<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, 1998, 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.)

                         3102 Oak Lawn Avenue, Suite 215
                               Dallas, Texas 75219
                            Telephone (214) 525-7700
               (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 19, 1999, the aggregate market price of the Class A Common Stock held
by non-affiliates of the Company was approximately $1,078.1 million. (For
purposes hereof, directors, executive officers and 10% or greater shareholders
have been deemed affiliates).

On March 19, 1999, there were 35,182,719 outstanding shares of Class A Common
Stock, $.001 par value per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1999 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>
<CAPTION>
                                                                                      Page
                                                                                    Number
<S>                                                                                 <C>
PART I.

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

Item 2.  Properties.....................................................................16

Item 3.  Legal Proceedings..............................................................16

Item 4.  Submission of Matters to a Vote of Security Holders............................16

PART II.

Item 5.  Market for Registrant's Class A Common Stock and Related Stockholder Matters... 17

Item 6.  Selected Financial Data........................................................ 18

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations............................................ 19

Item 7a. Quantitative and Qualitative Disclosures About Market Risk .................... 23

Item 8.  Financial Statements and Supplementary Data ................................... 24

Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure............................................ 44

PART III.

Item 10.  Directors and Executive Officers of the Registrant............................ 45

Item 11.  Executive Compensation........................................................ 45

Item 12.  Security Ownership of Certain Beneficial Owners and Management................ 45

Item 13.  Certain Relationships and Related Transactions................................ 45

PART IV.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............. 46
</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 39 radio stations in 12 markets. The Company's stations are located in
eleven 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, San Diego 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 21,641,400 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 10
of the 12 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, 1998:

<TABLE>
<CAPTION>
        Ranking of
         Market by                                                              No. of
         Hispanic                                                              Stations      
       Population (1)                      Market                            AM       FM     
------------------------------------------------------------------------ ---------- ----------
      <S>             <C>                                                    <C>      <C>
           1          Los Angeles                                             1        2
           2          New York                                                1        1
           3          Miami                                                   2        2
           4          San Francisco/San Jose                                  0        2
           5          Chicago                                                 2        1
           6          Houston                                                 2        5
           7          San Antonio                                             2        2
           8          Dallas/Fort Worth                                       2        3
           9          McAllen/Brownsville/Harlingen                           1        2
           10         San Diego                                               0        2
           11         El Paso                                                 2        1
           26         Las Vegas                                               1        0
                                                                         ---------------------
                          Total                                              16       23
</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 10.4% of the total United States population) at the end of
     1995 to an estimated 30.4 million (approximately 11.2% 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 $1.7 billion in 1998. 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 3102 Oak Lawn
Avenue, Suite 215, Dallas, Texas 75219 and the telephone number is (214)
525-7700.

RECENT DEVELOPMENTS

         KISF(FM) ACQUISITION. The Company entered into an asset purchase 
agreement with Radio Vision, Inc. and George E. Tobin on March 1, 1999, to 
acquire the assets of KISF(FM) serving the Las Vegas market for $20.3 
million. The closing of this asset acquisition is expected to occur during 
the second quarter of 1999. Immediately after closing, the station's 
programming will be converted to a Spanish language format. Consummation of 
the purchase is subject to a number of conditions, including approval by the 
FCC of the transfer of the FCC licenses.

         KHOT(FM) ACQUISITION. The Company entered into an asset purchase 
agreement with New Century Arizona, LLC and New Century Arizona License 
Partnership on January 27, 1999, to acquire the assets of KHOT(FM) serving 
the Phoenix market for $18.3 million. The closing of this asset acquisition 
is expected to occur during the second quarter of 1999. Immediately after 
closing, the station's programming will be converted to a Spanish language 
format. Consummation of the purchase is subject to a number of conditions, 
including approval by the FCC of the transfer of the FCC licenses.

         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) in
Los Angeles, California, upon the death of Gene Autry, the indirect principal
stockholder of the seller (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. Gene Autry died on October 2, 1998,
and the Company exercised the KSCA Option. The closing of the acquisition of the
KSCA(FM) assets is expected to occur during the second quarter of 1999. The
Company made a total of $13.0 million in payments under the terms of the KSCA
Option which will be credited against the purchase price of the KSCA (FM)
assets. If the acquisition closes on June 1, 1999, the purchase price for the
KSCA(FM) assets will be approximately $116.6 million ($103.6 million would be
paid at closing after the $13.0 million in option payments are credited to the
purchase price). Consummation of the acquisition is subject to a number of
conditions, including approval by the FCC of the transfer of FCC licenses.

         KLQV(FM) AND KLNV(FM) ACQUISITION. The Company entered into an asset
purchase agreement with Citicasters Co. on May 26, 1998, to acquire the assets
of KLQV(FM) and KLNV(FM) (formerly KJQY(FM) and KKLQ(FM)) serving the San Diego
market (the "San Diego Acquisition") for $65.2 million. The San Diego
Acquisition closed on August 10, 1998. Immediately after closing, the
programming of the stations was converted to two Spanish language formats.

         KLTN(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 KLTN(FM) (formerly 


                                       4
<PAGE>

KKPN(FM)), serving the Houston, Texas market, for $54.0 million in cash (the 
"KLTN(FM) Acquisition"). The KLTN(FM) Acquisition closed on May 29, 1998. 
Immediately after closing, the station's programming was converted to a 
Spanish language format.

         WCAA(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 $115.5 million in cash for the assets of WCAA(FM) (formerly WNWK(FM)), an FM
station also serving the New York City market (the "WCAA(FM) Acquisition"). The
WCAA(FM) Acquisition closed on May 22, 1998. WCAA(FM) broadcasts on 105.9 MHz
from a transmitter site located on the Empire State Building. Immediately
following the consummation of the WCAA(FM) Acquisition, the Company converted
the station's programming to a Spanish language format.

SALE OF CLASS A COMMON STOCK

         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 $205.1 million in proceeds. The proceeds from the offering were used
to repay borrowings under the Company's credit facility and to finance the
WCAA(FM) Acquisition, the KLTN(FM) Acquisition, and a portion of the San Diego 
Acquisition.

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 the 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 music 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 with a distinct Mexican flavor. Banda is a regional
music 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.


                                       5
<PAGE>

         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.

COMPANY'S STATIONS
         The following table sets forth information regarding the radio stations
owned or programmed by the Company as of December 31, 1998:

<TABLE>
<CAPTION>

   RANKING OF
    MARKET BY                                                                             PRIMARY 
    HISPANIC                                                                            DEMOGRAPHIC
   POPULATION           MARKET(1)                STATION          STATION FORMAT(2)       MARKET
------------- ------------------------------- ------------------ ------------------- ---------------
<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                           WCAA(FM)            Tropical             A 25-54
                                                 WADO(AM)           News/Talk             A 25+

       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                            KLTN(FM)        Regional Mexican         A 18-49
                                                 KOVE(FM)          Contemporary           A 25-54
                                                 KOVA(FM)          Contemporary           A 25-54
                                                 KLTO(FM)          Contemporary           A 25-54
                                                 KLAT(AM)            News/Talk            A 25-54
                                                 KRTX(FM)             Tejano              A 25-54
                                                 KRTX(AM)             Tejano              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      Dallas/Fort Worth                  KESS(AM)          Full Service            A 18+
                                                 KHCK(FM)             Tejano              A 18-49
                                                 KDXT(FM)          Contemporary           A 18-49
                                                 KDXX(FM)             Tejano              A 18-49
                                                 KDXX(AM)          Contemporary           A 18-49

       9      McAllen/Brownsville/Harlingen      KGBT(FM)        Regional Mexican         A 25-54
                                                 KGBT(AM)        Regional Mexican         A 25-54
                                                 KIWW(FM)             Tejano              A 25-54


                                       6
<PAGE>

<CAPTION>

   RANKING OF
    MARKET BY                                                                             PRIMARY 
    HISPANIC                                                                            DEMOGRAPHIC
   POPULATION           MARKET(1)                STATION          STATION FORMAT(2)       MARKET
------------- ------------------------------- ------------------ ------------------- ---------------
<S>           <C>                             <C>                <C>                 <C>
        10      San Diego                        KLQV(FM)          Contemporary           A 25-54
                                                 KLNV(FM)        Regional Mexican         A 18-49

        11      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>

(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. 

The following table sets forth selected information with regard to Company owned
radio stations:

<TABLE>
<CAPTION>
                                                 DATE         LICENSE         BROADCAST 
              STATION/LOCATION                 ACQUIRED   EXPIRATION DATE     FREQUENCY
------------------------------------------- ------------ ---------------- --------------
<S>                                         <C>          <C>              <C>
KTNQ(AM), Los Angeles, CA                       10/85         12/1/05          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
WCAA(FM), New York, NY                           5/98          6/1/98 (1)     105.9 MHz
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                            5/98          8/1/05         102.9 MHz
KOVE(FM), Houston, TX                            2/97          8/1/05          93.3 MHz
KOVA(FM), Houston, TX                            2/97          8/1/05         104.9 MHz
KLTO(FM), Houston, TX                            2/97          8/1/05         104.9 MHz
KRTX(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


                                       7
<PAGE>
                                                 DATE         LICENSE         BROADCAST 
              STATION/LOCATION                 ACQUIRED   EXPIRATION DATE     FREQUENCY
------------------------------------------- ------------ ---------------- --------------

KIWW(FM), McAllen/Brownsville/Harlingen, TX      2/97          8/1/05          96.1 MHz
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), Dallas/Ft. Worth, TX                   4/95          8/1/05         107.9 MHz
KDXT(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
KLNV(FM), San Diego, CA                          8/98         12/1/97 (1)     106.5 MHz
KLQV(FM), San Diego, CA                          8/98         12/1/97 (1)     102.9 MHz
</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 1996-1998 radio metro ratings and national data base (the
Company's station rankings were based upon the Arbitron Adults 25-54 category
1998 Fall Book); 1997 U.S. Census; Strategy Research Corporation--1998 U.S.
Hispanic Market Study; Hispanic Business (December 1993-1998); 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 radio broadcasting station
except under a license issued by the FCC and empowers the FCC, among other
things, 


                                       8
<PAGE>

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.

         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 1996 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 1996 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 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.

         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.


                                       9
<PAGE>

         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 FCC 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 FCC 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 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 "--Control by Certain 
Stockholders--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 

                                      10
<PAGE>

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 FCC'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 and the FCC has implemented the eight year
license term provision for radio stations. 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 person other than the renewal applicant. Instead,
under the 1996 Act, competing applications for the same frequency may be
accepted only after the FCC 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 


                                      11
<PAGE>

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.

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 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. 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 


                                      12
<PAGE>

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. For example, the FCC has recently adopted
new rules which, with limited exceptions, requires the holder of an FCC
construction permit to complete construction of new or modified facilities
within three (3) years of grant. 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 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 47% of the Company's broadcast cash flow for the
year ended December 31, 1998. 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 March 11, 1999, the Tichenor
Family had voting control over approximately 20.6% 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.


                                      13
<PAGE>

RELATIONSHIP BETWEEN THE COMPANY AND CLEAR CHANNEL.

         As of March 19, 1999, 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 28.7%
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 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 December 31, 1998, Clear Channel owned,
programmed or sold airtime for 206 radio stations in 48 domestic markets, as
well as radio stations in a number of foreign countries. Clear Channel also
owned or programmed 20 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.


                                      14
<PAGE>

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.

INDUSTRY SEGMENTS

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

EMPLOYEES

         As of March 23, 1999, the Company employed 652 persons on a full-time
basis, including corporate employees and 16 employees (at WCAA(FM) and WADO(AM),
New York) who are subject to two collective bargaining agreements. The Company
considers its employee relations to be good.


                                      15
<PAGE>

ITEM 2.  PROPERTIES

         The Company's corporate headquarters is in Dallas, Texas. The Company
has leased approximately 11,000 square feet at 3102 Oak Lawn Avenue in Dallas,
Texas. 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 1998. 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, 1998, the Company owns or
programs 39 radio stations in 12 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

         In the ordinary course of business, the Company becomes involved in
certain 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.


                                      16
<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>
<CAPTION>
                                                HIGH           LOW
                                             -----------   -----------
<S>                                          <C>           <C>
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

YEAR ENDED DECEMBER 31, 1998
   First Quarter...........................     $  50.88      $  40.38
   Second Quarter..........................        45.50         34.88
   Third Quarter...........................        42.81         30.00
   Fourth Quarter..........................        49.25         31.25
</TABLE>


         As of December 31, 1998, there were approximately 79 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.






                                      17

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following table presents selected consolidated financial data for
Heftel Broadcasting Corporation and its subsidiaries for the years ended
December 31, 1998 and 1997, the three months ended December 31, 1996, and the
years ended September 30, 1996, 1995 and 1994 (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                   
                                                                   Three Months 
                                           Year Ended December 31,    Ended          Year Ended September 30,
                                         ------------------------- December 31, -----------------------------------
                                             1998         1997         1996        1996        1995       1994
                                         --------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenues                             $   164,122  $   136,584  $    18,309  $   71,732  $   64,160 $   27,433
Operating expenses                            95,784       82,065       11,207      48,896      43,643     15,345
Depreciation and amortization                 21,149       14,928        1,747       5,140       3,344      1,906
                                         -----------  -----------  -----------  ----------  ---------- ----------
Operating income before corporate             47,189       39,591        5,355      17,696      17,173     10,182
 expenses
Corporate expenses                             5,451        4,579          368       5,072       4,720      3,454
                                         -----------  -----------  -----------  ----------  ---------- ----------
Operating income                              41,738       35,012        4,987      12,624      12,453      6,728
                                         -----------  -----------  -----------  ----------  ---------- ----------

Other income (expense):
 Interest income (expense), net                2,634       (3,541)      (2,841)    (11,034)     (6,389)    (2,997)
 Income (loss) in equity of joint venture(a)       -            -            -           -           -        616
 Restructuring charges(b)                          -            -            -     (29,011)          -          -
 Other, net                                      252          (82)          18      (1,671)       (428)    (1,407)
                                         -----------  -----------  -----------  ----------  ---------- ----------
                                               2,886       (3,623)      (2,823)    (41,716)     (6,817)    (3,788)
                                         -----------  -----------  -----------  ----------  ---------- ----------

Income (loss) before minority interest
 and income tax                               44,624       31,389        2,164     (29,092)      5,636      2,940
Minority interest(a)                               -            -            -           -       1,167        351
Income tax                                    17,740       12,617          100          65         150        100
                                         -----------  -----------  -----------  ----------  ---------- ----------
Income (loss) from continuing operations      26,884       18,772        2,064     (29,157)      4,319      2,489
Loss on discontinued operations of CRC(b)          -            -            -       9,988         626        285
                                         -----------  -----------  -----------  ----------  ---------- ----------
Income (loss) before extraordinary item       26,884       18,772        2,064     (39,145)      3,693      2,204
Extraordinary item - loss on retirement
 of debt                                           -            -            -       7,461           -      1,738
                                         -----------  -----------  -----------  ----------  ---------- ----------
Net income (loss)                        $    26,884  $    18,772  $     2,064  $  (46,606) $    3,693 $      466
                                         -----------  -----------  -----------  ----------  ---------- ----------
                                         -----------  -----------  -----------  ----------  ---------- ----------

Net income (loss) per common share(c):

 Basic:
 Continuing operations                   $      0.55  $      0.45  $      0.09  $   (1.41)  $     0.21 $     0.25
 Discontinued operations                           -            -            -      (0.49)       (0.03)     (0.03)
 Extraordinary loss                                -            -            -      (0.36)           -      (0.19)
                                         -----------  -----------  -----------  ---------   ---------- ----------
 Net income (loss)                       $      0.55  $      0.45  $      0.09  $   (2.26)  $     0.18 $     0.03
                                         -----------  -----------  -----------  ---------   ---------- ----------
                                         -----------  -----------  -----------  ---------   ---------- ----------

 Diluted:
 Continuing operations                   $      0.54  $      0.45  $      0.09  $   (1.41)  $     0.20 $     0.22
 Discontinued operations                           -            -            -      (0.49)       (0.03)     (0.03)
 Extraordinary loss                                -            -            -      (0.36)           -      (0.16)
                                         -----------  -----------  -----------  ---------   ---------- ----------
 Net income (loss)                       $      0.54  $      0.45  $      0.09  $   (2.26)  $     0.17 $     0.03
                                         -----------  -----------  -----------  ---------   ---------- ----------
                                         -----------  -----------  -----------  ---------   ---------- ----------

Weighted average common shares outstanding:
 Basic                                        49,021       41,671       23,095     20,590       20,021      9,137
 Diluted                                      49,348       41,792       23,095     20,590       21,611     10,769

OTHER OPERATING DATA:
Broadcast cash flow                      $    68,338  $    54,519  $     7,102  $   22,836  $   20,517 $   12,088
EBITDA                                        62,887       49,940        6,734      17,764      15,797      8,634

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital                          $    17,168  $    10,970  $     8,429  $    7,168  $   14,967 $   18,366
Net intangible assets                        643,955      423,530      120,592     121,742     109,253     70,528
Total assets                                 744,444      512,249      163,725     165,751     151,637    113,353
Long-term debt, less current portion           1,547       14,122      135,504     137,659      97,516     59,898
Stockholders' equity                         622,621      389,960       14,166      12,101      43,581     44,436
</TABLE>

(a) Effective August 20, 1994, the Company began accounting for its 49.0%
    interest in Viva Media on a consolidated basis. Accordingly, Viva Media's
    result of operations are included in the consolidated financial statements 
    commencing August 20, 1994. The Company acquired the remaining 51.0% of 
    Viva Media on September 7, 1995. Prior to August 20, 1994, the results of 
    operations of Viva Media were accounted for using the equity method of 
    accounting.
(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.

                                       18
<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 years ended December 31, 1998 and 1997,
the three months ended December 31, 1996 and the year ended September 30, 
1996 and consolidated financial condition as of December 31, 1998 and 1997 
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.

         Another measure of operating performance is EBITDA. EBITDA consists 
of operating income or loss excluding depreciation and amortization and other 
non-cash and non-recurring charges.

         Broadcast cash flow and EBITDA are not calculated in accordance with 
generally accepted accounting principles. These measures should not be 
considered in isolation or as substitutes 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 and EBITDA do 
not take into account the Company's debt service requirements and other 
commitments and, accordingly, broadcast cash flow and EBITDA are 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, 1998 COMPARED TO THE 
YEAR ENDED DECEMBER 31, 1997.

         The results of operations for the year ended December 31, 1998 are 
not comparable to results of operations for the same period in 1997 primarily 
due to (a) the Tichenor Merger which closed February 14, 1997, and (b) the 
start-up of radio stations KSCA(FM) in Los Angeles on February 5, 1997, 
WCAA(FM) in New York on May 22, 1998 (WPAT(AM) was exchanged for WCAA(FM)), 
KRTX(AM/FM) in Houston on May 29, 1998, and KLQV(FM) and KLNV(FM) in San 
Diego on August 10, 1998.

         Net revenues for the year ended December 31, 1998 increased by $27.5 
million, or 20.1% to $164.1 million compared to $136.6 million for the year 
ended December 31, 1997. Operating expenses increased by $13.7 million, or 
16.7%, to $95.8 million for the year ended December 31, 1998 compared to $82.1 
million for the year ended December 31, 1997. Broadcast cash flow increased 
$13.8 million, or 25.3% to $68.3 million for the year ended December 31, 1998 
compared to $54.5 million for the year ended December 31, 1997. The improved 
operating performance was due to same station revenue growth.

         Corporate expenses for the year ended December 31, 1998 increased by 
$0.9 million, or 19.6%, to $5.5 million compared to $4.6 million for the year 
ended December 31, 1997. The increase was primarily due to higher staffing 
costs of the Company after the Tichenor Merger. As a result, EBITDA increased 
$12.9 million, or 25.9% to $62.9 million.

         Depreciation and amortization for the year ended December 31, 1998 
increased 41.6% to $21.1 million compared to $14.9 million for the year ended 
December 31, 1997. The increase is due to radio 

                                       19
<PAGE>

station acquisitions, capital expenditures, and the additional depreciation 
and amortization associated with the Tichenor Merger included in all of the 
year ended December 31, 1998 compared to a portion of the same period in 1997.

         Interest expense, net of interest income decreased from $3.5 million 
for the year ended December 31, 1997 to $2.6 million of interest income, net 
of interest expense for the year ended December 31, 1998. The reduction in 
interest expense was the result of the repayment of debt funded from the 
January 1998 Offering. Interest income increased due to an increase in 
invested cash from the January 1998 Offering.

         Other, net decreased from $0.1 million of other expense for the year 
ended December 31, 1997 to $0.3 million of the other income for the year 
ended December 31, 1998. In 1998, the Company reversed the remaining balance 
of an accrual of costs relating to unconsummated acquisitions of $0.3 million 
which was made in a prior reporting period.

         Income tax expense increased from $12.6 million for the year ended 
December 31, 1997 to $17.7 million for the year ended December 31, 1998. The 
increase was primarily due to income before income tax increasing from $31.4 
million for the year ended December 31, 1997 to $44.6 million for the year 
ended December 31, 1998. The effective tax rates for the years ended December 
31, 1997 and 1998 are 40.2% and 39.8%, respectively.

         Net income of $18.8 million was generated by the Company for the 
year ended December 31, 1997 compared to net income of $26.9 million for the 
year ended December 31, 1998.

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.

         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.

                                       20
<PAGE>

         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 of $29.1 million for the year ended September 30, 1996 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 million 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.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities for the years ended 
December 31, 1998 and 1997 was $57.0 and $43.8 million, respectively. 
Generally, capital expenditures are financed with cash provided by operations 
and long-term borrowings. For the years ended December 31, 1998 and 1997, the 
Company's capital expenditures were $4.7 and $4.0 million, respectively. The 
increase in capital expenditures was due primarily to the office space 
improvement costs for New York and the corporate office in Dallas. During 
1998 and 1997, the Company spent $236.6 and $1.1 million ($3.2 million to 
acquire KOVA(FM) net of approximately $2.1 million of cash and cash 
equivalents acquired in the Tichenor Merger), respectively, to acquire radio 
stations.

STOCKHOLDERS' EQUITY

         On January 22, 1998, the Company completed the 1998 Offering, 
selling 5,175,000 shares of Class A Common Stock for $39.75 per share, after 
underwriters' discounts and commissions. The net proceeds of the offering 
were approximately $205.1 million.

         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.

                                       21
<PAGE>

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 February 1997 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 February 
1997 Offering to retire the outstanding debt and senior preferred stock of 
Tichenor assumed on the date of the Tichenor Merger. At December 31, 1997, 
the Company had outstanding borrowings of $12.0 million under the Credit 
Facility. On January 29, 1998, the Company repaid the entire amount 
outstanding under the Credit Facility. In August 1998, the Company borrowed 
$18.0 million which was subsequently repaid in December 1998. 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. 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, 1998. 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 additional borrowings under the Credit Facility and available cash 
balances.

ACCOUNTING PRONOUNCEMENTS

         In 1998, the Company adopted 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. The adoption of these new accounting standards did not 
have a material impact on the Company.

YEAR 2000

         The Year 2000 problem is the result of computer programs being 
written using two digits rather than four to define the applicable year. 
Programs that have time-sensitive software may recognize a date using "00" as 
the year 1900 rather than the year 2000. This could result in system failures 
or miscalculations.

         The Company has been replacing its software and hardware 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.

         All software used in the accounting system is in the process of 
being replaced. The key software components used in the accounting system are 
the general ledger and traffic system. The general ledger is used to record 
all transactional activity whereas the traffic system is used to record the 
airing of commercials, perform billing and maintain the accounts receivable 
detail. The new general ledger software has been implemented in twelve of the 
thirteen locations in which the Company operates. The one remaining location 
will implement the new general ledger software by May 1, 1999. Ten of the 
twelve radio station markets in which the Company operates have implemented 
the new traffic software. The two remaining radio station markets will 
implement the new traffic software at or around June 1999. The Company is in 
the 

                                       22
<PAGE>

process of reviewing the hardware used in its operations that might be 
affected by the Year 2000 problem. Hardware testing for Year 2000 compliance 
is anticipated to be completed by June 30, 1999.

         Inquiries of the Company's top ten customers, vendors and service 
providers regarding Year 2000 compliance will be made during 1999.

         The Company decided, after the merger with Tichenor Media System, 
Inc. in February 1997, to change its general ledger and traffic system 
software so all locations would be on the same system. The replacement of the 
general ledger and traffic system software was not accelerated due to Year 
2000 issues.

         The Company does not believe the costs related to the Year 2000 
compliance project will be material to its financial position or results of 
operations. Unanticipated failures by critical customers, vendors and service 
providers, as well as the failure by the Company to execute its own 
remediation efforts, could have a material adverse effect on the cost of the 
Year 2000 project, its completion date, and the Company's financial position 
or results of operations. The Company has not yet established contingency 
plans in the event of the failure of its system with regard to Year 2000 
compliance or those of its significant customers, vendors and service 
providers. Based on its assessment of the Year 2000 issue, the Company will 
establish contingency plans, however there is no assurance that such plans 
will be adequate to meet the Company's needs in the event of any disruption 
in the Company's operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company does not have significant market risk exposure since it 
does not have any outstanding variable rate debt or derivative financial and 
commodity instruments as of December 31, 1998.






                                       23
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                         Number
                                                                                                         -------
<S>                                                                                                      <C>
Reports of Independent Auditors......................................................................... 25 - 26

Consolidated Balance Sheets as of December 31, 1998 and 1997................................................. 27

Consolidated Statements of Operations for the Years Ended December 31, 1998 and 1997,
     the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 28

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998 and 1997,
     the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 29

Consolidated Statements of Cash Flows for the Years Ended December 31, 1998 and 1997,
     the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 30

Notes to Consolidated Financial Statements................................................................... 31
</TABLE>








                                       24
<PAGE>


                           INDEPENDENT AUDITORS' REPORT


The Board of Directors
Heftel Broadcasting Corporation:


We have audited the accompanying consolidated balance sheets of Heftel 
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997, 
and the related consolidated statements of operations, stockholders' equity, 
and cash flows for the years then ended. In connection with our audits of the 
consolidated financial statements, we also have audited the financial 
statement schedule for these periods included at Item 14(a)(2). These 
consolidated financial statements and financial statement schedule are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these consolidated financial statements and financial statement 
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 audits 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 financial statements referred to above 
present fairly, in all material respects, the financial position of Heftel 
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997, 
and the results of their operations and their cash flows for the years then 
ended in conformity with generally accepted accounting principles. Also, in 
our opinion, the related financial statement schedule, 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 LLP



Dallas, Texas
February 15, 1999

                                       25
<PAGE>


                          REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Heftel Broadcasting Corporation

        We have audited the accompanying consolidated statements of 
operations, stockholders' equity and cash flows of Heftel Broadcasting 
Corporation for the three months ended December 31, 1996 and the year 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 financial statements referred to 
above present fairly, in all material respects, the consolidated results of 
operations and cash flows of Heftel Broadcasting Corporation for the three 
months ended December 31, 1996 and the year 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, presents fairly 
in all material respects the information set forth therein.

                                       /s/ ERNST & YOUNG LLP



Los Angeles, California
July 2, 1997


                                       26
<PAGE>
                                       
               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                    ------------------------------
                                                                                         1998             1997
                                                                                    ---------------  -------------
<S>                                                                                 <C>              <C>
Current assets:
   Cash and cash equivalents                                                        $  10,293,241     $  6,553,271
   Accounts receivable, net of allowance of $2,301,286 in 1998 and $2,612,847 in       34,309,106       29,324,324
      1997
   Prepaid expenses and other current assets                                              456,843          817,456
                                                                                     ------------     ------------
         Total current assets                                                          45,059,190       36,695,051
                                                                                     ------------     ------------

Property and equipment, at cost:
   Land                                                                                 7,965,865       11,046,486
   Buildings and improvements                                                           7,366,617        7,034,799
   Broadcast and other equipment                                                       25,948,994       20,663,573
   Furniture and fixtures                                                               8,356,121        5,705,226
                                                                                     ------------     ------------
                                                                                       49,637,597       44,450,084
   Less accumulated depreciation                                                       15,830,226       11,150,167
                                                                                     ------------     ------------
                                                                                       33,807,371       33,299,917
                                                                                     ------------     ------------
Intangible assets:
   Broadcast licenses                                                                 569,914,391      334,821,684
   Cost in excess of fair value of net assets acquired                                 97,553,319       95,308,112
   Other intangible assets                                                             14,861,481       14,351,232
                                                                                     ------------     ------------
                                                                                      682,329,191      444,481,028
   Less accumulated amortization                                                       36,128,832       20,951,102
                                                                                     ------------     ------------
                                                                                      646,200,359      423,529,926
                                                                                     ------------     ------------

Deferred charges and other assets                                                      21,622,079       18,723,785
                                                                                     ------------     ------------

       Total assets                                                                  $746,688,999     $512,248,679
                                                                                     ------------     ------------
                                                                                     ------------     ------------

                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                  $  2,063,294     $  2,103,419
   Accrued expenses                                                                    22,200,882       19,832,802
   Income taxes payable                                                                 3,505,640        3,349,161
   Current portion of long-term obligations                                               121,052          440,097
                                                                                     ------------     ------------
                  Total current liabilities                                            27,890,868       25,725,479
                                                                                     ------------     ------------

Long-term obligations, less current portion                                             1,547,130       14,122,019
                                                                                     ------------     ------------

Deferred income taxes                                                                  94,630,353       82,441,601
                                                                                     ------------     ------------

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 100,000,000 shares in 1998
       and 50,000,000 shares in 1997;  issued and outstanding 35,171,980 shares in
       1998 and 29,978,748 shares in 1997                                                  35,172           29,979
   Class B Common Stock, convertible, $.001 par value; authorized 50,000,000
       shares; issued and outstanding 14,156,470 shares                                    14,156           14,156
   Additional paid-in capital                                                         665,339,306      459,567,282
   Accumulated deficit                                                                (42,767,986)     (69,651,837)
                                                                                     ------------     ------------
       Total stockholders' equity                                                     622,620,648      389,959,580
                                                                                     ------------     ------------

      Total liabilities and stockholders' equity                                     $746,688,999     $512,248,679
                                                                                     ------------     ------------
                                                                                     ------------     ------------
</TABLE>
                                       
        See accompanying notes to consolidated financial statements

                                      27
<PAGE>

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                       Three Months
                                                        YEAR ENDED DECEMBER 31,            Ended         Year Ended
                                                 -----------------------------------    December 31,     September 30,
                                                       1998               1997            1996              1996
                                                 ------------------ ---------------- ---------------- ------------------
<S>                                              <C>                <C>              <C>              <C>
  Revenues                                        $   186,778,637    $   154,869,079 $   20,850,616    $   81,242,695
  Agency commissions                                   22,657,029         18,285,224      2,541,648         9,510,663
                                                  ---------------    ---------------  -------------    --------------
  Net revenues                                        164,121,608        136,583,855     18,308,968        71,732,032
  Operating expenses                                   95,783,645         82,064,446     11,207,309        48,896,256
  Depreciation and amortization                        21,149,369         14,928,326      1,746,732         5,140,131
                                                  ---------------    ---------------  -------------    --------------
  Operating income before corporate expenses           47,188,594         39,591,083      5,354,927        17,695,645
  Corporate expenses                                    5,451,010          4,579,270        368,074         5,071,859
                                                  ---------------    ---------------  -------------    --------------
  Operating income                                     41,737,584         35,011,813      4,986,853        12,623,786
                                                  ---------------    ---------------  -------------    --------------

  Other income (expense):
      Interest income                                   4,680,652            406,241         26,290           206,605
      Interest expense                                 (2,046,185)        (3,947,092)    (2,866,872)      (11,240,835)
      Costs relating to unconsummated
          acquisitions                                          -                  -              -        (1,383,187)
      Restructuring charges                                     -                  -              -       (29,011,237)
      Other, net                                          251,780            (81,973)        18,044          (287,140)
                                                  ---------------    ---------------  -------------    --------------
                                                        2,886,247         (3,622,824)    (2,822,538)      (41,715,794)
                                                  ---------------    ---------------  -------------    --------------
  Income (loss) before income tax                      44,623,831         31,388,989      2,164,315       (29,092,008)
  Income tax                                           17,739,980         12,616,833        100,000            65,000
                                                  ---------------    ---------------  -------------    --------------
  Income (loss) from continuing operations             26,883,851         18,772,156      2,064,315       (29,157,008)
                                                  ---------------    ---------------  -------------    --------------

  Discontinued operations:
      Loss from operations of CRC                               -                  -              -         1,844,939
      Loss on disposal of CRC                                   -                  -              -         8,142,598
                                                  ---------------    ---------------  -------------    --------------
  Total loss on discontinued operations                         -                  -              -         9,987,537
                                                  ---------------    ---------------  -------------    --------------

  Income (loss) before extraordinary item              26,883,851         18,772,156      2,064,315       (39,144,545)
  Extraordinary item - loss on retirement of
      debt                                                      -                  -              -         7,461,267
                                                  ---------------    ---------------  -------------    --------------
  Net income (loss)                               $    26,883,851    $    18,772,156  $   2,064,315    $  (46,605,812)
                                                  ---------------    ---------------  -------------    --------------
                                                  ---------------    ---------------  -------------    --------------

  Net income (loss) per common share:

      Basic:
      Continuing operations                      $           0.55   $           0.45  $        0.09    $        (1.41)
      Discontinued operations                                   -                  -              -             (0.49)
      Extraordinary loss                                        -                  -              -             (0.36)
                                                  ---------------    ---------------  -------------    --------------
      Net income (loss)                           $          0.55    $          0.45  $        0.09    $        (2.26)
                                                  ---------------    ---------------  -------------    --------------
                                                  ---------------    ---------------  -------------    --------------

      Diluted:
      Continuing operations                      $           0.54   $           0.45  $        0.09    $        (1.41)
      Discontinued operations                                   -                  -              -             (0.49)
      Extraordinary loss                                        -                  -              -             (0.36)
                                                  ---------------    ---------------  -------------    --------------
      Net income (loss)                           $          0.54    $          0.45  $        0.09    $        (2.26)
                                                  ---------------    ---------------  -------------    --------------
                                                  ---------------    ---------------  -------------    --------------

  Weighted average common shares outstanding:
      Basic                                            49,020,759         41,671,026      23,095,462       20,589,934
      Diluted                                          49,347,646         41,792,191      23,095,462       20,589,934
</TABLE>
                                       
        See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

              HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                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, 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 (pre-split)
   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)           -             -
Net proceeds from issuance
   of 5,193,232 shares of                                                                                        
   Class A Common Stock               -        5,193             -      205,772,024             -            -             -
Net income                            -            -             -                -    26,883,851            -             -
                              ---------   ----------    ----------     ------------  ------------  -----------   -----------
Balance at December 31, 1998  $       -   $   35,172    $   14,156     $665,339,306  $(42,767,986) $         -   $         -
                              ---------   ----------    ----------     ------------  ------------  -----------   -----------
                              ---------   ----------    ----------     ------------  ------------  -----------   -----------
</TABLE>
    
        See accompanying notes to consolidated financial statements.

                                      29
<PAGE>

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Three Months
                                                             Year Ended December 31,            Ended        Year Ended
                                                         -------------------------------    December 31,    September 30,
                                                              1998             1997             1996             1996
                                                         --------------   --------------   --------------   --------------
<S>                                                      <C>              <C>              <C>              <C>
Cash flows from operating activities:
    Net income (loss)                                    $   26,883,851   $   18,772,156   $    2,064,315   $  (46,605,812)
    Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
       Loss on discontinued operations                                -                -                -        9,987,537
       Extraordinary loss on debt retirement                          -                -                -        7,461,267
       Provision for bad debts                                1,417,505        2,756,605          722,691        2,871,700
       Depreciation and amortization                         21,149,369       14,928,326        1,746,732        5,140,131
       Amortization of debt facility fee included
           in interest expense                                  160,152          133,200          360,000          993,674
       Deferred income taxes                                  9,943,545        8,106,930                -                -
       Non-cash restructuring charges                                 -                -                -        1,219,048
       Changes in operating assets and liabilities:
           Accounts receivable, net                          (6,327,755)      (4,996,984)        (702,939)      (4,711,197)
           Prepaid expenses and other current assets            360,613          360,381          380,441        1,175,118
           Accounts payable                                     (26,250)      (4,770,977)        (341,698)        (421,251)
           Accrued expenses                                   3,519,021        2,788,673       (1,595,238)       4,087,219
           Income taxes payable                                 156,479        5,506,696                -                -
           Other, net                                          (251,943)         206,987          (27,122)         297,960
                                                         --------------   --------------   --------------   --------------
              Net cash provided by  (used in) operating                                                     
                 activities of continuing operations         56,984,587       43,791,993        2,607,182      (18,504,606)
              Net cash used in discontinued operations                -                -                -       (1,594,006)
                                                         --------------   --------------   --------------   --------------
              Net cash provided by (used in) operating
                 activities                                  56,984,587       43,791,993        2,607,182      (20,098,612)
                                                         --------------   --------------   --------------   --------------

Cash flows from investing activities:
    Acquisitions of radio stations                         (236,648,434)      (1,096,424)               -      (20,150,000)
    Property and equipment acquisitions                      (4,745,912)      (4,010,775)        (400,396)      (3,687,780)
    Additions to intangible assets                              (56,003)      (2,777,245)               -       (7,000,000)
    Collection of loans to related parties                            -                -                -        2,357,932
    Increase in other noncurrent assets                      (4,875,701)     (15,134,257)        (397,684)               -
                                                         --------------   --------------   --------------   --------------
              Net cash used in investing activities        (246,326,050)     (23,018,701)        (798,080)     (28,479,848)
                                                         --------------   --------------   --------------   --------------

Cash flows from financing activities:
    Borrowings on long-term obligations                      18,000,000       56,000,000                -      163,459,267
    Payments on long-term obligations                       (30,893,934)    (250,826,404)      (2,153,410)    (123,752,057)
    Payment of deferred financing costs                               -       (1,232,061)               -       (5,799,878)
    Proceeds from stock issuances                           205,975,367      177,050,792                -       10,548,259
    Repurchase of preferred and common stock                          -                -                -         (335,634)
    Dividends on preferred stock                                      -                -                -          (42,961)
    Note payments from stockholders                                   -                -                -        4,229,114
                                                         --------------   --------------   --------------   --------------
              Net cash provided by (used in)
                 financing activities                       193,081,433      (19,007,673)      (2,153,410)      48,306,110
                                                         --------------   --------------   --------------   --------------

Net increase (decrease) in cash and cash equivalents          3,739,970        1,765,619         (344,308)        (272,350)
Cash and cash equivalents at beginning of period              6,553,271        4,787,652        5,131,960        5,404,310
                                                         --------------   --------------   --------------   --------------
Cash and cash equivalents at end of period               $   10,293,241   $    6,553,271   $    4,787,652   $    5,131,960
                                                         --------------   --------------   --------------   --------------
                                                         --------------   --------------   --------------   --------------
</TABLE>
                                       
        See accompanying notes to consolidated financial statements.

                                       30
<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 39 Spanish language broadcast radio 
stations serving 12 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, San Diego, 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.

         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.

     INVESTMENTS

         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, 1998 are 
comprised primarily of 50% interests in entities which own transmission 
towers that are 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.

         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.

                                       31
<PAGE>

     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:

<TABLE>
<S>                                                                    <C>
             Broadcast licenses                                            40 years
             Cost in excess of fair value of net assets acquired           40 years
             Other intangibles                                         3 - 40 years
</TABLE>

         The Company evaluates periodically the propriety of the carrying 
amount of intangible assets, including goodwill, 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 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 
cash flows are 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 $6.4, $4.0, $0.3, and $2.4 million for the 
years ended December 31, 1998 and 1997, the three months ended December 31, 
1996, and the year ended September 30, 1996, respectively.

     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 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 the period that includes the 
enactment date.

                                       32
<PAGE>

     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 common shares outstanding during each year. Diluted earnings per 
common share reflects the incremental increase in the weighted average number 
of common shares due to the dilutive effect of stock options.

     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, 1998 and 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 of Financial Accounting 
Standards 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.

     COMPREHENSIVE INCOME

         In June 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING 
COMPREHENSIVE INCOME. SFAS 130 requires the reporting of comprehensive income 
in financial statements by all entities that provide a full set of financial 
statements. The Company's net income is the same as its comprehensive income 
and no additional disclosures are necessary.

     RECLASSIFICATIONS

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

                                       33
<PAGE>

2.   ACQUISITIONS AND DISPOSITIONS

     1998 ACQUISITIONS

         On December 1, 1997, the Company entered into an asset exchange 
agreement to exchange WPAT(AM), serving the New York City market, and $115.5 
million in cash for the assets of WCAA(FM) (formerly WNWK(FM)), serving the 
New York City market (the "WCAA(FM) Acquisition"). The asset exchange was 
financed with a portion of the proceeds from the January 1998 secondary 
public stock offering (the "January 1998 Offering"). The WCAA(FM) Acquisition 
closed on May 22, 1998. Immediately after closing, the station's programming 
was converted to a Spanish language format.

         On March 25, 1998, the Company entered into an asset purchase 
agreement to acquire the assets of KLTN(FM) (formerly KKPN(FM)), serving the 
Houston market, for $54.0 million (the "KLTN(FM) Acquisition"). The asset 
acquisition was financed with a portion of the proceeds from the January 1998 
Offering. The KLTN(FM) Acquisition closed on May 29, 1998. Immediately after 
closing, the station's programming was converted to a Spanish language format.

         The Company entered into an asset purchase agreement on May 26, 
1998, to acquire the assets of KLQV(FM) and KLNV(FM) (formerly KJQY(FM) and 
KKLQ(FM)) serving the San Diego market (the "San Diego Acquisition") for 
$65.2 million. The asset acquisition was financed with a portion of the 
proceeds from the January 1998 Offering, an additional $18.0 million 
borrowing under the Company's credit agreement and cash generated from 
operations. The San Diego Acquisition closed on August 10, 1998. Immediately 
after closing, the programming of the stations was converted to two Spanish 
language formats.

     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.

                                       34
<PAGE>

     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.

         Unaudited consolidated condensed pro forma results of operations as 
if all completed acquisitions occurred as of January 1, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                               ---------------------------------------------
                                                                       1998                     1997
                                                               ---------------------    --------------------
<S>                                                            <C>                      <C>
             Net revenues                                        $    165,401,849         $    144,277,581
             Operating income                                          39,425,539               27,447,932
             Net income                                                21,532,287               11,804,576
             Net income per common share:
                  Basic                                                      0.44                     0.24
                  Diluted                                                    0.43                     0.24
</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.

     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 was 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. 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.

         Gene Autry died on October 2, 1998, and the Company exercised the 
KSCA Option. The closing is expected to occur during the second quarter of 
1999. If the acquisition of KSCA(FM) closes on June 1, 1999, the purchase 
price for the KSCA(FM) assets will be approximately $116.6 million, and 
approximately $103.6 million ($116.6 million less $13.0 million in option 
payments credited against the purchase price) will be paid at closing. 
Consummation of the purchase is subject to a number of conditions, including 
approval by the FCC of the transfer of the FCC licenses.

         On January 27, 1999, the Company entered into an agreement to 
purchase the assets of KHOT(FM), serving the Phoenix market, for $18.3 
million. The closing of this asset acquisition is expected to occur during 
the second quarter of 1999. Immediately after closing, the station's 
programming will be converted to a Spanish language format. Consummation 
of the purchase is subject to a number of conditions, including approval by 
the FCC of the transfer of the FCC license.

                                       35
<PAGE>

         All of the pending transactions will be financed with borrowings 
under the Company's credit agreement and cash generated from operations.

3.   CHANGE IN CONTROL OF COMPANY

         On August 5, 1996, Clear Channel Communications, Inc. ("Clear 
Channel") completed the purchase of 9,345,092 shares (pre-split) of the 
Company's Class A and Class B common stock for $23 (pre-split) 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 (pre-split) 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 
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 1998 and 1997, approximately $0.2 and $0.4 million, 
respectively was charged against the accrual primarily for operating losses 
and severance payments. The majority of the remaining accrued balance of 
approximately $0.4 million at December 31, 1998 is for severance payments to 
be paid to a former employee through 2000.

         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 1998 and 1997, 
approximately $1.4 and $2.5 million, respectively, was charged against the 
accrual primarily for severance payments. The majority of the remaining 
accrued balance of approximately $0.5 million at December 31, 1998 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 1999.

                                       36
<PAGE>

5.   LONG-TERM OBLIGATIONS

         The following is a summary of long-term obligations outstanding as 
of December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                            1998                   1997         
                                                                                     -------------------    --------------------
<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 5.69% at
     December 31, 1998; interest rates ranged from 5.69% to 6.38% during 1998;
     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    
                                                                                                                                  
     Various loans, interest ranging from 8.1% to 9.38%, payable in                                                               
     varying installments through 2001                                                          198,267              1,055,820    
                                                                                                                                  
     Prize awards net of imputed interest (10% to 12%), payable in                                                                
     varying annual installments through 2044                                                 1,469,915              1,506,296    
                                                                                        ---------------        ---------------    
                                                                                              1,668,182             14,562,116    
     Less current portion                                                                      (121,052)              (440,097)   
                                                                                        ---------------        ---------------    
                                                                                        $     1,547,130        $    14,122,019    
                                                                                        ---------------        ---------------    
                                                                                        ---------------        ---------------    
</TABLE>

     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 1997 secondary public stock offering 
to retire the outstanding debt and senior preferred stock of Tichenor assumed 
on the date of the Tichenor 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 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 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.

                                       37
<PAGE>

         Maturities of long-term obligations for the five years subsequent to 
December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                      YEAR                              AMOUNT
                      ----                              ------
<S>                                                 <C>
                      1999                          $       121,052
                      2000                                   99,703
                      2001                                   23,019
                      2002                                    6,042
                      2003                                    6,714
                      Thereafter                          1,411,652
</TABLE>

         Interest paid for the years ended December 31, 1998 and 1997, the 
three months ended December 31, 1996 and the year ended September 30, 1996 
amounted to $1.2, $3.9, $2.9, and $11.2 million, respectively.

6.   COMMITMENTS AND CONTINGENCIES

         The Company leases office space and other property under 
noncancellable operating leases. Terms of the leases vary from two 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, 1998 are summarized 
as follows:

<TABLE>
<CAPTION>
                      YEAR                              AMOUNT
                      ----                              ------
<S>                                                 <C>
                  1999                               $ 3,684,385
                  2000                                 3,192,339
                  2001                                 3,029,793
                  2002                                 2,747,614
                  2003                                 2,429,795
                  Thereafter                          11,057,669
</TABLE>

         Rent expense for the years ended December 31, 1998 and 1997, the 
three months ended December 31, 1996, and the year ended September 30, 1996 
was $3.4, $2.6, $0.3, and $1.7 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 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. The net proceeds of the offering 
were approximately $205.1 million.

         On October 6, 1998, the Company filed a Second Amended and Restated 
Certificate of Incorporation to increase the authorized shares of the Class A 
Common Stock to 100,000,000 shares.

         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 

                                       38
<PAGE>

underwriters' discounts and commissions. The net proceeds of the offering 
were approximately $176.4 million.

         On February 14, 1997, all of the outstanding shares of Heftel Common 
Stock owned by Clear Channel (14,156,470 shares) were converted to Class B 
Common Stock. 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. Shares of Class B Common Stock are convertible into 
shares of Class A Common Stock, at Clear Channel's option, subject to any 
necessary governmental consents, including the consent of the FCC.

         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 split, $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.

     PREFERRED STOCK

         The Company is authorized to issue 5,000,000 shares of $.001 par 
value Preferred Stock. The Preferred Stock may be issued in series, with the 
rights and preferences of each series established by the Company's Board of 
Directors.

8.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                                  Three Months
                                                 Year Ended December 31,             Ended           Year Ended
                                          ----------------------------------       December 31,       September 30,
                                                 1998              1997               1996               1996
                                          ----------------    --------------     --------------     --------------
<S>                                       <C>                 <C>                <C>                <C>
             Current:
                  Federal                   $    6,103,464    $    3,144,449     $            -     $            -
                  State                          1,692,971         1,365,454            100,000             65,000
                                            --------------    --------------     --------------     --------------
             Total current tax                   7,796,435         4,509,903            100,000             65,000
                                            --------------    --------------     --------------     --------------
             Deferred:
                  Federal                        9,514,876         7,782,653                  -                  -
                  State                            428,669           324,277                  -                  -
                                            --------------    --------------     --------------     --------------
             Total deferred tax                  9,943,545         8,106,930                  -                  -
                                            --------------    --------------     --------------     --------------
             Total income tax               $   17,739,980    $   12,616,833     $      100,000     $       65,000
                                            --------------    --------------     --------------     --------------
                                            --------------    --------------     --------------     --------------
</TABLE>

                                       39
<PAGE>

         The tax effects of temporary differences that give rise to 
significant portions of the deferred tax assets and liabilities at December 
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
                                                                                    1998               1997
                                                                               --------------     --------------
<S>                                                                            <C>                <C>
 Deferred tax assets:
      Net operating losses                                                     $    4,161,265        $12,987,833
      Other intangible assets                                                       1,668,659          1,668,659
      Long-term obligations - prize awards                                            574,722            587,455
      Allowance for doubtful accounts receivable                                      909,964          1,019,010
      Other                                                                           919,167            869,649
                                                                               --------------     --------------
 Total deferred tax assets                                                          8,233,777         17,132,606
                                                                               --------------     --------------
 Deferred tax liabilities:
      Broadcast licenses                                                           93,117,633         91,668,629
      Property and equipment                                                        2,095,041          1,139,937
      Restructuring charges                                                         7,395,033          6,585,218
      Other                                                                           256,423            180,423
                                                                               --------------     --------------
 Total deferred tax liabilities                                                   102,864,130         99,574,207
                                                                               --------------     --------------
 Net deferred tax liabilities                                                  $   94,630,353     $   82,441,601
                                                                               --------------     --------------
                                                                               --------------     --------------
</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 reduction in the valuation allowance reduced the carrying value of 
intangibles recognized in the Tichenor Merger.

         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 December 31,          Ended        Year Ended    
                                                  --------------------------------   December 31,  September 30,   
                                                        1998            1997            1996             1996      
                                                  -----------------------------------------------------------------
<S>                                               <C>               <C>             <C>             <C>            
Federal income tax (benefit) at statutory rate      $  15,618,341   $  10,986,146   $    735,867    $  (9,891,283)
State income taxes, net of federal benefit              1,115,009         941,674         66,000           42,900
Nondeductible and non-taxable items, net                1,006,630         689,013        (46,629)       8,490,286
Net operating loss carryforward not
    recognized                                                  -               -              -        1,423,097
Use of net operating loss carryforwards                         -               -       (655,238)               -
                                                    -------------   -------------   ------------    -------------
                                                    $  17,739,980   $  12,616,833   $    100,000    $      65,000
                                                    =============   =============   ============    =============
</TABLE>

         As of December 31, 1998, the Company had tax net operating loss 
carryforwards for federal and state tax purposes of approximately $10.7 and 
$14.2 million, respectively. The net operating losses expire in the year 2010 
if not used.

         Income taxes paid for the years ended December 31, 1998 and 1997, 
the three months ended December 31, 1996, and the year ended September 30, 
1996 amounted to $6.0, $2.2 million, $0, and $65,000, respectively.

                                       40

<PAGE>

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 December 31,              Ended          Year Ended    
                                            -------------------------------------   December 31,      September 30,  
                                                   1998              1997               1996              1996
                                            --------------------------------------------------------------------------
<S>                                          <C>                 <C>               <C>                <C>             
Numerator:
     Income (loss) from continuing
         operations                           $   26,883,851     $   18,772,156    $    2,064,315     $  (29,157,008)
     Preferred stock dividends                             -                  -                 -             22,823
                                              --------------     --------------    --------------     --------------
     Numerator for basic and
         diluted earnings per share           $   26,883,851     $   18,772,156    $    2,064,315     $  (29,179,831)
                                              ==============     ==============    ==============     ==============
Denominator:
     Weighted average common
         shares                                   49,020,759         41,671,026        23,095,462         20,589,934
     Effect of dilutive securities:
         Stock options                               318,094            121,165                 -                  -
         Employee Stock Purchase
               Plan                                    8,793                  -                 -                  -
                                              --------------     --------------    --------------     --------------
     Denominator for diluted
         earnings per share                       49,347,646         41,792,191        23,095,462         20,589,934
                                              ==============     ==============    ==============     ==============
</TABLE>

10.      RETIREMENT PLAN

         The Company has a defined contribution retirement savings plan (the 
"Plan"). The Plan covers all employees who have reached the age of 18 years 
and have been employed by the Company for at least one year. The Company 
matches participants' contributions to the Plan in an amount not to exceed 
$1,600. The Company, at the sole discretion of the Board of Directors, may 
make additional supplemental contributions to the Plan. The Company's 
expenses related to the Plan for the years ended December 31, 1998 and 1997, 
the three months ended December 31, 1996, and the year ended September 30, 
1996 amounted to $334,050, $237,671, $56,655 and $226,355, respectively.

11.      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 to a key employee 6,084 options 
at $16.44 per share. The options vest ratably over a three year period.

         In May 1997, the stockholders of the Company approved a stock 
incentive plan ("Long-Term Incentive Plan"), to be administered by the Board 
of Directors or by a sub-committee of the Board of Directors. The maximum 
number of shares of Class A Common Stock that may be the subject of awards 

                                       41

<PAGE>

at any one time shall be five percent of the total number of shares of Class 
A Common Stock outstanding. Options granted under the Long-Term Incentive 
Plan have a ten-year term and vest one third at the end of years three, four 
and five.

         The stockholders of the Company also approved an Employee Stock 
Purchase Plan in May 1997. Under the plan, shares of the Company's common 
stock may be purchased at six-month intervals at 85% of the lower of the fair 
market value on the first or the last day of each six-month period. Employees 
may purchase shares having a value not exceeding 15% of their gross 
compensation during an offering period. During 1998 and 1997, employees 
purchased 22,222 and 6,753 common shares at average prices of $37.22 and 
$28.26, respectively. At December 31, 1998, 371,025 shares were reserved for 
future issuance.

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

         In 1998, the Company issued 369,650 stock options to various 
employees of the Company under its Long-Term Incentive Plan. The exercise 
prices ranged from $31.00 to $43.94 per share, the market prices at dates of 
issuance.

         The following is a summary of management incentive stock options 
granted, exercised and outstanding for the year ended September 30, 1996, the 
three months ended December 31, 1996, and the years ended December 31, 1997 
and 1998:
<TABLE>
<CAPTION>
                                                                             Number          Weighted Average
                                                                            of Shares         Exercise Price 
                                                                            ---------        ----------------
<S>                                                                    <C>                   <C>
Options outstanding at September 30, 1995                                   1,845,212             $   1.90
       Granted                                                              1,048,678                 7.65
       Exercised                                                           (2,883,890)                3.39
       Canceled                                                               (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
       Canceled                                                               (36,000)               23.50
                                                                       --------------
Options outstanding at December 31, 1997                                      723,084                23.84
       Granted                                                                369,650                36.26
       Canceled                                                               (52,000)               25.71
                                                                       --------------
Options outstanding at December 31, 1998                                    1,040,734                28.16
                                                                       ===============
</TABLE>

         At December 31, 1998, 19,056 options were exercisable at the 
weighted average exercise price of $22.31 per share.

         No compensation expense related to stock option grants was 
recognized during any of the periods presented because all such options were 
granted at market value.

         Pro forma information regarding net earnings and earnings per share 
is required by Statement of Financial Accounting Standards No. 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 weighted average 
fair values for these options were estimated at the dates of grant using a 
Black-Scholes option pricing model


                                       42
<PAGE>

with the following assumptions:

<TABLE>
<CAPTION>
                                           1998             1997              1996    
--------------------------------------------------------------------------------------
<S>                                       <C>              <C>               <C>
Risk-free interest rate                    5.22%            6.55%             5.73%
Dividend yield                             0.00%            0.00%             0.00%
Volatility factor                         50.67%           50.00%            51.00%
Weighted average expected life            6 years          6 years           3 years
</TABLE>

         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>
<CAPTION>
                                                                             Three Months
                                             Year Ended December 31,            Ended              Year Ended
                                       ---------------------------------      December 31,        September 30,   
                                             1998               1997             1996                 1996        
                                       ---------------    --------------    -------------      ------------------
<S>                                    <C>                <C>               <C>                <C>               
Net earnings - as reported             $    26,883,851    $   18,772,156    $   2,064,315      $     (46,605,812)
Net earnings - pro forma                    25,448,980        18,147,081        2,063,644            (48,509,974)
Net earnings per common
  share - as reported
       Basic                                      0.55              0.45             0.09                  (2.26)
       Diluted                                    0.54              0.45             0.09                  (2.26)
Net earnings per common    
  share - pro forma
       Basic                                      0.52              0.44             0.09                  (2.36)
       Diluted                                    0.52              0.44             0.09                  (2.36)
Weighted average fair value of
  options granted during the
  year                                           19.49             13.17             6.51                   6.51
</TABLE>

         The following table summarizes stock options outstanding at December 
31, 1998:
<TABLE>
<CAPTION>
                                                                                       Weighted Average
       Exercise Price                 Number                Weighted Average             Remaining    
          Range                     of Shares                Exercise Price           Contractual Life
       --------------               ---------               ----------------          ----------------
       <S>                           <C>                     <C>                       <C>            
       $16.44 - $23.50                638,084                    $ 23.43                    8.4
        24.69 -  36.25                369,150                      35.23                    9.3
        37.50 -  43.94                 33,500                      40.24                    9.6
                                    ---------
                                    1,040,734
                                    =========
</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.

                                       43
<PAGE>

12.  OTHER FINANCIAL INFORMATION

     ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                                                               December 31,                 
                                                               ---------------------------------------------
                                                                      1998                     1997
                                                               --------------------    ---------------------
             <S>                                               <C>                     <C>
             Wages, salaries and benefits payable              $        3,569,451      $        3,145,530
             Commissions payable                                        7,160,344               5,969,278
             Accrued restructuring and discontinued                                    
               operation charges                                          918,732               2,467,200
             Advertising payable                                        2,393,566               1,176,578
             Deferred income                                            1,151,829                 816,257
             Other accrued expenses                                     7,006,961               6,257,959
                                                               ------------------      ------------------
                                                               $       22,200,882      $       19,832,802
                                                               ==================      ==================
</TABLE>

13.      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

         The following is a summary of the quarterly  results of operations  
for the years ended  December 31, 1998 and 1997:
<TABLE>
<CAPTION>

Year ended December 31, 1998:
                                                        3/31/98           6/30/98          9/30/98          12/31/98
                                                    --------------------------------------------------------------------
<S>                                                 <C>                 <C>              <C>              <C>           
Net revenues                                        $    31,347,088     $ 44,392,528     $ 44,205,828     $ 44,176,164  
Net income                                                4,344,418        7,803,470        7,104,146        7,631,817  
Net income per common share - basic
    and diluted                                                0.09             0.16             0.14             0.15  

Year ended December 31, 1997:
<CAPTION>
                                                        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
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>

14.      SUBSEQUENT EVENT (UNAUDITED)

         The Company entered into an agreement on March 1, 1999 to 
purchase the assets of KISF(FM), serving the Las Vegas market, for $20.3 
million. The closing of this asset acquisition is expected to occur during the
second quarter of 1999. Immediately after closing, the station's programming
will be converted to a Spanish language format. Consummation of the purchase 
is subject to a number of conditions, including approval by the FCC of the 
transfer of the FCC licenses.

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

         Not applicable.


                                       44

<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.

                                       45

<PAGE>

                                    PART IV

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

(a)
      1. FINANCIAL STATEMENTS

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

         Reports of Independent Auditors

         Consolidated Balance Sheets as of December 31, 1998 and 1997

         Consolidated Statements of Operations for the Years Ended December 31,
         1998 and 1997, the Three Months Ended December 31, 1996, and the Year
         Ended September 30, 1996

         Consolidated Statements of Stockholders' Equity for the Years Ended
         December 31, 1998 and 1997, the Three Months Ended December 31, 1996,
         and the Year Ended September 30, 1996

         Consolidated Statements of Cash Flows for the Years Ended December 31,
         1998 and 1997, the Three Months Ended December 31, 1996, and the Year
         Ended September 30, 1996

         Notes to Consolidated Financial Statements

      2. FINANCIAL STATEMENT SCHEDULES

               HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES 
                     VALUATION AND QUALIFYING ACCOUNTS          
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND      
                 1997, THE THREE MONTHS ENDED DECEMBER 31,      
                1996, AND THE YEAR ENDED SEPTEMBER 30, 1996     
                            (Dollars in Thousands)              
<TABLE>
<CAPTION>
                                                                       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, 1998:
    Allowance for Doubtful Accounts                $    2,613    $    1,417    $        -    $    1,729    $    2,301

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
</TABLE>

                                       46
<PAGE>

      3. EXHIBITS
<TABLE>
<CAPTION>
        EXHIBIT 
         NUMBER                            DESCRIPTION
         ------                            -----------
<S>                <C>
         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 referenceto 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).


                                       47
<PAGE>

<CAPTION>
         EXHIBIT 
         NUMBER                            DESCRIPTION
         ------                            -----------
<S>                <C>
         10.11     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)).
         
         10.12     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)).
         
         10.13     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).
         
         10.14     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).

         10.15     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 D. Lykes (incorporated by reference to Exhibit 10.1 to the 
                   Registrant's Form 8-K filed March 3, 1997).
         
         10.16     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).
         
         10.17     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).

         10.18     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).
         
         10.19     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).
         
         10.20     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)).

                                       48
<PAGE>

<CAPTION>
        EXHIBIT 
         NUMBER                                  DESCRIPTION
         ------                                  -----------
<S>                <C>
         10.21     Heftel Broadcasting Corporation Amended and Restated 1997 Employee Stock Purchase Plan (incorporated 
                   by reference to the Registrant's Form S-8 filed on December 31, 1997).
         
         10.22     Asset Purchase Agreement, dated March 25, 1998, by and between HBC Houston, Inc., HBC Houston
                   License Corporation and SBI Holding Corporation (incorporated by reference to Exhibit 10.1 to
                   Registrant's Form 10-Q filed May 13, 1998).
         
         10.23     Assets Purchase Agreement, dated May 26, 1998, by and between Citicasters Co. and Heftel
                   Broadcasting Corporation, HBC San Diego, Inc. and HBC San Diego License Corporation (incorporated
                   by reference to Exhibit 10.1 to Registrant's Form 10-Q filed August 6, 1998).
         
         10.24     Asset Purchase Agreement, dated January 27, 1999, by and between New Century Arizona LLC, New
                   Century Arizona License Partnership and Heftel Broadcasting Corporation.
         
         10.25     Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc., George E. Tobin
                   and Heftel Broadcasting Corporation.
         
         11        Statement Regarding Computations of Per Share Earnings.
         
         21        Subsidiaries of the Registrant
         
         23.1      Consent of KPMG LLP

         23.2      Consent of Ernst & Young LLP
          
         24        Power of Attorney (included on Signature Page)
          
         27        Financial Data Schedule
</TABLE>

         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).

(b)
         REPORTS ON FORM 8-K

             No reports on Form 8-K were filed by the Registrant during the 
fourth quarter of 1998.

                                       49

<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, 1999.

                                       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.
<TABLE>
<CAPTION>
              NAME                                           TITLE                                DATE
              ----                                           -----                                ----
<S>                                           <C>                                               <C>           
   /s/ MCHENRY T. TICHENOR, JR.               President, Chief Executive Officer and Chairman   March 31, 1999
------------------------------------          of the Board of Directors
McHenry T. Tichenor, Jr.            

   /s/ JEFFREY T. HINSON                      Senior Vice President, Chief Financial Officer    March 31, 1999
------------------------------------          and Treasurer                
Jeffrey T. Hinson                             (Principal Financial Officer)

   /s/ DAVID P. GEROW                         Vice President and Controller                     March 31, 1999
------------------------------------          (Principal Accounting Officer)
David P. Gerow                      

   /s/ MCHENRY T. TICHENOR                    Director                                          March 31, 1999
------------------------------------
McHenry T. Tichenor

   /s/ ROBERT W. HUGHES                       Director                                          March 31, 1999
------------------------------------
Robert W. Hughes

   /s/ JAMES M. RAINES                        Director                                          March 31, 1999
------------------------------------
James M. Raines

   /s/ ERNESTO CRUZ                           Director                                          March 31, 1999
------------------------------------
Ernesto Cruz
</TABLE>
                                       50