UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                    For the quarter ended September 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 No. 333-05017

                           UIH Australia/Pacific, Inc.
             (Exact name of Registrant as specified in its charter)

        State of Colorado                                        84-1341958
 (State or other jurisdiction of                              (I.R.S. Employer
  incorporation or organization)                             Identification No.)

     4643 South Ulster Street, #1300
            Denver, Colorado                                       80237
 (Address of principal executive offices)                       (Zip code)

       Registrant's telephone number, including area code: (303) 770-4001







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 and (2) has been subject to such filing requirements for
the past 90 days. Yes  X    No 
                     -----    -----

The Company has no  publicly-traded  shares of capital stock. As of November 16,
1998, the Company had 13,864,941 shares of common stock outstanding.

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<CAPTION>
                                                UIH AUSTRALIA/PACIFIC, INC.
                                                     TABLE OF CONTENTS


 
                                                                                                                 Page
                                                                                                                Number
                                                                                                                ------
                                              PART I - FINANCIAL INFORMATION
                                              ------------------------------

Item 1 - Financial Statements
------
     <S>                                                                                                          <C>
     Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 (Unaudited).........     2

     Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30,
         1998 and 1997 (Unaudited)............................................................................     3

     Condensed Consolidated Statement of Stockholder's Deficit for the Nine Months Ended September 30,
         1998 (Unaudited).....................................................................................     4

     Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 and
         1997 (Unaudited)....................................................................................      5

     Notes to Condensed Consolidated Financial Statements (Unaudited)........................................      6


Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations...............     15
------                                                                                        


                                                PART II - OTHER INFORMATION
                                                ---------------------------


Item 6 - Exhibits and Reports on Form 8-K....................................................................     25
------                                   
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                  UIH AUSTRALIA/PACIFIC, INC.
                                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Stated in thousands, except share and per share amounts)
                                                          (Unaudited)

                                                                                                  As of              As of
                                                                                              September 30,       December 31,
                                                                                                  1998               1997
                                                                                              -------------       ------------
<S>                                                                                             <C>                 <C>
ASSETS
Current assets
  Cash and cash equivalents..................................................................   $  2,929            $ 12,344
  Restricted cash............................................................................        197                 420
  Short-term investments.....................................................................         --              12,325
  Subscriber receivables.....................................................................      5,147               2,548
  Related party receivables..................................................................      1,131               1,942
  Other receivables..........................................................................      1,136               1,220
  Prepaids...................................................................................      4,094               1,468
  Other current assets.......................................................................        504                 717
                                                                                                --------            --------
     Total current assets....................................................................     15,138              32,984
Property, plant and equipment, net of accumulated depreciation of $129,991 and
  $78,179, respectively......................................................................    158,745             183,101
License fees, net of accumulated amortization of $5,263 and $3,773, respectively.............      9,954               5,691
Goodwill, net of accumulated amortization of $10,105 and $8,044, respectively................     39,022              43,017
Deferred financing costs, net of accumulated amortization of $2,665 and $1,306,
  respectively...............................................................................     11,662              13,393
Other non-current assets, net................................................................        245                 846
                                                                                                --------            --------
     Total assets............................................................................   $234,766            $279,032
                                                                                                ========            ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
  Accounts payable, including related party payables of $6,221 and $1,596, respectively......   $ 14,112            $  5,651
  Construction payables......................................................................      4,343               6,008
  Accrued liabilities........................................................................     18,459              19,372
  Related party note payable.................................................................      4,999               4,999
  Current portion of long-term debt..........................................................      3,103               1,825
                                                                                                --------            --------
     Total current liabilities...............................................................     45,016              37,855
Due to parent................................................................................      8,377               5,394
Senior discount notes........................................................................    343,926             309,123
Other long-term debt.........................................................................     83,387              77,971
Other long-term liabilities..................................................................      1,562               1,426
                                                                                                --------            --------
     Total liabilities.......................................................................    482,268             431,769
                                                                                                --------            --------
Minority interest in subsidiary..............................................................     11,209              11,416
                                                                                                --------            --------
Stockholder's deficit
  Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and
    outstanding..............................................................................         --                  --
  Common stock, $0.01 par value, 30,000,000 shares authorized, 13,864,941 shares  
    issued and outstanding...................................................................        139                 139
  Additional paid-in capital.................................................................    202,848             139,621
  Cumulative translation adjustments.........................................................    (35,594)            (28,964)
  Accumulated deficit........................................................................   (426,104)           (274,949)
                                                                                                --------            --------
     Total stockholder's deficit.............................................................   (258,711)           (164,153)
                                                                                                --------            --------
     Total liabilities and stockholder's deficit.............................................   $234,766            $279,032
                                                                                                ========            ========

               The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>

                                                               2
<PAGE>
<TABLE>
<CAPTION>
                                                  UIH AUSTRALIA/PACIFIC, INC.
                                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Stated in thousands, except share and per share amounts)
                                                          (Unaudited)


                                                             For the Three Months Ended          For the Nine Months Ended
                                                                    September 30,                      September 30,
                                                             --------------------------          -------------------------
                                                               1998              1997              1998             1997
                                                             --------          --------          --------         --------
<S>                                                          <C>               <C>              <C>              <C>
Service and other revenue...............................     $ 22,191          $ 18,341         $  63,369        $  49,052

System operating expense, including related party
  expense of $1,203, $853, $3,435 and $2,174,
  respectively..........................................      (23,343)          (13,988)          (55,950)         (35,857)
System selling, general and administrative expense......      (13,954)          (14,220)          (38,018)         (37,025)
Corporate general and administrative expense, including
  related party expense of $219, $203, $635 and $588,
  respectively..........................................           74              (309)           (4,454)            (885)
Depreciation and amortization...........................      (23,286)          (22,061)          (75,177)         (57,797)
                                                             --------          --------         ---------        ---------
     Net operating loss.................................      (38,318)          (32,237)         (110,230)         (82,512)

Interest income, including related party income of
  $203, $0, $512 and $0, respectively...................          294               247               854              526
Interest expense, including related party expense of
  $467, $555, $1,399 and $633,  respectively............      (14,568)          (11,214)          (42,289)         (29,676)
Other expense, net......................................       (2,155)             (342)           (3,560)          (1,109)
                                                             --------          --------         ---------        ---------
     Net loss before other items........................      (54,747)          (43,546)         (155,225)        (112,771)

Equity in losses of affiliated companies................         (603)             (557)             (133)          (2,000)
Minority interest in subsidiary.........................        2,138               351             4,203              351
                                                             --------          --------         ---------        ---------
     Net loss...........................................     $(53,212)         $(43,752)        $(151,155)       $(114,420)
                                                             ========          ========         =========        =========

Basic and diluted loss per common share.................     $  (3.84)         $  (3.16)        $  (10.90)       $   (8.25)
                                                             ========          ========         =========        =========
Weighted-average number of common shares
  outstanding...........................................   13,864,941        13,864,941        13,864,941       13,864,941 
                                                           ==========        ==========        ==========       ==========











               The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
                                                               3

<PAGE>
<TABLE>
<CAPTION>
                                               UIH AUSTRALIA/PACIFIC, INC.
                                CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
                                       (Stated in thousands, except share amounts)
                                                       (Unaudited)


                                                    Common Stock       Additional   Cumulative
                                                --------------------    Paid-In     Translation    Accumlated 
                                                  Shares      Amount    Capital     Adjustments     Deficit        Total
                                                ----------    ------   ----------   -----------    ----------    ---------
<S>                                             <C>            <C>     <C>           <C>           <C>           <C>
Balances, January 1, 1998...................... 13,864,941     $139    $139,621      $(28,964)     $(274,949)    $(164,153)

Capital contributions from parent..............         --       --      63,227            --             --        63,227
Change in cumulative translation
  adjustments..................................         --       --          --        (6,630)            --        (6,630)
Net loss.......................................         --       --          --            --       (151,155)     (151,155)
                                                ----------     ----    --------      --------      ---------     ---------
Balances, September 30, 1998................... 13,864,941     $139    $202,848      $(35,594)     $(426,104)    $(258,711)
                                                ==========     ====    ========      ========      =========     ========= 






































               The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>

                                                               4
<PAGE>
<TABLE>
<CAPTION>
                                                  UIH AUSTRALIA/PACIFIC, INC.
                                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (Stated in thousands)
                                                          (Unaudited)
                                                                                                     For the Nine Months Ended
                                                                                                            September 30,
                                                                                                     -------------------------
                                                                                                       1998             1997
                                                                                                     --------         --------
<S>                                                                                                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................................     $(151,155)      $(114,420)
Adjustments to reconcile net loss to net cash flows from operating activities:
  Depreciation and amortization.................................................................        75,177          57,797
  Equity in losses of affiliated companies......................................................           133           2,000
  Allocation of expense accounted for as capital contributions by parent........................         3,617              --
  Minority interest share of losses.............................................................        (4,203)           (351)
  Accretion of interest on senior discount notes and amortization of deferred financing costs...        36,279          26,969
  Increase in receivables and other assets......................................................        (7,531)           (914)
  Increase in related party payables............................................................         8,046           2,248
  Increase in accounts payable, accrued liabilities and other...................................         4,457          19,992
                                                                                                     ---------       ---------
Net cash flows from operating activities........................................................       (35,180)         (6,679)
                                                                                                     ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments..............................................................            --          (3,663)
Proceeds from sale of short-term investments....................................................        12,325          22,303
Restricted cash released........................................................................           176              --
Investments in and advances to affiliated companies and other investments.......................          (666)         (2,366)
Additions to property, plant and equipment......................................................       (59,070)        (67,948)
Decrease in construction payables...............................................................        (1,123)        (29,385)
                                                                                                     ---------       ---------
Net cash flows from investing activities........................................................       (48,358)        (81,059)
                                                                                                     ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from parent...............................................................        53,455              --
Cash contributed from minority interest partner.................................................         5,504          19,566
Proceeds from offering of senior discount notes.................................................            --          29,925
Borrowing on related party payables to parent...................................................            --           4,999
Deferred financing costs........................................................................            --          (4,632)
Borrowings on other debt........................................................................        15,083          65,971
Payment on capital leases and other debt........................................................          (499)           (959)
                                                                                                     ---------       ---------
Net cash flows from financing activities........................................................        73,543         114,870
                                                                                                     ---------       ---------
EFFECT OF EXCHANGE RATES ON CASH................................................................           580            (663)
                                                                                                     ---------       ---------
(DECREASE) INCREASE  IN CASH AND CASH EQUIVALENTS...............................................        (9,415)         26,469
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................................        12,344          19,220
                                                                                                     ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................................     $   2,929       $  45,689
                                                                                                     =========       =========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Non-cash capital contribution from parent.....................................................     $   6,155       $      --
                                                                                                     =========       =========
  Gain on issuance of shares by a wholly-owned subsidiary.......................................     $      --       $   5,985
                                                                                                     =========       =========
  Decrease in unrealized loss on investment.....................................................     $      --       $     659
                                                                                                     =========       =========
  Assets acquired with capital leases...........................................................     $     621       $     535
                                                                                                     =========       =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Cash received for interest....................................................................     $     437       $     401
                                                                                                     =========       =========
  Cash paid for interest........................................................................     $   3,988       $   1,038
                                                                                                     =========       =========

               The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>

                                                               5

<PAGE>


                           UIH AUSTRALIA/PACIFIC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 1998
                     (Monetary amounts stated in thousands)
                                   (Unaudited)

1.   ORGANIZATION AND NATURE OF OPERATIONS

UIH Australia/Pacific,  Inc. (the "Company"),  a wholly-owned  subsidiary of UIH
Asia/Pacific  Communications,  Inc.  ("UAP"),  which  is  in  turn  an  indirect
98%-owned subsidiary of United International  Holdings, Inc. ("UIH"), was formed
on October 14,  1994,  for the purpose of  developing,  acquiring  and  managing
foreign multi-channel television, programming and telephony operations.

The following chart presents a summary of the Company's significant  investments
in  multi-channel  television,   programming  and  telephony  operations  as  of
September 30, 1998.

            ********************************************************
            *                        UIH                           *
            ********************************************************
                                      *
                               100%   *
                                      *
            ********************************************************
            *    United International Properties, Inc. ("UIPI")    *
            ********************************************************
                                      *
                               98%    *
                                      *
            ********************************************************
            *                        UAP                           *
            ********************************************************
                                      *
                               100%   *
                                      *
            ********************************************************
            *                   The Company                        *
            ********************************************************
                                      *
                                      *
                                      *
            ********************************************************
            * AUSTRALIA:                                           *
            *  CTV Pty Limited ("CTV") and STV Pty Limited         *
            *   ("STV")(collectively, "Austar")(1)            100% *
            *  Austar Satellite Pty Limited                        *
            *   ("Austar Satellite")                          100% *
            *  United Wireless Pty Limited                         *
            *   ("United Wireless")                           100% *
            *  XYZ Entertainment Pty Limited                       *
            *  ("XYZ Entertainment")                           25% *
            * NEW ZEALAND:                                         *
            *  Saturn Communications Limited ("Saturn")        65% *
            * TAHITI:                                              *
            *  Telefenua S.A. ("Telefenua")(2)                 90% *
            ********************************************************


     (1)  The  Company  holds an  effective  100%  economic  interest  in Austar
          through a combination of ordinary shares and convertible debentures.
     (2)  The Company owns an effective 90% economic interest in Telefenua.  The
          Company's  economic  interest will decrease to 75% and 64% once it has
          received a 20% and 40% internal  rate of return on its  investment  in
          Tahiti, respectively.

LIQUIDITY AND CAPITAL RESOURCES

A  substantial  portion  of the  Company's  investments  to date  relate  to its
investment in Austar, which is comprised primarily of multi-channel  multi-point
distribution systems ("MMDS") and direct-to-home  ("DTH") satellite  operations.
The Company  has  essentially  completed  the  construction  and  deployment  of
Austar's  entire MMDS  network  infrastructure  and has incurred  certain  other
significant  expenditures,  such as Austar's  National  Customer Service Center,
which contemplates  provision of MMDS and DTH services to a substantially larger
customer base than currently  exists.  In order to expand Austar's customer base
and build-out the Company's other projects,  the Company will need a significant
amount of additional  capital.  As of September 30, 1998,  the Company had a net
working capital deficit of $18,658, excluding related party payables of $11,220.
Due to the  nature of the  operation,  the  Company  is able to slow the rate of
subscriber connections at Austar and network construction at the Company's other
projects  to adjust to the level of  funding  sources  that are  available.  The


                                       6
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company believes it can, if necessary, substantially reduce the capital required
at Austar as the majority of future capital  expenditures will be for subscriber
installation and premises equipment, which are controllable by the Company based
upon the rate of new  subscriber  connections.  However,  the  Company  needs to
continue the present rate of new subscriber  connections to offset current churn
rates at Austar. In September 1998, Austar received a supplemental  amendment to
the existing  senior  syndicated  term debt facility in the amount of Australian
$("A$")200,000  ($118,659 as of September 30, 1998) (the "Austar Bank Facility")
which  allows  Austar  to draw up to  A$60,000  under  the  A$90,000  term  loan
facility.  Austar  also  received  a new  bank  underwriting  commitment  for an
A$400,000 senior secured debt facility (the "New Austar Bank  Facility"),  which
is intended to  refinance  the Austar Bank  Facility by early 1999 (see Note 7).
The Company believes that the financial support from UIH, other potential equity
sources, the Austar Bank Facility, the New Austar Bank Facility commitment,  and
the Saturn Bank  Facility (as defined in Note 11) combined  with,  if necessary,
reductions in the Company's  planned  capital  expenditures,  are  sufficient to
sustain its operations through at least the end of 1999.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The  accompanying  interim  condensed   consolidated  financial  statements  are
unaudited and include the accounts of the Company and all subsidiaries  where it
exercises  majority  control  and owns a  majority  economic  interest.  Austar,
Saturn,  Telefenua  and  United  Wireless  were  consolidated  for  all  periods
presented.  In November  1997,  the Company  formed  Austar  Satellite and began
consolidating  its  operations.   All  significant   intercompany  accounts  and
transactions have been eliminated in consolidation.

In management's  opinion,  all adjustments (of a normal  recurring  nature) have
been made which are necessary to present  fairly the  financial  position of the
Company as of September 30, 1998 and the results of its operations for the three
and  nine  months  ended  September  30,  1998  and  1997.  For a more  complete
understanding of the Company's financial position and results of its operations,
see  the  consolidated  financial  statements  of the  Company  included  in the
Company's annual report on Form 10-K for the year ended December 31, 1997.

INVESTMENTS  IN AND ADVANCES TO AN AFFILIATED  COMPANY,  ACCOUNTED FOR UNDER THE
EQUITY METHOD

The Company  accounts for its investment in XYZ  Entertainment  under the equity
method of accounting. Under this method, the investment,  originally recorded at
cost, is adjusted to recognize the Company's proportionate share of net earnings
or losses of the affiliate, limited to the extent of the Company's investment in
and  advances  to  the  affiliate,   including  any  debt  guarantees  or  other
contractual  funding  commitments.  The  Company's  proportionate  share  of net
earnings or losses of XYZ Entertainment  includes the amortization of the excess
of its cost over its  percentage  interest in XYZ  Entertainment's  net tangible
assets.

PROPERTY, PLANT AND EQUIPMENT

Property,  plant and equipment is stated at cost.  Additions,  replacements  and
major improvements are capitalized,  and costs for normal repair and maintenance
of  property,  plant and  equipment  are  charged to expense as  incurred.  With
respect to the Company's MMDS and DTH operations,  all subscriber  equipment and
capitalized  installation  labor are depreciated using the straight-line  method
over estimated useful lives of three years. Upon  disconnection of a MMDS or DTH
subscriber,  the remaining  book value of the  subscriber  equipment,  excluding
converters which are recovered upon disconnection, and the capitalized labor are
written  off  and  accounted  for  as  additional   depreciation  expense.  MMDS
distribution  facilities and cable  distribution  networks are depreciated using
the straight-line method over estimated useful lives of five to ten years.

With respect to the Company's cable  distribution  networks,  initial subscriber
installation  costs are capitalized and depreciated over a period no longer than
the  depreciation  period  used for  cable  television  plant or the term of the
license  agreement.  All  installation  fees and related  costs with  respect to
reconnects are recognized in the period in which the reconnection occurs.

                                       7
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Office equipment,  furniture and fixtures,  buildings and leasehold improvements
are depreciated  using the  straight-line  method over estimated useful lives of
three to ten years.

Assets  acquired  under  capital  leases are  included  in  property,  plant and
equipment.  The  initial  amount of the  leased  asset and  corresponding  lease
liability  are recorded at the present value of future  minimum lease  payments.
Leased assets are amortized over the life of the relevant lease.

COMPREHENSIVE LOSS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify  items of other  comprehensive  income  (loss) by their nature in a
financial   statement  and  (ii)  display  the  accumulated   balance  of  other
comprehensive  income (loss)  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position.  The
Company  adopted  SFAS 130  effective  January 1,  1998.  For the three and nine
months ended September 30, 1998 and 1997, the Company's only components of other
comprehensive   income  (loss)  were  the  changes  in  cumulative   translation
adjustments and the change in unrealized loss on investment (see Note 8).

FOREIGN OPERATIONS

The functional  currency for the Company's foreign  operations is the applicable
local currency for each  affiliate  company.  Assets and  liabilities of foreign
subsidiaries  are translated at the exchange rate in effect at  period-end,  and
the statements of operations are translated at the average exchange rates during
the period. Exchange rate fluctuations on translating foreign currency financial
statements  into U.S.  dollars  that  result in  unrealized  gains or losses are
referred to as translation  adjustments.  Cumulative translation adjustments are
recorded as a separate component of stockholder's deficit.

Transactions  denominated  in  currencies  other  than the  local  currency  are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in  exchange  rates  result in  transaction  gains and losses  which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

Cash flows from the  Company's  operations in foreign  countries are  translated
based on their reporting currencies.  As a result, amounts related to assets and
liabilities reported on the condensed consolidated statements of cash flows will
not agree to changes in the corresponding balances on the condensed consolidated
balance  sheets.  The effects of exchange  rate changes on cash balances held in
foreign  currencies  are  reported  as a  separate  line  below  cash flows from
financing activities.

NEW ACCOUNTING PRINCIPLE

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting for changes in fair value of a derivative depends on
its  intended  use and  designation.  SFAS 133 is  effective  for  fiscal  years
beginning after June 15, 1999. The Company is currently  assessing the effect of
this new standard.

RECLASSIFICATIONS

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

3.   ACQUISITION

In July 1998,  Austar acquired certain  Australian pay television assets of East
Coast  Television Pty Limited  ("ECT"),  an affiliate of Century  Communications
Corp.  ("Century"),  for  $6,155  of UIH's  newly-created  Series B  Convertible
Preferred  Stock ("Series B Preferred  Stock").  ECT's  subscription  television
business  includes  subscribers  and  certain  MMDS  licenses  and  transmission
equipment  serving the areas in and around Newcastle,  Gossford,  Wollongong and
Tasmania.

                                       8
<PAGE>


                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


4. INVESTMENTS IN AND ADVANCES TO AN AFFILIATED COMPANY, ACCOUNTED FOR UNDER THE
   EQUITY METHOD

<TABLE>
<CAPTION>
                                               Investments in         Cumulative Equity       Cumulative
                                               and Advances to          in Losses of          Translation
                                             Affiliated Company      Affiliated Company       Adjustments       Total
                                             ------------------      ------------------       -----------       -----
       <S>                                        <C>                     <C>                    <C>            <C>
       As of:
         September 30, 1998...............        $18,743                 $(18,853)              $110           $ --
                                                  =======                 ========               ====           ====
         December 31, 1997................        $18,610(1)              $(18,720)              $110           $ --
                                                  =======                 ========               ====           ====
</TABLE>

       (1) Includes an accrued funding  obligation of $406 at December 31, 1997.
           The Company does not have a  contractual  funding  obligation  to XYZ
           Entertainment;  however,  the  Company  would  face  significant  and
           punitive dilution if it did not make the requested fundings.

5.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                           As of              As of
                                                                                       September 30,      December 31,
                                                                                           1998               1997
                                                                                       -------------      -----------
     <S>                                                                                <C>                <C>
     Subscriber premises equipment and converters...............................        $ 168,504          $160,413
     MMDS distribution facilities...............................................           55,281            55,093
     Cable distribution networks................................................           30,892            16,770
     Office equipment, furniture and fixtures...................................           12,943            10,813
     Buildings and leasehold improvements.......................................            7,610             5,647
     Other......................................................................           13,506            12,544
                                                                                        ---------          --------
                                                                                          288,736           261,280
           Accumulated depreciation.............................................         (129,991)          (78,179)
                                                                                        ---------          --------
           Net property, plant and equipment....................................        $ 158,745          $183,101
                                                                                        =========          ========
</TABLE>

6.     SENIOR DISCOUNT NOTES

<TABLE>
<CAPTION>
                                                                                          As of             As of
                                                                                      September 30,      December 31,
                                                                                          1998              1997
                                                                                      -------------      ------------
     <S>                                                                                <C>                <C>
     May 1996 Notes (as defined below), net of unamortized discount............         $310,711           $278,662
     September 1997 Notes (as defined below), net of unamortized discount......           33,215             30,461
                                                                                        --------           --------
                                                                                        $343,926           $309,123
                                                                                        ========           ========
</TABLE>
MAY 1996 14% SENIOR DISCOUNT NOTES

The  Company's  14% senior notes that were issued in May 1996 at a discount from
their principal  amount of $443,000 (the "May 1996 Notes") had an accreted value
of $310,711 as of September 30, 1998.  On and after May 15, 2001,  cash interest
will accrue and will be payable  semi-annually  on each May 15 and  November 15,
commencing November 15, 2001. The May 1996 Notes are due May 15, 2006. Effective
May 16, 1997, the interest rate on these notes increased by an additional  0.75%
per annum to 14.75%.  On October 14, 1998, the Company  consummated a cumulative
issuance  of its  capital  stock to its parent  resulting  in  cumulative  gross
proceeds of $70,000 (an "Equity  Sale"),  reducing the interest rate from 14.75%
to 14.0% per annum.  Due to the increase in the interest rate  effective May 16,
1997 until consummation of the Equity Sale, the May 1996 Notes will accrete to a
principal  amount of $447,418 on May 15, 2001, the date cash interest  begins to
accrue.

                                       9
<PAGE>
                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 1997 14% SENIOR DISCOUNT NOTES

The Company's 14% senior notes that were issued in September  1997 at a discount
from their  principal  amount of $45,000  (the  "September  1997  Notes") had an
accreted  value of $33,215 as of September  30, 1998. On and after May 15, 2001,
cash interest will accrue and will be payable  semi-annually  on each May 15 and
November 15, commencing  November 15, 2001. The September 1997 Notes are due May
15,  2006.  Effective  September  23,  1997,  the  interest  rate on these notes
increased by an additional  0.75% per annum to 14.75%.  On October 14, 1998, the
Company  consummated  an Equity Sale,  reducing the interest rate from 14.75% to
14.0% per annum.  Due to the increase in the interest rate  effective  September
23, 1997 until  consummation  of the Equity Sale,  the September 1997 Notes will
accrete to a principal amount of $45,448 on May 15, 2001, the date cash interest
begins to accrue.

7.   OTHER LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                                        As of               As of
                                                                                    September 30,        December 31,
                                                                                        1998                1997
                                                                                    -------------        ------------
     <S>                                                                                <C>                <C>
     Austar Bank Facility.......................................................       $74,162             $71,531
     Vendor financed equipment at Saturn........................................         8,515               3,730
     Capitalized lease obligations..............................................         2,760               3,441
     Mortgage note, interest at 7.548%, 7-year term.............................         1,053               1,094
                                                                                       -------             -------
                                                                                        86,490              79,796
          Less current portion..................................................        (3,103)             (1,825)
                                                                                       -------             -------
                                                                                       $83,387             $77,971
                                                                                       =======             =======
</TABLE>

AUSTAR BANK FACILITY

In July  1997,  Austar  secured  the  Austar  Bank  Facility  to  fund  Austar's
subscriber  acquisition  and working  capital  needs.  The Austar Bank  Facility
consists  of  three  sub-facilities:  (i)  A$50,000  revolving  working  capital
facility,  (ii)  A$60,000  cash advance  facility and (iii)  A$90,000  term loan
facility.  All of Austar's  assets are pledged as collateral for the Austar Bank
Facility. In addition,  pursuant to the Austar Bank Facility,  Austar cannot pay
any dividends,  interest or fees under its technical assistance agreements prior
to December 31, 2000.  Subsequent to December 31, 2000, Austar will be permitted
to make these types of payments, subject to certain debt to cash flow ratios. As
of September 30, 1998, Austar had drawn the entire amount of the working capital
facility and the cash advance facility  totaling  A$110,000  ($65,263  converted
using the September 30, 1998 exchange  rate).  The working  capital  facility is
fully  repayable on June 30, 2000. The cash advance  facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.

In September 1998,  Austar secured the New Austar Bank Facility  commitment,  of
which the first  A$170,000 is intended to refinance  the Austar Bank Facility by
early 1999 and the remaining  A$230,000 is available  upon the  contribution  of
additional  equity on a 2:1  debt-to-equity  basis.  In the interim,  Austar has
received a  supplemental  amendment to the existing  Austar Bank Facility  which
allows Austar to draw up to A$60,000 under the A$90,000 term loan facility for a
maximum  term of six  months  from the  initial  cash draw down at an  increased
interest  rate of 2.25% above the  professional  market rate in  Australia.  All
other terms and conditions of the Austar Bank Facility remain  unchanged.  As of
September  30,  1998,  Austar had drawn  A$15,000  ($8,899  converted  using the
September  30,  1998  exchange  rate)  on the  term  loan  facility  for a total
outstanding  balance of  A$125,000  ($74,162 as of  September  30,  1998) on the
Austar Bank Facility.

                                       10
<PAGE>
                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
                                                          For the Three Months Ended          For the Nine Months Ended
                                                                 September 30,                      September 30,
                                                          --------------------------          -------------------------
                                                            1998              1997               1998            1997
                                                          ---------         --------          ---------       ---------
     <S>                                                  <C>               <C>               <C>             <C>
     Net loss..........................................   $(53,212)         $(43,752)         $(151,155)      $(114,420)
     Other comprehensive loss
       Change in cumulative translation adjustments....     (4,747)           (8,208)            (6,630)        (11,601)
       Change in unrealized loss on investment.........         --               954                 --             659
                                                          --------          --------          ---------       ---------
           Total comprehensive loss....................   $(57,959)         $(51,006)         $(157,785)      $(125,362)
                                                          ========          ========          =========       =========
</TABLE>

9.   RELATED PARTY

Effective May 1, 1996, the Company and UIH Management,  Inc. ("UIH Management"),
an  indirect  wholly-owned  subsidiary  of UIH,  executed  a 10-year  management
services  agreement  (the  "Management   Agreement"),   pursuant  to  which  UIH
Management performed certain administrative, accounting, financial reporting and
other  services  for the  Company,  which has no separate  employees of its own.
Pursuant to the Management Agreement,  the management fee was $750 for the first
year of  such  agreement  (beginning  May 1,  1996),  and it  increased  on each
anniversary date of the Management Agreement by 8% per year. Effective March 31,
1997, UIH Management  assigned its rights and  obligations  under the Management
Agreement to UAP, the Company's immediate parent, and extended the agreement for
20 years  from that date (the "UAP  Management  Agreement").  In  addition,  the
Company  reimburses UAP or UIH for any out-of-pocket  expenses including travel,
lodging  and  entertainment  expenses,  incurred  by UAP or UIH on behalf of the
Company.   In  December  1997,  UIH  began  allocating   corporate  general  and
administrative  expense to the  Company  in the form of  capital  contributions,
based on increased activity at the operating system level.  Management  believes
that this method of allocating costs is reasonable.

Austar,  Saturn,  Telefenua  and United  Wireless  are also parties to technical
assistance  agreements with UAP whereby such operating companies pay to UAP fees
based on their respective gross revenues. In addition, UIH has appointed certain
of its  employees  to serve in  senior  management  positions  at the  operating
systems.  The operating  systems reimburse UIH for certain direct costs incurred
by UIH,  including  salaries  and benefits  relating to these senior  management
positions, pursuant to the terms of the technical assistance agreements.

As of September 30, 1998,  UIPI, the immediate  parent of UAP, had loaned $4,999
to  UIH  Australia/Pacific  Finance,  Inc.,  a  wholly-owned  subsidiary  of the
Company.  This loan accrues  interest at 15% per annum and is due on demand.  In
October 1998, UIPI  contributed the amount of the loan plus interest into equity
in the Company.  In addition,  for the nine months ended September 30, 1998, UAP
invested  $53,455 in cash into the Company in the form of capital  contributions
in  addition to a non-cash  contribution  of UIH's  Series B Preferred  Stock of
$6,155.

Included in the amount due to parent is the following:
<TABLE>
<CAPTION>
                                                                                     As of               As of
                                                                                 September 30,        December 31,
                                                                                     1998                1997
                                                                                 -------------        ------------
     <S>                                                                           <C>                  <C>
     Austar technical assistance agreement obligations, including deferred
       management fees of $4,644 and $2,248, respectively(1)(2)..............      $ 6,750              $ 2,629
     Telefenua technical assistance agreement obligations....................        3,186                2,659
     Saturn technical assistance agreement obligations.......................          902                  406
     United Wireless technical assistance agreement obligations..............          547                  487
     Payable to parent for management fees and interest on note payable(2)...        1,887                  723
     Other...................................................................        1,326                   86
                                                                                   -------              -------
                                                                                    14,598                6,990
         Less current portion................................................       (6,221)              (1,596)
                                                                                   -------              -------
                                                                                   $ 8,377              $ 5,394
                                                                                   =======              =======
</TABLE>
                                       11
<PAGE>
                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     (1) The  management fees have been deferred until December 31,  2000 due to
         restrictions  under the Austar Bank Facility.  Subsequent to that date,
         Austar will be permitted  to make these types of  payments,  subject to
         certain debt to cash flow ratios.
     (2) UAP has the option of converting these management fees into equity.

10.  SEGMENT INFORMATION

The Company's reportable segments are the various countries in which it operates
multi-channel  television,   programming  and/or  telephony  operations.   These
reportable  segments  are  managed  separately  because  each  country  presents
different  marketing  strategies  and  technology  issues  as well  as  distinct
economic  climates  and  regulatory  constraints.  The Company has  selected the
following   reportable   segments:   (i)  Australia,   including  the  Company's
investments in Austar,  Austar Satellite and United Wireless,  (ii) New Zealand,
including  the  Company's  investment  in Saturn,  (iii)  Tahiti,  including the
Company's investment in Telefenua and (iv) Corporate,  including various holding
companies and consolidating eliminations.
<TABLE>
<CAPTION>
                                                                           As of and for the Three Months Ended
                                                                                   September 30, 1998
                                                             ---------------------------------------------------------------
                                                                             New
                                                             Australia     Zealand      Tahiti       Corporate       Total
                                                             ---------     -------     --------      ---------     ---------
<S>                                                          <C>           <C>         <C>           <C>           <C>
Service and other revenue.............................       $ 20,767      $   395     $ 1,153       $   (124)     $ 22,191
System operating expense, including management fees
  of $931, $214, $58, $0 and $1,203, respectively.....       $(20,449)     $(2,410)    $  (608)      $    124      $(23,343)
Selling, general and administrative expense...........       $(11,685)     $(1,660)    $  (609)      $     74      $(13,880)
Adjusted EBITDA (1)...................................       $(10,436)     $(3,461)    $    (6)           N/A           N/A
Depreciation and amortization.........................       $(22,000)     $  (907)    $  (379)      $     --      $(23,286)
Interest income, including related party income.......       $     13      $    58     $    19       $    204      $    294
Interest expense, including related party expense.....       $ (1,716)     $  (199)    $  (295)      $(12,358)     $(14,568)
Equity in losses of affiliated companies..............       $     --      $    --     $    --       $   (603)     $   (603)
Net loss..............................................       $(41,966)     $(4,056)    $  (724)      $ (6,466)     $(53,212)
Cash and cash equivalents.............................       $    457      $ 2,339     $   125       $      8      $  2,929
Property, plant and equipment, net....................       $109,234      $40,596     $ 8,915       $     --      $158,745
Total assets..........................................       $167,668      $49,798     $11,379       $  5,921      $234,766
</TABLE>
<TABLE>
<CAPTION>
                                                                                For the Three Months Ended
                                                                                   September 30, 1997
                                                             ---------------------------------------------------------------
                                                                             New
                                                             Australia     Zealand      Tahiti       Corporate       Total
                                                             ---------     -------     --------      ---------     ---------
<S>                                                          <C>           <C>         <C>           <C>           <C>
Service and other revenue.............................       $ 17,120      $   133     $1,088        $     --      $ 18,341
System operating expense, including management fees
  of $662, $71, $120, $0 and $853, respectively.......       $(12,620)     $  (802)    $ (566)       $     --      $(13,988)
Selling, general and administrative expense...........       $(12,794)     $  (934)    $ (492)       $   (309)     $(14,529)
Adjusted EBITDA (1)...................................       $ (7,632)     $(1,532)    $  150             N/A           N/A
Depreciation and amortization.........................       $(21,044)     $  (539)    $ (478)       $     --      $(22,061)
Interest income, including related party income.......       $     (6)     $   173     $   11        $     69      $    247
Interest expense, including related party expense.....       $   (950)     $   (20)    $  (23)       $(10,221)     $(11,214)
Equity in losses of affiliated companies..............       $     --      $    --     $   --        $   (557)     $   (557)
Net loss..............................................       $(30,693)     $(1,574)    $ (465)       $(11,020)     $(43,752)
</TABLE>

                                       12
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                For the Nine Months Ended
                                                                                   September 30, 1998
                                                             ---------------------------------------------------------------
                                                                             New
                                                             Australia     Zealand      Tahiti       Corporate       Total
                                                             ---------     -------     --------      ---------     ---------
<S>                                                          <C>           <C>         <C>           <C>           <C>
Service and other revenue.............................       $  59,301     $   810     $ 3,412       $   (154)     $  63,369
System operating expense, including management fees
  of $2,752, $512, $171, $0 and $3,435, respectively..       $ (49,088)    $(5,266)    $(1,750)      $    154      $ (55,950)
Selling, general and administrative expense...........       $ (32,507)    $(3,801)    $(1,710)      $ (4,454)     $ (42,472)
Adjusted EBITDA (1)...................................       $ (19,542)    $(7,745)    $   123            N/A            N/A
Depreciation and amortization.........................       $ (71,913)    $(2,164)    $(1,100)      $     --      $ (75,177)
Interest income, including related party income.......       $      34     $   183     $    52       $    585      $     854
Interest expense, including related party expense.....       $  (5,281)    $  (316)    $  (888)      $(35,804)     $ (42,289)
Equity in losses of affiliated companies..............       $      --     $    --     $    --       $   (133)     $    (133)
Net loss..............................................       $(107,431)    $(8,063)    $(1,997)      $(33,664)     $(151,155)
</TABLE>
<TABLE>
<CAPTION>
                                                                                For the Nine Months Ended
                                                                                   September 30, 1997
                                                             ---------------------------------------------------------------
                                                                             New
                                                             Australia     Zealand      Tahiti       Corporate       Total
                                                             ---------     -------     --------      ---------     ---------
<S>                                                          <C>           <C>         <C>           <C>           <C>
Service and other revenue.............................       $ 45,775      $   314     $ 2,963       $     --      $  49,052
System operating expense, including management fees
  of $1,682, $281, $211, $0 and $2,174, respectively..       $(31,945)     $(2,461)    $(1,451)      $     --      $ (35,857)
Selling, general and administrative expense...........       $(33,192)     $(2,330)    $(1,503)      $   (885)     $ (37,910)
Adjusted EBITDA (1)...................................       $(17,680)     $(4,196)    $   220            N/A            N/A
Depreciation and amortization.........................       $(55,092)     $(1,436)    $(1,269)      $     --      $ (57,797)
Interest income, including related party income.......       $     24      $   196     $    28       $    278      $     526
Interest expense, including related party expense.....       $ (1,692)     $   (21)    $  (684)      $(27,279)     $ (29,676)
Equity in losses of affiliated companies..............       $     --      $    --     $    --       $ (2,000)     $  (2,000)
Net loss..............................................       $(76,204)     $(5,753)    $(1,927)      $(30,536)     $(114,420)
</TABLE>

(1)  Adjusted  EBITDA  represents  net loss, as  determined  using United States
     generally accepted accounting principles, plus net interest expense, income
     tax expense, depreciation,  amortization, minority interest, management fee
     expense,  currency exchange gains (losses) and other  non-operating  income
     (expense) items. Industry analysts generally consider adjusted EBITDA to be
     an  appropriate  measure of the  performance  of  multi-channel  television
     operations.  Adjusted  EBITDA should not be considered as an alternative to
     net income or to cash flows or to any other generally  accepted  accounting
     principle  measure  of  performance  or  liquidity  as an  indicator  of an
     entity's operating performance.

11.  SUBSEQUENT EVENTS

NOTES

On October 14,  1998,  the Company  consummated  an Equity  Sale,  reducing  the
interest rate on the May 1996 Notes and the September 1997 Notes  (collectively,
the "Notes") from 14.75% to 14.0% per annum.

SATURN BANK FACILITY

In November 1998, Saturn secured a syndicated senior debt facility in the amount
of New Zealand  $("NZ$")125,000  ($62,500 as of September 30, 1998) (the "Saturn
Bank  Facility")  to fund the  completion of Saturn's  network.  Of this amount,
NZ$83,335  has been  subscribed  for by  financial  institutions.  Until  Saturn

                                       13
<PAGE>


                           UIH AUSTRALIA/PACIFIC, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

obtains  irrevocable  commitments  in the form of equity  funding or  additional
underwriting  commitments for the balance of NZ$41,665,  the maximum that may be
drawn  down is  NZ$73,000  ($36,500  as of  September  30,  1998).  If Saturn is
successful in obtaining the necessary  commitments from other financing sources,
Saturn may borrow an additional  NZ$10,335 from the initial  syndicate of banks.
If  Saturn  is not  successful  in  obtaining  the  necessary  commitments,  the
outstanding  balance will be due May 31, 1999.  As of November 16, 1998,  Saturn
had drawn  NZ$40,000 on the loan facility at a rate of  approximately  8.12% per
annum.  The ten-year  debt  facility has an interest rate of 3% over the current
base rate upon drawdown.

                                       14
<PAGE>

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

The following  discussion and analysis of the Company's  financial condition and
results of operations should be read in conjunction with the Company's condensed
consolidated  financial  statements and related notes thereto included elsewhere
herein.  Such condensed  consolidated  financial  statements  provide additional
information regarding the Company's financial activities and condition.

The Company conducts no operations other than through its operating companies in
which it holds varying interests.  Because the operating  companies have not yet
achieved the expected  subscriber  penetration  levels  anticipated  with mature
operating  systems,   the  Company  believes  that  its  historical  results  of
operations  discussed  herein  are  not  indicative  of  future  results  of its
operations.

The Company has no employees of its own.  UAP, the  Company's  parent,  provides
various management,  financial reporting,  accounting and other services for the
Company pursuant to the terms of the UAP Management Agreement.  Austar,  Saturn,
Telefenua and United Wireless are also parties to technical  service  agreements
with UAP for  which  such  operating  companies  pay to UAP fees  based on their
respective gross revenues.

Certain  statements in this Report may constitute  "forward-looking  statements"
within  the  meaning  of  the  federal  securities  laws.  Such  forward-looking
statements may include, among other things,  statements concerning the Company's
plans, objectives and future economic prospects,  expectations,  beliefs, future
plans and  strategies,  anticipated  events or trends  and  similar  expressions
concerning   matters  that  are  not  historical  facts.  Such   forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual results,  performance or achievements of the Company,
or  industry  results,  to be  materially  different  from any  future  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  Such factors  include,  among other  things,  changes in television
viewing preferences and habits by subscribers and potential  subscribers,  their
acceptance of new technology,  programming alternatives and new services offered
by the Company,  the Company's ability to secure adequate capital to fund system
growth and  development,  risks inherent in investment and operations in foreign
countries,  changes in government  regulation,  and other factors  referenced in
this Report.

SUMMARY OPERATING DATA

The following tables set forth certain unaudited operating data:
<TABLE>
<CAPTION>
                                                                                         As of
                                                                                   September 30, 1998
                                                            ------------------------------------------------------------------------
                                                             Television                                                   Economic
                                                              Homes in         Homes          Basic           Basic       Ownership
                                                            Service Area    Serviceable    Subscribers     Penetration    Interest
                                                            ------------    -----------    -----------     -----------    ---------
<S>                                                           <C>            <C>             <C>              <C>          <C>
MULTI-CHANNEL TELEVISION:
  Austar...................................................   2,085,000      2,072,706       251,255          12.1%        100% (1)
  Saturn...................................................     141,000         42,712         4,651          10.9%         65%
  Telefenua................................................      31,000         20,128         6,125          30.4%         90% (2)
                                                              ---------      ---------       -------
     Total.................................................   2,257,000      2,135,546       262,031
                                                              =========      =========       =======
TELEPHONY:
  Saturn (3)...............................................     141,000         26,974         4,190          15.5%         65%
                                                              =========      =========       =======
PROGRAMMING:
  XYZ Entertainment........................................         N/A (4)        N/A       647,255 (5)        N/A         25%
                                                              =========      =========       =======
</TABLE>
                                       15
<PAGE>
<TABLE>
<CAPTION>                                                                                As of
                                                                                   September 30, 1997
                                                            ------------------------------------------------------------------------
                                                             Television                                                   Economic
                                                              Homes in         Homes          Basic           Basic       Ownership
                                                            Service Area    Serviceable    Subscribers     Penetration    Interest
                                                            ------------    -----------    -----------     -----------    ---------
<S>                                                           <C>            <C>             <C>              <C>          <C>
MULTI-CHANNEL TELEVISION:
  Austar...................................................   1,622,000      1,589,000       178,832          11.3%        100% (1)
  Saturn...................................................     141,000         20,124         2,829          14.1%         65%
  Telefenua................................................      31,000         20,128         6,257          31.1%         90% (2)
                                                              ---------      ---------       -------
     Total.................................................   1,794,000      1,629,252       187,918
                                                              =========      =========       =======
PROGRAMMING:
  XYZ Entertainment........................................         N/A (4)        N/A       524,000 (5)        N/A         25%
                                                              =========      =========       =======
</TABLE>
(1)  The  Company  holds  an  effective   100%  interest  in  Austar  through  a
     combination of ordinary shares and convertible debentures.
(2)  The Company  holds an effective  90% economic  interest in  Telefenua.  The
     Company's  economic  interest  will  decrease  to 75% and  64%  once it has
     received a 20% and 40% internal rate of return on its investment in Tahiti,
     respectively.
(3)  In April 1998, Saturn launched business and residential  telephony services
     in the  Wellington,  New Zealand  area.
(4)  The Company expects that XYZ  Entertainment's  programming  package will be
     marketed to virtually all of Australia's 6.5 million television  households
     by Australian multi-channel television providers.
(5)  This figure represents the total estimated  subscribers to the five-channel
     XYZ Entertainment package.

SELECTED SYSTEM  OPERATING  DATA. The following  table displays  selected system
operating data in each company's local currency (A$, NZ$ or French Pacific franc
("CFP").
<TABLE>
<CAPTION>
                                            For the Three Months Ended                  For the Three Months Ended
                                                September 30, 1998                          September 30, 1997
                                     ---------------------------------------     ----------------------------------------- 
                                       Austar         Saturn       Telefenua       Austar         Saturn        Telefenua
                                         A$             NZ$           CFP            A$             NZ$            CFP
                                     --------       ---------      ---------     ---------       --------       ----------
                                                  (In thousands)                              (In thousands)
<S>                                  <C>            <C>             <C>           <C>             <C>            <C>
Service and other revenue......       34,620            780         123,662        23,093            206         120,034
System operating expense (1)...      (33,395)        (4,750)        (65,279)      (15,465)        (1,239)        (62,278)
System selling, general and 
  administrative expense.......      (19,149)        (3,276)        (65,351)      (16,674)        (1,446)        (54,771)
Adjusted EBITDA (2)............      (16,355)        (6,826)           (735)       (8,009)        (2,368)         15,951
Capital expenditures...........       20,219         13,936           5,105        28,620          1,924          16,091 
</TABLE>
<TABLE>
<CAPTION>
                                            For the Nine Months Ended                    For the Nine Months Ended
                                                September 30, 1998                          September 30, 1997
                                     ---------------------------------------     ----------------------------------------- 
                                       Austar         Saturn       Telefenua       Austar         Saturn        Telefenua
                                         A$             NZ$           CFP            A$             NZ$            CFP
                                     --------       ---------      ---------     ---------       --------       ----------
                                                  (In thousands)                              (In thousands)
<S>                                  <C>            <C>             <C>           <C>             <C>           <C>
Service and other revenue......       93,890          1,507         373,129        59,972            466         314,552
System operating expense (3)...      (73,423)        (9,742)       (191,425)      (39,363)        (3,631)       (154,034)
System selling, general and 
  administrative expense.......      (50,633)        (7,022)       (186,905)      (42,014)        (3,460)       (159,606)
Adjusted EBITDA (2)............      (25,795)       (14,309)         13,530       (19,179)        (6,211)         23,353
Capital expenditures...........       47,669         39,051          23,270        70,386         12,488          42,047 
</TABLE> 
(1)  Includes management fees of A$1,569, NZ$420, CFP6,233,  A$1,037, NZ$111 and
     CFP12,966, respectively.
(2)  Adjusted  EBITDA  represents  net loss, as  determined  using United States
     generally accepted accounting principles, plus net interest expense, income
     tax expense, depreciation,  amortization, minority interest, management fee
     expense,  currency exchange gains (losses) and other  non-operating  income
     (expense) items. Industry analysts generally consider adjusted EBITDA to be
     an  appropriate  measure of the  performance  of  multi-channel  television
     operations.  Adjusted  EBITDA should not be considered as an alternative to
     net income or to cash flows or to any other generally  accepted  accounting
     principle  measure  of  performance  or  liquidity  as an  indicator  of an
     entity's operating performance.
(3)  Includes management fees of A$4,371, NZ$948, CFP18,731, A$2,226, NZ$414 and
     CFP22,441, respectively.

                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of  September  30, 1998,  the Company had  invested a total of  approximately
$458.7  million  in  its  projects.   These  fundings  do  not  include  amounts
contributed  by  shareholders  other than the Company or amounts  contributed in
either cash or stock to increase the Company's economic interests.

     SOURCES OF FUNDINGS:
                                                                       As of
                                                                   September 30,
                                                                       1998
                                                                  --------------
                                                                  (In thousands)

     Senior discount notes proceeds, net of offering costs........   $250,430 
     Equity from parent...........................................    115,442
     System financing (1).........................................     92,794
                                                                     --------
                                                                     $458,666 
                                                                     ========

     (1)  These amounts were  converted  using the exchange rate on each funding
          date.

     USES OF FUNDINGS:
                                                                       As of
                                                                   September 30,
                                                                       1998
                                                                  --------------
                                                                  (In thousands)

     Austar......................................................    $378,986
     Saturn......................................................      38,605
     Telefenua...................................................      16,738
     XYZ Entertainment...........................................      14,756
     United Wireless.............................................       9,581
                                                                     --------
         Total...................................................    $458,666
                                                                     ========

     AUSTAR

     The  Company  expects  the need for  additional  funding  for Austar in the
     future.  The amount of capital  needed is  dependent  primarily  upon three
     factors:  (i) the number of new subscribers added; (ii) the level of churn,
     that is, the level of existing  subscribers  who  disconnect  from Austar's
     service; and (iii) the mix of DTH satellite compared to MMDS installations.
     Substantially  all fixed costs  required to operate  Austar's  service have
     already been  incurred.  The average cost to install a subscriber  includes
     variables such as equipment,  marketing and sales costs,  and  installation
     fees.  The average cost of a subscriber  who  disconnects is reduced by the
     recovery  of certain  equipment  (principally  converters),  and is further
     reduced if a new subscriber is installed in a previously disconnected home.
     Austar plans to continue to expand and add subscribers; however, the timing
     of such  expansion  and the funds  required for such  expansion are largely
     variable.  Based upon current plans and budgeted churn, Austar will require
     approximately  $45.0 million to continue on its current  expansion path for
     the period from  October 1, 1998 to December  31, 1998 which will be funded
     substantially  by the Austar Bank  Facility,  as amended.  Austar will also
     require  approximately $110.0 million for similar expansion plans for 1999,
     an  increase  over  previously-disclosed  estimates,  primarily  due to the
     acquisition  of  approximately  500,000  homes  related  to  the  Company's
     acquisition  of certain  assets of ECT and due to an increase in  satellite
     programming   costs  resulting  from  the  recent  agreements  with  Foxtel
     Management Pty Limited  ("Foxtel") and Optus Vision Pty Limited  ("Optus").
     The  required  capital  for 1999  will be funded  substantially  by the New
     Austar  Bank  Facility  (assuming  that the Austar  Bank  Facility  will be
     refinanced  by the New Austar Bank  Facility by early 1999).  The remaining
     sources of funds for such  expansion  may include the raising of private or
     public  equity,  continued  investment by UIH or the sale of  non-strategic
     assets.  The Company may or may not be successful in completing  all or any
     of such financings.  The Company believes,  however, that financial support
     from UIH, other potential equity sources,  the Austar Bank Facility and the
     New Austar Bank Facility commitment combined with, if necessary, reductions
     in planned capital  expenditures,  are sufficient to sustain its operations
     through at least the end of 1999.

                                       17
<PAGE>

     SATURN

     The  Company  expects  the need for  additional  funding  for Saturn in the
     future.  Saturn's  capital  needs  include  approximately  $37.0 million in
     capital for the completion of the network required by Saturn to offer cable
     television  and  telephony  services  and the  capital  required to install
     customers.  The sources of funds for such  expansion may include the Saturn
     Bank  Facility,  the  raising  of  private  or  public  equity,   continued
     investment  by UIH,  the  raising  of  equipment  financing  or the sale of
     non-strategic  assets. The Saturn Bank Facility,  secured in November 1998,
     is a syndicated senior debt facility of NZ$125.0 million ($62.5 million) of
     which NZ$73.0  million ($36.5  million) is available  through May 1999. The
     maximum  facility is subject to Saturn  obtaining  irrevocable  commitments
     from other financing sources (see Note 11). Management  currently estimates
     that the  Company's  portion of the total  funding  required  for Saturn is
     approximately  $14.0  million  (taking into  consideration  the Saturn Bank
     Facility)  for the period from October 1, 1998 until Saturn has  sufficient
     cash flows from  operations to cover such needs,  although  there can be no
     assurances  that  further  additional  capital  will not be  required.  The
     Company believes,  however,  that financial support from UIH combined with,
     if necessary, reductions in planned capital expenditures, are sufficient to
     sustain its operations through at least the end of 1999.

     OTHER

     The Company  expects that the aggregate  future  funding  requirements  for
     Telefenua,  XYZ  Entertainment  and  United  Wireless  are less  than  $5.0
     million.

The indentures  governing UIH's senior secured  discount notes due February 2008
and the Company's  Notes place  restrictions  on the Company and its  restricted
subsidiaries  with respect to incurring  additional debt. The Company and all of
the operating companies are currently  restricted under the UIH indentures.  The
Company, Austar and Telefenua are restricted under the Company's indentures. The
restrictions  imposed  by  the  UIH  indentures  will  be  eliminated  upon  the
retirement  of  UIH's  notes  at  their  maturity  in  February  2008,  and  the
restrictions  imposed by the Company's  indentures  will be eliminated  upon the
retirement  of the Company's  Notes at their  maturity in May 2006. In addition,
pursuant to the Austar Bank Facility, Austar cannot pay any dividends,  interest
on debentures  and  subordinated  debt,  or fees under its technical  assistance
agreements prior to December 31, 2000.  Subsequent to December 31, 2000,  Austar
will be permitted  to make these types of  payments,  subject to certain debt to
cash flow ratios.

On November  17, 1997,  pursuant to the terms of the  indentures  governing  the
Notes,  the Company issued warrants to purchase a total of 488,000 shares of its
common  stock,  which  represented  3.4% of its common  stock.  The warrants are
exercisable  at a price of $10.45 per share which would result in gross proceeds
of  approximately  $5.1  million,  if  exercised.  The warrants are  exercisable
through May 15, 2006.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

The Company  incurred a net loss during the nine months ended September 30, 1998
of $151.2  million,  which  included  non-cash  items such as  depreciation  and
amortization  expense  totaling  $75.2  million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $36.3 million.

Cash and cash  equivalents  decreased  $9.4  million  from  $12.3  million as of
December 31, 1997 to $2.9 million as of September 30, 1998. Principal sources of
cash during the nine months ended September 30, 1998 included cash contributions
from  parent  of  $53.5  million,  borrowings  on other  debt of $15.1  million,
proceeds  from  the  sale of  short-term  investments  of  $12.3  million,  cash
contributions  from the minority  interest partner in Saturn of $5.5 million and
other sources totaling $0.7 million.

During the nine months ended September 30, 1998,  cash was used  principally for
purchases of property,  plant and equipment  totaling  $59.1 million to continue
new  subscriber  connections  at Austar and the build-out of existing  projects,
primarily Saturn, the funding of operating activities of $35.2 million and other
investing and financing uses of $2.2 million.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

The Company  incurred a net loss during the nine months ended September 30, 1997
of $114.4  million,  which  included  non-cash  items such as  depreciation  and
amortization  expense  totaling  $57.8  million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $27.0 million.


                                       18
<PAGE>

Cash and cash  equivalents  increased  $26.5  million  from $19.2  million as of
December 31, 1996 to $45.7 million as of September 30, 1997.  Principal  sources
of cash during the nine months ended September 30, 1997 included borrowings from
Austar's interim financing facility of $66.0 million, proceeds from the offering
of the  September  1997  Notes of $29.9  million,  cash  contributions  from the
minority  interest partner of $19.6 million,  net proceeds from the net decrease
in short-term  investments of $18.6 million and  borrowings  from parent of $5.0
million.

During the nine months ended September 30, 1997,  cash was used  principally for
the purchase of  property,  plant and  equipment  of $67.9  million to construct
Austar's and Telefenua's  systems, a decrease in construction  payables of $29.4
million,  the funding of operating  activities of $6.7  million,  the payment of
deferred  financing costs of $4.6 million and other investing and financing uses
totaling $4.0 million.

RESULTS OF OPERATIONS

EXCHANGE  RATES.  The Company  translates  revenue and expense  from its foreign
subsidiaries  using the  weighted-average  exchange  rates  during  the  period.
However,  for ease of  presentation,  the spot  rates for the  countries  in the
Australia/Pacific  region are shown  below for the  Australian  dollar,  the New
Zealand dollar and the French Pacific franc, respectively, per one U.S. dollar.
<TABLE>
<CAPTION>
                                                                    Australia          New Zealand          Tahiti
                                                                    ---------          -----------          ------
     <S>                                                              <C>                 <C>              <C>
     September 30, 1998.......................................        1.6855              2.0000            99.6872
     December 31, 1997........................................        1.5378              1.7161           109.6900
     September 30, 1997.......................................        1.3778              1.5584           108.0000
     December 31, 1996........................................        1.2574              1.4156            95.8500
</TABLE>

SERVICE AND OTHER  REVENUE.  The Company's  service and other revenue  increased
$3.9 million and $14.3 million for the three and nine months ended September 30,
1998, respectively, compared to the amounts for the corresponding periods in the
prior year as follows:
<TABLE>
<CAPTION>
                                                             For the Three Months Ended   For the Nine Months Ended
                                                                   September 30,                September 30,
                                                             --------------------------   -------------------------
                                                               1998              1997       1998              1997
                                                             --------          --------   --------          -------
                                                                             (In thousands)
     <S>                                                     <C>               <C>         <C>              <C>
     Austar................................................  $20,588           $16,986     $58,934          $45,510
     Saturn................................................      395               133         810              314
     Telefenua.............................................    1,153             1,088       3,412            2,963
     United Wireless.......................................       55               134         213              265
                                                             -------           -------     -------          -------
          Total service and other revenue..................  $22,191           $18,341     $63,369          $49,052
                                                             =======           =======     =======          =======
</TABLE>

     AUSTAR

     Service and other revenue for Austar increased $3.6 million, or 21.2%, from
     $17.0  million  for the three  months  ended  September  30,  1997 to $20.6
     million for the three months ended  September  30, 1998.  Service and other
     revenue for Austar  increased $13.4 million,  or 29.5%,  from $45.5 million
     for the nine months ended  September 30, 1997 to $58.9 million for the nine
     months ended September 30, 1998. On a functional  currency basis,  Austar's
     service and other revenue increased A$11.5 million, from A$23.1 million for
     the three months ended  September 30, 1997 to A$34.6  million for the three
     months ended  September 30, 1998, a 49.8%  increase.  Austar's  service and
     other revenue  increased  A$33.9 million,  from A$60.0 million for the nine
     months ended September 30, 1997 to A$93.9 million for the nine months ended
     September 30, 1998, a 56.5% increase. These increases were primarily due to
     subscriber  growth  (251,255 at September  30, 1998  compared to 178,832 at
     September 30, 1997) as Austar continues to roll-out its services.  The U.S.
     dollar  increases  occurred despite the negative impact of $4.9 million due
     to fluctuation  in exchange rates between the three months ended  September
     30,  1998  and  1997  and the  negative  impact  of  $12.3  million  due to
     fluctuation in exchange  rates between the nine months ended  September 30,
     1998 and 1997.


                                       19
<PAGE>

SYSTEM OPERATING  EXPENSE.  System operating  expense increased $9.3 million and
$20.1  million  for  the  three  and  nine  months  ended  September  30,  1998,
respectively, compared to the amounts for the corresponding periods in the prior
year as follows:
<TABLE>
<CAPTION>
                                                             For the Three Months Ended   For the Nine Months Ended
                                                                   September 30,                September 30,
                                                             --------------------------   -------------------------
                                                               1998              1997       1998              1997
                                                             --------          --------   --------          -------
                                                                             (In thousands)
     <S>                                                     <C>               <C>         <C>              <C>
     Austar................................................  $19,860           $11,375     $ 45,501         $29,841
     Saturn................................................    2,410               802        5,266           2,461
     Austar Satellite......................................      148               831        2,431             831
     Telefenua.............................................      608               566        1,750           1,451
     United Wireless.......................................      317               414        1,002           1,273
                                                             -------           -------      -------         -------
          Total system operating expense.................... $23,343           $13,988      $55,950         $35,857
                                                             =======           =======      =======         =======
</TABLE>

     AUSTAR

     Operating  expense for Austar increased $8.5 million,  or 74.6%, from $11.4
     million for the three months ended  September 30, 1997 to $19.9 million for
     the three months ended  September  30, 1998.  Operating  expense for Austar
     increased $15.7 million,  or 52.7%,  from $29.8 million for the nine months
     ended  September  30,  1997 to  $45.5  million  for the nine  months  ended
     September  30, 1998. On a functional  currency  basis,  Austar's  operating
     expense increased A$17.9 million,  from A$15.5 million for the three months
     ended  September  30,  1997 to A$33.4  million for the three  months  ended
     September 30, 1998, a 115.5% increase. Austar's operating expense increased
     A$34.0 million, from A$39.4 million for the nine months ended September 30,
     1997 to A$73.4  million for the nine months ended  September  30, 1998,  an
     86.3%  increase.  These  increases  were  primarily  due to an  increase in
     satellite  programming  costs  resulting from the May 1998  agreements with
     Foxtel and Optus to obtain additional programming rights in connection with
     the  receivership  of  Australis  Media  Limited  ("Australis")  as well as
     additional  satellite  platform  costs  associated  with the May 1998 joint
     venture  with  Optus.  The  Company  expects  that  the   restructuring  of
     programming costs for certain channels will result in somewhat higher costs
     for these  channels  which will be offset by lower  costs in the  long-term
     when compared to Austar's previous agreements with Australis. The remainder
     of the  increase  between  periods was due to an  increase in salaries  and
     benefits related to the additional  personnel necessary to support Austar's
     establishment  of local and state offices in its markets and an increase in
     customer  subscriber  management  expense  related to volume  increases  in
     telephone,  billing and collection  costs.  The U.S. dollar  increases were
     positively  impacted by $4.7 million due to  fluctuation  in exchange rates
     between the three months ended  September 30, 1998 and 1997 and  positively
     impacted by $10.2 million due to  fluctuation in exchange rates between the
     nine months ended September 30, 1998 and 1997.

     During the nine months ended September 30, 1998,  Austar incurred  one-time
     charges of $1.4 million as a result of the  receivership  of Australis  and
     the subsequent  termination of various  agreements and incurred  additional
     programming  expense  of  $2.0  million  related  to  its  new  programming
     agreements  and $0.7 million  related to the operation of the joint venture
     with Optus.

     Austar  expects  operating  expense as a percentage  of service  revenue to
     decline  in  future  periods  because a  significant  portion  of  Austar's
     distribution  facilities and network costs,  such as local and state office
     staffing levels,  operating costs and wireless license costs,  have already
     been incurred and are fixed in relation to changes in  subscriber  volumes.
     Other  system  operating   expense,   such  as  certain  costs  related  to
     programming  and  subscriber   management  expense,  will  vary  in  direct
     proportion to the number of subscribers.


     SATURN

     For the three months ended September 30, 1998, the Company  reported system
     operating expense from Saturn of $2.4 million, an increase of $1.6 million,
     or 200.0%,  compared with system operating  expense of $0.8 million for the
     corresponding period in 1997. For the nine months ended September 30, 1998,
     the Company reported system operating  expense from Saturn of $5.3 million,
     an increase of $2.8  million,  or 112.0%,  compared  with system  operating
     expense  of $2.5  million  for  the  corresponding  period  in  1997.  On a

                                       20
<PAGE>

     functional  currency basis,  Saturn's  operating  expense  increased NZ$3.6
     million,  from NZ$1.2 million for the three months ended September 30, 1997
     to NZ$4.8  million for the three months ended  September 30, 1998, a 300.0%
     increase.  Saturn's operating expense increased NZ$6.1 million, from NZ$3.6
     million for the nine months ended  September 30, 1997 to NZ$9.7 million for
     the  nine  months  ended  September  30,  1998,  a 169.4%  increase.  These
     increases were primarily due to an increase in programming costs related to
     the launch of  additional  sports  programs  during 1998 and an increase in
     personnel  expenses in order to support  Saturn's  build-out  of its hybrid
     fiber coaxial  network in the Wellington  area. The U.S.  dollar  increases
     were  positively  impacted by $0.7 million due to  fluctuation  in exchange
     rates  between  the three  months  ended  September  30,  1998 and 1997 and
     positively  impacted by $1.4 million due to  fluctuation  in exchange rates
     between the nine months ended September 30, 1998 and 1997.

     AUSTAR SATELLITE

     In September  1997, the Company  commenced  transponder  fee payments for a
     satellite  service fee of  approximately  $0.4 million per month as part of
     its  five-year  agreement  with Optus  Networks Pty  Limited.  In May 1998,
     Austar  Satellite  began billing the joint venture between Austar and Optus
     for the  transponder  rental.  The Company  eliminates  all  related  party
     accounts in consolidation.

SYSTEM SELLING,  GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense decreased $0.3 million and increased $1.0 million for the
three and nine months ended  September 30, 1998,  respectively,  compared to the
amounts for the corresponding periods in the prior year as follows:

<TABLE>
<CAPTION>
                                                             For the Three Months Ended   For the Nine Months Ended
                                                                   September 30,                September 30,
                                                             --------------------------   -------------------------
                                                               1998              1997       1998              1997
                                                             --------          --------   --------          -------
                                                                             (In thousands)
     <S>                                                     <C>               <C>         <C>              <C>
     Austar................................................  $11,379           $12,301     $31,692          $31,910
     Saturn................................................    1,660               934       3,801            2,330
     Telefenua.............................................      609               492       1,710            1,503
     United Wireless.......................................      306               493         815            1,282
                                                             -------           -------     -------          -------
          Total system selling, general and
            administrative expense.........................  $13,954           $14,220     $38,018          $37,025
                                                             =======           =======     =======          =======
</TABLE>

     SATURN

     System selling,  general and administrative  expense increased $.8 million,
     or 88.9%,  from $0.9 million for the three months ended  September 30, 1997
     to $1.7  million for the three  months ended  September  30,  1998.  System
     selling,  general and  administrative  expense  increased $1.5 million,  or
     65.2%,  from $2.3 million for the nine months ended  September  30, 1997 to
     $3.8 million for the nine months ended  September 30, 1998. On a functional
     currency  basis,  Saturn's  selling,  general  and  administrative  expense
     increased  NZ$1.9  million,  from NZ$1.4 million for the three months ended
     September 30, 1997 to NZ$3.3  million for the three months ended  September
     30, 1998, a 135.7% increase.  Saturn's selling,  general and administrative
     expense  increased NZ$3.5 million,  from NZ$3.5 million for the nine months
     ended  September  30,  1997 to NZ$7.0  million  for the nine  months  ended
     September 30, 1998, a 100.0%  increase.  These increases were primarily due
     to  increases  in  marketing  and  promotion  costs  as well as  additional
     personnel  costs  related to the April 1998  launch of  Saturn's  telephony
     services. The U.S dollar increases were positively impacted by $0.5 million
     due to  fluctuation  in  exchange  rates  between  the three  months  ended
     September 30, 1998 and 1997 and positively  impacted by $1.0 million due to
     fluctuation in exchange  rates between the nine months ended  September 30,
     1998 and 1997.

CORPORATE   GENERAL   AND   ADMINISTRATIVE   EXPENSE.   Corporate   general  and
administrative expense decreased $0.4 million and increased $3.6 million for the
three and nine months ended  September 30, 1998,  respectively,  compared to the
amounts for the  corresponding  periods in the prior year.  The decrease for the
three-month period was primarily a result of adjusting for  previously-allocated
costs.  The  increase  for  the  nine-month  period  was  primarily  due  to the
allocation of UIH corporate general and administrative expense to the Company in
the form of capital contributions,  based on increased activity at the operating
system  level.  Management  believes  that this  method of  allocating  costs is
reasonable.

                                       21
<PAGE>

DEPRECIATION AND  AMORTIZATION  EXPENSE.  Depreciation and amortization  expense
increased  $1.2  million and $17.4  million for the three and nine months  ended
September 30, 1998, respectively,  compared to the amounts for the corresponding
periods in the prior year as follows:

<TABLE>
<CAPTION>
                                                             For the Three Months Ended   For the Nine Months Ended
                                                                   September 30,                September 30,
                                                             --------------------------   -------------------------
                                                               1998              1997       1998              1997
                                                             --------          --------   --------          -------
                                                                             (In thousands)
     <S>                                                     <C>               <C>         <C>              <C>

     Austar................................................  $21,774           $20,870      $70,009         $54,579
     Saturn................................................      907               540        2,165           1,436
     Austar Satellite......................................       74                --        1,439              --
     Telefenua.............................................      380               478        1,100           1,269
     United Wireless.......................................      151               173          464             513
                                                             -------           -------      -------         -------
          Total depreciation and amortization
            expense........................................  $23,286           $22,061      $75,177         $57,797
                                                             =======           =======      =======         =======
</TABLE>

     AUSTAR

     Depreciation and amortization expense for Austar increased $0.9 million, or
     4.3%,  from $20.9 million for the three months ended  September 30, 1997 to
     $21.8 million for the three months ended  September 30, 1998.  Depreciation
     and  amortization  expense from Austar  increased $15.4 million,  or 28.2%,
     from $54.6  million for the nine months ended  September  30, 1997 to $70.0
     million for the nine months  ended  September  30,  1998.  On a  functional
     currency basis,  Austar's  depreciation and amortization  expense increased
     A$8.0 million, from A$27.1 million for the three months ended September 30,
     1997 to A$35.1  million for the three  months ended  September  30, 1998, a
     29.5% increase.  Austar's  depreciation and amortization  expense increased
     A$38.0 million, from A$68.4 million for the nine months ended September 30,
     1997 to A$106.4  million for the nine months  ended  September  30, 1998, a
     55.6%  increase.  These  increases  were  primarily due to the larger fixed
     asset base due to the  significant  deployment of operating  assets to meet
     subscriber growth as well as an increase in depreciation expense related to
     subscriber disconnects.  The U.S. dollar increases were positively impacted
     by $5.0  million due to  fluctuation  in exchange  rates  between the three
     months ended  September 30, 1998 and 1997 and positively  impacted by $13.3
     million due to  fluctuation in exchange rates between the nine months ended
     September 30, 1998 and 1997.

INTEREST EXPENSE.  Interest expense increased $3.4 million and $12.6 million for
the three and nine months ended  September 30, 1998,  respectively,  compared to
the amounts for the  corresponding  periods in the prior year.  These  increases
were  primarily  due to continued  accretion on the Notes at 14.75%  during 1998
compared to 14% for the majority of the prior year interim period.  In addition,
interest expense related to the Austar Bank Facility,  which was secured in July
1997,  was $1.7  million and $5.3  million  for the three and nine months  ended
September 30, 1998, respectively,  compared to $1.0 million and $1.7 million for
the three and nine months ended September 30, 1997, respectively.

FOREIGN CURRENCY EXCHANGE RATE RISKS

The Company's foreign operating  companies'  monetary assets and liabilities are
subject to foreign  currency  exchange risk as certain  equipment  purchases and
payments  for certain  operating  expenses  such as  programming  expenses,  are
denominated in currencies other than their own functional currency. In addition,
certain of the  Company's  foreign  operating  companies  have notes payable and
notes  receivable that are denominated in and loans payable that are linked to a
currency other than their own functional  currency.  In general, the Company and
the  operating  companies  do not  execute  hedge  transactions  to  reduce  the
Company's  exposure to foreign currency  exchange rate risks.  Accordingly,  the
Company may  experience  economic  loss and a negative  impact on  earnings  and
equity  with  respect to its  holdings  solely as a result of  foreign  currency
exchange rate fluctuations,  which include foreign currency devaluations against
the dollar.

                                       22
<PAGE>

Assets and  liabilities of foreign  subsidiaries  are translated at the exchange
rates in effect at  period-end,  and the statements of operations are translated
at the average exchange rates during the period.  Exchange rate  fluctuations on
translating  foreign currency  financial  statements into U.S. dollars result in
unrealized  gains or losses referred to as translation  adjustments.  Cumulative
translation  adjustments are recorded as a separate  component of  stockholder's
deficit. During the nine months ended September 30, 1998, the Company recorded a
change in cumulative translation  adjustments of $6.6 million,  primarily due to
the  fluctuation in the Australian  dollar  compared to the U.S. dollar exchange
rates from 1.5378 as of December 31, 1997 to 1.6855 as of September  30, 1998, a
change of 9.6%.

Transactions  denominated  in  currencies  other  than the  local  currency  are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in  exchange  rates  result in  transaction  gains and losses  which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

Cash flows from the  Company's  operations in foreign  countries are  translated
based on their reporting currencies.  As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not agree
to changes in the corresponding balances on the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.

YEAR 2000 CONVERSION

The Company's multi-channel television, programming and telephony operations are
heavily  dependent upon computer  systems and other  technological  devices with
embedded chips. Such computer systems and other technological devices may not be
capable of  accurately  recognizing  dates  beginning  on January 1, 2000.  This
problem could cause  miscalculations,  resulting in the Company's  multi-channel
television  and telephony  systems or  programming  services  malfunctioning  or
failing to operate.

YEAR 2000  PROGRAM.  In response to possible  Year 2000  problems,  the Board of
Directors of UIH  established  a Task Force to assess the impact that  potential
Year 2000 problems may have on  company-wide  operations,  including the Company
and its operating companies,  and to implement necessary changes to address such
problems.  The Task  Force  reports  directly  to the UIH Board.  In  creating a
program  to  minimize  Year 2000  problems,  the Task Force  identified  certain
critical  operations of the business of the Company.  These critical  operations
are service delivery  systems,  field and headend devices,  customer service and
billing systems, and corporate  management and administrative  operations (e.g.,
cash flow,  accounts  payable and  accounts  receivable,  payroll  and  building
operations).

The Task Force has established a three-phase  program to address  potential Year
2000 problems:

     (a)  Identification Phase: identify and evaluate computer systems and other
          devices (e.g. headend devices, switches and set top boxes) on a system
          by system basis for Year 2000 compliance.
     (b)  Implementation   Phase:   establish  a  database   and   evaluate  the
          information   obtained   in  the   Identification   Phase,   determine
          priorities,  implement corrective procedures,  define costs and ensure
          adequate funding.
     (c)  Testing  Phase:  test the  corrective  procedures  to verify  that all
          material  compliance  problems  will  operate on and after  January 1,
          2000,  and  develop,  as  necessary,  contingency  plans for  material
          operations.

As of  November 5, 1998,  66.0% of the  operating  systems of the  Company  have
completed  the  Identification  Phase  and the  Task  Force  is  working  on the
Implementation  Phase for these systems.  The Task Force has  researched  almost
63.5% of the items identified by the Company during the Identification  Phase as
to Year 2000 compliance. Of the items researched,  60.8% are either compliant or
can be easily remediated without significant cost to the Company. Currently, the
Task Force  expects to complete its research on  substantially  all of the items
identified  during  first  quarter  1999.  Based on  current  data to date,  the
computer  systems for all corporate  operations are expected to be in compliance
with Year 2000 by  mid-1999  and  should not  require  material  remediation  or
replacement.

The Task Force has targeted  mid-1999 for  commencement of the Testing Phase. At
this time, the Company anticipates that all material aspects of the program will
be completed before January 1, 2000. Currently, UIH is managing the program with
its internal Task Force.  During the  Implementation  Phase, the Task Force will
also  be   evaluating   the  need  for   external   resources  to  complete  the
Implementation  Phase and  implement  the Testing  Phase.  In the event the Task
Force elects to use external  resources,  such  resources may not,  however,  be
available.

                                       23
<PAGE>

In addition to its program,  UIH is a member of a Year 2000 working group, which
has 12 cable  television  companies  and meets under the auspices of Cable Labs.
The dialogue with the other cable  operators has assisted UIH in developing  its
Year 2000  program.  Part of the agenda of the working  group is to develop test
procedures and contingency  plans for critical  components of operating  systems
for the benefit of all of its members.

THIRD PARTY DEPENDENCIES. The Company believes its largest Year 2000 risk is its
dependency  upon  third-party  products.  Two  significant  areas on  which  the
Company's systems depend upon third-party products are programming and telephony
interconnects.  The Company does not have the ability to control such parties in
their  assessment and  remediation  procedures for potential Year 2000 problems.
Should these  parties not be prepared for Year 2000,  their systems may fail and
the Company  would not be able to provide its  services  to its  customers.  The
Company is in the process of  communicating  with these parties on the status of
their  Year  2000  compliance  programs  in an effort to  prevent  any  possible
interruptions or failures.  To date,  responses to such communications have been
limited and the responses  received state only that the party is working on Year
2000 issues and does not have a definitive  position at this time.  As a result,
the Company is unable to assess the risk posed by its dependence upon such third
parties'  systems.  The Task Force is considering  certain  limited  contingency
plans,  including  preparing back-up  programming and stand-by power generators.
Such contingency plans may not,  however,  resolve the problem in a satisfactory
manner.  With respect to other  third-party  systems,  each operating  system is
responsible for inquiring of their vendors and other entities with which they do
business (e.g., utility companies,  financial  institutions and facility owners)
as to such entities' Year 2000 compliance programs.

The Task  Force is  working  closely  with the  manufacturers  of the  Company's
headend  devices  to  remedy  any Year 2000  problems  assessed  in the  headend
equipment.  Recent  information  from  the  two  primary  manufacturers  of such
equipment  indicate that most of the equipment  used in the Company's  operating
systems are not date  sensitive.  Where such equipment  needs to be upgraded for
Year 2000 issues, such vendors are upgrading without charge.  These upgrades are
expected to be completed  before  year-end  1999, but such process is not wholly
within the control of the Company or its  systems.  With  respect to billing and
customer  care  systems,  the Company uses  standard  billing and customer  care
programs  from several  vendors.  The Task Force is working with such vendors to
achieve Year 2000  compliance  for all systems.  On an overall  basis,  the Task
Force  continues to analyze the Year 2000 program and will revise the program as
necessary  throughout  1998 and 1999,  including  procedures it undertakes  with
respect to third parties to ensure their Year 2000 compliance.

COSTS OF COMPLIANCE.  The Task Force has not yet determined the full cost of its
Year 2000  program  and its related  impact on the  financial  condition  of the
Company. In the course of its business, the Company has made substantial capital
adjustments  over the past few years in  improving  its systems,  primarily  for
reasons other than Year 2000.  Because these upgrades also resulted in Year 2000
compliance,  replacement and remediation costs have been low. The Task Force has
identified  certain  replacement and remediation costs for the Company which are
currently  estimated at $0.2  million.  Although no assurance  can be made,  the
Company  believes  that the known Year 2000  compliance  issues can be  remedied
without a material  financial impact. No assurance can be made,  however,  as to
the  total  cost  for the  Year  2000  program  until  all of the  data has been
gathered. In addition,  the Company can not predict the financial impact it will
incur if Year 2000  problems are caused by third  parties upon which its systems
are  dependent or  experienced  by entities in which it holds  investments.  The
failure of any one of these parties to implement Year 2000 procedures could have
a material  adverse  impact on the  operations  and  financial  condition of the
Company.


                                       24
<PAGE>
                           PART II - OTHER INFORMATION
                           ---------------------------




                    ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27.1     Financial Data Schedule



(b)  Reports on Form 8-K filed during the quarter.

     None.



                                       25
<PAGE>
                                    SIGNATURE


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.



UIH AUSTRALIA/PACIFIC, INC.



Date:      November 16, 1998
           ---------------------------------------

By:        /S/ Valerie L. Cover
           ---------------------------------------
           Valerie L. Cover
           Controller
           (A Duly Authorized Officer and Principal Financial Officer)
























                                       26