<PAGE>   1
                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                  F O R M 10-Q


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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 0-26264


                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
            -------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


      State of Delaware                                 84-1289408
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


         5619 DTC Parkway
        Englewood, Colorado                             80111
----------------------------------------              ----------
(Address of principal executive offices)              (Zip Code)



       Registrant's telephone number, including area code: (303) 267-5500



         Indicate by check mark whether the Registrant (1) 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
                     -----   -----
         The number of shares outstanding of Tele-Communications International,
Inc.'s common stock (net of shares held in treasury) as of July 31, 1998, was:

                      Series A common stock - 103,640,680 shares; and 
                        Series B common stock - 11,700,000 shares.


<PAGE>   2


                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                           Consolidated Balance Sheets

                                   (unaudited)


<TABLE>
<CAPTION>
                                                              June 30,    December 31,
                                                                1998          1997
                                                             ----------   ------------
Assets                                                          amounts in thousands
<S>                                                          <C>          <C>        
Cash and cash equivalents (note 3)                           $    1,024             --

Trade and other receivables, net                                  1,332          5,065

Investment in Telewest Communications plc 
  ("Telewest"), accounted for under the equity 
  method (note 6)                                               263,381        324,417

Investment in Cablevision S.A. ("Cablevision"), 
  accounted for under the equity method (note 5)                231,957        239,379

Investment in other affiliates, accounted for
   under the equity method, and related
   receivables (note 7)                                         597,298        602,325

Other investments (note 8)                                       52,214         33,012

Property and equipment, at cost:
   Land                                                             415            415
   Distribution systems                                          82,447         78,185
   Support equipment and buildings                               11,997         11,269
                                                             ----------   ------------
                                                                 94,859         89,869
   Less accumulated depreciation                                 36,078         32,348
                                                             ----------   ------------
                                                                 58,781         57,521
                                                             ----------   ------------
Franchise costs and other intangible assets                      77,759         76,890
   Less accumulated amortization                                 12,490         11,494
                                                             ----------   ------------
                                                                 65,269         65,396
                                                             ----------   ------------
Deferred income tax asset                                        94,494         54,547

Deferred financing costs and other assets,
   net of amortization                                           10,540         12,338
                                                             ----------   ------------
                                                             $1,376,290      1,394,000
                                                             ==========   ============
</TABLE>


                                                                     (continued)


                                      I-1

<PAGE>   3

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                     Consolidated Balance Sheets, continued

                                   (unaudited)


<TABLE>
<CAPTION>
                                                          June 30,       December 31,
                                                            1998             1997
                                                       -------------     ------------
Liabilities and Stockholders' Equity                        amounts in thousands,
                                                             except share amounts
<S>                                                      <C>                    <C>  
Cash overdraft                                         $          --            1,003

Accounts payable                                               1,029              672

Accrued liabilities                                           17,984           19,490

Debt (note 9)                                                390,023          390,042

Other liabilities                                             22,869           18,482
                                                       -------------      -----------
         Total liabilities                                   431,905          429,689
                                                       -------------      -----------
Stockholders' equity:
   Preferred stock, $.01 par value
      Authorized 10,000,000 shares; none issued                   --               --
   Series A Common Stock, $1 par value
      Authorized 300,000,000 shares, issued
      107,022,880                                            107,023          106,998
   Series B Common Stock, $1 par value
      Authorized 12,000,000 shares, issued
      11,700,000 shares                                       11,700           11,700
   Additional paid-in capital                              1,286,245        1,285,904
   Accumulated deficit                                      (407,195)        (325,805)
   Accumulated other comprehensive earnings, 
      net of taxes (note 1)                                    2,269            5,640
                                                       -------------      -----------
                                                           1,000,042        1,084,437
   Treasury stock, at cost, 3,382,200 shares and 
      3,370,000 shares of Series A Common Stock 
      in 1998 and 1997                                       (42,216)         (42,014)
   Due from related parties (note 10)                        (13,441)         (78,112)
                                                       -------------      -----------
         Total stockholders' equity                          944,385          964,311
                                                       -------------      -----------
Commitments and contingencies
   (notes 6, 7, 8, 10 and 11)
                                                       $   1,376,290        1,394,000
                                                       =============      ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      I-2

<PAGE>   4

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                      Consolidated Statements of Operations

                                   (unaudited)

<TABLE>
<CAPTION>
                                                            Three months ended              Six months ended
                                                                 June 30,                       June 30,
                                                         ------------------------      ------------------------
                                                           1998            1997          1998             1997
                                                         ---------      ---------      ---------        -------
                                                                            amounts in thousands

<S>                                                      <C>               <C>         <C>              <C>    
Revenue                                                  $  13,128         68,545      $  25,672        134,156

Operating costs and expenses:
   Operating:
      Charges from related parties (note 10)                 1,302          6,595          2,768         11,875
      Other                                                  5,833         34,139         11,561         66,544

   Corporate general and administrative:
      Allocated from related parties (note 10)               1,527          2,257          6,435          2,613
      Other                                                  4,350          2,729         10,047          5,167
   Depreciation and amortization                             2,314         16,423          4,790         32,136
                                                         ---------      ---------      ---------      ---------
                                                            15,326         62,143         35,601        118,335
                                                         ---------      ---------      ---------      ---------

        Operating income (loss)                             (2,198)         6,402         (9,929)        15,821

Other income (expense):
   Share of losses of Telewest (note 6)                    (33,498)       (31,750)       (63,717)       (73,458)
   Share of losses of Cablevision (note 5)                  (4,386)            --         (7,591)            --
   Share of losses of other affiliates (note 7)            (22,872)       (26,342)       (45,406)       (48,788)
   Interest expense:
      Related parties (note 10)                               (187)          (584)          (375)        (1,164)
      Other                                                 (5,333)        (9,052)       (10,888)       (17,910)
   Interest income:
      Related parties (note 10)                                407          1,306          1,637          3,752
      Other                                                    463            691          1,099          1,407
   Gain on disposition of assets (note 8)                       --             --          9,165             --
   Minority interests' share of earnings                        --         (4,333)            --         (4,333)
   Other, net                                                  (68)         3,147            969          4,398
                                                         ---------      ---------      ---------      ---------
                                                           (65,474)       (66,917)      (115,107)      (136,096)
                                                         ---------      ---------      ---------      ---------

        Loss before income taxes                           (67,672)       (60,515)      (125,036)      (120,275)

Income tax benefit                                          24,291         28,473         43,646         54,778
                                                         ---------      ---------      ---------      ---------

        Net loss                                         $ (43,381)       (32,042)       (81,390)       (65,497)
                                                         =========      =========      =========      =========

Basic and diluted net loss per common share (note 2)     $    (.38)          (.28)          (.71)          (.56)
                                                         =========      =========      =========      =========

Comprehensive loss (note 1)                              $ (47,908)       (21,731)       (84,761)       (76,118)
                                                         =========      =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      I-3


<PAGE>   5

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                 Consolidated Statement of Stockholders' Equity

                         Six months ended June 30, 1998

                                   (unaudited)

<TABLE>
<CAPTION>
                                            Common Stock          Additional                   
                           Preferred    ----------------------     paid-in      Accumulated    
                             stock      Series A      Series B     capital         deficit    
                           ----------   --------      --------    ----------   ------------   
                                                                          amounts in thousands

<S>                        <C>         <C>            <C>         <C>          <C>             
Balance at January 1, 1998 $       --    106,998        11,700     1,285,904       (325,805)     

     Net loss                      --         --            --            --        (81,390)     
     Repurchase of
       common shares               --         --            --            --             --      
     Issuance of common
       shares in
       connection with
       exercise of stock
       options                     --         25            --           341             --      
     Foreign currency
       translation
       adjustment                  --         --            --            --             --      
     Change in due from
       related parties
       (note 10)                   --         --            --            --             --      
                           ----------   --------     ---------     ---------     ----------      

Balance at June 30, 1998   $       --    107,023        11,700     1,286,245       (407,195)     
                           ==========   ========     =========     =========     ==========      
</TABLE>


See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                             Accumulated
                               other
                            comprehensive                     Due from      Total
                             earnings,      Treasury stock,   related   stockholders'
                            net of taxes        at cost       parties     equity
                            -------------   ---------------   --------  -------------
<S>                        <C>              <C>              <C>        <C>      
Balance at January 1, 1998          5,640           (42,014)   (78,112)       964,311

     Net loss                          --                --         --        (81,390)
     Repurchase of
       common shares                   --              (202)        --           (202)
     Issuance of common
       shares in
       connection with
       exercise of stock
       options                         --                --         --            366
     Foreign currency
       translation
       adjustment                  (3,371)               --         --         (3,371)
     Change in due from
       related parties
       (note 10)                       --                --     64,671         64,671
                            -------------   ---------------   --------      ---------

Balance at June 30, 1998            2,269           (42,216)   (13,441)       944,385
                            =============   ===============   ========      =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      I-4

<PAGE>   6

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                      Consolidated Statements of Cash Flows


                                   (unaudited)




<TABLE>
<CAPTION>
                                                                                    Six months ended
                                                                                        June 30,
                                                                                  ---------------------
                                                                                    1998         1997
                                                                                  --------     --------- 
                                                                                    amounts in thousands
                                                                                       (see note 3)
<S>                                                                               <C>            <C>     
Cash flows from operating activities:
  Net loss                                                                        $(81,390)      (65,497)
  Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
        Depreciation and amortization                                                4,790        32,136
        Stock compensation                                                          10,515         1,831
        Payment of obligation relating to stock compensation                       (14,461)           --
        Share of losses of Telewest                                                 63,717        73,458
        Share of losses of Cablevision                                               7,591            --
        Share of losses of other affiliates                                         45,406        48,788
        Gain on disposition of assets                                               (9,165)           --
        Minority interests' share of earnings                                           --         4,333
        Other non-cash charges (credits)                                              (236)        1,581
        Deferred income tax benefit                                                (36,330)      (55,221)
        Intercompany tax allocation                                                 (7,412)       (7,465)
        Changes in operating assets and liabilities, net of the effect of the
           deconsolidation of Flextech p.l.c.:
             Change in receivables                                                   3,733           577
              Change in payables, accruals, other liabilities and the cash
                 intercompany account included
                 in due from related parties                                        (4,091)       (8,927)
                                                                                  --------      --------
                     Net cash provided by (used in) operating activities
                                                                                  $(17,333)       25,594
                                                                                  --------      --------
</TABLE>

                                                                     (continued)

                                      I-5


<PAGE>   7

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                Consolidated Statements of Cash Flows, continued


                                   (unaudited)


<TABLE>
<CAPTION>
                                                                             Six months ended
                                                                                June 30,
                                                                          ---------------------
                                                                            1998         1997
                                                                          --------     --------- 
                                                                            amounts in thousands
                                                                                (see note 3)
<S>                                                                       <C>            <C>     
Cash flows from investing activities:
    Investments in and loans to affiliates and others                     $(81,404)      (58,666)
    Proceeds from disposition of assets                                     10,000            --
    Capital expended for property and equipment                             (4,986)      (26,080)
    Cash paid for acquisitions                                                  --       (11,993)
    Repayments received on loans to affiliates                              13,548        19,598
    Effect of the deconsolidation of Flextech p.l.c. on cash and cash
       equivalents                                                              --       (38,142)
    Other, net                                                              (1,300)          340
                                                                          --------      --------

                 Net cash used in investing activities                     (64,142)     (114,943)
                                                                          --------      --------

Cash flows from financing activities:
    Repayments received on loan to related party                            83,357       122,782
    Borrowings of debt                                                          --       175,869
    Repayments of debt                                                         (19)     (205,555)
    Repurchases of common stock                                               (202)      (42,014)
    Proceeds from issuance of common stock                                     366            --
    Payment of deferred financing costs                                         --          (950)
    Change in cash overdraft                                                (1,003)           --
                                                                          --------      --------

                 Net cash provided by financing activities                  82,499        50,132
                                                                          --------      --------

                 Net increase (decrease) in cash and
                    cash equivalents                                         1,024       (39,217)

                 Cash and cash equivalents:
                    Beginning of period                                         --        44,192
                                                                          --------      --------

                    End of period                                         $  1,024         4,975
                                                                          ========      ========
</TABLE>



See accompanying notes to consolidated financial statements.


                                      I-6

<PAGE>   8


                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

                                  June 30, 1998

                                   (unaudited)
 (1)     Basis of Presentation

         Tele-Communications International, Inc. ("TINTA" or the "Company"), a
         majority-owned subsidiary of Tele-Communications, Inc. ("TCI"),
         operates multi-channel video and telecommunications distribution
         networks in, and provides diversified programming services to, selected
         markets outside the United States.

         TINTA's common stock, par value $1.00 per share is comprised of
         Tele-Communications International Inc. Series A Common Stock ("Series A
         Stock") and Tele-Communications International Inc. Series B Common
         Stock ("Series B Stock" and together with Series A Stock, the "Common
         Stock"). At June 30, 1998, TCI owned approximately 85% of the aggregate
         issued and outstanding TINTA Common Stock and 92% of the aggregate
         voting interest represented by the TINTA Common Stock.

         TCI's common stock, par value $1.00 per share, is comprised of six
         series: Tele-Communications, Inc. Series A TCI Group Common Stock,
         Tele-Communications, Inc. Series B TCI Group Common Stock,
         (collectively, the "TCI Group Stock"), Tele-Communications, Inc. Series
         A Liberty Media Group Common Stock, Tele-Communications, Inc. Series B
         Liberty Media Group Common Stock, (collectively, the "Liberty Group
         Stock"),Tele-Communications, Inc. Series A TCI Ventures Group Common
         Stock and Tele-Communications, Inc. Series B TCI Ventures Group Common
         Stock, (collectively, the "TCI Ventures Group Stock").

         The TCI Group Stock is intended to reflect the separate performance of
         the "TCI Group," which is comprised of TCI's domestic cable and
         communications business. The Liberty Group Stock is intended to reflect
         the separate performance of the "Liberty Media Group," which is
         comprised of TCI's businesses, and investments in entities, that are
         engaged in the production, acquisition and distribution through all
         available formats and media of branded entertainment, educational and
         informational programming and software, including multimedia products,
         and its investments in entities engaged in electronic retailing, direct
         marketing, advertising sales relating to programming services,
         informercials and transaction processing. The TCI Ventures Group Stock
         is intended to reflect the separate performance of the "TCI Ventures
         Group," which is comprised of TCI's principal international assets and
         businesses and substantially all of TCI's non-cable and non-programming
         domestic assets and businesses.

                                                                     (continued)
                                      I-7


<PAGE>   9

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements



         On August 28, 1997, the stockholders of TCI authorized the Board of
         Directors of TCI (the "Board") to issue the TCI Ventures Group Stock
         which reflects the separate performance of the TCI Ventures Group.
         TCI's 85% equity interest in TINTA has been attributed to the TCI
         Ventures Group along with substantially all of TCI's non-cable and
         non-programming domestic assets. In connection with the formation of
         the TCI Ventures Group, the shares of TINTA common stock held by TCI
         were transferred to TCI Ventures Group, LLC ("TVG LLC"), a wholly-owned
         subsidiary of TCI, effective October 1, 1997. On September 10, 1997,
         TCI consummated an exchange offer (the "Exchange Offer") whereby TCI
         issued 377,322,600 shares of Tele-Communications, Inc. Series A TCI
         Ventures Group Common Stock and 32,532,800 shares of
         Tele-Communications, Inc. Series B TCI Ventures Group Common Stock in
         exchange for 188,661,300 shares of Tele-Communications, Inc. Series A
         TCI Group Common Stock and 16,266,400 shares of Tele-Communications,
         Inc. Series B TCI Group Common Stock, respectively.

         During the six months ended June 30, 1998 and 1997, the most
         significant entities that were reflected in the Company's consolidated
         financial statements on a consolidated basis were engaged in the
         multi-channel video distribution business (the "cable" business) in
         Puerto Rico (the "Puerto Rico Subsidiary"), and in Buenos Aires,
         Argentina (through the October 1, 1997 deconsolidation of Cablevision,
         see note 5).

         As further described in note 10, the accompanying consolidated
         statements of operations separately present certain allocated corporate
         expenses of TCI. Although such allocated corporate expenses are not
         necessarily indicative of the costs that would have been incurred by
         the Company on a stand-alone basis, management believes the allocated
         amounts are reasonable.

         The accompanying interim consolidated financial statements are
         unaudited but, in the opinion of management, reflect all adjustments
         (consisting of normal recurring accruals) necessary for a fair
         presentation of the results of such periods. The results of operations
         for any interim period are not necessarily indicative of results for
         the full year. These unaudited interim consolidated financial
         statements should be read in conjunction with the Company's December
         31, 1997 audited financial statements and notes thereto.


                                                                     (continued)
                                      I-8

<PAGE>   10

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

        Effective January 1, 1998, the Company adopted the provisions of
        Statement of Financial Accounting Standards No. 130, Reporting
        Comprehensive Income ("SFAS 130"). The Company has reclassified its
        prior period consolidated balance sheet and consolidated statement of
        operations to conform to the requirements of SFAS 130. SFAS 130 requires
        that all items which are components of comprehensive earnings or losses
        be reported in a financial statement in the period in which they are
        recognized. The Company has included cumulative foreign currency
        translation adjustments in other comprehensive earnings that are
        recorded directly in stockholders' equity. Pursuant to SFAS 130, this
        item is reflected, net of related tax effects, as a component of
        comprehensive losses in the Company's consolidated statements of
        operations, and is included in accumulated other comprehensive earnings
        in the Company's consolidated balance sheets and statement of
        stockholders' equity.

        From time to time, the Company uses certain derivative financial
        instruments to manage its foreign currency risks. Amounts receivable or
        payable pursuant to derivative financial instruments that qualify as
        hedges of existing assets, liabilities and firm commitments are deferred
        and reflected as an adjustment of the carrying amount of the hedged
        item. Market value changes in all other derivative financial instruments
        are recognized currently in the consolidated statements of operations.
        At June 30, 1998, the Company had no material deferred hedging gains or
        losses and was not exposed to material near-term losses in future
        earnings, fair values or cash flows resulting from derivative financial
        instruments.

        The Financial Accounting Standards Board recently issued Statement of
        Financial Accounting Standards No. 133, Accounting for Derivative
        Instruments and Hedging Activities, ("SFAS 133"), which is effective for
        all fiscal years beginning after June 15, 1999. SFAS 133 establishes
        accounting and reporting standards for derivative instruments and
        hedging activities by requiring that all derivative instruments be
        reported as assets or liabilities and measured at their fair values.
        Under SFAS 133, changes in the fair values of derivative instruments are
        recognized immediately in earnings unless those instruments qualify as
        hedges of the (1) fair values of existing assets, liabilities, or firm
        commitments, (2) variability of cash flows of forecasted transactions,
        or (3) foreign currency exposures of net investments in foreign
        operations. Although management of the Company has not completed its
        assessment of the impact of SFAS 133 on its consolidated results of
        operations and financial position, management estimates that the impact
        of SFAS 133 will not be material.

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        at the date of the financial statements and the reported amounts of
        revenue and expenses during the reporting period. Actual results could
        differ from those estimates.

        Certain prior year amounts have been reclassified to conform to the
        1998 presentation.

                                                                     (continued)
                                      I-9

<PAGE>   11

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         Unless otherwise indicated, convenience translations of foreign
         currencies into U.S. dollars are calculated using the applicable spot
         rate at June 30, 1998, as published in the Wall Street Journal.

(2)      Loss Per Common Share

         Basic earnings (loss) per share ("EPS") is measured as the income or
         loss attributable to common stockholders divided by the weighted
         average outstanding common shares for the period. Diluted EPS is
         similar to basic EPS but presents the dilutive effect on a per share
         basis of potential common shares as if they had been converted at the
         beginning of the periods presented. Potential common shares that have
         an anti-dilutive effect are excluded from diluted EPS.

         The basic and diluted loss attributable to TINTA stockholders per
         common share was computed by dividing the net loss attributable to
         TINTA stockholders by a weighted average number of common shares
         outstanding of (i) 115.3 million and 115.8 million for the three months
         ended June 30, 1998 and 1997, respectively, and (ii) 115.3 million and
         117.2 million for the six months ended June 30, 1998 and 1997,
         respectively. Potential common shares were not included in the
         computation of weighted average shares outstanding because their
         inclusion would be anti-dilutive.

         At June 30, 1998, there were 15.4 million potential common shares
         consisting of performance awards and convertible securities that could
         potentially dilute future earnings per share calculations in periods of
         net income. Such potential common share amount does not take into
         account the assumed number of shares that would be repurchased by TINTA
         upon the exercise of the performance awards and the conversion of
         TINTA's convertible securities. No material changes in the weighted
         average outstanding shares or potential common shares occurred after
         June 30, 1998.

(3)      Supplemental Disclosures to Consolidated Statements of Cash Flows

         Cash paid for interest was $9.4 million and $15.0 million during the
         six months ended June 30, 1998 and 1997, respectively. Cash paid for
         income taxes was not significant during the six months ended June 30,
         1998 and was $7.6 million during the six months ended June 30, 1997.

         The effects of changing the method of accounting for the Company's
         ownership interest in Flextech p.l.c. ("Flextech"), effective January
         1, 1997, from the consolidation method to the equity method (see note
         7) are summarized below (amounts in thousands):

<TABLE>
                    <S>                                                         <C>           
                    Assets reclassified to equity investments                    $177,003
                    Liabilities reclassified to equity investments                (72,512)
                    Minority interests in equity of subsidiaries reclassified
                        to equity investments                                    (142,633)
                                                                                 --------
                    Decrease in cash and cash equivalents                        $(38,142)
                                                                                 ========
</TABLE>

                                                                     (continued)

                                      I-10

<PAGE>   12

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

(4)      Acquisitions

         On July 23, 1998, TINTA agreed to purchase 100% of the issued and
         outstanding common stock of Pramer S.A., an Argentine programming
         company, for $80 million in cash and the assumption of certain
         liabilities. Consummation of such transaction is expected to occur in
         the third quarter of 1998. No assurance can be given that such
         transaction will be consummated or consummated on the terms
         contemplated by the parties.

         On May 1, 1997, the Puerto Rico Subsidiary paid cash consideration of
         $12.0 million, and assumed aggregate indebtedness of $32.3 million, to
         acquire the 50% ownership interest in Caguas/Humacao Cable Systems
         ("Caguas") which the Company did not already own (the "Caguas
         Acquisition"). In connection with the Caguas Acquisition, the Puerto
         Rico Subsidiary entered into a new reducing revolving bank credit
         facility (the "Puerto Rico Bank Facility") and used borrowings of
         approximately $45 million thereunder to fund the cash portion of the
         purchase price and to repay the assumed indebtedness. See note 9.

(5)      Cablevision

         On October 9, 1997, TINTA sold a portion of its 51% interest in
         Cablevision to unaffiliated third parties (the "Buyers") for cash
         proceeds of $120.0 million. In addition, on October 9, 1997,
         Cablevision issued 3,541,829 shares of stock in the aggregate to the
         Buyers for $320.0 million. The 1997 transactions (collectively, the
         "Cablevision Sale") reduced TINTA's interest in Cablevision to 26.2%.
         TINTA recognized a gain of $48.8 million (excluding related tax expense
         of $17.1 million) on the Cablevision Sale. TINTA continues to manage
         Cablevision (pursuant to a renewable five-year management contract that
         was entered into in connection with the Cablevision Sale), and certain
         material corporate transactions of Cablevision will require TINTA's
         approval, so long as TINTA maintains at least a 16% interest in
         Cablevision. As a result of the Cablevision Sale, effective October 1,
         1997, TINTA ceased to consolidate Cablevision and began to account for
         Cablevision using the equity method of accounting.

                                                                     (continued)

                                      I-11


<PAGE>   13

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         Prior to 1997 none of Cablevision's post-acquisition operating results
         had been allocated to Cablevision's 49% minority interest because (i)
         the minority interest had no obligation to provide any funding to
         Cablevision and (ii) Cablevision's liabilities exceeded the minority
         interest's historical cost basis in Cablevision's assets. During the
         second quarter of 1997, Cablevision's post-acquisition net earnings
         caused the minority interest's historical cost basis in Cablevision's
         net assets to become positive. Accordingly, the Company began
         allocating 49% of such net earnings to the minority interest during the
         second quarter of 1997. If the minority interest's historical cost
         basis had been positive since January 1, 1997, the Company would have
         allocated an additional $4.3 million during the six months ended June
         30, 1997 of Cablevision's net earnings to the minority interest.

         Summarized unaudited results of operations of Cablevision for the six
         months ended June 30, 1998 are as follows (amounts in thousands):


<TABLE>
                            <S>                                     <C>           
                            Revenue                                 $127,620
                            Operating, selling, general 
                              and administrative expenses            (80,047)
                            Depreciation and amortization            (29,921)
                                                                    --------
                                Operating income                      17,652

                            Interest expense, net                    (42,879)
                            Other, net                                11,106
                                                                    --------

                                Net loss                            $(14,121)
                                                                    ========
</TABLE>

(6)      Investment in Telewest

         At June 30, 1998, the Company indirectly owned, through its 50%
         ownership interest in TW Holdings, L.L.C., 132,638,250 or 26.7% of the
         issued and outstanding non-voting Telewest convertible preference
         shares and 246,111,750 or 26.5% (assuming no conversion of the Telewest
         convertible preference shares) of the issued and outstanding Telewest
         ordinary shares. The reported closing price on the London Stock
         Exchange of Telewest's ordinary shares was (pound)1.41 ($2.35) per
         share at June 30, 1998.

         On April 15, 1998, it was announced that Telewest and General Cable PLC
         ("General Cable") had agreed to the terms of a proposed merger (the
         "Merger Offer") in which holders of General Cable will be offered 1.243
         new Telewest shares and (pound)0.65 ($1.08) in cash for each share of
         General Cable. In addition, holders of American Depository Shares of
         General Cable ("General Cable ADSs") (each representing five General
         Cable shares) will be offered 6.215 new Telewest shares and (pound)3.25
         ($5.42) in cash for each share of General Cable ADSs. Based upon
         Telewest's closing share price of (pound)0.89 ($1.48) on April 14,
         1998, the Merger Offer is valued at approximately (pound)649 million
         ($1.1 billion).

                                                                     (continued)
                                      I-12

<PAGE>   14

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         The cash portion of the Merger Offer will be financed through an offer
         to qualifying Telewest shareholders for the purchase of approximately
         261 million new Telewest shares at a price of (pound)0.925 ($1.54) per
         share. Mediaone Group, Inc. ("Mediaone") (formerly a division of U S
         WEST, Inc.), TINTA and Cox Communications, Inc. ("Cox") have agreed to
         subscribe for their full allocation of new Telewest shares
         (approximately 69 million shares in the case of TINTA) and to subscribe
         on a pro rata basis for any new Telewest shares not subscribed for by
         other Telewest shareholders. Together, Mediaone, TINTA and Cox held
         67.9% of the issued and outstanding Telewest ordinary shares at June
         30, 1998. In addition, it is anticipated that Mediaone, TINTA, Cox and
         SBC Communications, Inc. ("SBC") will convert their entire respective
         holdings of Telewest convertible preference shares into new Telewest
         shares. Following the issuance of new Telewest shares with respect to
         the above transactions, and assuming the exercise of all options under
         General Cable's share option schemes, it is anticipated that existing
         Telewest shareholders would hold 79% and existing General Cable
         shareholders would hold 21% of the then issued ordinary share capital
         of the combined group.

         Consummation of the merger is subject to regulatory approval and other
         conditions. There can be no assurance that such merger will be
         consummated or consummated on the terms contemplated by the parties.

         As a result of Telewest's issuance of U.S. dollar denominated
         debentures (the "Telewest Debentures"), changes in the exchange rate
         used to translate the U.S. dollar into the UK pound sterling will cause
         Telewest to experience realized and unrealized foreign currency
         transaction gains and losses throughout the term of the Telewest
         Debentures, which mature in 2006 and 2007, if not redeemed earlier.
         During the six months ended June 30, 1998 and 1997, Telewest
         experienced foreign currency transaction losses of (pound)1.4 million
         ($2.4 million using the applicable exchange rate) and (pound)24.3
         million ($40.0 million using the applicable exchange rate),
         respectively, resulting from the translation of the Telewest Debentures
         into UK pounds sterling and the adjustment of a related foreign
         currency option contract to market value.

         The functional currency of Telewest is the UK pound sterling. The
         average exchange rate used to translate the Company's share of
         Telewest's operating results from UK pounds to U.S. dollars was 1.6530
         to 1 and 1.6447 to 1 during the six months ended June 30, 1998 and
         1997, respectively. The spot rate used to translate the Company's share
         of Telewest's net assets from UK pounds to U.S. dollars was 1.6677 to 1
         and 1.6508 to 1 at June 30, 1998 and December 31, 1997, respectively.

                                                                     (continued)
                                      I-13

<PAGE>   15

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         Summarized unaudited results of operations of Telewest are as follows:

<TABLE>
<CAPTION>
                                          Six months ended
                                              June 30,
                                      ------------------------
                                         1998          1997
                                      ---------      --------- 
                                         amounts in thousands
<S>                                   <C>              <C>    
Revenue                               $ 373,912        298,357
Operating, selling, general and
   administrative expenses             (284,078)      (271,437)
Depreciation and amortization          (177,578)      (147,267)
                                      ---------      ---------

      Operating loss                    (87,744)      (120,347)

Share of losses of affiliates           (18,318)       (16,974)
Interest expense, net                  (132,937)       (97,215)
Foreign currency transaction loss        (2,413)       (40,006)
Other, net                                1,210            242
                                      ---------      ---------
      Net loss                        $(240,202)      (274,300)
                                      =========      =========
</TABLE>

(7)      Investments in Other Affiliates

         The Company's affiliates other than Cablevision and Telewest that are
         accounted for using the equity method (the "Other Affiliates")
         generally are engaged in the cable and/or programming businesses in
         various foreign countries. Most of the Other Affiliates have incurred
         net losses since their respective inception dates. As such,
         substantially all of the Other Affiliates are dependent upon external
         sources of financing and capital contributions in order to meet their
         respective liquidity requirements.

         The Company has guaranteed notes payable and other obligations of
         certain of the Other Affiliates (the "Guaranteed Obligations"). At June
         30, 1998, the U.S. dollar equivalent of the amounts borrowed pursuant
         to the Guaranteed Obligations aggregated approximately $101 million.

         Certain of the Other Affiliates are general partnerships and any
         subsidiary of the Company that is a general partner in a general
         partnership could be liable, depending upon the applicable partnership
         law, for all debts of that partnership to the extent liabilities of
         that partnership were to exceed its assets.

         Agreements governing the Company's investment in certain of the Other
         Affiliates contain (i) buy-sell and other exit arrangements whereby the
         Company could be required to purchase another investor's ownership
         interest and (ii) performance guarantees whereby the Company has
         guaranteed the performance of the Company's subsidiary that directly
         holds the related investment.

                                                                     (continued)
                                      I-14

<PAGE>   16

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

The following table reflects the Company's carrying value (including
receivables) of the Other Affiliates:

<TABLE>
<CAPTION>
                                                        June 30,  December 31,
                                                          1998        1997
                                                        --------  -----------
                                                         amounts in thousands
<S>                                                     <C>           <C>    
Flextech (a)                                            $259,058      261,453
Liberty/TINTA LLC 
   ("Liberty/TINTA")(b)                                  134,407      127,574
MultiThematiques S.A 
   ("MultiThematiques")                                   70,977       68,335
Jupiter Telecommunications Co., Ltd. 
   ("Jupiter")                                            51,225       49,197
United International Investments 
   ("UII") (c)                                            25,101       26,966
Bresnan International Partners 
   (Poland), L.P. ("BIP Poland")                          21,345       26,110
Jupiter Programming Co., Ltd. ("JPC")                     17,403       15,582
Bresnan International Partners 
   (Chile), L.P.                                          15,071       22,863
Other                                                      2,711        4,245
                                                        --------  -----------
                                                        $597,298      602,325
                                                        ========  ===========
</TABLE>

         (a)      Flextech

                  At June 30, 1998, the Company owned 57,889,032 Flextech
                  ordinary shares ("Flextech Ordinary Shares") representing
                  36.8% of the issued and outstanding Flextech share capital
                  and, when combined with a special voting share owned by TINTA,
                  50% of the aggregate voting interests attributable to such
                  Flextech share capital. Based upon the (pound)5.53 ($9.22) per
                  share closing price at June 30, 1998 of the Flextech Ordinary
                  Shares on the London Stock Exchange, the Flextech Ordinary
                  Shares owned by the Company had an aggregate market value of
                  (pound)320 million ($534 million) at June 30, 1998.

                                                                     (continued)

                                      I-15

<PAGE>   17

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         In January 1997, the Company reduced its voting interest in Flextech to
         50% by issuing to a nominee an irrevocable proxy (the "Proxy") to vote
         960,850 Flextech Ordinary Shares at any shareholder meeting to be held
         through December 31, 1997. In April 1997, Flextech and BBC Worldwide
         Limited ("BBC Worldwide") formed two separate joint ventures (the
         "Principal Joint Venture" and the "Second Joint Venture", collectively,
         the "BBC Joint Ventures") and entered into certain related
         transactions. The consummation of the BBC Joint Ventures and related
         transactions resulted in, among other things, a reduction of TINTA's
         ownership interest in Flextech to 35.9% and the issuance to TINTA by
         Flextech of a special voting share (the "Special Voting Share"). The
         Special Voting Share when combined with TINTA's other share capital in
         Flextech allows TINTA to cast 50% of the votes on most matters brought
         to the shareholders of Flextech for vote. The Special Voting Share will
         terminate upon the occurrence of the earlier of (i) the third
         anniversary of issuance or (ii) any transfer of Flextech shares by the
         Company outside a specified affiliated group. In light of the Company's
         decreased voting interest in Flextech, the Company, effective January
         1, 1997, ceased to consolidate Flextech and began to account for
         Flextech using the equity method of accounting.

         Flextech has undertaken to finance the working capital requirements of
         the Principal Joint Venture, and is obligated to provide the Principal
         Joint Venture with a primary credit facility of (pound)88 million ($147
         million) and, subject to certain restrictions, a standby credit
         facility of (pound)30 million ($50 million). As of June 30, 1998, the
         Principal Joint Venture had borrowed (pound)6.6 million ($11.0 million)
         under the primary credit facility. Flextech has also agreed to make
         available to the Second Joint Venture, if required, funding of up to
         (pound)10 million ($17 million). As of June 30, 1998, Flextech had
         funded (pound)7.5 million ($12.5 million) to the Second Joint Venture
         under such obligation. If Flextech defaults in its funding obligation
         to the Principal Joint Venture and fails to cure within 42 days after
         receipt of notice from BBC Worldwide, BBC Worldwide is entitled, within
         the following 90 days, to require that the Company assume all of
         Flextech's funding obligations to the Principal Joint Venture (the
         "Standby Commitment").

                                                                     (continued)
                                      I-16

<PAGE>   18

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         If BBC Worldwide requires the Company to perform Flextech's funding
         obligations pursuant to the Standby Commitment, then the Company will
         acquire Flextech's entire equity interest in the Principal Joint
         Venture for (pound)1.00, and will replace Flextech's directors on the
         board of the Principal Joint Venture with representatives of the
         Company. Flextech will pay commitment and standby fees to the Company
         for its undertaking under the Standby Commitment. If Flextech repays to
         the Company all loans the Company makes to the Principal Joint Venture
         (plus interest at TINTA's marginal cost of funds plus 2% per annum)
         within 180 days after the Company first becomes obligated to perform
         Flextech's financial obligations, it may reacquire its interest in the
         Principal Joint Venture for (pound)1.00. The Company may also, within
         the same period, require Flextech to reacquire its interest on the same
         terms. The Standby Commitment will terminate on the earliest of (i) the
         date on which Flextech has met all of its required financial
         obligations to the Principal Joint Venture under the primary and
         standby credit facilities, or (ii) the date on which Flextech delivers
         a bank guarantee of all of its funding obligations to the Principal
         Joint Venture.

         So long as the Company is contingently obligated under the Standby
         Commitment, it has been agreed that (i) Flextech will not sell any of
         its direct or indirect interests in the Principal Joint Venture, (ii)
         Flextech will not conduct its business in such a way as is likely to
         cause it to be in material breach of any material contracts or to have
         insufficient working capital to meet its funding obligation to the
         Principal Joint Venture, and (iii) Flextech will use its available
         resources to subscribe for any outstanding loan stock of the Principal
         Joint Venture, if and to the extent required by TINTA at any time after
         December 31, 2011.

(b)      Liberty/TINTA

         Subsidiaries of TINTA and Liberty Media Corporation ("Liberty") own
         equal parts of Liberty/TINTA. During 1996, Liberty/TINTA and News
         Corporation Limited ("News Corp.") formed a joint venture including a
         number of partnerships or other entities under common ownership, ("Fox
         Sports International"), to operate currently existing sports services
         in Latin America and Australia and a variety of new sports services
         throughout the world, excluding the United States, Canada and certain
         other defined geographic areas.

         During the third quarter of 1997, Fox Sports International distributed
         (i) its 35% interest in Torneos y Competencias S.A. ("Torneos") to
         Liberty/TINTA and (ii) certain Australian sports rights to News Corp.
         On October 2, 1997 TINTA purchased a 5% direct interest in Torneos from
         an unaffiliated third party for $12 million. As of June 30, 1998, TINTA
         had made cash contributions to Torneos on the behalf of Liberty/TINTA
         of $48 million.

                                                                     (continued)
                                      I-17

<PAGE>   19
                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         (c)      UII

                  At June 30, 1998, UII owned approximately 50.0%, 46.6% and
                  45.0% of Melita Cable TV Limited ("Melita"), Tevel Israel
                  International Communications Ltd. ("Tevel") and Princes
                  Holding Limited ("PHL"), respectively. Through UII, TINTA
                  owned 50.0%, 50.0% and 55.6% of the foregoing Melita, Tevel
                  and PHL ownership interests. Melita and Tevel operate cable
                  television systems in Malta and Israel, respectively. PHL is
                  an Irish cable and microwave-multichannel distribution
                  operator.

                  TINTA has signed a memorandum of understanding with United
                  International Holdings, Inc. ("UIH") for the sale of TINTA's
                  ownership interests in Tevel and Melita to UIH. Concurrently,
                  TINTA will purchase an additional 25% interest in PHL from
                  UIH. The parties have agreed that, net of its purchase of
                  UIH's 25% interest in PHL, TINTA will receive $71 million for
                  its interests in Tevel and Melita. Such proceeds are subject
                  to adjustment.

                  Consummation of such transactions is contingent on the consent
                  of certain third parties and regulatory bodies, as well as on
                  the completion of financing by UIH. There can be no assurance
                  that such transactions will be consummated or consummated on
                  the terms contemplated by the parties.

         Other

         Asia Business News (Singapore) PTE Ltd.

         On December 31, 1997, the Company surrendered all of its shares of Asia
         Business News (Singapore) PTE Ltd. ("ABN") in exchange for a $25
         million unsecured note receivable from ABN (the "ABN Note"). The ABN
         Note is due on December 31, 2012. Due to uncertainty regarding
         collection of the ABN Note, the Company recorded the ABN Note at an
         amount equal to its investment in ABN as of the date of conversion. No
         gain was recognized on the above transaction. The ABN Note has been
         included with "Other investments" in the accompanying consolidated
         balance sheets.

         The following table reflects the Company's share of earnings (losses)
         of the Other Affiliates:

<TABLE>
<CAPTION>
                        Six months ended
                            June 30,
                     ----------------------
                       1998         1997
                     --------      --------  
                      amounts in thousands
<S>                  <C>            <C>     
Jupiter              $(12,007)      (10,638)
MultiThematiques      (10,481)       (4,134)
JPC                    (6,670)       (7,513)
Liberty/TINTA          (6,664)       (7,432)
Flextech               (6,181)      (10,615)
BIP Poland             (3,754)         (750)
ABN                        --        (6,230)
Other                     351        (1,476)
                     --------      --------

                     $(45,406)      (48,788)
                     ========      ========
</TABLE>

                                                                     (continued)
                                      I-18

<PAGE>   20

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         Summarized unaudited results of operations of the Other Affiliates by
         geographic region for the periods in which the Company used the equity
         method to account for its investments in the Other Affiliates are as
         follows:

<TABLE>
<CAPTION>
                                             Six months ended June 30, 1998
                                    -------------------------------------------------------
                                                                  Latin America                    
                                                                   America and
                                                     Asia and          the     
                                     Europe        Australia (a)  Caribbean (b)     Total
                                    ---------      -------------  --------------  ---------
                                                      amounts in thousands
<S>                                 <C>            <C>            <C>             <C>
Combined Operations
Revenue                             $ 176,241            104,010              --    280,251
Operating, selling, general and
   administrative expenses           (193,241)          (139,435)             --   (332,676)
Depreciation and amortization          (6,486)           (11,308)           (170)   (17,964)
                                    ---------      -------------  --------------  ---------

        Operating loss                (23,486)           (46,733)           (170)   (70,389)

Interest expense, net                  (5,796)            (1,130)         (3,311)   (10,237)
Other, net                              4,802              3,212         (12,489)    (4,475)
                                    ---------      -------------  --------------  ---------

        Net loss                    $ (24,480)           (44,651)        (15,970)   (85,101)
                                    =========      =============  ==============  =========
</TABLE>

<TABLE>
<CAPTION>
                                             Six months ended June 30, 1998
                                    -------------------------------------------------------
                                                                  Latin America                    
                                                                   America and
                                                     Asia and          the     
                                     Europe        Australia (a)  Caribbean (b)     Total
                                    ---------      -------------  --------------  ---------
                                                      amounts in thousands
<S>                                 <C>            <C>            <C>             <C>
Combined Operations
Revenue                             $ 130,458        111,101          6,559        248,118
Operating, selling, general and
   administrative expenses           (159,370)      (129,664)        (5,233)      (294,267)
Depreciation and amortization         (14,422)        (7,205)        (1,191)       (22,818)
                                    ---------      ---------      ---------      ---------

        Operating income (loss)       (43,334)       (25,768)           135        (68,967)

Interest expense, net                    (922)        (5,498)        (2,784)        (9,204)
Other, net                             (4,815)       (13,579)       (14,807)       (33,201)
                                    ---------      ---------      ---------      ---------

        Net loss                    $ (49,071)       (44,845)       (17,456)      (111,372)
                                    =========      =========      =========      =========
</TABLE>

---------------

         (a)    The summarized operating results of ABN are included in the
                combined operations through December 31, 1997, the date the
                Company surrendered all of its shares of ABN in exchange for the
                ABN Note. See related discussion above. The summarized operating
                results of Sky Network Television New Zealand, Ltd. ("Sky") are
                included in the combined operations through September 26, 1997,
                the date that the Company sold its interest in Sky.

                                                                     (continued)
                                      I-19

<PAGE>   21

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         (b)      The summarized operating results of Caguas are included in the
                  combined operations through May 1, 1997, the date that the
                  Company acquired the 50% ownership in Caguas which the Company
                  did not already own. See note 4.

(8)      Other Investments

         The components of other investments are set forth below:

<TABLE>
<CAPTION>
                                     June 30,  December 31,
                                       1998         1997
                                     -------    -----------
                                      amounts in thousands
                <S>                  <C>        <C>   
                DTH Ventures (a)     $44,844         24,933
                Other (b)              7,370          8,079
                                     -------    -----------
                                     $52,214         33,012
                                     =======    ===========
</TABLE>

         (a)      DTH Ventures

                  TINTA has formed strategic partnerships with News Corp.,
                  Organizacoes Globo and Grupo Televisa S.A. to develop and
                  operate a direct-to-home satellite service for Latin America,
                  Mexico, and various Central and South American countries
                  (collectively, the "DTH Ventures"). Through June 30, 1998,
                  TINTA had contributed $44.8 million to the DTH Ventures. It is
                  anticipated that TINTA could be required to make additional
                  cash contributions to the DTH Ventures. In addition, as of
                  June 30, 1998, TINTA had guaranteed approximately $93 million
                  of the DTH Ventures' financial obligations.

         (b)      Other

                  On January 16, 1998, the Company sold its interest in
                  TeleCable Nacional, CXA for cash proceeds of $10.0 million.
                  The Company recognized a gain on such sale of $9.2 million.

(9)      Debt

         The components of debt are as follows:
<TABLE>
<CAPTION>
                                               June 30,   December 31,
                                                 1998         1997
                                               --------   ------------
                <S>                            <C>        <C>    
                TINTA:                           amounts in thousands
                  Convertible Subordinated     
                    Debentures (a)             $345,000        345,000

                Subsidiary:
                 Puerto Rico Subsidiary (b)      45,023         45,042
                                               --------   ------------
                                               $390,023        390,042
                                               ========   ============
</TABLE>

                                                                     (continued)

                                      I-20

<PAGE>   22

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements


         (a)      On February 8, 1996, TINTA received net cash proceeds of
                  approximately $336 million from the issuance of 4-1/2%
                  Convertible Subordinated Debentures due 2006 having an
                  aggregate principal amount of $345 million (the "Debentures").
                  The Debentures are convertible into shares of Series A Common
                  Stock at a price of $27.30 per share of Series A Common Stock,
                  subject to anti-dilution adjustments. Interest on the
                  Debentures is payable on February 15 and August 15 of each
                  year. The Debentures are redeemable by TINTA in whole or in
                  part, at any time on or after February 15, 1999.

         (b)      At June 30, 1998, the Puerto Rico Subsidiary had amounts
                  outstanding under the Puerto Rico Bank Facility of $45.0
                  million. The Puerto Rico Bank Facility is unsecured and
                  provides for maximum borrowing commitments of $100 million.
                  The availability of such commitments for borrowing is subject
                  to the Puerto Rico Subsidiary's compliance with applicable
                  financial covenants and other customary conditions. Commencing
                  March 31, 2000, the maximum commitments will be reduced
                  quarterly through March 31, 2006. Borrowings under the Puerto
                  Rico Bank Facility bear interest at variable rates (6.15% at
                  June 30, 1998). In addition, the Puerto Rico Subsidiary is
                  required to pay a commitment fee equal to 0.375% on the
                  average daily unused portion of the maximum borrowing
                  commitments, payable quarterly in arrears and at maturity. The
                  Puerto Rico Bank Facility contains restrictive covenants which
                  require, among other things, the maintenance of certain
                  financial ratios (primarily the ratios of cash flow to total
                  debt and cash flow to debt service, as defined), and includes
                  certain limitations on indebtedness, investments, guarantees,
                  acquisitions, dispositions, dividends, liens and encumbrances,
                  and transactions with affiliates. If TCI's ownership interest
                  in TINTA were to fall below 50.1%, borrowings under the Puerto
                  Rico Bank Facility would be secured by the assets of the
                  Puerto Rico Subsidiary and the variable interest rates on such
                  borrowings would be increased.

         With the exception of the Debentures, which had a fair value of $317
         million at June 30, 1998, the Company believes that the fair value and
         the carrying value of the Company's debt were approximately equal at
         June 30, 1998.

                                                                     (continued)
                                      I-21

<PAGE>   23

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

(10)     Related Party Transactions

         Due from related parties

         The components of "Due from (to) related parties" are as follows:

<TABLE>
<CAPTION>
                                               June 30,    December 31,
                                                 1998         1997
                                               -------     ------------
                                                 amounts in thousands
         <S>                                   <C>         <C>   
         TVG LLC Note Receivable (a)           $  5,351          88,707
         TVG LLC Credit Facility (b)                 --              --
         Non-Cash Intercompany Account (c)       11,470          (4,823)
         Cash Intercompany Account (d)           (3,380)         (5,772)
                                               --------    ------------
                                               $ 13,441          78,112
                                               ========    ============
</TABLE>

         (a)      In December 1997, amounts outstanding under TINTA's note
                  receivable from TCI were assigned to TVG LLC (the "TVG LLC
                  Note Receivable"). The TVG LLC Note Receivable bears interest
                  at variable rates (6.4% at June 30, 1998). Principal and
                  interest is due and payable as mutually agreed from time to
                  time by TVG LLC and TINTA. During the six months ended June
                  30, 1998 and 1997, interest income related to the TVG LLC Note
                  Receivable aggregated $1.6 million and $3.8 million,
                  respectively.

         (b)      The revolving subordinated credit agreement with TVG LLC, as
                  creditor, and TINTA, as borrower, (the "TVG LLC Credit
                  Facility") is a subordinated unsecured revolving credit
                  facility that initially provided for loans from TCI to the
                  Company in an aggregate outstanding principal amount of up to
                  $200 million. As of September 10, 1997, TCI assigned all of
                  its rights, interests and obligations in and to the TVG LLC
                  Credit Facility to TVG LLC. At the time of such assignment, no
                  borrowings were outstanding under TVG LLC Credit Facility. In
                  connection with the assignment, the parties agreed to extend
                  the maturity date of the TVG LLC Credit Facility to September
                  10, 2002, at which time all borrowings, together with all
                  accrued interest thereon, will be payable and the parties
                  reduced the interest rate on the TVG LLC Credit Facility from
                  13% to 10%. If at any time TVG LLC shall beneficially own
                  capital stock of TINTA representing less than a majority in
                  voting power of the outstanding shares of TINTA capital stock
                  entitled to vote for the election of directors, TVG LLC may
                  terminate its obligation to make further loans under the TVG
                  LLC Credit Facility upon two business days prior notice to
                  TINTA. There were no borrowings outstanding pursuant to the
                  TVG LLC Credit Facility at June 30, 1998 and December 31,
                  1997. The TVG LLC Credit Facility requires an annual credit
                  facility fee in an amount equal to 3/8% of the unused
                  borrowing availability under such facility. Such credit
                  facility fees aggregated $375,000 during each of the six month
                  periods ended June 30, 1998 and 1997.

                                                                     (continued)
                                      I-22

<PAGE>   24

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         (c)      At June 30, 1998, the non-cash intercompany account (the
                  "Non-Cash Intercompany Account") with TVG LLC was comprised of
                  $3.7 million due to TVG LLC with respect to TINTA's share of
                  TCI's compensation liability arising from certain stock
                  appreciation rights and stock options (the "TCI Compensation
                  Liability") and $15.2 million due from TVG LLC with respect to
                  the allocation of current intercompany income tax benefits
                  pursuant to a tax sharing agreement as described below. The
                  TCI Compensation Liability, which represents TINTA's share of
                  TCI's stock compensation liability, will be settled in cash
                  only to the extent that TCI is required to make cash payments
                  to satisfy the TCI Compensation Liability. As described below,
                  changes in the TCI Compensation Liability have been included
                  in the accompanying consolidated statements of operations.
                  Amounts included in the Non-Cash Intercompany Account are
                  non-interest bearing.

         (d)      Amounts included in the cash intercompany account (the "Cash
                  Intercompany Account") with TVG LLC are required to be settled
                  within 30 days following notification. Any payable amounts
                  that remain outstanding after such 30-day period generally are
                  treated as adjustments of the outstanding borrowings pursuant
                  to the TVG LLC Credit Facility. Amounts included in the Cash
                  Intercompany Account are non-interest bearing.

         Other Related Party Transactions

         Certain key employees of TINTA hold stock options with tandem stock
         appreciation rights ("SARs") with respect to certain common stock of
         TCI. Estimates of the compensation expense relating to SARs have been
         included in the accompanying consolidated statements of operations, but
         are subject to future adjustment based upon the vesting and market
         value of the underlying TCI common stock and ultimately on the final
         determination of market value when the rights are exercised. The
         estimated compensation adjustment with respect to SARs resulted in
         increases to TINTA's share of TCI's stock compensation liability of
         $5.4 million and $1.7 million for the six months ended June 30, 1998
         and 1997, respectively. Such compensation adjustments are included in
         corporate general and administrative costs and expenses in the
         accompanying consolidated statements of operations. For the six months
         ended June 30, 1998, TINTA made cash payments relating to its share of
         TCI's stock compensation obligations of $14.3 million.

         Corporate expenses are allocated to TINTA based upon the cost of
         general and administrative services provided. Through September 9,
         1997, such corporate expenses were allocated pursuant to a services
         agreement between TINTA and TCI. In connection with the September 10,
         1997 consummation of the Exchange Offer, TCI attributed its rights and
         obligations under such services agreement to TVG LLC. The amounts
         allocated to the Company for the six months ended June 30, 1998 and
         1997 aggregated $966,000 and $872,000, respectively.

                                                                     (continued)
                                      I-23

<PAGE>   25

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         The Puerto Rico Subsidiary purchases programming services from a
         subsidiary of TCI. The charges, which approximate such TCI subsidiary's
         cost and are based on the aggregate number of subscribers served by the
         Puerto Rico Subsidiary, aggregated $2.8 million and $2.9 million during
         the six months ended June 30, 1998 and 1997, respectively. Such
         programming charges are included in operating costs and expenses in the
         accompanying consolidated statements of operations.

         As further described in note 5, effective October 1, 1997, the Company
         ceased to consolidate Cablevision and began to account for Cablevision
         under the equity method of accounting. Cablevision purchases
         programming services from certain affiliates. The related charges
         generally are based upon the number of Cablevision's subscribers that
         receive the respective services. During the six months ended June 30,
         1997, such charges aggregated $7.4 million. Additionally, certain of
         Cablevision's general and administrative functions are provided by
         affiliates. The related charges, which generally are based upon the
         respective affiliate's cost of providing such functions, aggregated
         $1.6 million during the six months ended June 30, 1997. The
         above-described programming and general and administrative charges are
         included in operating costs and expenses in the accompanying
         consolidated statements of operations.

         During 1996, TCI Communications, Inc. ("TCIC"), a subsidiary of TCI,
         transferred, subject to regulatory approval, certain distribution
         equipment to a subsidiary of TINTA in exchange for a (pound)14,950,000
         ($23.3 million using the applicable exchange rate) principal amount
         promissory note (the "TVG LLC Promissory Note"). The TVG LLC Promissory
         Note was contributed by TCIC to TVG LLC in connection with the
         September 10, 1997 consummation of the Exchange Offer. The distribution
         equipment was subsequently leased back to TCIC over a five year term
         with semi-annual payments of (pound)998,000 ($1.7 million), plus
         expenses. Effective October 1, 1997, such distribution equipment was
         transferred back to TCIC and the related lease and the TVG LLC
         Promissory Note were canceled. During the six months ended June 30,
         1997, (i) the U.S. dollar equivalent of interest expense incurred with
         respect to the TVG LLC Promissory Note was $789,000, (ii) the U.S.
         dollar equivalent of the lease revenue under the above-described lease
         agreement aggregated $1.7 million, and (iii) the Company experienced
         foreign currency transaction losses of $589,000 with respect to the TVG
         LLC Promissory Note.

         TINTA and its 80%-or-more-owned domestic subsidiaries (the "TINTA Tax
         Group") are included in the consolidated federal and state income tax
         returns of TCI. The Company's income taxes include those items in the
         consolidated calculation applicable to the TINTA Tax Group
         ("intercompany tax allocation") and any income taxes of TINTA's
         consolidated foreign or domestic subsidiaries that are excluded from
         the consolidated federal and state income tax returns of TCI.
         Intercompany tax allocation represents an apportionment of tax expense
         or benefit (other than deferred taxes) among subsidiaries of TCI in
         relation to their respective amounts of taxable earnings or losses.


                                                                     (continued)
                                      I-24

<PAGE>   26

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         A tax sharing agreement (the "Old Tax Sharing Agreement") among TCI,
         TINTA and certain other subsidiaries of TCI was implemented effective
         July 1, 1995. The Old Tax Sharing Agreement formalized certain of the
         elements of a pre-existing tax sharing arrangement and contains
         additional provisions regarding the allocation of certain consolidated
         income tax attributes and the settlement procedures with respect to the
         intercompany allocation of current tax attributes. Under the Old Tax
         Sharing Agreement, TINTA was responsible to TCI for its share of
         consolidated income tax liabilities (computed as if TCI were not liable
         for the alternative minimum tax) determined in accordance with the Old
         Tax Sharing Agreement, and TCI was responsible to TINTA to the extent
         that the income tax attributes generated by the TINTA Tax Group were
         utilized by TCI to reduce its consolidated income tax liabilities
         (computed as if TCI were not liable for the alternative minimum tax).
         The tax liabilities and benefits of such entities so determined were
         charged or credited to an intercompany account between TCI and TINTA.
         Such intercompany account is required to be settled only upon the date
         that an entity ceases to be a member of TCI's consolidated group for
         federal income tax purposes. Under the Old Tax Sharing Agreement, TCI
         retains the burden of any alternative minimum tax and has the right to
         receive the tax benefits from an alternative minimum tax credit
         attributable to any tax period beginning on or after July 1, 1995 and
         ending on or before October 1, 1997.

         Effective October 1, 1997, (the "Effective Date"), the Old Tax Sharing
         Agreement was replaced by a new tax sharing agreement, as amended by
         the First Amendment thereto (the "New Tax Sharing Agreement"), which
         governs the allocation and sharing of income taxes by the TCI Group,
         the Liberty Media Group and the TCI Ventures Group (each a "Group").
         TINTA and its subsidiaries are members of the TCI Ventures Group for
         purposes of the New Tax Sharing Agreement. Effective for periods on and
         after the Effective Date, federal income taxes will be computed based
         upon the type of tax paid by TCI (on a regular tax or alternative
         minimum tax basis) on a separate basis for each Group. Based upon these
         separate calculations, an allocation of tax liabilities and benefits
         will be made such that each Group will be required to make cash
         payments to TCI based on its allocable share of TCI's consolidated
         federal income tax liabilities (on a regular tax or alternative minimum
         tax basis, as applicable) attributable to such Group and actually used
         by TCI in reducing its consolidated federal income tax liability. Tax
         attributes and tax basis in assets would be inventoried and tracked for
         ultimate credit to or charge against each Group. Similarly, in each
         taxable period that TCI pays alternative minimum tax, the federal
         income tax benefits of each Group, computed as if such Group were
         subject to regular tax, would be inventoried and tracked for payment to
         or payment by each Group in years that TCI utilizes the alternative
         minimum tax credit associated with such taxable period. The Group
         generating the utilized tax benefits would receive a cash payment only
         if, and when, the unutilized taxable losses of the other Group are
         actually utilized. If the unutilized taxable losses expire without ever
         being utilized, the Group generating the utilized tax benefits will
         never receive payment for such benefits. Pursuant to the New Tax
         Sharing Agreement, state and local income taxes are calculated on a
         separate return basis for each Group (applying provisions of state and
         local tax law and related regulations as if the Group were a separate
         unitary or combined group for tax purposes), and TCI's combined or
         unitary tax liability is allocated among the Groups based upon such
         separate calculation.

                                                                     (continued)
                                      I-25

<PAGE>   27

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         Notwithstanding the foregoing, items of income, gain, loss, deduction
         or credit resulting from certain specified transactions that were
         consummated after the Effective Date pursuant to a letter of intent or
         agreement that was entered into prior to the Effective Date will be
         shared and allocated pursuant to the terms of the Old Tax Sharing
         Agreement as amended.

         The intercompany tax account existing between TCI and TINTA for the
         period beginning July 1, 1995 and ending September 30, 1997 will be
         required to be settled between the TCI Ventures Group and TINTA if and
         when TINTA ceases to be a member of TCI's consolidated group for
         federal income tax purposes. For periods subsequent to September 30,
         1997, TINTA and TCI Ventures Group have followed a tax sharing
         arrangement with terms similar to those contained in the New Tax
         Sharing Agreement.

(11)     Commitments and Contingencies

         The Company has guaranteed the obligation of an affiliate (The Premium
         Movie Partnership) to pay fees for the license to exhibit certain films
         through 2000. Although the aggregate amount of The Premium Movie
         Partnership's license fee obligations is not currently estimable, the
         Company believes that the aggregate payments pursuant to such
         obligations could be significant. If the Company were to fail to
         fulfill its obligations under the guarantee, the beneficiaries have the
         right to demand an aggregate payment from the Company of approximately
         $38 million. In connection with this guarantee, the Company has agreed
         to maintain a defined net worth (cash equivalents plus the fair value
         of securities listed on an exchange less liabilities) of at least $150
         million. If the Company's net worth (as defined) were to fall below
         $150 million, TCI has agreed to subordinate any intercompany amounts
         owed by the Company to TCI to the Company's obligation pursuant to this
         guarantee. Although the Company has not had to perform under such
         guarantee to date, the Company cannot be certain that it will not be
         required to perform under such guarantee in the future.

         For information concerning the Company's commitments and contingent
         liabilities with respect to certain affiliates, see notes 6, 7, 8 and 
         10.


                                                                     (continued)
                                      I-26

<PAGE>   28

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         On October 5, 1992, Congress enacted the Cable Television Consumer
         Protection and Competition Act of 1992 (the "1992 Cable Act"). The
         Federal Communications Commission ("FCC") adopted certain rate
         regulations required by the 1992 Cable Act, and as a result, the Puerto
         Rico Subsidiary's basic and tier service rates and its equipment and
         installation charges (the "Regulated Services") could be subject to the
         jurisdiction of local franchising authorities and the FCC. The
         regulations established permissible rates that could be charged by
         cable operators for Regulated Services. The regulations further provide
         for the methodology for increasing rates generally allowing for
         recovery of costs beyond the control of the cable operator (e.g.
         inflation and programming costs).

         On March 15, 1998, the Puerto Rico Telecommunications Regulatory Board
         (the "Regulatory Board"), the local franchising authority, notified the
         Puerto Rico Subsidiary that it was certified to regulate rates for
         Regulated Services. The Puerto Rico Subsidiary submitted the required
         rate filings to the Regulatory Board for review. On June 30, 1998 the
         Regulatory Board adopted a Resolution and Order approving the basic
         service, equipment and installation rates as filed for the franchises
         under review. The Order requires that the Puerto Rico Subsidiary
         restructure its current pricing to be consistent with the filed rates.
         The impact of the restructuring will not have a material effect on the
         Puerto Rico Subsidiary's results of operations.

         During the six months ended June 30, 1998, TCI continued its
         enterprise-wide comprehensive efforts to review and correct computer
         systems, equipment and related software to ensure they properly
         recognize, process and store business information. The computer
         systems, equipment and software being evaluated include systems which
         are integral to the distribution of TINTA's products and services,
         systems that support operations of TINTA and protect its assets, and
         all internal use software. TCI is utilizing both internal and external
         resources, including the establishment of a year 2000 enterprise
         program management office accountable to TCI executive management, to
         identify and remediate or replace systems for year 2000 readiness.

         During the six months ended June 30, 1998, TINTA began the process of
         testing and replacing or remediating critical components of its cable
         systems' headend equipment, which is critical both to the cable
         operations of the Puerto Rico Subsidiary and to the ability of TINTA
         and its affiliates to earn revenue from the distribution of programming
         services. Although no assurance can be given, TINTA expects to conclude
         such testing by December 1998 with replacement or remediation completed
         by the end of the first quarter of 1999. Also, TINTA began the process
         of remediating systems that control the commercial advertising in its
         cable operations, including the advertisement of programming services
         distributed by TINTA and its affiliates. Although no assurance can be
         given, those remediation efforts should be complete by mid-1999. TINTA
         continued to assess potential year 2000 issues of its affiliated
         companies and provided its affiliates with remediation information on
         software products and systems. TINTA's business and financial systems
         and software which will continue to be utilized by TINTA beyond the
         year 1999 will be capable of recognizing the year 2000 and therefore
         should not require material remediation or replacement.

                                                                     (continued)
                                      I-27

<PAGE>   29

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements

         Significant third party vendors whose systems are critical to TINTA's
         operations have been identified and surveyed and confirmations from
         such parties have been received indicating that they are either year
         2000 ready or have plans in place to become ready. Also, TINTA has
         developed and initiated a plan with key suppliers who provide systems
         which are integral to the distribution of TINTA's products and services
         to upgrade or replace non-year 2000 compliant systems on a
         product-by-product and site-by-site basis by mid-1999.

         Management of TINTA intends to have further communication with primary
         vendors identified as having systems that are not year 2000 compliant
         to assess those vendors' plans for remediating their own year 2000
         issues and to assess the impact on TINTA if such vendors fail to
         remediate their year 2000 issues. TINTA continues to evaluate the level
         of validation it will require of third parties to ensure their year
         2000 readiness.

         Management of TCI has not yet determined the full cost associated with
         its year 2000 readiness efforts and the related potential impact on
         TCI's financial position, results of operations or cash flows but has
         identified certain cost elements that, in the aggregate, are not
         expected to be less than $63 million, which includes $3 million of
         program management expenses incurred during the six months ended June
         30, 1998. TINTA's allocable share of such cost elements is estimated to
         be not less than $4 million. Although there can be no assurance, TINTA
         anticipates that the costs ultimately required to be paid to ensure
         TINTA's year 2000 readiness will not have a material adverse effect on
         TINTA's financial position, results of operations or cash flows.
         However, there can be no assurance that TINTA's systems or the systems
         of other companies on which TINTA relies will be converted in time or
         that any such failure to convert by TINTA or other companies will not
         have a material adverse effect on its financial position, results of
         operations or cash flows.

(12)     Proposed Mergers

         TCI and AT&T Corp. ("AT&T") have agreed to a merger (the "Merger")
         pursuant to, and subject to the terms and conditions set forth in, the
         Agreement and Plan of Restructuring and Merger, dated as of June 23,
         1998. In the Merger, TCI will become a wholly-owned subsidiary of AT&T.

                                                                     (continued)
                                      I-28

<PAGE>   30

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.
           (A Majority-Owned Subsidiary of Tele-Communications, Inc.)

                   Notes to Consolidated Financial Statements



         In addition, TCI has announced its intention, subject to stockholder
         approval, to combine the assets and businesses of Liberty Media Group
         and TCI Ventures Group (the "Liberty/Ventures Combination"). Assuming
         the Liberty/Ventures Combination occurs prior to the Merger, the shares
         of "Liberty/Ventures Stock" to be issued in the Merger will be a newly
         authorized class of common stock of AT&T which will be intended to
         reflect the separate performance of the businesses and assets
         attributed to the "Liberty/Ventures Group." Subject to certain asset
         transfers, the Liberty/Ventures Group following the Merger will be made
         up of the corporations, partnerships and other entities and interests,
         including TINTA, which comprise Liberty Media Group and TCI Ventures
         Group at the time of the Merger. Certain agreements to be entered into
         at the time of the Merger as contemplated by the Merger Agreement will,
         among other things, provide preferred vendor status to Liberty/Ventures
         Group for digital basic distribution on AT&T's systems of new
         programming services created by Liberty/Ventures Group and its
         affiliates, provide for a renewal of existing affiliation agreements
         and provide for the business of the Liberty/Ventures Group to continue
         to be managed following the Merger by certain members of TCI's
         management who currently manage the businesses of Liberty Media Group
         and TCI Ventures Group.

         Consummation of the Merger is subject to the satisfaction or waiver of
         customary conditions to closing, including but not limited to, the
         separate approvals of the stockholders of AT&T and TCI, receipt of all
         necessary governmental consents and approvals, and effectiveness of the
         registration statement registering the AT&T Common Stock and
         Liberty/Ventures Stock to be issued to TCI stockholders in the Merger.
         As a result, there can be no assurance that the Merger will be
         consummated or, if the Merger is consummated, the date of such
         consummation.

         On July 13, 1998, the Company announced that it had received a proposal
         from Liberty Media Group concerning the acquisition by Liberty Media
         Group of all of the outstanding shares of common stock of the Company
         not beneficially owned by TCI Ventures Group. Under the proposal,
         Liberty Media Group would exchange, in a merger transaction, 0.58 of a
         share of Tele-Communications, Inc. Series A Liberty Media Group Common
         Stock for each share of TINTA Series A Stock acquired by Liberty Media
         Group in the merger. Liberty Media Group's proposal, and a proposed
         merger agreement, will be considered by the Company's board of
         directors. The Company, on behalf of the board of directors, has
         engaged an investment banking firm to render its opinion concerning the
         fairness to the Company's public shareholders of the consideration
         offered by Liberty Media Group.


                                      I-29


<PAGE>   31




                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Management's Discussion and Analysis  of Financial Condition and
     Results of Operations

General

         The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements, included elsewhere herein,
and the Management's Discussion and Analysis of Financial Condition and Results
of Operations and financial statements included in Part II of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. With respect to
trends, risks and uncertainties affecting the Company's results of operations
and financial condition, the following discussion addresses only changes in such
matters that have occurred during 1998 through the date of this Quarterly Report
on Form 10-Q.

         Certain statements included in this Quarterly Report on Form 10-Q
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements of the Company (or
entities in which the Company has interests), or industry results, to differ
materially from future results, performance or achievements expressed or implied
by such forward-looking statements. Such risks, uncertainties and other factors
include, among others: the continued strength of multi-channel video and
telecommunication networks and the distribution and production of programming
for multi-channel video distribution; general economic and business conditions
and industry trends; uncertainties inherent in proposed business strategies and
development plans, uncertainties inherent in the Company's and its major
vendors' year 2000 remediation efforts (including uncertainties with respect to
the availability of equipment and skilled personnel), rapid technological
changes, future financial performance, including availability, terms and
deployment of capital; the ability of vendors to deliver required equipment,
software and services; product launches; availability of qualified personnel;
changes in, or the failure or inability to comply with, government regulation,
and adverse outcomes from regulatory proceedings; changes in the nature of key
strategic relationships with partners and joint venturers; changes in exchange
rates; changes in repatriation rights; governmental upheaval; bribery and
corruption; loss of control of operations; competitor responses to the Company's
products and services, and the overall market acceptance of such products and
services, including acceptance of the pricing of such products and services; and
other factors. These forward-looking statements speak only as of the date of
this Quarterly Report on Form 10-Q. The Company expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.

         A significant portion of the Company's operations are conducted through
corporations and partnerships in which the Company holds a 20%-50% ownership
interest. As the Company generally accounts for such ownership interests using
the equity method of accounting, the financial condition and results of
operations of such entities are not reflected on a consolidated basis within the
Company's consolidated financial statements.

                                      I-30

<PAGE>   32

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Year 2000

       During the six months ended June 30, 1998, TCI continued its
enterprise-wide comprehensive efforts to review and correct computer systems,
equipment and related software to ensure they properly recognize, process and
store business information. The computer systems, equipment and software being
evaluated include systems which are integral to the distribution of TINTA's
products and services, systems that support operations of TINTA and protect its
assets, and all internal use software. TCI is utilizing both internal and
external resources, including the establishment of a year 2000 enterprise
program management office accountable to TCI executive management, to identify
and remediate or replace systems for year 2000 readiness.

       During the six months ended June 30, 1998, TINTA began the process of
testing and replacing or remediating critical components of its cable systems'
headend equipment, which is critical both to the cable operations of the Puerto
Rico Subsidiary and to the ability of TINTA and its affiliates to earn revenue
from the distribution of programming services. Although no assurance can be
given, TINTA expects to conclude such testing by December 1998 with replacement
or remediation completed by the end of the first quarter of 1999. Also, TINTA
began the process of remediating systems that control the commercial advertising
in its cable operations, including the advertisement of programming services
distributed by TINTA and its affiliates. Although no assurance can be given,
those remediation efforts should be complete by mid-1999. TINTA continued to
assess potential year 2000 issues of its affiliated companies and provided its
affiliates with remediation information on software products and systems.
TINTA's business and financial systems and software which will continue to be
utilized by TINTA beyond the year 1999 will be capable of recognizing the year
2000 and therefore should not require material remediation or replacement.

       Significant third party vendors whose systems are critical to TINTA's
operations have been identified and surveyed and confirmations from such parties
have been received indicating that they are either year 2000 ready or have plans
in place to become ready. Also, TINTA has developed and initiated a plan with
key suppliers who provide systems which are integral to the distribution of
TINTA's products and services to upgrade or replace non-year 2000 compliant
systems on a product-by-product and site-by-site basis by mid-1999.

       Management of TINTA intends to have further communication with primary
vendors identified as having systems that are not year 2000 compliant to assess
those vendors' plans for remediating their own year 2000 issues and to assess
the impact on TINTA if such vendors fail to remediate their year 2000 issues.
TINTA continues to evaluate the level of validation it will require of third
parties to ensure their year 2000 readiness.

       Management of TCI has not yet determined the full cost associated with
its year 2000 readiness efforts and the related potential impact on TCI's
financial position, results of operations or cash flows but has identified
certain cost elements that, in the aggregate, are not expected to be less than
$63 million, which includes $3 million of program management expenses incurred
during the six months ended June 30, 1998. TINTA's allocable share of such cost
elements is estimated to be not less than $4 million. Although there can be no
assurance, TINTA anticipates that the costs ultimately required to be paid to
ensure TINTA's year 2000 readiness will not have a material adverse effect on
TINTA's financial position, results of operations or cash flows. However, there
can be no assurance that TINTA's systems or the systems of other companies on
which TINTA relies will be converted in time or that any such failure to convert
by TINTA or other companies will not have a material adverse effect on its
financial position, results of operations or cash flows.

Material Changes in Results of Operations

       As further described in note 5 to the accompanying consolidated financial
statements, the October 9, 1997 sale of a portion of TINTA's 51% interest in
Cablevision reduced TINTA's interest in Cablevision to 26.2%. As a result of the
Cablevision Sale, the Company, effective October 1, 1997, ceased to consolidate
Cablevision and began to account for Cablevision using the equity method of
accounting.

         The following table sets forth summary information with respect to
Cablevision's results of operations for the six months ended June 30, 1997
(amounts in thousands):

<TABLE>
               <S>                              <C>     
               Revenue                           $114,208
               Operating costs and expenses       (67,618)
               Depreciation and amortization      (26,376)
                                                 --------

               Operating income                  $ 20,214
                                                 ========
</TABLE>

         Revenue

         Revenue decreased $55.4 million or 81% and $108.5 million or 81% during
the three and six month periods ended June 30, 1998, respectively, as compared
to the corresponding prior year periods. Such decreases are primarily
attributable to the deconsolidation of Cablevision. Revenue of the Puerto Rico
Subsidiary increased $2.4 million or 24% and $7.2 million or 43% during the
three and six month periods ended June 30, 1998, respectively, as compared to
the corresponding prior year periods. Such increases are due primarily to the
Caguas Acquisition and a 7% increase in the average number of the Puerto Rico
Subsidiary's basic customers (exclusive of the basic customers acquired in the
Caguas Acquisition).

         Operating Costs and Expenses

         Operating costs and expenses decreased $33.6 million or 82% and $64.1
million or 82% during the three and six month periods ended June 30, 1998,
respectively, as compared to the corresponding prior year periods. Such
decreases are primarily attributable to the deconsolidation of Cablevision.
Operating costs and expenses of the Puerto Rico Subsidiary increased $1.2
million or 20% and $3.8 million or 36% during the three and six months ended
June 30, 1998, respectively, as compared to the corresponding prior year
periods. Such increases are due primarily to the Caguas Acquisition and
increased programming costs.

                                      I-31

<PAGE>   33

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.


Material Changes in Results of Operations (continued)

         The Puerto Rico Subsidiary purchases programming under contracts that
expire at various dates in the future. No assurance can be given that future
contracts will contain terms as favorable as those contained in the existing
programming contracts of the Puerto Rico Subsidiary.

         TINTA incurred corporate, general and administrative expenses of $5.9
million and $5.0 million during the three months ended June 30, 1998 and 1997,
respectively, of which $1.5 million and $2.3 million were allocated from related
parties. TINTA incurred corporate, general and administrative expenses of $16.5
million and $7.8 million during the six months ended June 30, 1998 and 1997,
respectively, of which $6.4 million and $2.6 million were allocated from related
parties. General and administrative allocations from related parties are
generally based upon the estimated cost of the services provided to the Company.
Estimated changes in (i) TINTA's stock compensation liability and (ii) TINTA's
share of TCI's stock compensation liability are also reflected in general and
administrative expenses. Such estimated increases aggregated $2.5 million and
$1.9 million during the three months ended June 30, 1998 and 1997, respectively,
and include increases in the Company's share of TCI's stock compensation
liability of $1.0 million and $1.8 million, respectively. Such estimated
increases aggregated $10.5 million and $1.8 million during the six months ended
June 30, 1998 and 1997, respectively, and include increases in the Company's
share of TCI's stock compensation liability of $5.4 million and $1.7 million,
respectively. Such estimated amounts are subject to future adjustment based upon
market value and, ultimately, upon the final determination of the market value
of the stock appreciation rights at the time they are exercised.

         Depreciation and amortization expense decreased $14.1 million and $27.3
million or 86% and 85% during the three and six month periods ended June 30,
1998, respectively, as compared to the corresponding prior year periods. Such
decreases are primarily the result of the deconsolidation of Cablevision.

         Other Income and Expense

         Telewest has incurred losses since its inception. The Company's share
of Telewest's net losses increased (decreased) $1.8 million and $(9.7 million)
or 6% and (13)% during the three and six month periods ended June 30, 1998,
respectively, as compared to the corresponding prior year periods. Such changes
are primarily attributable to the net effects of (i) changes in foreign currency
transaction gains and losses, (ii) an increase in operating cash flow resulting
from revenue growth and (iii) an increase in interest expense. In connection
with a previous merger transaction, Telewest issued the Telewest Debentures.
Changes in the exchange rate used to translate the Telewest Debentures into UK
pounds sterling and the adjustment of a foreign currency option contract to
market value caused Telewest to experience unrealized foreign currency
transaction losses of (i) (pound)8.0 million ($13.4 million using the applicable
exchange rate) and (pound)172,000 ($282,000 using the applicable exchange rate)
during the three months ended June 30, 1998 and 1997, respectively, and (ii)
(pound)1.4 million ($2.4 million using the applicable exchange rate) and
(pound)24.3 million ($40.0 million using the applicable exchange rate) during
the six months ended June 30, 1998 and 1997, respectively. It is anticipated
that Telewest will continue to experience realized and unrealized foreign
currency transaction gains and losses throughout the term of the Telewest
Debentures, which mature in 2006 and 2007, if not redeemed earlier.


                                      I-32

<PAGE>   34

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Results of Operations (continued)

         As described in note 5 to the accompanying consolidated financial
statements, effective October 1, 1997, TINTA ceased to consolidate Cablevision
and began to account for Cablevision using the equity method of accounting.
TINTA's share of Cablevision's net losses for the six months ended June 30, 1998
was $7.6 million.

         The Company's share of losses of the Other Affiliates remained
relatively constant during the three and six month periods ended June 30, 1998
and 1997, as increased losses for MultiThematiques and Jupiter were partially
offset by a reduction in the Company's share of ABN's and Flextech's losses. As
of December 31, 1997, TINTA surrendered all of its shares of ABN in exchange for
a $25 million unsecured note receivable. Accordingly, effective December 31,
1997, TINTA no longer accounts for ABN under the equity method of accounting.
The Company expects that the Other Affiliates will continue to incur losses as
they continue to expand their operations and/or launch new services. For
additional information concerning the Other Affiliates, see note 7 to the
accompanying consolidated financial statements.

         Interest expense decreased $4.1 million and $7.8 million or 43% and 41%
during the three and six month periods ended June 30, 1998, respectively, as
compared to the corresponding prior year periods. Such decreases are due to a
reduction in interest expense that is attributable to the deconsolidation of
Cablevision and the payment in 1997 of all remaining amounts due to
MultiThematiques. Such decreases were partially offset by an increase in
interest expense attributable to the Puerto Rico Bank Facility.

         Interest income decreased $1.1 million and $2.4 million or 56% and 47%
during the three and six month periods ended June 30, 1998, respectively, as
compared to the corresponding prior year periods. Such decreases are due
primarily to decreases in the outstanding balance of the TVG LLC Note Receivable
and a decrease in the Company's cash and cash equivalents.

         On January 16, 1998, the Company sold its interest in TeleCable
Nacional, CXA for cash proceeds of $10.0 million. The Company recognized a gain
on such sale of $9.2 million.

         Income Taxes

         The Company's income tax benefit was $43.6 million and $54.8 million
during the six months ended June 30, 1998 and 1997, respectively. The effective
tax rates associated with such benefits were 35% and 46%, respectively. See note
10 to the accompanying consolidated financial statements.

         Net Losses

         The Company reported net losses of $81.4 million and $65.5 million
during the six months ended June 30, 1998 and 1997, respectively. Any
improvements in the Company's results of operations are largely dependent upon
the ability of the Company's operating subsidiaries and affiliates to increase
their respective customer bases while maintaining pricing structures and
controlling costs. There can be no assurance that any such customer base
increases will occur.

                                      1-33

<PAGE>   35

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Financial Condition

         On April 15, 1998, it was announced that Telewest and General Cable had
agreed to the terms of a Merger Offer in which holders of General Cable will be
offered 1.243 new Telewest shares and (pound)0.65 ($1.08) in cash for each share
of General Cable. In addition, holders of General Cable ADSs (each representing
five General Cable shares) will be offered 6.215 new Telewest shares and
(pound)3.25 ($5.42) in cash for each share of General Cable ADSs. Based upon
Telewest's closing share price of (pound)0.89 ($1.48) on April 14, 1998, the
Merger Offer is valued at approximately (pound)649 million ($1.1 billion).

         The cash portion of the Merger Offer will be financed through an offer
to qualifying Telewest shareholders for the purchase of approximately 261
million new Telewest shares at a price of (pound)0.925 ($1.54) per share.
Mediaone, TINTA and Cox have agreed to subscribe for their full allocation of
new Telewest shares (approximately 69 million shares in the case of TINTA) and
to subscribe on a pro rata basis for any new Telewest shares not subscribed for
by other Telewest shareholders. Together, Mediaone, TINTA and Cox hold 67.9% of
the issued and outstanding Telewest ordinary shares at June 30, 1998. In
addition, it is anticipated that Mediaone, TINTA, Cox and SBC will convert their
entire respective holdings of Telewest convertible preference shares into new
Telewest shares. Following the issuance of new Telewest shares with respect to
the above transactions, and assuming the exercise of all options under General
Cable's share option schemes, it is anticipated that existing Telewest
shareholders would hold 79% and existing General Cable shareholders would hold
21% of the then issued ordinary share capital of the combined group.

         Consummation of the merger is subject to regulatory approval and other
conditions. There can be no assurance that such merger will be consummated or
consummated on the terms contemplated by the parties.

         On July 23, 1998, TINTA agreed to purchase 100% of the issued and
outstanding common stock of Pramer S.A., an Argentine programming company, for
$80 million in cash and the assumption of certain liabilities. Consummation of
such transaction is expected to occur in the third quarter of 1998. No assurance
can be given that such transaction will be consummated or consummated on the
terms contemplated by the parties.

         TINTA expects to have substantial capital requirements for the
foreseeable future because its businesses and investments consist of entities
which require the acquisition, ownership, development and operation of broadband
cable television and telephony distribution networks and new programming
services. Many of TINTA's subsidiaries and affiliates are incurring substantial
costs as they build or rebuild their cable networks or develop and acquire
programming. Until such companies begin generating profits and positive cash
flow from operating activities, they will need additional capital to fund
capital expenditures and working capital requirements. TINTA and its
consolidated subsidiaries have commitments under various partnership and other
agreements to contribute capital or loan money to fund capital expenditures and
other capital requirements of certain affiliates. The Company is not able to
more precisely predict the timing or amount of the future funding requirements
of its affiliates because such future requirements are dependent upon a variety
of factors.

                                      1-34


<PAGE>   36

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Financial Condition (continued)

         TINTA's business strategy also requires that it have the ability to
access or raise sufficient funds to allow it to take advantage of new
acquisition and joint venture opportunities as they arise, which management of
TINTA believes will require the availability of substantial additional funds.
Although TINTA had, at June 30, 1998, (i) $5.4 million due from TVG LLC pursuant
to the TVG LLC Note Receivable, (ii) $200 million of borrowing availability
pursuant to the TVG LLC Credit Facility and (iii) the ability to access any
excess cash and borrowing availability of the Puerto Rico Subsidiary, TINTA's
ability to otherwise obtain financing to assist its operating companies and to
meet its capital obligations at other than the subsidiary level will be limited
because TINTA does not conduct any operations directly. Furthermore, because the
Company's assets consist primarily of ownership interests in foreign
subsidiaries and affiliates, the repatriation of any cash provided by such
subsidiaries' and affiliates' operating activities in the form of dividends,
loans or other payments is subject to, among other things, exchange rate
fluctuations, tax laws and other economic considerations, as well as applicable
statutory and contractual restrictions. Moreover, the liquidity sources of the
Company's foreign subsidiaries and affiliates are generally intended to be
applied towards the respective liquidity requirements of such foreign
subsidiaries and affiliates, and accordingly, do not represent a direct source
of liquidity to TINTA. Accordingly, with the exception of any liquidity that may
be provided to TINTA by the Puerto Rico Subsidiary, no assurance can be given
that TINTA will have access to any cash generated by its foreign operating
subsidiaries and affiliates.

         TINTA held cash and cash equivalents of $1.0 million at June 30, 1998.
TINTA believes that such cash and cash equivalents, amounts due under the TVG
LLC Note Receivable, borrowing availability pursuant to the TVG LLC Credit
Facility and the Puerto Rico Bank Facility, and any funds generated by the
operating or financing activities of TINTA's operating subsidiaries and
affiliates, subject to the restrictions noted above, will be sufficient for the
next year to fund the Company's (i) commitments to its affiliates and (ii)
working capital, debt service and capital expenditure requirements. Although
TINTA's ability to obtain dividends or advances from certain of its operating
subsidiaries and affiliates is limited, TINTA's liquidity requirements with
respect to its operating subsidiaries and affiliates are reduced to the extent
that such operating subsidiaries and affiliates are able to generate funds
through their respective operating or financing activities. To the extent that
the Company seeks to make significant acquisitions or is required to meet
significant future liquidity requirements in addition to those described above,
the Company anticipates that it will need to obtain additional debt or equity
financing. Other events could occur involving TINTA that could require TINTA to
obtain significant additional funds. No assurance can be given, however, that
TINTA or its subsidiaries or affiliates will be able to obtain additional
financing on terms acceptable to them, or at all.


                                      I-35

<PAGE>   37

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Financial Condition (continued)

         The Company's consolidated operating activities provided (used) cash of
$(17.3 million) and $25.6 million during the six months ended June 30, 1998 and
1997, respectively. As discussed in note 5 to the accompanying consolidated
financial statements, effective October 1, 1997, Cablevision's cash flows are no
longer included in the Company's consolidated statements of cash flows. During
the six months ended June 30, 1997, Cablevision's operating activities provided
cash of $21.3 million.

         During the six months ended June 30, 1998 and 1997, cash used by the
Company's investing activities aggregated $64.1 million and $114.9 million,
respectively. Such amounts include $81.4 million and $58.7 million,
respectively, that were used by the Company to fund investments in, and loans
to, affiliates. In addition, the 1997 amount includes a $38.1 million reduction
in the Company's cash and cash equivalents as a result of the deconsolidation of
Flextech. See note 7 to the accompanying consolidated financial statements. See
also the consolidated statements of cash flows included in the accompanying
consolidated financial statements.

         Many of TINTA's interests in its subsidiaries and affiliates are
governed by partnership and other agreements that require it to contribute
capital or make loans to such subsidiaries or affiliates. The failure of TINTA
to meet its capital commitments to a particular operating company may have
adverse consequences to it and therefore to TINTA.

         Because TINTA generally views its foreign operating subsidiaries and
affiliates as long-term investments, TINTA generally does not attempt to hedge
existing investments in its foreign affiliates and subsidiaries. Although TINTA
monitors foreign currency exchange rates with the objective of mitigating its
exposure to unfavorable fluctuations in such rates, TINTA believes that, given
the nature of its business, it is not possible or practical to eliminate TINTA's
exposure to unfavorable fluctuations in foreign currency exchange rates. As of
June 30, 1998, TINTA was not exposed to material near-term losses in future
earnings, fair values or cash flows resulting from derivative financial
instruments.

         At June 30, 1998, the Company had aggregate debt of $390 million, of
which $45 million (12%) bears interest at variable rates. Accordingly, in an
environment of rising interest rates, the Company would experience an increase
in interest expense. For additional information concerning the terms of such
debt, see note 9 to the accompanying consolidated financial statements.

                                      I-36

<PAGE>   38

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Financial Condition (continued)

         The Company has significant contingent obligations with respect to
guarantees, credit enhancements and other contingent obligations arising from
its ownership interests in affiliates and other matters. The Company also has
consummated certain transactions and entered into certain agreements which have
impacted or may, in the future, impact the Company's liquidity and capital
resources. For additional information, see notes 6, 7, 8, 10 and 11 to the
accompanying consolidated financial statements.

         During the six months ended June 30, 1998, the Puerto Rico Subsidiary
had capital expenditures of $5.0 million. Although the Company expects that its
future capital expenditure requirements with respect to the Puerto Rico
Subsidiary will equal or exceed historical levels, the Company currently
believes that the internally generated funds and other sources of liquidity of
the Puerto Rico Subsidiary generally will be sufficient to satisfy its
foreseeable capital expenditure requirements. In this regard, the Puerto Rico
Subsidiary entered into the Puerto Rico Bank Facility in connection with the
Caguas Acquisition. See note 9 to the accompanying consolidated financial
statements.

         On October 9, 1997, the Company sold a portion of its 51% interest in
Cablevision for cash proceeds of $120.0 million. The Cablevision Sale reduced
TINTA's interest in Cablevision to 26.4%. The Company recognized a $48.8 million
gain on the Cablevision Sale. As a result of the Cablevision Sale, effective
October 1, 1997, TINTA ceased to consolidate Cablevision and began to account
for Cablevision using the equity method of accounting. For additional
information regarding the Cablevision Sale, see note 5 to the accompanying
consolidated financial statements.

         In December 1997, amounts outstanding under TINTA's note receivable
from TCI were assigned to TVG LLC. Amounts outstanding under the TVG LLC Note
Receivable ($5.4 million at June 30, 1998) bear interest at variable rates (6.4%
at June 30, 1998). Principal and interest are due and payable as mutually agreed
from time to time by TVG LLC and TINTA.

         On January 16, 1998, the Company sold its interest in TeleCable
Nacional, CXA for cash proceeds of $10.0 million. The Company recognized a gain
on such sale of $9.2 million.

         TINTA has signed a memorandum of understanding with UIH for the sale of
TINTA's ownership interests in Tevel and Melita to UIH. Concurrently, TINTA will
purchase an additional 25% interest in PHL from UIH. The parties have agreed
that, net of its purchase of UIH's 25% interest in PHL, TINTA will receive $71
million for its interests in Tevel and Melita. Consummation of such transactions
is contingent on the consent of certain third parties and regulatory bodies, as
well as on the completion of financing by UIH. There can be no assurance that
such transactions will be consummated or consummated on the terms contemplated
by the parties.

         TCI and AT&T have agreed to a merger in which TCI will become a
wholly-owned subsidiary of AT&T. In addition, TCI has announced its intention,
subject to stockholder approval, to combine the assets and businesses of Liberty
Media Group and TCI Ventures Group. For additional information concerning these
transactions, see note 12 to the accompanying consolidated financial statements.

                                      I-37

<PAGE>   39

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.

Material Changes in Financial Condition (continued)

         On July 13, 1998, the Company announced that it had received a proposal
from Liberty Media Group concerning the acquisition by Liberty Media Group of
all of the outstanding shares of common stock of the Company not beneficially
owned by TCI Ventures Group. Under the proposal, Liberty Media Group would
exchange, in a merger transaction, 0.58 of a share of Tele-Communications, Inc.
Series A Liberty Media Group Common Stock for each share of TINTA Series A Stock
acquired by Liberty Media Group in the merger. Liberty Media Group's proposal,
and a proposed merger agreement, will be considered by the Company's board of
directors. The Company, on behalf of the board of directors, has engaged an
investment banking firm to render its opinion concerning the fairness to the
Company's public shareholders of the consideration offered by Liberty Media
Group.


                                      I-38


<PAGE>   40

                     TELE-COMMUNICATIONS INTERNATIONAL, INC.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         On July 13, 1998, two putative class action complaints were filed by
         certain stockholders of TINTA in the Court of Chancery of the State of
         Delaware. The actions, which have identical claims and allegations, are
         styled as Berkowitz v. Hindery, et al., C.A. No. 16533, and Chetkov v.
         Hindery, et al., C.A. No. 16534, respectively. The complaints were
         filed following the announcement of a proposed business combination in
         which Liberty Media Group would acquire all outstanding public shares
         of TINTA not already owned by TCI Ventures Group. The defendants named
         in both complaints are TCI, TINTA, and the Board of Directors of TINTA:
         Leo J. Hindery, John C. Malone, Gary S. Howard, David J. Evans, Pierre
         Lescure, Paul A. Gould, Fred A. Vierra, and Jerome H. Kern. The
         gravamen of both complaints is that the TINTA directors will breach
         their fiduciary duties by approving the merger and undervaluing the
         proposed merger consideration to the detriment of the TINTA public
         stockholders. Plaintiffs in both actions seek to enjoin the
         consummation or closing of the proposed merger, or the rescission of
         the merger in the event it is consummated, and unspecified compensatory
         damages, fees and costs. The actions remain pending and discovery has
         not commenced. Based on the facts available, management believes that
         although no assurance can be given as to the outcome of this action,
         the ultimate disposition of this matter should not have a material
         adverse effect upon the financial condition of TINTA.

Item 6.  Exhibits and Reports on Form 8-K.

         (a)      Exhibits

                  27 - Financial Data Schedule

         (b)      Reports on Form 8-K filed during quarter ended June 30, 1998 -
                  none

                                      II-1

<PAGE>   41


                                   SIGNATURES


         Pursuant to the requirements 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.

                                     TELE-COMMUNICATIONS INTERNATIONAL, INC.


Date: August 12, 1998                 By: /s/ David J. Evans
                                          ------------------------------------
                                              David J. Evans
                                               President and Chief Executive 
                                                 Officer


Date: August 12, 1998                 By: /s/ Graham Hollis
                                          ------------------------------------
                                              Graham Hollis
                                               Executive Vice President and
                                                Chief Financial Officer
                                                  (Principal Accounting Officer)

<PAGE>   42

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION
-------                        -----------
<S>                            <C>                       
  27                           FINANCIAL DATA SCHEDULE
</TABLE>