<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q


(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

    For the quarterly period ended March 31, 1999
                                   --------------

                                       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 0-21389
                                                -------

                       PEGASUS COMMUNICATIONS CORPORATION
             -----------------------------------------------------
             (Exact name of Registrant as specified in its charter)



                     Delaware                                    51-0374669
           ------------------------------                 ----------------------
          (State or other jurisdiction of                    (IRS Employer
           incorporation or organization)                 Identification Number)


         c/o Pegasus Communications Management Company;
         225 City Line Avenue, Suite 200, Bala Cynwyd, PA          19004
         ------------------------------------------------        ---------
         (Address of principal executive offices)                (Zip code)


         Registrant's telephone number, including area code:   (888) 438-7488
                                                                -------------

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


         Number of shares of each class of the Registrant's common stock
outstanding as of May 10, 1999:

                Class A, Common Stock, $0.01 par value               15,051,703
                Class B, Common Stock, $0.01 par value                4,581,900




<PAGE>




                       PEGASUS COMMUNICATIONS CORPORATION

                                    Form 10-Q
                                Table of Contents
                  For the Quarterly Period Ended March 31, 1999


                                                                           Page
                                                                           ----
Part I.  Financial Information


         Item 1      Consolidated Financial Statements

                     Consolidated Balance Sheets
                       December 31, 1998 and March 31, 1999                   3

                     Consolidated Statements of Operations
                       Three months ended March 31, 1998 and 1999             4

                     Consolidated Statements of Cash Flows
                       Three months ended March 31, 1998 and 1999             5

                     Notes to Consolidated Financial Statements               6


         Item 2      Management's Discussion and Analysis of
                       Financial Condition and Results of Operations         11


         Item 3      Quantitative and Qualitative Disclosures About
                       Market Risk                                           18


Part II. Other Information


         Item 2      Changes in Securities and Use of Proceeds               19

         Item 6      Exhibits and Reports on Form 8-K                        19

         Signature                                                           20





                                        2









<PAGE>

                       Pegasus Communications Corporation
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>



                                                                                December 31,                    March 31,
                                                                                    1998                           1999
                                                                             -------------------            -------------------
                              ASSETS                                                                           (unaudited)
<S>                                                                          <C>                             <C>
Current  assets:
     Cash and cash equivalents                                                      $54,505,473                    $20,767,983
     Restricted cash                                                                 21,479,305                     10,955,768
     Accounts receivable, less allowance for doubtful                                                        
      accounts of $567,000 and $674,000, respectively                                20,882,260                     22,668,512
     Inventory                                                                        5,426,348                      4,757,507
     Program rights                                                                   3,156,715                      2,868,071
     Deferred taxes                                                                   2,602,453                      2,073,248
     Prepaid expenses and other                                                       1,207,312                      1,438,373
                                                                             -------------------            -------------------
       Total current assets                                                         109,259,866                     65,529,462

Property and equipment, net                                                          34,066,502                     37,407,298
Intangible assets, net                                                              729,405,657                    772,821,027
Program rights                                                                        3,428,382                      3,103,382
Deferred taxes                                                                        9,277,280                      7,156,946
Deposits and other                                                                      872,386                        872,386
                                                                             -------------------            -------------------

     Total assets                                                                  $886,310,073                   $886,890,501
                                                                             ===================            ===================


                  LIABILITIES AND TOTAL EQUITY

Current liabilities:
     Current portion of long-term debt                                              $14,399,046                    $12,419,298
     Accounts payable                                                                 4,794,809                      2,336,721
     Accrued interest                                                                17,465,493                     15,092,766
     Accrued satellite programming and fees                                          19,352,780                     22,042,341
     Accrued expenses                                                                12,926,864                     14,271,766
     Current portion of program rights payable                                        2,431,515                      2,140,828
                                                                             -------------------            -------------------
       Total current liabilities                                                     71,370,507                     68,303,720

Long-term debt                                                                      544,629,706                    518,627,987
Program rights payable                                                                2,472,367                      2,197,367
Deferred taxes                                                                       80,671,714                     77,579,675
                                                                             -------------------            -------------------
      Total liabilities                                                             699,144,294                    666,708,749
                                                                             -------------------            -------------------

Commitments and contingent liabilities                                                        -                              -

Minority interest                                                                     3,000,000                      3,000,000

Preferred Stock; $0.01 par value; 5.0 million shares authorized                               -                              -

Series A Preferred Stock; $0.01 par value; 126,978 shares
     authorized; 119,369 and 126,978 issued and outstanding                         126,027,871                    130,075,309

Common stockholders' equity:
     Class A Common Stock; $0.01 par value; 30.0 million shares
       authorized; 11,315,809 and 14,933,681 issued and outstanding                     113,158                        149,336
     Class B Common Stock; $0.01 par value; 15.0 million shares
       authorized; 4,581,900 issued and outstanding                                      45,819                         45,819
     Additional paid-in capital                                                     173,870,633                    244,680,079
     Deficit                                                                       (115,891,702)                  (157,768,791)
                                                                             -------------------            -------------------
      Total common stockholders' equity                                              58,137,908                     87,106,443
                                                                             -------------------            -------------------

     Total liabilities and stockholders' equity                                    $886,310,073                   $886,890,501
                                                                             ===================            ===================
</TABLE>

           See accompanying notes to consolidated financial statements

                                        3


<PAGE>

                       Pegasus Communications Corporation
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                         Three Months Ended March 31,
                                                                    ----------------------------------------
                                                                           1998                  1999
                                                                    ------------------    ------------------
                                                                                   (unaudited)
<S>                                                                  <C>                   <C>
Net revenues:
     DBS                                                                  $17,464,162           $58,335,773
     Broadcast                                                              6,925,019             7,949,530
     Cable                                                                  4,394,511             3,070,984
                                                                    ------------------    ------------------
       Total net revenues                                                  28,783,692            69,356,287

Operating expenses:
     DBS
        Programming, technical, general and administrative                 12,194,387            40,519,557
        Marketing and selling                                               4,199,406            21,146,272
        Incentive compensation                                                360,000               390,000
        Depreciation and amortization                                       6,644,127            21,451,553
     Broadcast
        Programming, technical, general and administrative                  3,877,798             4,942,549
        Marketing and selling                                               1,384,801             1,466,609
        Incentive compensation                                                      -               155,542
        Depreciation and amortization                                       1,329,419             1,189,144
     Cable
        Programming, technical, general and administrative                  2,297,341             1,665,968
        Marketing and selling                                                 107,066               108,878
        Incentive compensation                                                 49,205                22,935
        Depreciation and amortization                                       1,542,378             1,084,580

     Corporate expenses                                                       685,266             1,240,243
     Corporate depreciation and amortization                                  414,660               710,590
                                                                    ------------------    ------------------
       Loss from operations                                                (6,302,162)          (26,738,133)

Interest expense                                                           (5,975,738)          (15,691,140)
Interest income                                                               345,747               460,565
Other expense, net                                                           (352,454)             (350,881)
                                                                    ------------------    ------------------
     Loss before income taxes                                             (12,284,607)          (42,319,589)
Provision (benefit) for income taxes                                           75,000              (442,500)
                                                                    ------------------    ------------------
     Net loss                                                             (12,359,607)          (41,877,089)
     Preferred stock dividends                                              3,576,853             4,047,438
                                                                    ------------------    ------------------
      Net loss applicable to common shares                               ($15,936,460)         ($45,924,527)
                                                                    ==================    ==================


Basic and diluted earnings per common share:
     Net loss                                                                  ($1.54)               ($2.81)
                                                                    ==================    ==================

     Weighted average shares outstanding                                   10,332,436            16,352,307
                                                                    ==================    ==================
</TABLE>

           See accompanying notes to consolidated financial statements

                                        4

<PAGE>

                       Pegasus Communications Corporation
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                       Three Months Ended March 31,
                                                                  ----------------------------------------
                                                                        1998                   1999
                                                                  -----------------      -----------------
                                                                                (unaudited)
<S>                                                               <C>                    <C>
Cash flows from operating activities:
    Net loss                                                          ($12,359,607)          ($41,877,089)
    Adjustments to reconcile net loss                                                     
      to net cash used by operating activities:                                           
      Depreciation and amortization                                      9,930,584             24,435,867
      Program rights amortization                                          601,129                783,158
      Accretion on discount of bonds and seller notes                       98,853                374,648
      Stock incentive compensation                                         409,205                568,477
      Gain on disposal of assets                                               -                  (35,343)
      Bad debt expense                                                     272,379              1,020,105
      Change in assets and liabilities:                                                   
         Accounts receivable                                             1,697,397             (2,490,809)
         Inventory                                                        (159,490)               839,841
         Prepaid expenses and other                                       (140,082)              (157,593)
         Accounts payable and accrued expenses                          (3,951,049)                50,404
         Accrued interest                                                 (449,289)            (2,372,727)
         Amounts due seller                                              2,261,790                      -
         Deposits and other                                             (2,000,000)                     -
                                                                  -----------------      -----------------
    Net cash used for operating activities                              (3,788,180)           (18,861,061)
                                                                  -----------------      -----------------

Cash flows from investing activities:
       Acquisitions                                                     (7,777,494)           (65,776,010)
       Capital expenditures                                             (1,502,066)            (1,662,246)
       Purchase of intangible assets                                    (1,063,812)            (2,022,444)
       Payments for programming rights                                    (626,308)              (735,201)
       Proceeds from sale of assets                                              -                508,988
                                                                  -----------------      -----------------
    Net cash used for investing activities                             (10,969,680)           (69,686,913)
                                                                  -----------------      -----------------

Cash flows from financing activities:
       Repayments of long-term debt                                     (5,353,852)           (10,849,211)
       Borrowings on bank credit facilities                                      -             30,500,000
       Repayments of bank credit facilities                                      -            (50,200,000)
       Restricted cash                                                    (871,277)            10,523,537
       Capital lease repayments                                            (53,992)               (56,904)
       Proceeds from issuance of common stock                                    -             79,550,460
       Underwriting and common stock offering costs                              -             (4,657,398)
                                                                  -----------------      -----------------
    Net cash provided (used) by financing activities                    (6,279,121)            54,810,484
                                                                  -----------------      -----------------

Net decrease in cash and cash equivalents                              (21,036,981)           (33,737,490)
Cash and cash equivalents, beginning of year                            44,049,097             54,505,473
                                                                  -----------------      -----------------
Cash and cash equivalents, end of period                               $23,012,116            $20,767,983
                                                                  =================      =================
</TABLE>





           See accompanying notes to consolidated financial statements


                                       5
<PAGE>


 



                       PEGASUS COMMUNICATIONS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   The Company:

         Pegasus Communications Corporation ("Pegasus" or together with its
subsidiaries, the "Company") operates in growing segments of the media industry
and is a direct subsidiary of Pegasus Communications Holdings, Inc. ("PCH" or
the "Parent"). Pegasus' significant direct operating subsidiaries are Pegasus
Media & Communications, Inc. ("PM&C") and Digital Television Services, Inc.
("DTS").

         PM&C's subsidiaries provide direct broadcast satellite television
("DBS") services to customers in certain rural areas of the United States; own
and/or program broadcast television ("Broadcast" or "TV") stations affiliated
with the Fox Broadcasting Company ("Fox"), United Paramount Network ("UPN") and
The WB Television Network ("WB"); and own and operate cable television ("Cable")
systems that provide service to individual and commercial subscribers in Puerto
Rico. DTS and its subsidiaries provide DBS services to customers in certain
rural areas of the United States.

2.   Basis of Presentation:

         The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements include the accounts of Pegasus
and all of its subsidiaries. All intercompany transactions and balances have
been eliminated. Certain amounts for 1998 have been reclassified for comparative
purposes.

         The unaudited consolidated financial statements reflect all adjustments
consisting of normal recurring items which are, in the opinion of management,
necessary for a fair presentation, in all material respects, of the financial
position of the Company and the results of its operations and its cash flows for
the interim period. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 1998 included
in the Company's Annual Report on Form 10-K for the year then ended.

3.   Common Stock:

         In March 1999, Pegasus completed a secondary public offering in which
it sold approximately 3.6 million shares of its Class A Common Stock to the
public at a price of $22 per share, resulting in net proceeds to the Company of
$74.9 million.

         As of December 31, 1998 and March 31, 1999, the Company had two classes
of Common Stock: Class A Common Stock and Class B Common Stock. Holders of Class
A Common Stock and Class B Common Stock are entitled to one vote per share and
ten votes per share, respectively.

         The Company's ability to pay dividends on its Common Stock is subject
to certain restrictions.

4.   Preferred Stock:

         As of December 31, 1998 and March 31, 1999, the Company had 5.0 million
shares of Preferred Stock authorized of which 126,978 shares have been
designated as 12.75% Series A Cumulative Exchangeable Preferred Stock (the
"Series A Preferred Stock").

         The Company had approximately 119,369 and 126,978 shares of Series A
Preferred Stock issued and outstanding at December 31, 1998 and March 31, 1999,
respectively. On January 1, 1999 the Company paid dividends on the Series A
Preferred Stock in the aggregate of approximately 7,610 shares of Series A
Preferred Stock, to shareholders of record on December 15, 1998.



                                       6










<PAGE>






                       PEGASUS COMMUNICATIONS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


4.   Preferred Stock: - (Continued)

         The carrying amount of the Series A Preferred Stock is periodically
increased by amounts representing dividends not currently declared or paid but
which will be payable under the mandatory redemption features. The increase in
carrying amount is effected by charges against retained earnings, or in the
absence of retained earnings, by charges against paid-in capital.

         Under the terms of the Series A Preferred Stock, Pegasus' ability to
pay dividends on its Common Stock is subject to certain restrictions.

5.   Long-Term Debt:

Long-term debt consists of the following :
<TABLE>
<CAPTION>
                                                                            December 31,         March 31,
                                                                                1998               1999
                                                                            -------------        ---------
<S>                                                                            <C>                  <C>
Series B Senior Notes payable by Pegasus, due 2005,
    interest at 9.625%, payable semi-annually in arrears on
    April 15 and October 15.......................................         $115,000,000         $115,000,000
Series A Senior Notes payable by Pegasus,  due 2006,
    interest at 9.75%,  payable  semi-annually in arrears on
    June 1 and December 1, commencing on June 1, 1999.............          100,000,000          100,000,000
Senior six-year  $180.0 million  revolving  credit  facility,
    payable by PM&C, interest at PM&C's option at either
    the bank's base rate plus an applicable margin or
    LIBOR plus an applicable margin...............................           27,500,000            4,000,000
Senior six-year  $70.0  million  revolving  credit  facility,
    payable  by DTS,  interest  at DTS'  option at either  the
    bank's base rate or the Eurodollar Rate.......................           26,800,000           30,800,000
Senior six-year $20.0 million term loan facility,
    payable by DTS,  interest  at DTS' option at either the
    bank's base rate or the Eurodollar Rate.......................           19,600,000           19,400,000
Series B Notes payable by PM&C, due 2005, interest at
    12.5%, payable semi-annually in arrears on January 1 
    and July 1, net of unamortized discount of $2,621,878
    and $2,522,548 as of December 31, 1998 and March 31, 1999,
    respectively..................................................           82,378,122           82,477,452
Series B Notes  payable by DTS,  due 2007,  interest at 12.5%,
    payable semi-annually in arrears on February 1 and August
    1, net of unamortized discount of $1,784,844 and $1,716,377
    as of December 31, 1998 and March 31, 1999, respectively......          153,215,156          153,283,623
    
Mortgage payable, due 2000, interest at 8.75%.....................              454,965              448,989
Sellers' notes, due 1999 to 2005, interest at 3% to 8%............           33,537,788           25,151,404
Capital leases and other..........................................              542,721              485,817
                                                                          ---------------    -----------------
                                                                            559,028,752          531,047,285
Less current maturities...........................................           14,399,046           12,419,298
                                                                          ---------------    -----------------
Long-term debt....................................................         $544,629,706         $518,627,987
                                                                          ===============    =================
</TABLE>


                                       7




<PAGE>

                       PEGASUS COMMUNICATIONS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


5.   Long-Term Debt: - (Continued)

         DTS maintains a $70.0 million senior revolving credit facility and a
$20.0 million senior term credit facility (collectively, the "DTS Credit
Facility") which expires in 2003 and is collateralized by substantially all of
the assets of DTS and its subsidiaries. The DTS Credit Facility is subject to
certain financial covenants as defined in the loan agreement, including a debt
to adjusted cash flow covenant. As of March 31, 1999, $18.5 million of stand-by
letters of credit were issued pursuant to the DTS Credit Facility, including
$10.7 million collateralizing certain of the Company's outstanding sellers'
notes.

         PM&C maintains a $180.0 million senior revolving credit facility (the
"PM&C Credit Facility") which expires in 2003 and is collateralized by
substantially all of the assets of PM&C and its subsidiaries. The PM&C Credit
Facility is subject to certain financial covenants as defined in the loan
agreement, including a debt to adjusted cash flow covenant. As of March 31,
1999, $30.9 million of stand-by letters of credit were issued pursuant to the
PM&C Credit Facility, including $16.8 million collateralizing certain of the
Company's outstanding sellers' notes.

         Certain of the Company's notes may be redeemed, at the option of the
Company, in whole or in part, at various points in time after July 1, 2000 at
the redemption prices specified in the indentures governing the respective
notes, plus accrued and unpaid interest thereon.

         The Company's indebtedness contain certain financial and operating
covenants, including restrictions on the Company's ability to incur additional
indebtedness, create liens and pay dividends.

6.   Earnings Per Common Share:

Calculation of basic and diluted earnings per common share:

         The following table sets forth the computation of the number of shares
used in the computation of basic and diluted earnings per common share:
<TABLE>
<CAPTION>
                                                                                 Three Months Ended March 31,
                                                                           ---------------------------------------
                                                                                   1998                 1999
                                                                                   ----                 ----
<S>                                                                                <C>                  <C>
Net loss applicable to common shares                                           ($15,936,460)        ($45,924,527)
                                                                           ==================   ==================

Weighted average common shares outstanding                                        10,332,436           16,352,307
                                                                           ==================   ==================

Total shares used for calculation of basic earnings per common share              10,332,436           16,352,307
Stock options and warrants                                                         -                    -
                                                                           ------------------   -----------------

Total shares used for calculation of diluted earnings per common share            10,332,436           16,352,307
                                                                           ==================   ==================
</TABLE>

         Basic earnings per common share amounts are based on net income, after
deducting preferred stock dividend requirements, divided by the weighted average
number of shares of Class A and Class B Common Stock outstanding during the
year. The total shares used for the calculation of diluted earnings per common
share were not adjusted for securities that have not been issued as they are
antidilutive.

         For the three months ended March 31, 1998 and 1999, net loss per common
share was determined by dividing net loss, as adjusted by the aggregate amount
of dividends on the Company's Series A Preferred Stock, approximately $3.6
million and $4.0 million, respectively, by applicable shares outstanding.





                                       8



<PAGE>


                       PEGASUS COMMUNICATIONS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)




7. Acquisitions:

         In the first quarter of 1999, the Company acquired, from six
independent DIRECTV(R) ("DIRECTV") providers, the rights to provide DIRECTV
programming in certain rural areas of Colorado, Illinois, Indiana, Minnesota and
Texas and the related assets in exchange for total consideration of
approximately $26.1 million, which consisted of $23.7 million in cash, $2.3
million in promissory notes, payable over one year, and $198,000 in assumed
liabilities.

         Effective March 31, 1999, the Company purchased a cable system serving
Aguadilla, Puerto Rico and neighboring communities for a purchase price of
approximately $42.1 million in cash. The Aguadilla cable system serves
approximately 21,000 subscribers and passes approximately 81,000 of the 90,000
homes in the franchise area. The Aguadilla cable system is contiguous to the
Company's other Puerto Rico cable system and the Company intends to consolidate
the Aguadilla cable system with its existing cable system.

8. Supplemental Cash Flow Information:

         Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
                                                                               Three Months Ended March 31,
                                                                              -------------------------------
                                                                                    1998            1999
                                                                                    ----            ----
<S>                                                                                <C>              <C>
Barter revenue and related expense.......................................       $1,459,500      $1,682,500
Acquisition of program rights and assumption of related program payables             -             169,514
Acquisition of plant under capital leases................................           36,500           -
Notes payable and related acquisition of intangibles.....................        9,500,000       2,250,000
Series A Preferred Stock dividend and reduction of paid-in capital.......        3,576,853       4,047,438
</TABLE>

         For the three months ended March 31, 1998 and 1999, the Company paid
cash for interest in the amount of $6.4 million and $18.1 million, respectively.
The Company paid no federal income taxes for the three months ended March 31,
1998 and 1999.

9. Commitments and Contingent Liabilities:

Legal Matters:

         In connection with the pending license renewal application of one of
the Company's television stations, it has come to the attention of the Company
that, at that station, there were violations of the FCC's rules establishing
limits on the amount of commercial material in programs directed to children.

         The Company was notified that is has been sued in Indiana for allegedly
charging DBS subscribers excessive fees for late payments. The plaintiffs, who
purport to represent a class consisting of residential DIRECTV customers in
Indiana, seek unspecified damages for the purported class and modification of
the Company's late-fee policy. The Company is advised that similar suits have
been brought against DIRECTV and various cable operators in other parts of the
United States.

         From time to time the Company is involved with claims that arise in the
normal course of business.

         In the opinion of management, the ultimate liability with respect to
the aforementioned claims and matters will not have a material adverse effect on
the consolidated operations, liquidity, cash flows or financial position of the
Company.








                                        9



<PAGE>



                       PEGASUS COMMUNICATIONS CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. Industry Segments:

         The Company operates in growing segments of the media industry: DBS,
Broadcast and Cable. DBS consists of providing direct broadcast satellite
television services to customers in certain rural areas of 35 states. Broadcast
consists of nine television stations affiliated with Fox, UPN and the WB and two
transmitting towers, all located in the eastern United States. Cable consists of
providing cable television services to individual and commercial subscribers in
Puerto Rico.

         All of the Company's revenues are derived from external customers.
Capital expenditures for the Company's DBS segment were $77,000 and $380,000 for
the three months ended March 31, 1998 and 1999, respectively. Capital
expenditures for the Company's Broadcast segment were $1.0 million and $251,000
for the three months ended March 31, 1998 and 1999, respectively. Capital
expenditures for the Company's Cable segment were $280,000 and $892,000 for the
three months ended March 31, 1998 and 1999, respectively. Identifiable total
assets for the Company's DBS segment were $715.6 million and $697.3 million as
of December 31, 1998 and March 31, 1999, respectively. Identifiable total assets
for the Company's Broadcast segment were $67.1 million and $66.1 million as of
December 31, 1998 and March 31, 1999, respectively. Identifiable total assets
for the Company's Cable segment were $47.0 million and $86.3 million as of
December 31, 1998 and March 31, 1999, respectively.

11. Other Events:

         In April 1999, the Company acquired, from two independent DIRECTV
providers, the rights to provide DIRECTV programming in certain rural areas of
Nebraska and Ohio and the related assets in exchange for $5.0 million in cash,
warrants to purchase a total of 25,000 shares of the Company's Class A Common
Stock and $2.0 million in promissory notes, payable over two years.

         On April 29, 1999, Pegasus exchanged its 9.75% Series A Senior Notes 
due 2006 (the "9.75% Series A Notes") for its 9.75% Series B Senior Notes due 
2006 (the "9.75% Series B Notes"). The 9.75% Series B Notes have substantially 
the same terms and provisions as the 9.75% Series A Notes.







                                       10
<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         This Report contains certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to us that are based on the beliefs of our management, as
well as assumptions made by and information currently available to our
management. When used in this Report, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. Such statements reflect our current
views with respect to future events and are subject to unknown risks,
uncertainties and other factors that may cause actual results to differ
materially from those contemplated in such forward-looking statements. Such
factors include, among other things, the following: general economic and
business conditions, both nationally, internationally and in the regions in
which we operate; demographic changes; existing government regulations and
changes in, or the failure to comply with government regulations; competition;
the loss of any significant numbers of subscribers or viewers; changes in
business strategy or development plans; technological developments and
difficulties (including any associated with the Year 2000); the ability to
attract and retain qualified personnel; our significant indebtedness; the
availability and terms of capital to fund the expansion of our businesses; and
other factors referenced in this Report. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as the date
hereof. We do not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

         The following discussion of the financial condition and results of
operations of Pegasus should be read in conjunction with the consolidated
financial statements and related notes which are included on pages 3-10 herein.

General

         Pegasus Communications Corporation is:

         o The largest independent provider of DIRECTV with 503,000 subscribers
           at April 30, 1999. We have the exclusive right to distribute DIRECTV
           digital broadcast satellite services to 4.8 million rural households
           in 35 states. We distribute DIRECTV through the Pegasus retail
           network, a network of approximately 2,000 independent retailers.

        o The owner or programmer of nine TV stations affiliated with either
          Fox, UPN or the WB and the owner of a large cable system in Puerto
          Rico serving approximately 50,000 subscribers.

         DBS revenues are principally derived from monthly customer
subscriptions and pay-per-view services. Broadcast revenues are derived from the
sale of broadcast airtime to local and national advertisers. Cable revenues are
derived from monthly customer subscriptions, pay-per-view services, subscriber
equipment rentals and installation charges.

         In this section we use the terms pre-marketing cash flow and location
cash flow. Pre-marketing cash flow is calculated by taking our earnings and
adding back the following expenses:

         o interest;

         o income taxes;

         o depreciation and amortization;

         o non-cash charges;

         o corporate overhead; and















                                       11
<PAGE>



         o DBS subscriber acquisition costs, which are sales and marketing 
           expenses incurred to acquire new DBS subscribers.

         Location cash flow is pre-marketing cash flow less DBS subscriber
acquisition costs.

         Pre-marketing cash flow and location cash flow are not, and should not
be considered, alternatives to income from operations, net income, net cash
provided by operating activities or any other measure for determining our
operating performance or liquidity, as determined under generally accepted
accounting principles. Pre-marketing cash flow and location cash flow also do
not necessarily indicate whether our cash flow will be sufficient to fund
working capital, capital expenditures, or to react to changes in Pegasus'
industry or the economy generally. We believe that pre-marketing cash flow and
location cash flow are important, however, for the following reasons:

         o those who follow our industry frequently use them as measures of
           financial performance and ability to pay debt service; and

         o they are measures that our lenders, investors and we use to monitor
           our financial performance and debt leverage.

         Pegasus generally does not require new DBS customers to sign
programming contracts and, as a result, subscriber acquisition costs are
currently being charged to operations in the period incurred.


Results of Operations

Three months ended March 31, 1999 compared to three months ended March 31, 1998

         Total net revenues for the three months ended March 31, 1999 were $69.4
million, an increase of $40.6 million, or 141%, compared to total net revenues
of $28.8 million for the same period in 1998. The increase in total net revenues
for the three months ended March 31, 1999 was primarily due to an increase in
DBS revenues of $40.9 million attributable to acquisitions and to internal
growth in Pegasus' DBS subscriber base. Total operating expenses for the three
months ended March 31, 1999 were $96.1 million, an increase of $61.0 million, or
174%, compared to total operating expenses of $35.1 million for the same period
in 1998. The increase was primarily due to an increase of $60.1 million in
operating expenses attributable to the growth in Pegasus' DBS business.

         Total corporate expenses, including corporate depreciation and
amortization, were $2.0 million for the three months ended March 31, 1999, an
increase of $851,000, or 77%, compared to $1.1 million for the same period in
1998. The increase in corporate expenses is attributable to the growth in
Pegasus' business. The increase in corporate depreciation and amortization is
primarily due to amortization of deferred financing costs associated with the
issuance of $100.0 million of senior notes in November 1998.

         Interest expense was $15.7 million for the three months ended March 31,
1999, an increase of $9.7 million, or 163%, compared to interest expense of $6.0
million for the same period in 1998. The increase in interest expense is
primarily due to interest on Pegasus' $100.0 million senior notes issued in
November 1998, Digital Television Service Inc.'s $155.0 million senior notes,
which were assumed by Pegasus in April 1998, and an increase in bank borrowings
and sellers' notes associated with Pegasus' DBS acquisitions. Interest income
was $461,000 for the three months ended March 31, 1999, an increase of $115,000,
or 33%, compared to interest income of $346,000 for the same period in 1998. The
increase in interest income is due to greater average cash balances for the
three months ended March 31, 1999 compared to the same period in 1998.

         Other expenses were $351,000 for the three months ended March 31, 1999,
a decrease of $1,000 compared to other expenses of $352,000 for the same period
in 1998.

         The provision for income taxes declined by approximately $518,000
primarily as a result of the amortization of the deferred tax liability that
originated from the acquisition of Digital Television Services, Inc.











                                       12
<PAGE>



         Preferred stock dividends were $4.0 million for the three months ended
March 31, 1999, an increase of $471,000, or 13%, compared to $3.6 million in
preferred stock dividends for the same period in 1998. The increase is
attributable to a greater number of shares of Pegasus' preferred stock
outstanding during the first quarter of 1999 compared to the first quarter of
1998 as the result of payment of dividends in preferred stock.

DBS

         Pegasus' DBS business has experienced significant growth. During the
last twelve months, Pegasus acquired approximately 218,000 subscribers and the
exclusive DIRECTV distribution rights to approximately 2.5 million households in
rural areas of the United States. At March 31, 1999, Pegasus had exclusive
DIRECTV distribution rights to 4.8 million households and 481,000 subscribers as
compared to 2.3 million households and 154,000 subscribers at March 31, 1998.
Pegasus had 4.9 million households and 505,000 subscribers at March 31, 1999,
including pending acquisitions. At March 31, 1998, subscribers would have been
384,000, including pending and completed acquisitions. Subscriber penetration
increased from 7.8% at March 31, 1998 to 10.3% at March 31, 1999, including
pending and completed acquisitions.

         Total DBS net revenues were $58.3 million for the three months ended
March 31, 1999, an increase of $40.9 million, or 234%, compared to DBS net
revenues of $17.5 million for the same period in 1998. The increase is primarily
due to an increase in the average number of subscribers in the first quarter of
1999 compared to the first quarter of 1998. The average monthly revenue per
subscriber was $43.12 for the three months ended March 31, 1999 compared to
$41.91 for the same period in 1998. Pro forma DBS net revenues, including
pending acquisitions at March 31, 1999, were $62.6 million, an increase of $16.3
million, or 35%, compared to pro forma DBS net revenues of $46.3 million for the
same period in 1998.

         Programming, technical, and general and administrative expenses were
$40.5 million for the three months ended March 31, 1999, an increase of $28.3
million, or 232%, compared to $12.2 million for the same period in 1998. The
increase is attributable to significant growth in subscribers and territory
during the last twelve months. As a percentage of revenue, programming,
technical, and general and administrative expenses were 69.5% for the three
months ended March 31, 1999 compared to 69.8% for the same period in 1998.

         Subscriber acquisition costs were $21.1 million for the three months
ended March 31, 1999, an increase of $16.9 million compared to $4.2 million for
the same period in 1998. The total subscriber acquisition costs per gross
subscriber addition were $410 for the three months ended March 31, 1999 compared
to $283 for the same period in 1998. The increase is principally due to an
increase in promotional programming.

         Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $390,000 for the three months ended March 31,
1999, an increase of $30,000, or 8%, compared to $360,000 for the same period in
1998. The increase resulted from a larger gain in pro forma location cash flow
during the first quarter of 1999 as compared to the first quarter of 1998.

         Depreciation and amortization was $21.5 million for the three months
ended March 31, 1999, an increase of $14.8 million, or 223%, compared to $6.6
million for the same period in 1998. The increase in depreciation and
amortization is primarily due to an increase in the fixed and intangible asset
base as the result of DBS acquisitions that occurred during the last two years.

Broadcast

         During the three months ended March 31, 1999, Pegasus owned or
programmed nine broadcast television stations in six markets. Two new stations
were launched during the second half of 1998. Total net broadcast revenues for
the three months ended March 31, 1999 were $7.9 million, an increase of $1.0
million, or 15%, compared to net broadcast revenues of $6.9 million for the same
period in 1998. The increase was primarily attributable to an increase of
$340,000 in net broadcast revenues from the four stations launched in 1997 and
1998, a $229,000 increase in barter revenue and an increase in local advertising
sales.










                                       13
<PAGE>


         Programming, technical, and general and administrative expenses were
$4.9 million for the three months ended March 31, 1999, an increase of $1.1
million, or 28%, compared to $3.9 million for the same period in 1998. The
increase is primarily due to an increase in expenses from the two new stations
launched in 1998 and an increase in news related expenses associated with the
launch of self-produced news in our Portland, Maine and Chattanooga, Tennessee
markets.

         Marketing and selling expenses were $1.5 million for the three months
ended March 31, 1999, an increase of $82,000, or 6%, compared to $1.4 million
for the same period in 1998. The increase in marketing and selling expenses was
due to an increase in promotional costs associated with the launch of the new
stations and news programs.

         Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $156,000 for the three months ended March 31, 1999
compared to no incentive compensation for the same period in 1998. The incentive
compensation resulted from a gain in pro forma location cash flow during the
first quarter of 1999 as compared to a loss in the first quarter of 1998.

         Depreciation and amortization was $1.2 million for the three months
ended March 31, 1999, a decrease of $140,000, or 11%, compared to $1.3 million
for the same period in 1998.

Cable

         Total net cable revenues were $3.1 million for the three months ended
March 31, 1999, a decrease of $1.3 million, or 30%, compared to net cable
revenues of $4.4 million for the same period in 1998. The decrease is primarily
due to the sale of Pegasus' New England cable systems effective July 1, 1998.
Net cable revenues from the New England Cable systems were $1.6 million for the
three months ended March 31, 1998. The net revenues derived from Pegasus' Puerto
Rico cable system were $3.1 million for the three months ended March 31, 1999,
an increase of $275,000, or 10%, compared to net cable revenues of $2.8 million
for the same period in 1998. The average monthly revenue per subscriber was
$35.15 for the three months ended March 31, 1999 compared to $33.71 for the same
period in 1998. On a pro forma basis, including the completed acquisition of the
Aguadilla, Puerto Rico cable system and the disposition of the New England cable
systems, there were 50,200 subscribers as of March 31, 1999 compared to 49,300
subscribers as of March 31, 1998.

         Programming, technical, and general and administrative expenses were
$1.7 million for the three months ended March 31, 1999, a decrease of $631,000,
or 28%, compared to $2.3 million for the same period in 1998. The decrease is
primarily attributable to the sale of Pegasus' New England cable systems.

         Marketing and selling expenses were $109,000 for the three months ended
March 31, 1999, an increase of $2,000, or 2%, compared to $107,000 for the same
period in 1998.

         Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $23,000 for the three months ended March 31, 1999,
a decrease of $26,000, or 53%, compared to $49,000 for the same period in 1998.
The decrease resulted from a lower gain in pro forma location cash flow during
the first quarter of 1999 as compared to the first quarter of 1998.

         Depreciation and amortization was $1.1 million for the three months
ended March 31, 1999, a decrease of $458,000, or 30%, compared to $1.5 million
for the same period in 1998. The decrease in depreciation and amortization is
primarily due to the sale of Pegasus' New England cable systems.

Liquidity and Capital Resources

         Pegasus' primary sources of liquidity have been the net cash provided
by its DBS, broadcast and cable operations, credit available under its credit
facilities and proceeds from public and private offerings. Pegasus' principal
use of its cash has been to fund acquisitions, to meet debt service obligations,
to fund DBS subscriber acquisition costs and to fund investments in its
broadcast and cable technical facilities.








                                       14
<PAGE>



         Pre-marketing cash flow increased by approximately $11.7 million, or
131%, for the three months ended March 31, 1999 as compared to the same period
in 1998. Pre-marketing cash flow increased as a result of:

         o a $12.5 million, or 238%, increase in DBS pre-marketing cash flow of
           which $2.2 million, or 17%, was due to an increase in same territory
           pre-marketing cash flow and $10.4 million, or 83%, was attributable
           to territories acquired in 1998 and 1999;

         o a $122,000, or 7%, decrease in broadcast location cash flow as the
           result of a $59,000, or 4%, increase in same station location cash
           flow and a $181,000 decrease attributable to the two new stations
           launched in July 1998 and November 1998; and

         o a $694,000, or 35%, decrease in cable location cash flow. This
           decrease was the net result of a $76,000, or 6%, increase in Puerto
           Rico same system location cash flow and a $770,000 reduction due to
           the sale of Pegasus' New England cable systems effective July 1,
           1998.

         During the three months ended March 31, 1999, $54.5 million of cash on
hand at the beginning of the year, together with $54.8 million of net cash
provided by Pegasus' financing activities, was used to fund operating activities
of approximately $18.9 million and investing activities of $69.7 million.
Investing activities consisted of:

         o the purchase of a cable system serving Aguadilla, Puerto Rico and
           neighboring communities for approximately $42.1 million;

         o the acquisition of DBS assets from six independent DIRECTV providers
           during the first quarter of 1999 for approximately $23.7 million;

         o broadcast expenditures associated with the launch of self-produced
           news in our Portland, Maine and Chattanooga, Tennessee markets
           totaling $428,000;

         o DBS facility upgrades of $376,000;

         o the expansion and enhancements of the Puerto Rico cable system
           amounting to $600,000, including $213,000 related to hurricane
           damage;

         o payments of programming rights amounting to $735,000;

         o capitalized costs relating to Pegasus' financing of approximately
           $1.5 million;

         o proceeds from the sale of DBS assets to an independent DIRECTV
           provider for $509,000; and

         o maintenance and other capital expenditures and intangibles totaling
           $792,000.

         Financing activities consisted of:

         o the issuance of approximately 3.6 million shares of Class A common
           stock resulting in net proceeds to Pegasus of approximately $74.9
           million;

         o net repayments of bank credit facilities totaling $19.7 million;

         o the repayment of approximately $10.9 million of long-term debt,
           primarily sellers' notes and capital leases; and

         o net restricted cash draws of approximately $9.5 million for interest
           payments and $1.0 million in connection with the acquisition of the
           Aguadilla, Puerto Rico cable system.








                                       15
<PAGE>



         As of March 31, 1999, cash on hand amounted to $20.8 million plus
restricted cash of $11.0 million.

         Pegasus Media & Communications maintains a $180.0 million senior,
reducing revolving credit facility. Borrowings under the credit facility are
available for acquisitions, subject to the approval of the lenders in certain
circumstances, working capital, capital expenditures and for general corporate
purposes. As of March 31, 1999, $4.0 million was outstanding and stand-by
letters of credit amounting to $30.9 million were issued under its $180.0
million credit facility. The credit facility expires in December 2003.

         Digital Television Services maintains a $70.0 million senior, reducing
revolving credit facility and a $20.0 million senior term credit facility.
Borrowings under the credit facilities are available to refinance certain
indebtedness and for acquisitions, subject to the approval of the lenders in
certain circumstances, working capital, capital expenditures and for general
corporate purposes. As of March 31, 1999, $50.2 million was outstanding and
stand-by letters of credit amounting to $18.5 million were issued under its
$90.0 million credit facilities. The credit facilities expire in July 2003.

         In March 1999, Pegasus completed its secondary public offering in which
it sold approximately 3.6 million shares of its Class A Common Stock to the
public at a price of $22.00 per share, resulting in net proceeds to Pegasus of
approximately $74.9 million. Pegasus applied $49.9 million of the net proceeds
to pay down indebtedness under the Pegasus Media & Communications credit
facility and $25.0 million towards the acquisition of the cable system serving
Aguadilla, Puerto Rico and neighboring communities.

         As defined in the Certificate of Designation governing Pegasus' Series
A Preferred Stock and the indentures governing Pegasus' senior notes, Pegasus is
required to provide Adjusted Operating Cash Flow data for Pegasus and its
Restricted Subsidiaries on a consolidated basis where Adjusted Operating Cash
Flow is defined as "for the four most recent fiscal quarters for which internal
financial statements are available, Operating Cash Flow of such Person and its
Restricted Subsidiaries less DBS Cash Flow for the most recent four-quarter
period plus DBS Cash Flow for the most recent quarterly period, multiplied by
four." Operating Cash Flow is income from operations before income taxes,
depreciation and amortization, interest expense, extraordinary items and
non-cash charges. Although Adjusted Operating Cash Flow is not a measure of
performance under generally accepted accounting principles, we believe that
Location Cash Flow, Operating Cash Flow and Adjusted Operating Cash Flow are
accepted within our business segments as generally recognized measures of
performance and are used by analysts who report publicly on the performance of
companies operating in such segments. Restricted Subsidiaries carries the same
meaning as in the Certificate of Designation. Digital Television Services, Inc.,
among certain other Pegasus' subsidiaries, are not included in the definition of
Restricted Subsidiaries and, accordingly, their operating results are not
included in the Adjusted Operating Cash Flow data provided below. Pro forma for
the acquisition of the Aguadilla, Puerto Rico cable system, the six completed
DBS acquisitions occurring in the first quarter of 1999 and the sale of our New
England cable systems, as if such acquisitions/disposition occurred on April 1,
1998, Adjusted Operating Cash Flow would have been approximately $56.7 million
as follows:
<TABLE>
<CAPTION>
 
                                                                                   Four Quarters Ended
                               (in thousands)                                          March 31,1999
                                                                                   --------------------
<S>                                                                                        <C>
Revenues........................................................................          $189,543
Direct operating expenses, excluding depreciation, amortization and other    
  non-cash charges..............................................................           128,929
                                                                                          -------- 
Income from operations before incentive compensation corporate
  expenses, depreciation and amortization and other non-cash charges............            60,614
Corporate expenses..............................................................             3,870 
                                                                                          --------                               
Adjusted operating cash flow ...................................................          $ 56,744
                                                                                          ========
</TABLE>







                                       16
<PAGE>
         Pegasus believes that it has adequate resources to meet its working
capital, maintenance capital expenditure and debt service obligations for at
least the next twelve months. However, Pegasus is highly leveraged and our
ability in the future to repay our existing indebtedness will depend upon the
success of our business strategy, prevailing economic conditions, regulatory
matters, levels of interest rates and financial, business and other factors that
are beyond our control. We cannot assure you that we will be able to generate
the substantial increases in cash flow from operations that we will need to meet
the obligations under our indebtedness. Furthermore, our agreements with respect
to our indebtedness contain numerous covenants that, among other things:

         o restrict our ability to pay dividends and make certain other payments
           and investments;

         o borrow additional funds;

         o create liens; and

         o to sell our assets.

Failure to make debt payments or comply with our covenants could result in an
event of default which if not cured or waived could have a material adverse
effect on us.

         Pegasus closely monitors conditions in the capital markets to identify
opportunities for the effective use of financial leverage. In financing its
future expansion and acquisition requirements, Pegasus would expect to avail
itself of such opportunities and thereby increase its indebtedness. This could
result in increased debt service requirements. We cannot assure you that such
debt financing can be completed on terms satisfactory to Pegasus or at all.
Pegasus may also issue additional equity to fund its future expansion and
acquisition requirements.

Year 2000

         The year 2000 issue is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other equipment as the year 2000
approaches and is reached. These problems generally arise from the fact that
most computer hardware and software have historically used only two digits to
identify the year in a date, often resulting in the computer failing to
distinguish dates in the 2000s from dates in the 1900s. These problems may also
arise from additional sources, such as the use of special codes and conventions
in software utilizing the date field.

         Pegasus has reviewed all of its systems as to the year 2000 issue.
Pegasus' primary focus has been on its own internal systems. Pegasus has in the
past three years replaced or upgraded, or is in the process of replacing or
upgrading, all of its TV traffic systems, cable billing systems and corporate
accounting systems. All of these new systems are expected to be in place by May
31, 1999. However, if any necessary changes are not made or completed in a
timely fashion or unanticipated problems arise, the year 2000 issue may take
longer for Pegasus to address and may have a material adverse impact on Pegasus'
financial condition and its results of operations.

         Pegasus relies on outside vendors for the operation of its DBS
satellite control and billing systems, including DIRECTV, the National Rural
Telecommunications Cooperative and their respective vendors. Pegasus has
established a policy to ensure that these vendors are currently in compliance
with the year 2000 issue or have a plan in place to be in compliance with the
year 2000 issue by the first quarter of 1999. In addition, Pegasus has had
initial communications with certain of its other significant suppliers,
distributors, financial institutions, lessors and parties with which it conducts
business to evaluate their year 2000 compliance plans and state of readiness and
to determine the extent to which Pegasus' systems may be affected by the failure
of others to remediate their own year 2000 issues. To date, however, Pegasus has
received only preliminary feedback from such parties and has not independently
confirmed any information received from other parties with respect to the year
2000 issue. As such, we cannot assure you that these other parties will complete
their year 2000 conversion in a timely fashion or will not suffer a year 2000
business disruption that may adversely affect Pegasus' financial condition and
its results of operations.








                                       17
<PAGE>



         Because Pegasus' year 2000 conversion is expected to be completed prior
to any potential disruption to Pegasus' business, Pegasus has not yet completed
the development of a comprehensive year 2000-specific contingency plan. However,
as part of its year 2000 contingency planning effort, Pegasus examines
information received from external sources for date integrity before bringing it
into its internal systems. If Pegasus determines that its business or a segment
thereof is at material risk of disruption due to the year 2000 issue or
anticipates that its year 2000 conversion will not be completed in a timely
fashion, it will work to enhance its contingency plan. Costs to date relating to
the year 2000 issue amounted to approximately $200,000. Costs to be incurred
beyond March 31, 1999, relating to the year 2000 issue are expected to be
approximately $150,000.

Dividend Policy

         As a holding company, Pegasus' ability to pay dividends is dependent
upon the receipt of dividends from its direct and indirect subsidiaries. Credit
facilities and publicly held debt securities of Pegasus' principal subsidiaries
restrict them from paying dividends to Pegasus. In addition, Pegasus' ability to
pay dividends and Pegasus' and its subsidiaries' ability to incur indebtedness
are subject to certain restrictions contained in Pegasus' and its subsidiaries'
credit facilities and publicly held debt securities and in the terms of Pegasus'
Series A preferred stock.

Seasonality

         Pegasus' revenues vary throughout the year. As is typical in the
broadcast television industry, Pegasus' first quarter generally produces the
lowest revenues for the year and the fourth quarter generally produces the
highest revenues for the year. Pegasus' operating results in any period may be
affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues in the short-term until the impact of
such advertising and promotion is realized in future periods.

Inflation

         Pegasus believes that inflation has not been a material factor
affecting its business. In general, Pegasus' revenues and expenses are impacted
to the same extent by inflation. A majority of Pegasus' indebtedness bears
interest at a fixed rate.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not Applicable.








                                       18
<PAGE>




PART II. OTHER INFORMATION



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS



         On April 13, 1999, Pegasus issued warrants to purchase 25,000 shares of
its Class A Common Stock as partial consideration for the acquisition of DIRECTV
rights and related assets from an independent provider of DIRECTV in certain
rural portions of Nebraska. The warrants are exercisable on or before April 13,
2004 at a price of $24.1771 per share, subject to certain adjustments. In
issuing the warrants, Pegasus relied upon exemption from registration set forth
in Section 4(2) of the Securities Act of 1933, as amended.




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

    Exhibit 27             Financial Data Schedule.

(b)  Reports on Form 8-K

         There were no Current Reports on Form 8-K filed during the quarter
ended March 31, 1999.












                                       19
<PAGE>



                                    SIGNATURE




Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Pegasus Communications Corporation has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.


                                              Pegasus Communications Corporation



Date May 12, 1999                      By /s/ Robert N. Verdecchio
     ------------                         -------------------------------------
                                              Robert N. Verdecchio
                                              Senior Vice President, Chief 
                                              Financial Officer, Assistant
                                              Secretary and Director
                                              (Principal Financial and
                                              Accounting Officer)