<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                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 QUARTERLY PERIOD ENDED MARCH 31, 1999
 
                                       OR
 
[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
           FOR THE TRANSITION PERIOD FROM             TO
 
                        COMMISSION FILE NUMBER 333-25683
 
                             ---------------------
 
                      CAPSTAR BROADCASTING PARTNERS, INC.
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      75-2672663
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)
             600 CONGRESS AVENUE
                  SUITE 1400
                AUSTIN, TEXAS                                      78701
   (Address of principal executive offices)                      (Zip Code)
</TABLE>
 
                                 (512) 340-7800
              (Registrant's telephone number, including area code)
 
                             ---------------------
 
     Indicate by check mark whether Capstar Broadcasting Corporation ("Capstar
Broadcasting") (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.  Yes  [X]  No  [ ]
 
     Indicate the number of shares outstanding of each of Capstar Partners'
classes of common stock, as of the latest practicable date: As of May 1, 1999,
279,632,180 shares of Common Stock, par value $.01 per share ("Common Stock"),
of Capstar Partners were outstanding. As of such date, there was no public
market for the Common Stock.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                                   FORM 10-Q
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                       NUMBER
                                                                       ------
<S>      <C>                                                           <C>
                       PART I -- FINANCIAL INFORMATION
Item 1.  Financial Statements:
         CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
         Consolidated Balance Sheets as of December 31, 1998 and
         March 31, 1999 (unaudited)..................................     3
         Consolidated Statements of Operations for the three months
         ended March 31, 1998 and 1999 (unaudited)...................     4
         Condensed Consolidated Statements of Cash Flows for the
         three months ended March 31, 1998 and 1999 (unaudited)......     5
         Notes to Consolidated Financial Statements (unaudited)......     6
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................    11
Item 3.  Quantitative and Qualitative Disclosure About Market Risk...    18
 
                         PART II -- OTHER INFORMATION
Item 1.  Legal Proceedings...........................................    19
Item 6.  Exhibits and Reports on Form 8-K............................    20
</TABLE>
 
     As used in this Quarterly Report on Form 10-Q, unless the context otherwise
requires, (i) "Capstar Partners" refers to Capstar Broadcasting Partners, Inc.,
(ii) the "Company" collectively refers to Capstar Partners and its subsidiaries,
(iii) "Capstar Radio" refers to Capstar Radio Broadcasting Partners, Inc., a
direct wholly-owned subsidiary of Capstar Partners, (iv) "Capstar Broadcasting"
refers to Capstar Broadcasting Corporation, the parent company of Capstar
Partners who owns all of the outstanding common stock of Capstar Partners, and
(v) "CCI" refers to Capstar Communications, Inc. (formerly known as SFX
Broadcasting, Inc.), an indirect subsidiary of Capstar Radio.
 
                                        2
<PAGE>   3
 
                        PART I -- FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS.
 
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   MARCH 31,
                                                                  1998          1999
                                                              ------------   ----------
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................   $   17,115    $   12,525
  Accounts receivable, net of allowance for doubtful
    accounts of $8,352 and $8,085, respectively.............      112,846        91,900
  Prepaid expenses and other current assets.................       20,121        23,413
                                                               ----------    ----------
        Total current assets................................      150,082       127,838
  Property and equipment, net...............................      248,920       252,004
  Intangibles and other, net................................    4,240,378     4,210,888
  Other non-current assets..................................       10,317         8,704
                                                               ----------    ----------
        Total assets........................................   $4,649,697    $4,599,434
                                                               ==========    ==========
 
                         LIABILITIES AND STOCKHOLDER'S EQUITY
 
Current Liabilities:
  Current portion of long-term debt.........................   $   29,834    $   39,891
  Accounts payable..........................................       11,615        11,247
  Accrued liabilities.......................................       68,231        68,011
  Income taxes payable......................................       38,018         4,081
                                                               ----------    ----------
        Total current liabilities...........................      147,698       123,230
  Long-term debt, net of current portion....................    1,598,755     1,619,897
  Due from parent...........................................         (797)       (1,031)
  Deferred income taxes.....................................    1,175,519     1,163,606
                                                               ----------    ----------
        Total liabilities...................................    2,921,175     2,905,702
                                                               ----------    ----------
Commitments and contingencies
Redeemable preferred stock:
  Capstar Broadcasting Partners, Inc., $.01 par value,
    10,000 shares authorized, 1,196 shares issued and
    outstanding respectively, aggregate liquidation
    preference of $119,624 and $123,212, respectively.......      113,699       116,756
Redeemable preferred stock of subsidiary:
  Capstar Communications, Inc. Series E Cumulative
    Exchangeable Preferred Stock, $.01 par value, 4,150
    shares authorized, 1,266 and 1,346 shares issued and
    outstanding, respectively, aggregate liquidation
    preference of $133,944 and $138,150, respectively.......      148,669       152,511
Stockholder's equity:
  Common stock, Class A, voting $.01 par value, 300,000
    shares authorized, 279,632 shares issued and outstanding
    at December 31, 1998 and March 31, 1999.................        2,796         2,796
  Common stock, Class B, nonvoting, $.01 par value, 50,000
    shares authorized, none issued..........................           --            --
  Additional paid-in capital................................    1,577,380     1,561,339
  Unearned compensation.....................................       (4,893)       (4,397)
  Accumulated deficit.......................................     (109,129)     (135,273)
                                                               ----------    ----------
        Total stockholder's equity..........................    1,466,154     1,424,465
                                                               ----------    ----------
        Total liabilities and stockholder's equity..........   $4,649,697    $4,599,434
                                                               ==========    ==========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        3
<PAGE>   4
 
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS
                                                                 ENDED MARCH 31,
                                                              ---------------------
                                                                1998        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
Gross broadcast revenue.....................................  $ 70,086    $155,721
Less: agency commissions....................................    (6,011)    (13,716)
                                                              --------    --------
Net broadcast revenue.......................................    64,075     142,005
                                                              --------    --------
Operating expenses:
  Programming, technical and news...........................    15,780      29,855
  Sales and promotion.......................................    18,009      39,059
  General and administrative................................    13,971      23,272
Corporate expenses..........................................     3,664       6,268
Corporate expenses -- noncash compensation..................    15,793       2,002
LMA fees....................................................     1,871         319
Depreciation and amortization...............................    11,032      36,439
Merger, nonrecurring and systems development expense........        --       2,548
                                                              --------    --------
Operating income (loss).....................................   (16,045)      2,243
Other income (expense):
  Interest expense..........................................   (15,897)    (36,458)
  Interest income...........................................       454          97
  Other.....................................................      (134)       (145)
                                                              --------    --------
Loss before benefit for income taxes and dividends and
  accretion on preferred stock of subsidiary................   (31,622)    (34,263)
Benefit for income taxes....................................     4,962      11,961
Dividends and accretion on preferred stock of subsidiary....        --       3,842
                                                              --------    --------
Net loss....................................................   (26,660)    (26,144)
Dividends and accretion on preferred stocks.................     3,052       3,057
                                                              --------    --------
Net loss attributable to common stock.......................  $(29,712)   $(29,201)
                                                              ========    ========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        4
<PAGE>   5
 
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS
                                                                ENDED MARCH 31,
                                                              --------------------
                                                                1998        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Cash flows from operating activities:
          Net cash used in operating activities.............  $    (934)  $ (8,192)
                                                              ---------   --------
Cash flows from investing activities:
  Proceeds from sale of broadcasting property...............     52,335         --
  Purchase of property and equipment........................     (4,162)   (11,788)
  Payments for acquisitions, net of cash acquired...........    (82,238)   (14,714)
  Payments for pending acquisitions.........................     (8,138)    (2,036)
  Other investing activities, net...........................       (353)      (580)
                                                              ---------   --------
          Net cash used in investing activities.............    (42,556)   (29,118)
                                                              ---------   --------
Cash flows from financing activities:
  Proceeds from long-term debt and credit facilities........    105,600     61,000
  Repayment of long-term debt and credit facilities.........   (248,256)   (34,952)
  Payment of financing related costs........................         --       (330)
  Equity contribution by parent.............................    556,630      7,002
  Advances from Parent......................................        500         --
  Dividends paid on common stock............................   (224,669)        --
                                                              ---------   --------
          Net cash provided by financing activities.........    189,805     32,720
                                                              ---------   --------
Net increase (decrease) in cash and cash equivalents........    146,315     (4,590)
Cash and cash equivalents at beginning of period............     70,059     17,115
                                                              ---------   --------
Cash and cash equivalents at end of period..................  $ 216,374   $ 12,525
                                                              =========   ========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        5
<PAGE>   6
 
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
NOTE 1 -- BASIS OF PRESENTATION
 
     Information with respect to the three month periods ended March 31, 1998
and 1999 is unaudited. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments considered necessary for a fair
presentation. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999, or for any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 1998 for Capstar Partners included in
the Form 10-K of Capstar Partners (Commission File No. 333-25683).
 
     The consolidated financial statements include the accounts of Capstar
Partners, and its direct and indirect wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
 
NOTE 2 -- CHANCELLOR MERGER AGREEMENT
 
     On August 26, 1998, Capstar Broadcasting and Chancellor Media Corporation
("Chancellor Media"), an affiliate of Capstar Broadcasting, entered into a
merger agreement (the merger agreement was subsequently amended and restated
effective April 29, 1999). Under the merger agreement:
 
     - Chancellor Media will acquire Capstar Broadcasting in a merger between a
       wholly-owned subsidiary of Chancellor Media and Capstar Broadcasting,
       with Capstar Broadcasting surviving the merger as a wholly-owned
       subsidiary of Chancellor Media;
 
     - each share of Class A Common Stock, par value $0.01 per share, of Capstar
       Broadcasting ("Class A Common Stock"), Class B Common Stock, par value
       $0.01 per share, of Capstar Broadcasting, and Class C Common Stock, par
       value $0.01 per share, of Capstar Broadcasting, will represent 0.4955
       shares of common stock in Chancellor Media;
 
     - each Capstar Broadcasting stock option and warrant that is outstanding
       and unexercised immediately prior to the merger will be assumed by
       Chancellor Media and will thereafter be an option or warrant to acquire
       0.4955 shares of common stock of Chancellor Media;
 
     - each share of Chancellor Media common stock will remain equal to one
       share of Chancellor Media common stock; and
 
     - each share of Chancellor Media preferred stock will remain equal to one
       share of Chancellor preferred stock.
 
     The completion of the merger depends on the satisfaction of a number of
conditions. There can be no assurance that all of the conditions to the merger
will be satisfied. Either company may waive compliance with the conditions at
its discretion if permitted by law.
 
NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENT
 
     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging
                                        6
<PAGE>   7
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This pronouncement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Management does not
believe the implementation of this accounting pronouncement will have a material
effect on its consolidated financial statements.
 
NOTE 4 -- ACQUISITIONS AND DISPOSITIONS OF BROADCASTING PROPERTIES
 
     During the three months ended March 31, 1999, Capstar Partners acquired 11
FM and 3 AM radio stations and related broadcast equipment through several
acquisitions, all of which have been accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets and
liabilities acquired based upon their fair values at the date of acquisition.
The excess purchase price over the fair value of net tangible assets acquired is
allocated to intangible assets, primarily FCC licenses. The results of
operations associated with the acquired radio stations have been included in the
accompanying consolidated financial statements from the dates of acquisition.
 
     Acquisition activity during the three months ended March 31, 1999 was as
follows. All consideration paid for the acquisitions scheduled below consisted
solely of cash.
 
<TABLE>
<CAPTION>
                                              STATIONS
                                              ACQUIRED
                                              ---------
TRANSACTION                                   FM    AM    DATE OF ACQUISITION   PURCHASE OF    COST
-----------                                   ---   ---   -------------------   -----------   -------
<S>                                           <C>   <C>   <C>                   <C>           <C>
Appalachian Broadcasting Company, Inc. .....   1     -    February 1999           Assets       $1,056
Noalmark Broadcasting Corp. ................   1     1    March 1999              Assets        3,395
Champion Broadcasting Corporation...........   9     2    March 1999              Assets       12,539
                                                                                              -------
                                                                                              $16,990
                                                                                              =======
</TABLE>
 
     The acquisitions during the three months ended March 31, 1999 are
summarized in the aggregate as follows:
 
<TABLE>
<CAPTION>
                                                                 FOR THE
                                                               THREE MONTHS
                                                                  ENDED
                                                                MARCH 31,
                                                                   1999
                                                               ------------
<S>                                                            <C>
Consideration:
  Cash......................................................     $15,522
  Acquisition costs.........................................       1,468
                                                                 -------
          Total.............................................     $16,990
                                                                 =======
Assets acquired:
  Property and equipment....................................     $ 4,639
  Intangible assets.........................................      12,351
                                                                 -------
          Total.............................................     $16,990
                                                                 =======
</TABLE>
 
     On March 18, 1999, Capstar Broadcasting contributed to Muzak Holdings LLC
("Muzak Holdings") Capstar Broadcasting's Muzak affiliate territories in
Atlanta, Albany and Macon, Georgia and Ft. Myers, Florida in exchange for voting
membership units in Muzak Holdings. On May 3, 1999, Capstar Broadcasting
contributed to Muzak Holdings its Muzak affiliate territory located in Omaha,
Nebraska that Capstar Broadcasting acquired from Triathlon Broadcasting Company
on April 30, 1999, in exchange for additional voting membership units in Muzak
Holdings. The value of the membership units in Muzak Holdings that
 
                                        7
<PAGE>   8
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
\Capstar Broadcasting then held was approximately $20,500, subject to a working
capital adjustment to be finalized. The investment in Muzak Holdings represents
the book value of the net assets contributed, which approximates fair market
value. Upon completion of the contribution of the Omaha affiliate territory,
Capstar Broadcasting then held approximately 22.87% of the then outstanding
voting power of Muzak Holdings.
 
     The following unaudited pro forma summary presents the consolidated results
of operations for the three months ended March 31, 1998 and 1999 as if all the
acquisitions and dispositions completed through March 31, 1999 had occurred at
the beginning of 1998. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisitions and dispositions been made as of that date or of
results which may occur in the future.
 
<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS
                                                                 ENDED MARCH 31,
                                                              ---------------------
                                                                1998        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
Net revenue.................................................  $125,562    $139,371
                                                              ========    ========
Net loss....................................................   (50,083)    (27,733)
                                                              ========    ========
</TABLE>
 
     Subsequent to March 31, 1999, Capstar Partners acquired 22 FM and 10 AM
radio stations and related broadcast equipment through the acquisition of
Triathlon Broadcasting Company ("Triathlon") for aggregate consideration in cash
of approximately $201,000. This acquisition was funded with borrowings from
Capstar Partners' credit facility. In order to consummate the acquisition of
Triathlon, Capstar Partners was required to dispose of certain radio stations in
the Colorado Springs, Colorado, Spokane, Washington and Wichita, Kansas markets.
Therefore, concurrently with the acquisition of Triathlon, Capstar Partners sold
1 FM and 3 AM radio stations (all of which were owned by Triathlon) in the
Colorado Springs and Spokane markets to Citadel Broadcasting Company ("Citadel")
for $10,000 in cash and exchanged radio station KSPZ-FM for KKLI-FM in the
Colorado Springs market with Citadel. In addition, Capstar Partners placed 2 FM
and 3 AM radio stations from the Wichita market (one of which was an existing
Capstar Partners AM station) into trust pending the sale of the stations. As a
result of the above transactions, Capstar Partners added 19 FM and 5 AM radio
stations in six markets to its portfolio of radio stations.
 
     Subsequent to March 31, 1999, Capstar Partners disposed of one AM station
and related broadcast equipment for approximately $500 in cash.
 
     Additionally, Capstar Partners has entered into the following;
 
     - one agreement to acquire two additional stations in Harrisburg,
       Pennsylvania for approximately $12,750; and
 
     - one agreement to dispose of one AM station for a total of approximately
       $500.
 
     Upon completion of the pending transactions, Capstar Partners will own and
operate 340 stations in primarily mid-sized markets located throughout the
United States. Consummation of each of the pending transactions is subject to
numerous conditions, including governmental approvals. Accordingly, the actual
date of consummation of each of the pending transactions may vary from the
anticipated closing dates. No assurances can be given that any or all of the
pending transactions will be consummated or that, if completed, they will be
successful.
 
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
 
     On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County
 
                                        8
<PAGE>   9
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
against Capstar Communications. Noddings alleges that Capstar Communications
breached a warrant agreement that Noddings contends requires Capstar
Communications to permit Noddings to exercise warrants in exchange for cash and
shares of stock of SFX Entertainment, Inc. Specifically, Noddings alleges that
Capstar Communications, Inc. has violated the warrant agreement by permitting
Noddings to receive cash in exchange for its warrants, but refusing to convey
shares of stock of SFX Entertainment. In addition to suing on its own behalf,
Noddings is seeking to prosecute the action on behalf of a putative class
comprised of all persons who owned equivalent warrants on April 21, 1998 (the
date immediately following the record date of the distribution of stock of SFX
Entertainment to holders of the stock of SFX) and their transferees and
successors in interest. Noddings has requested that the Court:
 
     - declare that on the exercise of its warrants Capstar Communications
       transmit to plaintiffs and members of the class that it seeks to
       represent $22.3725 in cash per warrant and 0.2983 shares of common stock
       of SFX Entertainment per warrant,
 
     - require Capstar Communications to pay 0.2983 shares of common stock of
       SFX Entertainment per warrant and, (if not previously paid) $22.3725 in
       cash, to any putative class member that has exercised or exercises
       warrants after April 20, 1998,
 
     - in the alternative, award plaintiffs and members of the putative class
       monetary damages in an amount to be determined at trial, and
 
     - award costs and attorneys' fees. CCI has filed a motion to dismiss this
       lawsuit.
 
     In March 1999, the court issued an opinion dismissing two of Noddings'
counts and granted summary judgment in favor of Noddings on one count. The court
held that Noddings is entitled to 0.2983 shares of SFX Entertainment, Inc. stock
per warrant. Both parties have filed a notice of appeal.
 
     On July 24, 1998 in connection with the acquisition of Triathlon
Broadcasting Company, Capstar Partners was notified of an action filed on behalf
of all holders of depository shares of Triathlon against Triathlon, its
directors, and Capstar Partners. The action was filed in the Court of Chancery
of the State of Delaware in and for New Castle County, Delaware. The complaint
alleges that Triathlon and its directors breached their fiduciary duties to the
class of depository shareholders by agreeing to a transaction with Capstar
Partners that allegedly favored the Class A common shareholders of Triathlon at
the expense of the depository shareholders. Capstar Partners is accused of
knowingly aiding and abetting the breaches of fiduciary duties allegedly
committed by the other defendants. The complaint seeks to have the action
certified as a class action and seeks to enjoin the Triathlon acquisition or, in
the alternative, seeks monitory damages in an unspecified amount. On February
12, 1999, the parties signed a Memorandum of Understanding that provides for the
settlement of the lawsuit. The amount of the settlement will equal $0.11
additional consideration for each depository share owned by any class member at
the effective time of the Triathlon acquisition. Capstar Partners also agreed
not to oppose plaintiff's counsel's application for attorney's fees and expenses
in the aggregate amount of $150. The proposed settlement is contingent upon a
confirmatory discovery by the plaintiff, executive of a definitive settlement
agreement and court approval.
 
     Capstar Partners is subject to various legal proceedings and claims that
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not have a
material impact on the consolidated financial position or results of operations
or cash flows of Capstar Partners.
 
NOTE 6 -- SEGMENT INFORMATION
 
     In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Company is engaged principally in
one line of business-ownership and manage-
                                        9
<PAGE>   10
              CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
ment of radio broadcast stations ("Radio") which represents more than 95% of
consolidated net revenue. Radio is the Company's only reportable segment.
Operating segments categorized as "Other" include results of insignificant
operations and income and expense not allocated to reportable segments.
 
     The Company evaluates the performance of its operating segments and
allocates resources to them based on their net revenue and broadcast cash flow
("BCF") which consists of operating income before merger, nonrecurring and
systems development expense; depreciation, amortization, LMA fees, non-cash
compensation expense, and corporate expenses.
 
     The Company has developed an operating structure designed to manage a large
and growing number of radio stations throughout the United States. The Radio
segment is operationally organized into six regions.
 
     The table below presents information about the reportable and "Other"
operating segments. The prior period's segment information has been restated to
conform with the current period's presentation. For the three months ended March
31, 1998 and 1999, segment data includes intersegment revenues.
 
<TABLE>
<CAPTION>
                                                               RADIO     OTHER     TOTAL
                                                              --------   ------   --------
<S>                                                           <C>        <C>      <C>
1998:
  Net revenue...............................................  $ 60,844   $3,231   $ 64,075
  BCF.......................................................    16,099      216     16,315
1999:
  Net revenue...............................................   137,266    6,332    143,598
  BCF.......................................................    50,719     (508)    50,211
</TABLE>
 
     A reconciliation of total segment net revenue to total consolidated net
revenue and of total segment BCF to total consolidated loss before benefit for
income taxes and extraordinary item, for the three months ended March 31, 1998
and 1999 is as follows:
 
<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
NET REVENUE
Total segment net revenue...................................  $ 64,075   $143,598
Elimination of intersegment net revenue.....................        --     (1,593)
                                                              --------   --------
  Consolidated net revenue..................................  $ 64,075   $142,005
                                                              ========   ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
BCF
Total BCF for reportable segments...........................  $ 16,315   $ 50,211
Corporate Expenses..........................................    (3,664)    (6,268)
Corporate expenses -- noncash compensation..................   (15,793)    (2,002)
LMA fees....................................................    (1,871)      (319)
Depreciation and Amortization...............................   (11,032)   (36,439)
Merger, nonrecurring and other expense......................        --     (2,548)
Nonoperating expenses.......................................   (15,577)   (36,506)
Intercompany profit.........................................        --       (392)
                                                              --------   --------
Consolidated loss before income taxes and dividends and
  accretion on preferred stock of subsidiaries..............  $(31,622)  $(34,263)
                                                              ========   ========
</TABLE>
 
                                       10
<PAGE>   11
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
 
GENERAL
 
     In Management's Discussion and Analysis, management explains the general
financial condition and the results of operations of Capstar Partners including:
 
     - what factors affect Capstar Partners' business;
 
     - what Capstar Partners' earnings and costs were in 1998 and 1999;
 
     - why those earnings and costs were different from the period before;
 
     - where Capstar Partners' earnings come from;
 
     - how all of this affects Capstar Partners' overall financial condition;
 
     - what Capstar Partners' expenditures for acquisitions and other capital
       needs were in the first quarter of 1999 and what management expects them
       to be for the remainder of the year; and
 
     - where cash will come from to pay for future capital expenditures and debt
       service obligations.
 
     As you read this Management's Discussion and Analysis, it may be helpful to
refer to Capstar Partners' Consolidated Financial Statements on pages 3 through
5. In Management's Discussion and Analysis, management analyzes and explains the
changes in the specific line items in the consolidated statements of operations
and other data. You should know that these changes are not historically
comparable because of the numerous acquisitions and dispositions that Capstar
Partners has completed since its inception. Management's analysis may be
important to you in making decisions about your investments in Capstar Partners.
 
     Capstar Broadcasting and Chancellor Media have agreed to merge. The merger
with Chancellor Media may impact many of the matters discussed in this
Management's Discussion and Analysis, including earnings, results of operations,
expenses, liquidity and capital resources.
 
     Management believes that it is important to discuss advertising revenues
and seasonal fluctuations of advertising revenues, two factors that have a
strong influence on Capstar Partners' business performance:
 
     - Advertising Revenues. Capstar Partners' revenues are derived primarily
       from the sale of time to local and national advertisers. These revenues
       are affected by the advertising rates that Capstar Partners is able to
       charge and the number of advertisements that can be broadcast without
       jeopardizing listener levels (and resulting ratings). Advertising rates
       tend to be based upon demand for a station's advertising inventory and
       its ability to attract audiences in targeted demographic groups, as
       measured principally by Arbitron. Capstar Partners attempts to maximize
       revenues for each of its stations by adjusting rates based upon local
       market conditions, controlling advertising inventory and creating demand
       and audience ratings.
 
     - Seasonality. Seasonal revenue fluctuations are common in the radio
       broadcasting industry and are due primarily to fluctuations in
       advertising expenditures by local and national advertisers. Advertising
       expenditures are typically lowest in the first calendar quarter and
       highest in the second and fourth calendar quarters of each year. Capstar
       Partners' operating results in any period may be affected by the
       occurrence of advertising and promotion expenses that do not produce
       commensurate revenues in the period in which the expenditures are made.
       Because Arbitron reports audience ratings on a quarterly basis, Capstar
       Partners' ability to realize revenues as a result of increased
       advertising and promotional expenses and any resulting audience ratings
       improvements may be delayed for several months.
 
     In the following analysis, management discusses broadcast cash flow and
EBITDA (before noncash compensation expense, LMA fees and merger, nonrecurring
and systems development expense) because they are measures widely used in the
broadcasting industry to evaluate a radio company's operating performance.
Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses, LMA fees, noncash compensation expense and
merger nonrecurring and systems development expense. EBITDA
 
                                       11
<PAGE>   12
 
(before noncash compensation expense, LMA fees and merger, nonrecurring and
systems development expense) consists of operating income before depreciation,
amortization, LMA fees, noncash compensation expense fees and merger,
nonrecurring and systems development expense. You should know that broadcast
cash flow and EBITDA (before noncash compensation expense, LMA fees and merger,
nonrecurring and systems development expense) are not measures of performance
calculated in accordance with GAAP. Accordingly, you should also review Capstar
Partners' operating income, cash flows from operating activities and other
income or cash flow statements that are prepared in accordance with GAAP.
 
RESULTS OF OPERATIONS
 
     The following table presents summary supplemental historical consolidated
financial data of Capstar Partners for the three months ended March 31, 1998 and
1999 and should be read in conjunction with the consolidated financial
statements of Capstar Partners and the related notes included elsewhere in this
Quarterly Report on Form 10-Q.
 
<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS
                                                                    ENDED MARCH 31,
                                                              ----------------------------
                                                                 1998             1999
                                                              -----------      -----------
                                                              (DOLLARS IN THOUSANDS,EXCEPT
                                                                    PER SHARE DATA)
<S>                                                           <C>              <C>
OPERATING DATA:
  Net revenue...............................................   $ 64,075         $142,005
  Station operating expenses................................     47,760           92,186
  Corporate expenses........................................      3,664            6,268
  Noncash compensation expense(1)...........................     15,793            2,002
  LMA fees..................................................      1,871              319
  Depreciation and amortization.............................     11,032           36,439
  Merger, nonrecurring and systems development expense......         --            2,548
  Operating income (loss)...................................    (16,045)           2,243
  Interest expense..........................................     15,897           36,458
  Net loss..................................................    (26,660)         (26,144)
  Net loss attributable to common stock.....................    (29,712)         (29,201)
OTHER DATA:
  Broadcast cash flow.......................................   $ 16,315         $ 49,819
  Broadcast cash flow margin................................       25.5%            35.1%
  EBITDA (before noncash compensation expense, LMA fees and
     merger, nonrecurring and systems development
     expense)...............................................     12,651           43,551
</TABLE>
 
---------------
 
(1) Consists of noncash compensation charges resulting from the grant of
    warrants, options and stock subscriptions.
 
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
 
     Net Revenue. Net revenue increased $77.9 million or 121.6% to $142.0
million in the three months ended March 31, 1999 from $64.1 million in the three
months ended March 31, 1998. This increase was attributable to the acquisitions
of radio stations and revenue generated from stations being operated by
Chancellor Media pursuant to an LMA. On a same store basis, for stations owned
or operated, LMA fees and other non-radio operations as of March 31, 1999, net
revenue increased $13.8 million or 11.0% to $139.4 million from $125.6 million
in the three months ended March 31, 1998. The increase was primarily
attributable to growth in the sale of time to local and national advertisers.
 
     Station Operating Expenses. Station operating expenses increased $44.4
million or 93.0% to $92.2 million in the three months ended March 31, 1999 from
$47.8 million in the three months ended March 31, 1998. On a same store basis,
for stations owned or operated, LMA fees and other non-radio operations as of
March 31, 1999, operating expenses increased $8.4 million or 10.4% to $89.8
million from $81.4 million in the three months ended March 31, 1998. As a
percent of revenue, historical operating expenses have declined
 
                                       12
<PAGE>   13
 
from 74.5% in 1998 to 64.9% in 1999 as a result of cost savings measures
implemented by Capstar Partners in connection with its acquisitions and the
spreading of fixed costs over a larger revenue base.
 
     Corporate Expenses. Corporate expenses increased $2.6 million or 71.1% to
$6.3 million in the three months ended March 31, 1999 from $3.7 million in the
same period during 1998 primarily as a result of higher salary expense for
additional staffing. As a percent of revenue, historical corporate expenses have
declined from 5.7% in 1998 to 4.4% in 1999 as a result of cost savings measures
implemented by Capstar Partners in connection with its acquisitions and the
spreading of fixed costs over a larger revenue base.
 
     Other Operating Expenses. Depreciation and amortization increased $25.4
million or 230.3% to $36.4 million in the three months ended March 31, 1999 from
$11.0 million in the same period in 1998 primarily due to radio station
acquisitions consummated in 1998 and the first quarter of 1999. Noncash
compensation expense related to certain options, warrants and stockholder
non-recourse notes decreased $13.8 million or 87.3% to $2.0 million in 1999 from
$15.8 million in 1998 due a significant increase in the fair value of the Class
A common stock, $0.01 par value per share, of Capstar Broadcasting ("Class A
Common Stock") during the first quarter of 1998 compared to an insignificant
change in the fair value of the Class A Common Stock in the first quarter of
1999. In quarter ended March 31, 1999, Capstar Partners has recorded merger,
nonrecurring and systems development expense of $2.5 million which consisted of
$1.1 million of investment banking, legal and other expense related to the
pending merger with Chancellor Media, $0.7 million consisting primarily of
startup costs associated with Capstar Partners' sales training initiative and
$0.7 million of business process reengineering and training expense incurred in
connection with Capstar Partners' development of the Galaxy(TM) system.
 
     Other Income (Expense). Interest expense increased $20.6 million or 129.3%
to $36.5 million in the three months ended March 31, 1999 from $15.9 million in
the same period in 1998 primarily due to the interest expense associated with
indebtedness incurred in connection with Capstar Partners' acquisitions.
 
     Net Loss. As a result of the factors described above, net loss decreased by
$516,000 to a $26.1 million net loss in the three months ended March 31, 1999
from a $26.6 million net loss in the three months ended March 31, 1998.
 
     Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $33.5 million or 205.4% to $49.8 million in the three months
ended March 31, 1999 from $16.3 million in the three months ended March 31,
1998. The broadcast cash flow margin was 35.1% in the three months ended March
31, 1999 as compared to 25.5% in the same period in 1998. On a same store basis,
for stations owned or operated, LMA fees and other non-radio operations as of
March 31, 1999, broadcast cash flow increased $5.4 million or 12.2% to $49.5
million from $44.1 million in the three months ended March 31, 1998.
 
     EBITDA (before noncash compensation expense, LMA fees and merger,
nonrecurring and systems development expense). As a result of the factors
described above, EBITDA (before noncash compensation expense, LMA fees and
merger, nonrecurring and systems development) increased $30.9 million or 244.2%
to $43.5 million in the three months ended March 31, 1999 from $12.6 million in
the three months ended March 31, 1998. The EBITDA (before noncash compensation
expense, LMA fees and merger, nonrecurring and systems development) margin
increased to 30.7% in 1999 from 19.7% in 1998.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Capstar Partners' acquisition strategy requires a great deal of capital.
Capstar Partners has historically used the proceeds of bank debt, debt
offerings, equity offerings and cash flow from operations to fund the
implementation of its acquisition strategy. Capstar Partners' business has
generated sufficient cash flow from operations to finance its existing
operations and debt service requirements, and management anticipates that this
will continue to be the case. A brief summary of each of Capstar Partners'
outstanding debt or preferred equity instruments follows.
 
     In February 1997, Capstar Partners issued its 12 3/4% Senior Discount Notes
due 2009 (the "12 3/4% Capstar Partners Notes") at a substantial discount from
their aggregate principal amount at maturity of $277.0 million. The 12 3/4%
Capstar Partners Notes pay no cash interest until August 1, 2002. Accordingly,
the
                                       13
<PAGE>   14
 
carrying value will increase through accretion until August 1, 2002. As of March
31, 1999, the outstanding principal balance was $195.0 million. Beginning on
August 1, 2002, Capstar Partners will pay interest of approximately $17.7
million semi-annually on February 1 and August 1 of each year until maturity on
February 1, 2009.
 
     In June 1997, Capstar Radio issued its 9 1/4% Senior Subordinated Notes due
2007 (the "9 1/4% Capstar Radio Notes".) As of March 31, 1999, the outstanding
principal balance was $199.3 million. Capstar Radio pays interest payments of
$9.25 million on the 9 1/4% Capstar Radio Notes semi-annually on January 1 and
July 1 of each year. The 9 1/4% Capstar Radio Notes mature on July 1, 2007.
 
     In June 1997, Capstar Partners issued 1,000,000 shares of its 12% Senior
Exchangeable Preferred Stock (the "12% Capstar Partners Preferred Stock").
Capstar Partners is required to pay dividends on the 12% Capstar Partners
Preferred Stock semi-annually on January 1 and July 1 of each year at a rate of
$12.00 per share. Until July 1, 2002, dividends may be paid, at Capstar
Partners' option, either in cash or in additional shares of 12% Capstar Partners
Preferred Stock. Since issuance, Capstar Partners has paid the required dividend
in additional shares. Capstar Partners intends to continue to pay the dividend
in additional shares, rather than cash, through July 1, 2002. As of May 1, 1999,
1,196,236 shares of the 12% Capstar Partners Preferred Stock were issued and
outstanding with a liquidation preference equal to $100.00 per share or
approximately $119.6 million, excluding accrued dividends of $4.0 million.
 
     Capstar Communications has outstanding its 10 3/4% Senior Subordinated
Notes due 2006 (the "10 3/4% CCI Notes") and its 11 3/8% Senior Subordinated
Notes due 2000 (the "11 3/8% CCI Notes"). Capstar Communications pays interest
of approximately $15.8 million on the 10 3/4% CCI Notes semi-annually on May 15
and November 15 of each year. The 10 3/4% CCI Notes mature on May 15, 2006.
Capstar Communications pays interest of approximately $32,000 on the 11 3/8% CCI
Notes semi-annually on April 1 and October 1 of each year. The 11 3/8% CCI Notes
mature on October 1, 2000. As of March 31, 1999, the outstanding principal
balances were $322.6 million and $566,000 on the 10 3/4% CCI Notes and 11 3/8%
CCI Notes, respectively.
 
     Capstar Communications has outstanding its Series E Cumulative Exchangeable
Preferred Stock ("CCI Series E Preferred Stock"). Capstar Communications is
required to pay dividends on the CCI Series E Preferred Stock semi-annually on
January 15 and July 15 of each year at the rate per share of $12.625 per year.
Until January 15, 2002, Capstar Communications may pay dividends either in cash
or in additional shares of CCI Series E Preferred Stock. Since July 15, 1998,
Capstar Communications has paid the required dividend by issuing additional
shares. Capstar Communications intends to continue to pay the dividend in
additional shares, rather than cash, through January 15, 2002. As of May 1,
1999, 1,346,091 shares of the CCI Series E Preferred Stock were issued and
outstanding with a liquidation preference equal to $100.00 per share or
approximately $134.6 million, excluding accrued dividends of $5.0 million.
 
     The merger with Chancellor Media will result in a change of control under
Capstar Partners' and its subsidiaries' indebtedness and preferred stock, and
Capstar Partners will be obligated to purchase the notes and the preferred stock
from the holders thereof at an offer price in cash equal to 101% of the
aggregate principal amount or liquidation preference, as applicable, plus
accrued and unpaid interest or dividends, as applicable, if any, thereon.
Capstar Partners anticipates paying for the change in control offers out of cash
from operating activities.
 
     In addition to the debt and equity described above, Capstar Partners is a
party to a credit facility under which Capstar Radio is the borrower. The credit
facility consists of a $500 million revolving loan, a $450 million A Term Loan
and a $400 million B Term Loan. Pursuant to the credit facility and subject to
bank availabilities and approvals, Capstar Partners may request additional term
loans and revolving credit loans in an aggregate amount up to $550 million. The
interest rate under the Capstar Partners credit facility is a floating rate. On
May 1, 1999, Capstar Partners had borrowings of approximately $1,131.0 million
outstanding under the Capstar Partners credit facility comprised of $284.0
million in revolving loans, $450.0 million under the A Term Loan and $397.0
million under the B Term Loan, with a weighted average effective interest rate
of 7.3% per annum. On May 1, 1999, $205.7 million was available for borrowing,
subject to financial covenants contained in the credit facility and the
indentures that govern the indebtedness of
                                       14
<PAGE>   15
 
Capstar Partners' subsidiaries. Beginning August 31, 1999, the A Term Loan will
require scheduled annual principal payments, payable quarterly, of $45 million
for the first year, $67.5 million in the second and third years, $90 million for
the fourth and fifth years, and two quarterly payments of $45 million during the
final year commencing August 31, 2004. The B Term Loan requires scheduled annual
principal payments, payable quarterly, of $4 million in years 1999 through 2003,
$180 million in 2004 and $200 million in 2005. In April 1999, the credit
facility was amended to, among other things, permit the merger with Chancellor
Media and related transactions to be consummated; increase the leverage ratio
required to be maintained by Capstar Radio during the period from April 1, 1999
through September 30, 2000; increase the pricing of the credit facility
beginning January 1, 2000; and permit the proposed amendment of a $150 million
note payable by Capstar Broadcasting to Chancellor Media.
 
     In connection with the sales of assets and the spin-off of SFX
Entertainment, Inc., Capstar Communications incurred an estimated federal income
tax liability of approximately $93.0 million. SFX Entertainment, Inc.
indemnified Capstar Communications for all of the estimated tax liability. These
estimated federal income taxes were paid prior to March 31, 1999.
 
     Chancellor Media is providing services for eleven large market stations
under separate LMAs with Capstar Broadcasting for approximately $49.4 million
per year. In addition, Chancellor Media has agreed to acquire such stations in
exchange for radio stations to be identified by Capstar Broadcasting over a
three-year period beginning in May 1998, with corresponding decreases in the
amount of the LMA fees as stations are exchanged. From January 1, 1999 to March
31, 1999, Chancellor Media has paid Capstar Broadcasting approximately $12.4
million in LMA fees. For the remainder of 1999, Capstar Broadcasting expects to
receive approximately $37.0 in LMA fees from Chancellor Media. During the
pendency of the merger with Chancellor Media, Capstar Broadcasting does not
anticipate effecting any exchanges with Chancellor Media. Chancellor Media is
currently assessing whether the terms of the letter agreement will be modified
upon the consummation of the merger with Chancellor Media.
 
     In addition to debt service and tax liabilities, Capstar Partners'
principal liquidity requirements in 1999 will be for working capital and general
corporate purposes, including capital expenditures estimated at $42.0 million,
to consummate its pending acquisitions and, as appropriate opportunities arise,
to acquire additional radio stations or complementary broadcast-related
businesses. Capstar Partners believes that the disposition of certain assets,
cash from operating activities, LMA fees from Chancellor Media, together with
available revolving credit borrowings under the its credit facility, should be
sufficient to permit Capstar Partners to meet its obligations. No assurances can
be given that Capstar Partners will be able to find an alternative source of
funds. In the future, Capstar Partners may require additional financing, either
in the form of additional debt or equity securities. Capstar Partners evaluates
potential acquisition opportunities on an on-going basis and has had, and
continues to have, preliminary discussions concerning the purchase of additional
stations. Capstar Partners expects that in connection with the financing of
future acquisitions, it may consider disposing of stations in its current
markets.
 
     Capstar Partners is a holding company with no significant assets other than
the capital stock of its direct and indirect subsidiaries. Consequently, its
sole source of cash from which to service indebtedness is dividends distributed
or other payments made to it by its operating subsidiaries. The instruments
governing Capstar Partners' indebtedness contain certain covenants that restrict
or prohibit the ability of subsidiaries to pay dividends and make other
distributions. These restrictions are not anticipated to have an impact on
Capstar Partners' ability to meet its cash obligations.
 
     Net cash used in operating activities was approximately $0.9 million and
$8.2 million for the three months ended March 31, 1998 and 1999, respectively.
Changes in Capstar Partners' net cash provided by operating activities are
primarily the result of completed acquisitions and station operating agreements
entered into during the periods and their effects on income from operations and
working capital requirements.
 
     Net cash used in investing activities was $42.6 million and $29.1 million
for the three months ended March 31, 1998 and 1999, respectively. Net cash
provided by financing activities was $189.8 million and $32.7 million for the
three months ended March 31, 1998 and 1999, respectively. These cash flows
primarily reflect borrowings, capital contributions and expenditures for
stations acquisitions and dispositions.
                                       15
<PAGE>   16
 
FORWARD LOOKING STATEMENTS
 
     This Quarterly Report on Form 10-Q contains forward looking statements. The
words "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "foresee," "will," "could," "may" and similar expressions are
intended to identify forward looking statements. Such statements reflect Capstar
Partners' current views with respect to future events and financial performance
and involve risks and uncertainties, including without limitation business
conditions and growth in the industry and the general economy, competitive
factors, changes in interest rates, the failure or inability to renew one or
more of Capstar Partners' broadcasting licenses, and regulatory developments
affecting Capstar Partners' operations and the acquisitions and dispositions
described elsewhere in this Quarterly Report on Form 10-Q. Should one or more of
these risks or uncertainties occur, or should underlying assumptions prove
incorrect, actual results may vary materially and adversely from those
indicated.
 
RECENT ACCOUNTING PRONOUNCEMENT
 
     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Management does not believe the implementation of
this accounting pronouncement will have a material effect on its consolidated
financial statements.
 
IMPACT OF THE YEAR 2000 ISSUE
 
     The Year 2000 issue concerns the inability of computer programs and
embedded computer chips to properly recognize and process date sensitive
information when the year changes to 2000, or "00". Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail causing disruption in the operations of a company.
 
     A company-wide inventory and assessment of Capstar Partners' systems and
operations began in December 1996, and is continuing, to identify any software
or hardware systems, equipment with embedded chips or processors, and
non-information technology systems, such as telephone, voicemail and HVAC
systems, which do not properly recognize dates after December 31, 1999.
Concurrently with its company-wide assessment, Capstar Partners is developing
and is in the process of implementing its Year 2000 compliance program. Capstar
Partners is utilizing both internal and external resources to identify its
compliance. In addition, as part of its acquisition and consolidation strategy,
Capstar Partners assesses and, as necessary, remediates or replaces the systems
of acquired companies and stations with Year 2000 compliant systems.
 
     Initially, Capstar Partners has identified StarSystem(TM), its digital
automation systems, its advertising scheduling and billing systems and its
accounting systems as the mission critical systems to evaluate for Year 2000
compliance. The list of Capstar Partners' mission critical systems may be
expanded, however, upon completion of its company-wide inventory and assessment.
If remediations or replacements are not made, are not completed on time, or are
insufficient to prevent systems failures or other disruptions, the Year 2000
issue could have a material adverse impact on Capstar Partners' results of
operations and financial condition.
 
     Management has determined that the software underlying StarSystem(TM) is
Year 2000 compliant. StarSystem's(TM) wide area computer network is, however,
dependent on the systems of Capstar Partners' telecommunications services
providers. Capstar Partners sent a questionnaire to each of its
telecommunications services providers asking it to update Capstar Partners on
the status of its Year 2000 compliance. Based on the telecommunications services
providers responses to the questionnaire, the providers appear to be Year 2000
compliant.
 
     Management has been assured by its vendors that Capstar Partners' digital
automation systems are Year 2000 compliant. Capstar Partners has tested over 50%
of these systems to insure their Year 2000 compliance and expects to complete
testing of all of these systems by year end.
 
                                       16
<PAGE>   17
 
     Capstar Partners employs advertising scheduling and billing systems at each
of its stations. Capstar Partners has received Year 2000 compliance certificates
from the vendors providing the software applications underlying Capstar
Partners' existing advertising scheduling and billing systems, certifying that
such applications are Year 2000 compliant. Not all of the hardware underlying
Capstar Partners' existing advertising scheduling and billing systems are Year
2000 compliant. As part of Capstar Partners' capital improvement program,
Capstar Partners is replacing its Year 2000 noncompliant advertising scheduling
and billing systems. Management estimates that such hardware replacement will be
completed by the end of August 1999 at a total cost of approximately $90,000.
 
     Capstar Partners utilizes purchased software programs for it financial
applications and office automation. Capstar Partners has received Year 2000
compliance certificates from the venders providing these software packages,
certifying that such packages are Year 2000 compliant. Capstar Partners is
currently testing these systems to insure their Year 2000 compliance.
 
     Capstar Partners has determined that some of its telephone systems are not
Year 2000 compliant. As part of Capstar Partners' Year 2000 compliance efforts
and its capital improvement program, management intends to remediate or replace
such telephone systems by the end of September 1999 at a current estimated cost
of approximately $150,000.
 
     In addition to identifying, assessing and remediating or replacing its
mission critical systems, Capstar Partners is assessing its exposure from
external sources to Year 2000 failures. Capstar Partners relies on third-party
providers for key services such as telecommunications and utilities.
Interruption of these services could, in management's view, have a material
adverse impact on the operations of Capstar Partners. Capstar Partners has begun
sending questionnaires to each of these and other significant third party
providers asking them to update Capstar Partners on the status of their Year
2000 compliance. Until those questionnaires are returned and reviewed, Capstar
Partners will be unable to fully assess the potential for disruption in its
programming and operations arising from this third party risk. If Capstar
Partners does not receive reasonable assurance regarding Year 2000 compliance
from any provider of these services, Capstar Partners will then develop
contingency plans, to the extent possible, to address its exposure.
 
     Costs specifically associated with ensuring that Capstar Partners' systems
and the systems of third parties on which Capstar Partners is dependent are Year
2000 compliant are currently expected to be approximately $1.0 million, of which
approximately $700,000 has been incurred to date. These cost estimates are
subject to change once Capstar Partners has fully assessed its systems and
responses are obtained from third party vendors and service providers. Any
change in cost may be material. Funding of these costs is anticipated to come
from cash flows generated by business operations and/or borrowings under Capstar
Partners' credit facility.
 
     Capstar Partners is in the process of identifying the most reasonably
likely worst case scenarios that may affect its operations due to Year 2000
noncompliance of Capstar Partners' systems or the systems of third parties.
Initially, Capstar Partners believes that the failure of its advertising
scheduling and billing systems and the temporary loss of power at some of its
stations due to Year 2000 noncompliance are the most reasonably likely worst
case scenarios. Many of Capstar Partners' stations and transmitter sites
currently have on-site generators in the event of power outages. As part of
Capstar Partners' capital improvement program, management has begun installation
of generators at each of its remaining stations and transmitter sites and
expects to have approximately 98% coverage of its stations and transmitter sites
by year end. Capstar Partners believes that the upgrade of the hardware on its
existing advertising scheduling and billing systems and the installation of
generators at substantially all of its stations will resolve possible
disruptions in the business operations of Capstar Partners that would result
from such risks. Capstar Partners may identify additional worst case scenarios
once it has fully assessed its mission critical systems and obtained responses
from third party vendors and service providers. Capstar Partners expects to
develop other contingency plans to mitigate the possible disruption in business
operations that may result from Capstar Partners' systems or the systems of
third parties that are not Year 2000 compliant.
 
                                       17
<PAGE>   18
 
     Based on the nature of Capstar Partners' business and dispersed
geographical locations, Capstar Partners believes that it may experience some
disruption in its business due to the impact of the Year 2000 issue. Management
presently believes, however, that Capstar Partners is taking appropriate steps
to assess and control its Year 2000 issues. If Capstar Partners does not
complete all phases of its Year 2000 compliance program and remediations or
replacements are not made, are not completed on time, or are insufficient to
prevent systems failures or other disruptions, the Year 2000 issue could have a
material adverse impact on Capstar Partners' results of operations and financial
condition. Capstar Partners does not currently have any contingency plans in the
event that it does not complete all phases of its Year 2000 compliance program.
Capstar Partners is continually assessing the status of completion of its Year
2000 compliance program and, as necessary, will determine whether any such
contingency plans are necessary.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
 
     Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of Capstar Partners due to adverse
changes in financial and commodity market prices and rates. Capstar Partners is
exposed to market risk in the areas of changes in the Unites States and
international borrowing rates (i.e. prime rate or LIBOR).
 
INTEREST RATE RISK MANAGEMENT
 
     In January 1997, Capstar Partners entered into an interest rate swap
agreement (a derivative instrument) designated as a partial hedge of Capstar
Partners' portfolio of variable rate debt. The purpose of the swap is to reduce
certain exposures to interest rate fluctuations. At March 31, 1999, this
interest rate swap had a notional amount of $26.0 million, and a portfolio value
of variable debt outstanding in the amount of $936.0 million. Under the
agreement, Capstar Partners is receiving a weighted-average variable rate equal
to LIBOR and paying a weighted-average fixed interest rate of 6.34%. The
weighted-average LIBOR rate applicable to this agreement was 4.97% at March 31,
1999. Interest expense was increased by $170,000 and $74,000 in the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively.
Notional amounts do not quantify risk or represent assets or liabilities of
Capstar Partners, but are used in the determination of cash settlements under
the agreements. The interest rate swap agreement matures on January 31, 2000.
 
     The fair value of the interest rate swap is estimated by obtaining
quotations from brokers. The fair value of the interest rate swap agreement as
of March 31, 1999 is approximately negative $326,000, which is the estimate of
the amount Capstar Partners would have to pay as of March 31, 1999 if the
contract was transferred to other parties or cancelled by the broker. Management
believes that potential, near-term losses in future earnings from reasonably
possible near-term changes in market rates will be immaterial.
 
     The following table represents the notional amount and expected interest
rates that exist during the term of the interest rate swap agreement. The
notional amount is used to calculate the contractual payments to be exchanged
under the contract. The variable rates are based on implied forward rates in the
yield curve at the reporting date.
 
     In the normal course of business, Capstar Partners also faces risks that
are either non-financial or non-quantifiable. Such risks principally include
credit risk and legal risk and are not represented in the following table.
 
<TABLE>
<CAPTION>
                                                                                FAIR
                                                             1999      2000     VALUE
                                                            -------   -------   -----
<S>                                                         <C>       <C>       <C>
INTEREST RATE DERIVATIVE
Variable to Fixed:
Notional amount (in thousands)............................  $26,000   $26,000   $(326)
                                                                                (loss)
  Average pay rate........................................     6.34%     6.34%
  Average receive rate....................................     5.50%     5.75%
</TABLE>
 
                                       18
<PAGE>   19
 
                          PART II -- OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS.
 
     On August 29, 1997, two lawsuits were commenced against SFX Broadcasting
Inc. (currently Capstar Communications, Inc., an indirect subsidiary of Capstar
Partners) and its directors in the Court of Chancery of the State of Delaware
(New Castle County). The plaintiffs in the lawsuits are Harbor Finance Partners
(C.A. No. 15891) and Steven Lieberman (C.A. No. 15901). The complaints are
identical and allege that the consideration to be paid as a result of the SFX
acquisition to the holders of the CCI Class A Common Stock is unfair and that
the individual defendants have breached their fiduciary duties. Both complaints
seek to have the actions certified as class actions and seek to enjoin the SFX
acquisition or, in the alternative, monetary damages. The defendants have filed
answers denying the allegations, and discovery has commenced. The parties have
agreed that the lawsuits may be consolidated in one action entitled In Re SFX
Broadcasting, Inc. Shareholders Litigation (C.A. No. 15891). On March 17, 1998,
the parties entered into a Memorandum of Understanding, pursuant to which the
parties reached an agreement providing for a settlement of the action. Pursuant
to the settlement, SFX agreed not to seek an amendment to the SFX merger
agreement to reduce the consideration to be received by the stockholders of SFX
in the SFX acquisition in order to offset the indemnity obligations of SFX
Entertainment Inc., a former subsidiary of SFX. The settlement also provides for
SFX to pay plaintiff's counsel an aggregate of $950,000, including all fees and
expenses as approved by the court. The settlement is conditioned on the
consummation of the SFX acquisition (which has been consummated), completion of
the confirmatory discovery (which has been completed) and approval of the court.
Pursuant to the settlement, the defendants have denied, and continue to deny,
that they have acted in bad faith or breached any fiduciary duty. The parties
expect to submit the settlement documents soon to the court for its approval.
However, there can be no assurance that the court will approve the settlement.
 
     On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County against Capstar Communications.
Noddings alleges that Capstar Communications breached a warrant agreement that
Noddings contends requires Capstar Communications to permit Noddings to exercise
warrants in exchange for cash and shares of stock of SFX Entertainment, Inc.
Specifically, Noddings alleges that Capstar Communications, Inc. has violated
the warrant agreement by permitting Noddings to receive cash in exchange for its
warrants, but refusing to convey shares of stock of SFX Entertainment. In
addition to suing on its own behalf, Noddings is seeking to prosecute the action
on behalf of a putative class comprised of all persons who owned equivalent
warrants on April 21, 1998 (the date immediately following the record date of
the distribution of stock of SFX Entertainment to holders of the stock of SFX)
and their transferees and successors in interest. Noddings has requested that
the Court:
 
     - declare that on the exercise of its warrants Capstar Communications
       transmit to plaintiffs and members of the class that it seeks to
       represent $22.3725 in cash per warrant and 0.2983 shares of common stock
       of SFX Entertainment per warrant,
 
     - require Capstar Communications to pay 0.2983 shares of common stock of
       SFX Entertainment per warrant and, (if not previously paid) $22.3725 in
       cash, to any putative class member that has exercised or exercises
       warrants after April 20, 1998,
 
     - in the alternative, award plaintiffs and members of the putative class
       monetary damages in an amount to be determined at trial, and
 
     - award costs and attorneys' fees.
 
In March 1999, the court issued an opinion dismissing two of Noddings' counts
and granted summary judgment in favor of Noddings on one count. The court held
that Noddings is entitled to 0.2983 shares of SFX Entertainment, Inc. stock per
warrant. Both parties have filed a notice of appeal.
 
     On July 24, 1998 in connection with the acquisition of Triathlon
Broadcasting Company, Capstar Partners was notified of an action filed on behalf
of all holders of depository shares of Triathlon against
 
                                       19
<PAGE>   20
 
Triathlon, its directors, and Capstar Partners. The action was filed in the
Court of Chancery of the State of Delaware in and for New Castle County,
Delaware. The complaint alleges that Triathlon and its directors breached their
fiduciary duties to the class of depository shareholders by agreeing to a
transaction with Capstar Partners that allegedly favored the Class A common
shareholders of Triathlon at the expense of the depository shareholders. Capstar
Partners is accused of knowingly aiding and abetting the breaches of fiduciary
duties allegedly committed by the other defendants. The complaint seeks to have
the action certified as a class action and seeks to enjoin the Triathlon
acquisition or, in the alternative, seeks monitory damages in an unspecified
amount. On February 12, 1999, the parties signed a Memorandum of Understanding
that provides for the settlement of the lawsuit. The amount of the settlement
will equal $0.11 additional consideration for each depository share owned by any
class member at the effective time of the Triathlon acquisition. Capstar
Partners also agreed not to oppose plaintiff's counsel's application for
attorney's fees and expenses in the aggregate amount of $150,000. The proposed
settlement is contingent upon a confirmatory discovery by the plaintiff,
executive of a definitive settlement agreement and court approval.
 
     On September 9, 1998, Capstar Partners was notified of an action filed on
behalf of all owners of securities of Chancellor Media against Chancellor Media,
Hicks, Muse, Tate & Furst, Inc. ("Hicks, Muse") and the individual directors of
Hicks, Muse in the Court of Chancery of the State of Delaware in and for New
Castle County, Delaware. While the complaint does not name Capstar Partners as a
defendant, the complaint alleges that Chancellor Media and its directors
breached their duties to the alleged class by entering into an "overly generous
offer for Capstar assets." The action is relevant to Capstar Partners because
inter alia, the plaintiff seeks an injunction prohibiting the proposed merger of
Capstar Broadcasting with Chancellor Media. As Capstar Partners is not a
defendant in this action, Capstar Partners has no obligation to appear or
participate.
 
     Capstar Partners is also involved in various other claims and lawsuits
which are generally incidental to its business. Capstar Partners is vigorously
contesting all of these matters and believes that the ultimate resolution of
these matters and those mentioned above will not have a material adverse affect
on its consolidated financial position or results of operation.
 
     See Part I Item 1 Note 5 to the March 31, 1999 unaudited financial
statements.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
           2.1           -- Amended and Restated Agreement and Plan of Merger, dated
                            as of April 29, 1999, among Chancellor Media Corporation,
                            Capstar Broadcasting Corporation, CBC Acquisition
                            Company, Inc. and CMC Merger Sub, Inc.(1)
           2.2           -- Amended and Restated Voting Agreement, dated as of April
                            29, 1999, among Chancellor Media Corporation, Capstar
                            Broadcasting Corporation, Capstar Broadcasting Partners,
                            L.P., Thomas O. Hicks and R. Steven Hicks.(1)
          10.1           -- Second Amendment and Waiver, dated as of April 23, 1999,
                            among Capstar Broadcasting Corporation, Capstar
                            Broadcasting Partners, Inc., Capstar Radio Broadcasting
                            Partners, Inc. and the financial institutions party
                            thereto.(1)
          10.2           -- Second Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and Paul
                            D. Stone.(1)
          10.3           -- Second Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and
                            William S. Banowsky, Jr.(1)
          10.4           -- Second Amendment to Employment Agreement, dated March 15,
                            1999, between Capstar Broadcasting Corporation and D.
                            Geoffrey Armstrong.(1)
          10.5           -- Third Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and R.
                            Steven Hicks.(1)
</TABLE>
 
                                       20
<PAGE>   21
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
          10.6           -- Second Amendment to Warrant, dated April 29, 1999,
                            between Capstar Broadcasting Corporation and William S.
                            Banowsky, Jr.(1)
          10.7           -- Second Amendment to Warrant, dated April 29, 1999,
                            between Capstar Broadcasting Corporation and Paul D.
                            Stone.(1)
          10.8           -- Amendment to Warrants, dated April 29, 1999, between
                            Capstar Broadcasting Corporation and R. Steven Hicks.(1)
          10.9           -- Second Amendment to Warrant, dated March 15, 1999,
                            between Capstar Broadcasting Corporation and D. Geoffrey
                            Armstrong.(1)
          27.1           -- Financial Data Schedule.*
</TABLE>
 
---------------
 
 * Filed herewith.
 
(1) Incorporated by reference to Capstar Broadcasting's Quarterly Report on Form
    10-Q for the three months ended March 31, 1999, File No. 001-14107.
 
     (b) Reports on Form 8-K
 
     No reports on Form 8-K were filed by Capstar Partners during the three
months ended March 31, 1999.
 
                                       21
<PAGE>   22
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934,
Capstar Broadcasting Partners, Inc. has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
 
                                            CAPSTAR BROADCASTING PARTNERS, INC.
 
                                            By:      /s/ PAUL D. STONE
                                              ----------------------------------
                                                        Paul D. Stone
                                                 Executive Vice President and
                                                   Chief Financial Officer
 
Date: May 17, 1999
 
                                       22
<PAGE>   23
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
           2.1           -- Amended and Restated Agreement and Plan of Merger, dated
                            as of April 29, 1999, among Chancellor Media Corporation,
                            Capstar Broadcasting Corporation, CBC Acquisition
                            Company, Inc. and CMC Merger Sub, Inc.(1)
           2.2           -- Amended and Restated Voting Agreement, dated as of April
                            29, 1999, among Chancellor Media Corporation, Capstar
                            Broadcasting Corporation, Capstar Broadcasting Partners,
                            L.P., Thomas O. Hicks and R. Steven Hicks.(1)
          10.1           -- Second Amendment and Waiver, dated as of April 23, 1999,
                            among Capstar Broadcasting Corporation, Capstar
                            Broadcasting Partners, Inc., Capstar Radio Broadcasting
                            Partners, Inc. and the financial institutions party
                            thereto.(1)
          10.2           -- Second Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and Paul
                            D. Stone.(1)
          10.3           -- Second Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and
                            William S. Banowsky, Jr.(1)
          10.4           -- Second Amendment to Employment Agreement, dated March 15,
                            1999, between Capstar Broadcasting Corporation and D.
                            Geoffrey Armstrong.(1)
          10.5           -- Third Amendment to Employment Agreement, dated April 29,
                            1999, between Capstar Broadcasting Corporation and R.
                            Steven Hicks.(1)
          10.6           -- Second Amendment to Warrant, dated April 29, 1999,
                            between Capstar Broadcasting Corporation and William S.
                            Banowsky, Jr.(1)
          10.7           -- Second Amendment to Warrant, dated April 29, 1999,
                            between Capstar Broadcasting Corporation and Paul D.
                            Stone.(1)
          10.8           -- Amendment to Warrants, dated April 29, 1999, between
                            Capstar Broadcasting Corporation and R. Steven Hicks.(1)
          10.9           -- Second Amendment to Warrant, dated March 15, 1999,
                            between Capstar Broadcasting Corporation and D. Geoffrey
                            Armstrong.(1)
          27.1           -- Financial Data Schedule.*
</TABLE>
 
---------------
 
 * Filed herewith.
 
(1) Incorporated by reference to Capstar Broadcasting's Quarterly Report on Form
    10-Q for the three months ended March 31, 1999, File No. 001-14107.