
 as reported                        0.45         0.09            (2.26)          0.18
Basic earnings per share -
 pro forma                          0.44         0.09            (2.36)          0.18

Weighted average fair value
 of options granted during the     10.45         5.50                -           2.59
 year
</TABLE>

     Because the Statement provides for pro forma amounts for options granted
beginning in 1995, the pro forma expense will likely increase in future years
as the new option grants become subject to the pricing model.

11. OTHER FINANCIAL INFORMATION

    ACCRUED EXPENSES

<TABLE>
                                                          DECEMBER 31,
                                                  ----------------------------
                                                      1997            1996
                                                  ------------    ------------
<S>                                               <C>             <C>
      Wages, salaries and benefits payable        $  3,145,530    $  1,780,200
      Commissions payable                            5,969,278       2,813,223
      Interest payable                                 871,461         742,222
      Accrued restructuring and
       discontinued operation charges                2,467,200       4,968,420
      Other accrued expenses                         7,379,333       1,455,588
                                                  ------------    ------------
                                                  $ 19,832,802    $ 11,759,653
                                                  ------------    ------------
                                                  ------------    ------------
</TABLE>

                                      48

<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

12.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED EXCEPT FOR THE QUARTER ENDED
     DECEMBER 31, 1996, WHICH IS AUDITED)

     The following is a summary of the quarterly results of operations for
the year ended December 31, 1997, the quarter ended December 31, 1996
(transition period) and the year ended September 30, 1996:

<TABLE>
Year ended December 31, 1997:
                                              3/31/97        6/30/97        9/30/97       12/31/97
                                          -------------  -------------  -------------  -------------
<S>                                       <C>            <C>            <C>            <C>
Net revenues                              $  23,029,373  $  37,980,889  $  37,196,813  $  38,376,780
Income from continuing operations               565,983      5,373,047      5,948,853      6,884,273
Net income                                      565,983      5,373,047      5,948,853      6,884,273
Net income per common share - basic
   and diluted                                     0.02           0.12           0.13           0.16
</TABLE>

<TABLE>
Quarter ended December 31, 1996:
                                            12/31/96
                                          -------------
<S>                                       <C>
   Net revenues                           $  18,308,968
   Income from continuing operations          2,064,315
   Net income                                 2,064,315
   Net income per common share - basic
   and diluted                                     0.09
</TABLE>

<TABLE>
Year ended September 30, 1996:
                                             12/31/95       3/31/96        6/30/96        9/30/96
                                          -------------  -------------  -------------  -------------
<S>                                       <C>            <C>            <C>            <C>
Net revenues                              $  17,457,686  $  15,695,750  $  19,900,061  $  18,678,535
Income (loss) from continuing operations      1,302,238       (307,859)      (362,442)   (29,788,945)
Loss on discontinued operations                 444,043        663,798        500,326      8,379,370
Extraordinary loss                                    -              -              -      7,461,267
Net income (loss)                               858,195       (971,657)      (862,768)   (45,629,582)
Net income (loss) per common share -
  basic and diluted:
   Continuing operations                  $        0.06  $       (0.02) $       (0.02) $       (1.46)
   Discontinued operations                        (0.02)         (0.03)         (0.02)         (0.41)
   Extraordinary loss                                 -              -              -          (0.36)
                                          -------------  -------------  -------------  -------------
   Net income (loss)                      $        0.04  $       (0.05) $       (0.04) $       (2.23)
                                          -------------  -------------  -------------  -------------
                                          -------------  -------------  -------------  -------------
</TABLE>

                                       49
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     In 1997, the Company solicited proposals from qualified firms of
certified public accountants to perform audit services beginning in calendar
year 1997 for the Company and its subsidiaries.  On February 19, 1997, Ernst
& Young LLP, the Company's prior independent accountant, was notified that
KPMG Peat Marwick LLP had been selected as the Company's new independent
accountants as a result of this process.  The decision to change accountants
was approved by the Board of Directors of the Company on February 19, 1997.
Ernst & Young LLP served as the independent accountants for the Company and
its subsidiaries for the fiscal years ended September 30, 1995 and 1996 and
the three months ended December 31, 1996.

     The independent auditors' reports of Ernst & Young LLP on the
consolidated financial statements of the Company and its subsidiaries as of
September 30, 1995 and 1996 and December 31, 1996 and for each of the two
years in the period ended September 30, 1996 and the three months ended
December 31, 1996, each expressed an unqualified opinion and were not
modified as to uncertainty, audit scope or accounting principles.  During the
fiscal years ended September 30, 1995 and 1996 and through March 27, 1998,
there were no reportable events (as defined in Regulation S-K, Item
304(a)(1)(v)) or disagreements with Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure that were not resolved to the satisfaction of
Ernst & Young LLP.

     There were no disagreements with accountants on accounting and financial
disclosure.

                                       50
<PAGE>

                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 10 with respect to the directors,
nominees and executive officers of the Company is incorporated by reference
to the information set forth under the caption "Election of Directors,"
"Executive Compensation and Other Matters" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Definitive Schedule 14A
Proxy Statement to be filed with the Securities and Exchange Commission not
later than 120 days after the Company's fiscal year-end.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by Item 11 is incorporated by reference to the
information set forth under the caption "Executive Compensation and Other
Matters" in the Company's Definitive Schedule 14A Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the
Company's fiscal year-end.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

     The information required by Item 12 is incorporated by reference to the
information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Definitive Schedule 14A
Proxy Statement to be filed with the Securities and Exchange Commission not
later than 120 days after the Company's fiscal year-end.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 is incorporated by reference to the
information set forth under the caption "Certain Transactions" in the
Company's Definitive Schedule 14A Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days after the
Company's fiscal year-end.


                                       51
<PAGE>

                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
          FORM 8-K


(a)  1.   FINANCIAL STATMENTS

          The following financial statements have been filed under Item 8 of
          this report:

          Reports of Independent Auditors

          Consolidated Balance Sheets as of December 31, 1997 and 1996

          Consolidated Statements of Operations for the Year Ended December 31,
            1997, the Three Months Ended December 31, 1996, and the Years Ended
            September 30, 1996 and 1995

          Consolidated Statements of Stockholders' Equity for the Year Ended
            December 31, 1997, the Three Months Ended December 31, 1996, and
            the Years Ended September 30, 1996 and 1995

          Consolidated Statements of Cash Flows for the Year Ended
            December 31, 1997, the Three Months Ended December 31, 1996, and
            the Years Ended September 30, 1996 and 1995

          Notes to Consolidated Financial Statements

     2.   FINANCIAL STATEMENT SCHEDULES


                HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
 FOR THE YEAR ENDED DECEMBER 31, 1997, THE THREE MONTHS ENDED DECEMBER 31, 1996,
                 AND THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
                             (Dollars in Thousands)

<TABLE>
                                                               Additions
                                                         ---------------------
                                           Balance at    Charged to   Charged                  Balance
                                           beginning     costs and    to other                 at end
             Description                   of period      expenses    accounts   Deductions   of period
-------------------------------------      ---------     ----------   --------   ----------   ---------
<S>                                        <C>           <C>          <C>        <C>          <C>
FOR THE YEAR ENDED DECEMBER 31, 1997:
   Allowance for Doubtful Accounts         $  1,128       $  2,757      $  -     $  1,272     $  2,613

FOR THE THREE MONTHS ENDED DECEMBER 31,
 1996:
   Allowance for Doubtful Accounts            1,658            723         -        1,253        1,128

FOR THE YEAR ENDED SEPTEMBER 30, 1996:
   Allowance for Doubtful Accounts            1,492          2,872         -        2,706        1,658

FOR THE YEAR ENDED SEPTEMBER 30, 1995:
   Allowance for Doubtful Accounts              942          1,522         -          972        1,492
</TABLE>



                                       52
<PAGE>

   3.  EXHIBITS

EXHIBIT
NUMBER                               DESCRIPTION
------                               -----------

2.1    Agreement and Plan of Merger, dated July 9, 1996, between Clear Channel
       Communications, Inc. and Tichenor Media System, Inc. with Exhibits
       (Schedules omitted) (incorporated by reference to Exhibit 99 (c) (16) of
       Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc.,
       filed on July 9, 1996)

2.2    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and McHenry T. Tichenor, Sr. (incorporated
       by reference to Exhibit 99 (c) (17) of Amendment No. 2 to Schedule 14D-1
       of Clear Channel Communications, Inc., filed on July 9, 1996)

2.3    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and McHenry T. Tichenor, Jr. (incorporated
       by reference to Exhibit 99 (c) (18) of Amendment No. 2 to Schedule 14D-1
       of Clear Channel Communications, Inc., filed on July 9, 1996)

2.4    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and Warren Tichenor (incorporated by
       reference to Exhibit 99 (c) (19) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.5    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and William Tichenor (incorporated by
       reference to Exhibit 99 (c) (20) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.6    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and Jean Russell (incorporated by
       reference to Exhibit 99 (c) (21) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.7    Amended and Restated Agreement and Plan of Merger, dated October 10,
       1996, between Clear Channel Communications, Inc. and Tichenor Media
       System, Inc. without Exhibits (Schedules omitted) (incorporated by
       reference to Exhibit 2.5.7 to Registrant's Form 10-K/A for the year
       ended September 30, 1996)

2.8    Assignment Agreement, dated October 10, 1996 by Registrant and Heftel
       Merger Sub, Inc. (incorporated by reference to Exhibit 2.5.8 to
       Registrant's Form 10-K/A for the year ended September 30, 1996)

2.9    Assignment and Assumption Agreement, dated as of January 2, 1997, among
       the Registrant, Clear Channel, and Tichenor Media System, Inc.
       (incorporated by reference to Exhibit 2.5.16 to the Registrant's
       Registration Statement on Form S-3, as amended (Reg. No. 333-14207))

                                      53
<PAGE>

3.1    Second Amended and Restated Certificate of Incorporation of the
       Registrant dated February 14, 1997 (incorporated by reference to Exhibit
       3.1 to the Registrant's Form 8-K filed March 3, 1997)

3.2    Amended and Restated Bylaws of the Registrant (1)

4      Specimen certificate for the Class A Common Stock (1)

10.1   Lease dated May 15, 1987, between the Registrant and Hollywood and Vine
       Development Co. (incorporated by reference to Exhibit 10.15 of
       Registrant's Registration Statement on Form S-1 (Registration No.
       33-78370) filed on April 29, 1994, as amended (Registrant's S-1))

10.2   Tower Lease Agreement, dated April 13, 1990, between the Registrant and
       KTNQ/KLVE, Inc. (formerly Heftel Broadcasting of California, Inc.),
       together with the Assignment and Assumption Agreement dated April 13,
       1990 between the Registrant and The Tower Company (incorporated by
       reference to Exhibit 10.16 of Registrant's S-1)

10.3   Lease Agreement dated June 18, 1991 between Newcrow XI and KTNQ/KLVE,
       Inc. (incorporated by reference to Exhibit 10.17 of Registrant's S-1)

10.4   Reciprocal Easement Agreement, dated June 18 1991, between Newcrow XI
       and KTNQ/KLVE, Inc. (incorporated by reference to Exhibit 10.18 of
       Registrant's S-1)

10.5   Lease dated April 26, 1994, between the Registrant and Tropicana Trail
       Limited Partnership (incorporated by reference to Exhibit 10.14 of
       Registrant's S-1)

10.6   Stock Option Plan (incorporated by reference to Exhibit 10.4 of
       Registrant's S-1)

10.7   Form of Indemnification Agreement (incorporated by reference to Exhibit
       10.22 of Registrant's S-1)

10.8   Employment Agreement between KTNQ/KLVE, Inc. and Richard Heftel
       (incorporated by reference to Exhibit 10.23 of Registrant's S-1)

10.9   Amendment No. 1 to Employment Agreement dated May 31, 1996, between
       KTNQ/KLVE, Inc. and Richard Heftel (incorporated by reference to Exhibit
       10.5 of Registrant's Form 10-Q/A filed on November 6, 1996)

10.10  Lease Agreement, dated July 17, 1995, between the Registrant and 485
       Madison Associates, a New York Limited Partnership (incorporated by
       reference to Exhibit 10.20 of Registrant's Form 10-K filed on December
       29, 1995)

                                      54
<PAGE>

10.11  Employment Agreement dated August 1, 1995 between the Registrant and
       John T. Kendrick (incorporated by reference to Exhibit 10.15 to
       Registrant's Form 10-K filed on December 20, 1996)

10.12  Promissory Note dated January 9, 1996, executed by Registrant and HBC
       Florida, Inc. to the order of Mambisa (incorporated by reference to
       Exhibit 2.1.5 to Registrant's Form 10-K, filed on December 20, 1996)

10.13  Agreement Not to Compete, dated June 1, 1996, between the Company and
       Carl Parmer (incorporated by reference to Exhibit 99 (c) (4) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.14  Agreement Not to Compete, dated June 1, 1996, between the Company and
       Cecil Heftel (incorporated by reference to Exhibit 99 (c) (3) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.15  Settlement Agreement, dated June 1, 1996, between the Company and Carl
       Parmer (incorporated by reference to Exhibit 99 (c) (6) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.16  Settlement Agreement, dated June 1, 1996, between the Company and Cecil
       Heftel (incorporated by reference to Exhibit 99 (c) (5) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.17  Option Agreement, dated as of December 23, 1996, among Clear Channel,
       Golden West Broadcasters (GWB), and Gene Autry and Stanley B. Schneider,
       as co-trustees of the Autry Survivor's Trust, with Exhibits (Schedules
       omitted) (incorporated by reference to Exhibit 2.5.14 to the
       Registrant's Registration Statement on Form S-3, as amended (Reg. No.
       333-14207))

10.18  Time Brokerage Agreement, dated as of December 23, 1996, between GWB and
       Clear Channel (Exhibits omitted) (incorporated by reference to Exhibit
       2.5.15 to the Registrant's Registration Statement on Form S-3, as
       amended (Reg. No. 333-14207))

10.19  Time Brokerage Agreement, dated as of February 3, 1997, by and between
       Tichenor Media System, Inc. and Heart Unlimited Company (incorporated by
       reference to Exhibit 10.1 to Registrant's Form 8-K filed on May 14,
       1997)

10.20  Option Agreement, dated February 3, 1997, by and between Tichenor Media
       System, Inc. and Heart Unlimited Company (incorporated by reference to
       Exhibit 10.2 to Registrant's Form 8-K filed on May 14, 1997)

                                      55
<PAGE>

10.21  Registration Rights Agreement, dated February 14, 1997, by and among the
       Registrant, McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren
       W. Tichenor, William E. Tichenor, Jean T. Russell, McHenry T. Tichenor,
       Jr., as Custodian for David T. Tichenor, Alta Subordinated Debt Partners
       III, L.P., Prime II Management, LP, PrimeComm, LP, Ricardo A. del
       Castillo, Jeffrey Hinson and David L. Lykes (incorporated by reference
       to Exhibit 10.1 to the Registrant's Form 8-K filed March 3, 1997)

10.22  Employment Agreement, dated February 14, 1997, by and between the
       Registrant and McHenry T. Tichenor, Jr. (incorporated by reference to
       Exhibit 10.2 to the Registrant's Form 8-K filed March 3, 1997)

10.23  Stockholders Agreement, dated February 14, 1997, by and among the
       Registrant and each of  the stockholders listed on the signature pages
       thereto (incorporated by reference to Exhibit 10.4 to Schedule 13D of
       McHenry T. Tichenor, Jr. filed February 14, 1997)

10.24  Registration Rights Agreement, dated February 14, 1997, by and among the
       Registrant and Clear Channel Communications, Inc. (incorporated by
       reference to Exhibit 10.4 to the Registrant's Form 8-K filed March 3,
       1997)

10.25  Credit Agreement among the Registrant and its subsidiaries, The Chase
       Manhattan Bank, as administrative agent, and certain other lenders,
       dated February 14, 1997 without Exhibits (Schedules omitted)
       (incorporated by reference to Exhibit 10.5 to the Registrant's Form 8-K
       filed on May 14, 1997)

10.27  Asset Exchange Agreement, dated December 1, 1997, by and between
       Multicultural Radio Broadcasting, Inc. and Heftel Broadcasting
       Corporation.

10.28  Heftel Broadcasting Corporation Long-Term Incentive Plan (incorporated
       by reference to Appendix A to the Company's definitive Proxy Statement
       filed on April 24, 1997 (Commission File No. 000-24516)).

11     Statement regarding Computations of Per Share Earnings

16     Letter from Ernst & Young LLP regarding change of certifying accountants
       (incorporated by reference to Exhibit 16.1 to the Registrant's Form 8-K
       filed February 26, 1997)

21     Subsidiaries of the Registrant

23.1   Consent of KPMG Peat Marwick LLP

23.2   Consent of Ernst & Young LLP

24     Power of Attorney (included on Signature Page)

27.1   Financial Data Schedule

27.2   Financial Data Schedule

27.3   Financial Data Schedule

27.4   Financial Data Schedule

27.5   Financial Data Schedule

       Registrant agrees to furnish supplementally a copy of any omitted
schedules to the Commission upon request.

(1)  Incorporated by reference to the identically numbered Exhibit to the
     Company's Registration Statement on Form S-1, as amended
     (Reg. No. 33-78370).

                                      56
<PAGE>

(b)
       REPORTS ON FORM 8-K

       The Company filed a report on Form 8-K dated December 12, 1997 which
included consolidated balance sheets of Tichenor Media System, Inc.
("Tichenor") and its subsidiaries, which were acquired by the Company on
February 14, 1997, as of December 31, 1996 and 1995 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996,
with an Independent Auditors' Report dated October 17, 1997.  Also included
were unaudited pro forma condensed consolidated statements of operations of
the Company and its subsidiaries for the year ended December 31, 1996 and the
nine months ended September 30, 1997. The Tichenor acquisition is described
under the caption "Recent Developments" in Item 1 of Part I of this Form
10-K.





                                      57
<PAGE>


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 31,
1998.

                                      HEFTEL BROADCASTING CORPORATION

                                      By: /s/ McHenry T. Tichenor, Jr.
                                          -------------------------------------
                                          McHenry T. Tichenor, Jr.
                                          President and Chief Executive Officer

       Each person whose signature appears below authorizes McHenry T.
Tichenor, Jr. and Jeffrey T. Hinson, or either of them, each of whom may act
without joinder of the other, to execute in the name of each such person who
is then an officer or director of the Registrant and to file any amendments
to this annual report on Form 10-K necessary or advisable to enable the
Registrant to comply with the Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
report as such attorney-in-fact may deem appropriate.

       Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


            NAME                          TITLE                      DATE
            ----                          -----                      ----
/s/ McHenry T. Tichenor, Jr.
----------------------------  President, Chief Executive         March 31, 1998
McHenry T. Tichenor, Jr.      Officer and Chairman of the Board
                              of Directors
/s/ Jeffrey T. Hinson
----------------------------  Senior Vice President, Chief       March 31, 1998
Jeffrey T. Hinson             Financial Officer and Treasurer
                              (Principal Financial Officer)
/s/ David P. Gerow
----------------------------  Vice President and Controller      March 31, 1998
David P. Gerow                (Principal Accounting Officer)

/s/ McHenry T. Tichenor
----------------------------  Director                           March 31, 1998
McHenry T. Tichenor

/s/ Robert W. Hughes
----------------------------  Director                           March 31, 1998
Robert W. Hughes

/s/ James M. Raines
----------------------------  Director                           March 31, 1998
James M. Raines

/s/ Ernesto Cruz
----------------------------  Director                           March 31, 1998
Ernesto Cruz

                                     58
<PAGE>

                                EXHIBIT INDEX

EXHIBIT
NUMBER                           DESCRIPTION
------                           -----------

2.1    Agreement and Plan of Merger, dated July 9, 1996, between Clear Channel
       Communications, Inc. and Tichenor Media System, Inc. with Exhibits
       (Schedules omitted) (incorporated by reference to Exhibit 99 (c) (16) of
       Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc.,
       filed on July 9, 1996)

2.2    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and McHenry T. Tichenor, Sr. (incorporated
       by reference to Exhibit 99 (c) (17) of Amendment No. 2 to Schedule 14D-1
       of Clear Channel Communications, Inc., filed on July 9, 1996)

2.3    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and McHenry T. Tichenor, Jr. (incorporated
       by reference to Exhibit 99 (c) (18) of Amendment No. 2 to Schedule 14D-1
       of Clear Channel Communications, Inc., filed on July 9, 1996)

2.4    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and Warren Tichenor (incorporated by
       reference to Exhibit 99 (c) (19) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.5    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and William Tichenor (incorporated by
       reference to Exhibit 99 (c) (20) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.6    Stock Purchase Agreement dated as of July 9, 1996, by and among Clear
       Channel Communications, Inc., and Jean Russell (incorporated by
       reference to Exhibit 99 (c) (21) of Amendment No. 2 to Schedule 14D-1 of
       Clear Channel Communications, Inc., filed on July 9, 1996)

2.7    Amended and Restated Agreement and Plan of Merger, dated October 10,
       1996, between Clear Channel Communications, Inc. and Tichenor Media
       System, Inc. without Exhibits (Schedules omitted) (incorporated by
       reference to Exhibit 2.5.7 to Registrant's Form 10-K/A for the year
       ended September 30, 1996)

2.8    Assignment Agreement, dated October 10, 1996 by Registrant and Heftel
       Merger Sub, Inc. (incorporated by reference to Exhibit 2.5.8 to
       Registrant's Form 10-K/A for the year ended September 30, 1996)

2.9    Assignment and Assumption Agreement, dated as of January 2, 1997, among
       the Registrant, Clear Channel, and Tichenor Media System, Inc.
       (incorporated by reference to Exhibit 2.5.16 to the Registrant's
       Registration Statement on Form S-3, as amended (Reg. No. 333-14207))

                                      59
<PAGE>

3.1    Second Amended and Restated Certificate of Incorporation of the
       Registrant dated February 14, 1997 (incorporated by reference to Exhibit
       3.1 to the Registrant's Form 8-K filed March 3, 1997)

3.2    Amended and Restated Bylaws of the Registrant (1)

4      Specimen certificate for the Class A Common Stock (1)

10.1   Lease dated May 15, 1987, between the Registrant and Hollywood and Vine
       Development Co. (incorporated by reference to Exhibit 10.15 of
       Registrant's Registration Statement on Form S-1 (Registration No.
       33-78370) filed on April 29, 1994, as amended (Registrant's S-1))

10.2   Tower Lease Agreement, dated April 13, 1990, between the Registrant and
       KTNQ/KLVE, Inc. (formerly Heftel Broadcasting of California, Inc.),
       together with the Assignment and Assumption Agreement dated April 13,
       1990 between the Registrant and The Tower Company (incorporated by
       reference to Exhibit 10.16 of Registrant's S-1)

10.3   Lease Agreement dated June 18, 1991 between Newcrow XI and KTNQ/KLVE,
       Inc. (incorporated by reference to Exhibit 10.17 of Registrant's S-1)

10.4   Reciprocal Easement Agreement, dated June 18 1991, between Newcrow XI
       and KTNQ/KLVE, Inc. (incorporated by reference to Exhibit 10.18 of
       Registrant's S-1)

10.5   Lease dated April 26, 1994, between the Registrant and Tropicana Trail
       Limited Partnership (incorporated by reference to Exhibit 10.14 of
       Registrant's S-1)

10.6   Stock Option Plan (incorporated by reference to Exhibit 10.4 of
       Registrant's S-1)

10.7   Form of Indemnification Agreement (incorporated by reference to Exhibit
       10.22 of Registrant's S-1)

10.8   Employment Agreement between KTNQ/KLVE, Inc. and Richard Heftel
       (incorporated by reference to Exhibit 10.23 of Registrant's S-1)

10.9   Amendment No. 1 to Employment Agreement dated May 31, 1996, between
       KTNQ/KLVE, Inc. and Richard Heftel (incorporated by reference to Exhibit
       10.5 of Registrant's Form 10-Q/A filed on November 6, 1996)

10.10  Lease Agreement, dated July 17, 1995, between the Registrant and 485
       Madison Associates, a New York Limited Partnership (incorporated by
       reference to Exhibit 10.20 of Registrant's Form 10-K filed on December
       29, 1995)

10.11  Employment Agreement dated August 1, 1995 between the Registrant and
       John T. Kendrick (incorporated by reference to Exhibit 10.15 to
       Registrant's Form 10-K filed on December 20, 1996)

                                     60
<PAGE>

10.12  Promissory Note dated January 9, 1996, executed by Registrant and HBC
       Florida, Inc. to the order of Mambisa (incorporated by reference to
       Exhibit 2.1.5 to Registrant's Form 10-K, filed on December 20, 1996)

10.13  Agreement Not to Compete, dated June 1, 1996, between the Company and
       Carl Parmer (incorporated by reference to Exhibit 99 (c) (4) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.14  Agreement Not to Compete, dated June 1, 1996, between the Company and
       Cecil Heftel (incorporated by reference to Exhibit 99 (c) (3) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.15  Settlement Agreement, dated June 1, 1996, between the Company and Carl
       Parmer (incorporated by reference to Exhibit 99 (c) (6) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.16  Settlement Agreement, dated June 1, 1996, between the Company and Cecil
       Heftel (incorporated by reference to Exhibit 99 (c) (5) of Clear
       Channel's Schedule 14D-1 filed on June 7, 1996)

10.17  Option Agreement, dated as of December 23, 1996, among Clear Channel,
       Golden West Broadcasters (GWB), and Gene Autry and Stanley B. Schneider,
       as co-trustees of the Autry Survivor's Trust, with Exhibits (Schedules
       omitted) (incorporated by reference to Exhibit 2.5.14 to the
       Registrant's Registration Statement on Form S-3, as amended (Reg. No.
       333-14207))

10.18  Time Brokerage Agreement, dated as of December 23, 1996, between GWB and
       Clear Channel (Exhibits omitted) (incorporated by reference to Exhibit
       2.5.15 to the Registrant's Registration Statement on Form S-3, as
       amended (Reg. No. 333-14207))

10.19  Time Brokerage Agreement, dated as of February 3, 1997, by and between
       Tichenor Media System, Inc. and Heart Unlimited Company (incorporated by
       reference to Exhibit 10.1 to Registrant's Form 8-K filed on May 14,
       1997)

10.20  Option Agreement, dated February 3, 1997, by and between Tichenor Media
       System, Inc. and Heart Unlimited Company (incorporated by reference to
       Exhibit 10.2 to Registrant's Form 8-K filed on May 14, 1997)

10.21  Registration Rights Agreement, dated February 14, 1997, by and among the
       Registrant, McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren
       W. Tichenor, William E. Tichenor, Jean T. Russell, McHenry T. Tichenor,
       Jr., as Custodian for David T. Tichenor, Alta Subordinated Debt Partners
       III, L.P., Prime II Management, LP, PrimeComm, LP, Ricardo A. del
       Castillo, Jeffrey Hinson and David L. Lykes (incorporated by reference
       to Exhibit 10.1 to the Registrant's Form 8-K filed March 3, 1997)

10.22  Employment Agreement, dated February 14, 1997, by and between the
       Registrant and McHenry T. Tichenor, Jr. (incorporated by reference to
       Exhibit 10.2 to the Registrant's Form 8-K filed March 3, 1997)

                                     61
<PAGE>

10.23  Stockholders Agreement, dated February 14, 1997, by and among the
       Registrant and each of  the stockholders listed on the signature pages
       thereto (incorporated by reference to Exhibit 10.4 to Schedule 13D of
       McHenry T. Tichenor, Jr. filed February 14, 1997)

10.24  Registration Rights Agreement, dated February 14, 1997, by and among the
       Registrant and Clear Channel Communications, Inc. (incorporated by
       reference to Exhibit 10.4 to the Registrant's Form 8-K filed March 3,
       1997)

10.25  Credit Agreement among the Registrant and its subsidiaries, The Chase
       Manhattan Bank, as administrative agent, and certain other lenders,
       dated February 14, 1997 without Exhibits (Schedules omitted)
       (incorporated by reference to Exhibit 10.5 to the Registrant's Form 8-K
       filed on May 14, 1997)

10.26  Asset Purchase Agreement, dated March 28, 1997, by and among Roy E.
       Henderson and Fort Bend Broadcasting Company, Inc. and Tichenor Media
       System, Inc. (incorporated by reference to Exhibit 10.3 to Registrant's
       Form 8-K filed on May 14, 1997)

10.27  Asset Exchange Agreement, dated December 1, 1997, by and between
       Multicultural Radio Broadcasting, Inc. and Heftel Broadcasting
       Corporation.

10.28  Heftel Broadcasting Corporation Long-Term Incentive Plan (incorporated
       by reference to Appendix A to the Company's definitive Proxy Statement
       filed on April 24, 1997 (Commission File No. 000-24516)).

11     Statement regarding Computations of Per Share Earnings

16     Letter from Ernst & Young LLP regarding change of certifying accountants
       (incorporated by reference to Exhibit 16.1 to the Registrant's Form 8-K
       filed February 26, 1997)

21     Subsidiaries of the Registrant

23.1   Consent of KPMG Peat Marwick LLP

23.2   Consent of Ernst & Young LLP

24     Power of Attorney (included on Signature Page)

27.1   Financial Data Schedule

27.2   Financial Data Schedule

27.3   Financial Data Schedule

27.4   Financial Data Schedule

27.5   Financial Data Schedule

       Registrant agrees to furnish supplementally a copy of any omitted
schedules to the Commission upon request.

(1)  Incorporated by reference to the identically numbered Exhibit to the
     Company's Registration Statement on Form S-1, as amended
     (Reg. No. 33-78370).

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