
<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 :

                                     0-23008
--------------------------------------------------------------------------------


                           AMERICAN TELECASTING, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                        <C>
                          Delaware                                                       54-1486988
--------------------------------------------------------------             ------------------------------------                 
(State or other jurisdiction of incorporation or organization)             (I.R.S. Employer Identification No.)

        5575 Tech Center Drive, Colorado Springs, CO                                        80919                      
        --------------------------------------------                                     ----------
          (Address of principal executive offices)                                       (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (719) 260 - 5533 
                                                   -----------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X           No          
    -----            -----

As of May 14, 1999, 25,847,256 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.



<PAGE>   2



                           AMERICAN TELECASTING, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                 Page
                                                                                                                 ----
<S>                                                                                                              <C>
PART I - FINANCIAL INFORMATION

   Item 1.  Financial Statements

     Condensed Consolidated Balance Sheets -
      December 31, 1998 and March 31, 1999........................................................................3

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

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

     Notes to Condensed Consolidated Financial Statements.........................................................6

   Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations................12


PART II - OTHER INFORMATION

   Item 1.  Legal Proceedings....................................................................................23

   Item 2.  Changes in Securities................................................................................24

Items 3-4.  Not Applicable

   Item 5.  Other Information....................................................................................24

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


                                       2
<PAGE>   3

                         PART I - FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS

                   AMERICAN TELECASTING, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                 December 31,    March 31,
                                                                                                    1998            1999  
                                                                                                 ------------    ---------
                                                                                                                (Unaudited)
<S>                                                                                               <C>            <C>
ASSETS
Current Assets:
  Cash and cash equivalents..................................................................     $  11,155      $   9,007
  Trade accounts receivable, net ............................................................           971            940
  Prepaid expenses and other current assets .................................................         1,472          1,292
                                                                                                  ---------      ---------
              Total current assets ..........................................................        13,598         11,239
Property and equipment, net .................................................................        28,349         24,989
Deferred license and leased license acquisition costs, net ..................................        81,141         80,277
Restricted escrowed funds ...................................................................         1,828          1,846
Deferred financing costs, net ...............................................................         2,523          2,429
Other assets, net ...........................................................................           226            248
                                                                                                  ---------      ---------
               Total assets .................................................................     $ 127,665      $ 121,028
                                                                                                  =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable and accrued expenses .....................................................     $  11,338      $  10,056
  Current portion of long-term obligations ..................................................           271            164
  Subscriber deposits .......................................................................           186            160
                                                                                                  ---------      ---------
         Total current liabilities ..........................................................        11,795         10,380
2004 Notes ..................................................................................       134,130        138,977
2005 Notes ..................................................................................       105,383        109,269
Other long-term obligations, net of current portion .........................................           527            191
                                                                                                  ---------      ---------
               Total liabilities ............................................................       251,835        258,817

COMMITMENTS AND CONTINGENCIES (see Note 4)

STOCKHOLDERS' DEFICIT:
Class A Common Stock, $.01 par value; 45,000,000 shares authorized; 25,743,607
  shares issued and outstanding .............................................................           257            257
Class B Common Stock, $.01 par value; 10,000,000 shares authorized; no shares
  issued and outstanding ....................................................................            --             --
Additional paid-in capital ..................................................................       189,413        189,710
Deferred compensation .......................................................................            --            (71)
Common Stock warrants .......................................................................        10,129         10,129
Accumulated deficit .........................................................................      (323,969)      (337,814)
                                                                                                  ---------      ---------
         Total stockholders' deficit ........................................................      (124,170)      (137,789)
                                                                                                  ---------      ---------
         Total liabilities and stockholders' deficit ........................................     $ 127,665      $ 121,028
                                                                                                  =========      =========
</TABLE>




      See Accompanying Notes to Condensed Consolidated Financial Statements

                                        3
<PAGE>   4




                   AMERICAN TELECASTING, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                       March 31,
                                                                 1998              1999
                                                             ------------      ------------
<S>                                                          <C>               <C>
Revenues:
  Service and other ....................................     $     12,500      $     10,181
  Installation .........................................              213               118
                                                             ------------      ------------
Total revenues .........................................           12,713            10,299
Costs and expenses:
  Operating ............................................            7,762             6,507
  Marketing ............................................              701               106
  General and administrative ...........................            5,672             3,763
  Noncash compensation expense .........................               --               226
  Depreciation and amortization ........................            9,644             5,244
                                                             ------------      ------------
Total costs and expenses ...............................           23,779            15,846
Loss from operations ...................................          (11,066)           (5,547)
Interest expense .......................................          (10,975)           (8,837)
Interest income ........................................              471               231
Gain on disposition of wireless cable systems and 
  assets................................................            3,219                --
Other income, net ......................................               81               308
                                                             ------------      ------------
Net loss ...............................................     $    (18,270)     $    (13,845)
                                                             ============      ============
Basic and diluted net loss per share ...................     $       (.71)     $       (.54)
                                                             ============      ============

Weighted average number of shares outstanding ..........       25,743,607        25,743,607
                                                             ============      ============
</TABLE>




      See Accompanying Notes to Condensed Consolidated Financial Statements

                                        4

<PAGE>   5


                   AMERICAN TELECASTING, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                                ----------------------
                                                                                  1998          1999
                                                                                --------      --------
<S>                                                                             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................................     $(18,270)     $(13,845)
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization ...........................................        9,644         5,244
  Amortization of debt discount and deferred financing costs ..............       10,956         8,829
  Bond appreciation rights ................................................          (45)           --
  Minority interest income ................................................         (138)         (325)
  Noncash compensation expense ............................................           --           226
  Gain on disposition of wireless cable systems and assets ................       (3,219)           --
  Other ...................................................................           62            32
  Changes in operating assets and liabilities .............................       (2,620)       (1,168)
                                                                                --------      --------
    Net cash used in operating activities .................................       (3,630)       (1,007)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .......................................       (4,866)         (943)
Additions to deferred license and leased license acquisition costs ........       (1,871)          (80)
Proceeds from disposition of wireless cable systems and assets ............        4,377            --
Decrease in cash available for asset purchases and debt repayment .........        5,058            --
Net cash used in acquisitions .............................................       (1,672)           -- 
                                                                                --------      --------

   Net cash provided by (used in) investing activities ....................        1,026        (1,023)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable .......................................         (123)          (45)
Principal payments on capital lease obligations ...........................         (441)          (73)
                                                                                --------      --------
  Net cash used in financing activities ...................................         (564)         (118)
                                                                                --------      --------
Net decrease in cash and cash equivalents .................................       (3,168)       (2,148)
Cash and cash equivalents, beginning of period ............................        9,125        11,155
                                                                                --------      --------
Cash and cash equivalents, end of period ..................................     $  5,957      $  9,007
                                                                                ========      ========
</TABLE>


      See Accompanying Notes to Condensed Consolidated Financial Statements

                                        5

<PAGE>   6

                   AMERICAN TELECASTING, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       BUSINESS DESCRIPTION

         History and Organization

                  American Telecasting, Inc. ("ATI") owns and operates a network
         of wireless cable television systems providing subscription television
         service to residential and commercial subscribers. ATI and its
         subsidiaries are collectively referred to herein as the "Company." As
         of March 31, 1999, the Company owned and operated 32 wireless cable
         systems located throughout the United States (the "Developed Markets").
         The Company also has wireless cable (microwave) frequency interests in
         21 other U.S. markets (the "Undeveloped Markets").

         Pending Sprint Transaction

                  On April 26, 1999, the Company, DD Acquisition Corp.
         ("Acquisition"), a wholly owned subsidiary of Sprint Corporation, and
         Sprint Corporation ("Sprint") entered into an Agreement and Plan of
         Merger (the "Merger Agreement"), pursuant to which Acquisition would be
         merged with and into ATI, with ATI being the surviving corporation of
         such merger (the "Merger"), upon the terms and subject to the
         conditions of the Merger Agreement. After the completion of the Merger,
         the Company will be wholly owned by Sprint.

                  At the effective time of the Merger, each outstanding share of
         ATI's Class A Common Stock, par value $.01 per share ("Common Stock"),
         would be converted into the right to receive $6.50 in cash. The
         consummation of the Merger is subject to certain conditions, including
         approval by the stockholders of ATI and the receipt of all necessary
         regulatory approvals. Pursuant to the Merger Agreement, ATI adopted a
         stockholder rights plan.

         Business Strategy

                  The Company's principal business strategy is to pursue
         implementation of a Wireless Broadband Access ("WBA") capability that
         it believes will eventually be the best use of the wireless cable
         spectrum. The Company believes that market, technological and
         regulatory developments are creating an opportunity for the current
         wireless cable spectrum to be used to serve future customers with
         fixed, two-way, high-speed data and telephony services. The Company is
         not presently offering any WBA services. A key element of the Company's
         principal business strategy has been to seek a relationship with a
         strategic partner who would benefit from this direct broadband "last
         mile" access and facilitate access to technology, markets,
         infrastructure and capital. Over recent years, the Company has engaged
         in discussions with a variety of potential strategic partners,
         including several telecommunications, software, Internet service
         providers and equipment companies, regarding the possibility of an
         investment in or business combination with the Company.

                  The Company's ability to introduce WBA services on a
         commercial basis to future customers depends on a number of factors,
         including the completion of the pending Merger with Sprint, the success
         of the Company's development efforts, competitive factors such as the
         introduction of new technologies, the availability of appropriate
         transmission and reception equipment on satisfactory terms, the
         expertise of the Company's management, and the Company's ability to
         obtain the necessary regulatory changes and approvals in a timely
         fashion. There is also uncertainty regarding the degree of subscriber
         demand for these services, especially at pricing levels at which the
         Company can achieve an attractive return on investment. Moreover, the
         Company expects that the market for any such services will be extremely
         competitive.



                                       6
<PAGE>   7

                  During the first quarter of 1999, the Company continued
         operating its Developed Markets principally as an analog video
         subscription television business and offering high-speed Internet
         service in three existing markets. The Company is continuing to manage
         its analog video business to maximize operating cash flow while
         pursuing its WBA business strategy, in part, by not investing the
         capital resources necessary to replace all subscribers who choose to
         stop receiving the Company's service ("Subscriber Churn").

         Going Concern  and Other Financial Matters

                  The financial statements do not include any adjustments
         relating to the recoverability and classification of asset carrying
         amounts or the amount and classification of liabilities that might be
         necessary should the Company be unable to continue as a going concern.
         The Company's continuation as a going concern is dependent upon its
         ability to complete a strategic relationship such as the Merger with
         Sprint or some other strategic partner. If the Merger does not occur,
         without additional funding or financing the Company will not have the
         necessary unrestricted cash to meet its current obligations as they
         come due and will run out of unrestricted cash on or before December
         31, 1999. In addition, the Company will require significant additional
         capital to fully implement its business strategy. To meet such capital
         requirements, the Company is dependent upon consummating a strategic
         relationship such as the Merger with Sprint or some other strategic
         partner, or securing other funding or financing.

                  Cash interest payments on the 2004 Notes and 2005 Notes are
         required to commence on December 15, 1999 and February 15, 2001,
         respectively. The aggregate interest payments on the 2004 Notes and the
         2005 Notes are approximately $10.5 million, $21.0 million and $40.7
         million in 1999, 2000 and 2001, respectively. If on September 30, 1999,
         the initial termination date of the Merger Agreement, the only
         condition to the closing of the Merger with Sprint remaining
         unfulfilled is the receipt of any required approval by the FCC, then
         Sprint will have the option to extend the termination date to December
         31, 1999 by Sprint agreeing to loan to the Company up to $13 million in
         cash for the purpose, among other things, of paying interest due in
         December 1999 on the 2004 Notes. Interest would accrue on such loan at
         a rate of 10%.

                  The Merger would constitute a Change of Control as defined by
         the Indentures of the 2004 and 2005 Notes and would also initiate "Put
         Rights" for the 2004 Notes and "Call Rights" for the 2005 Notes (see
         Note 3).

         Antilles Transaction

                  On April 6, 1999, the Company entered into an agreement with
         Antilles Wireless, L.L.C. ("Antilles") to sell to Antilles the
         Company's wireless cable channel rights and operating assets in
         Billings, Montana, Grand Island, Nebraska and Rapid City, South Dakota
         for up to $6.2 million in cash. As of March 31, 1999, these markets
         represented approximately 142,000 estimated households in the service
         area and served approximately 8,700 subscribers. The transaction is
         contingent upon the grant by final order of the FCC of the assignment
         application for licenses owned and upon consents of channel lessors for
         licenses leased. The transaction is also subject to other customary
         closing conditions. The agreement will terminate if the transaction is
         not consummated by September 30, 1999. The purchase price is subject to
         a downward adjustment for expected decreases in subscriber levels prior
         to closing. At closing, the Company will receive the adjusted closing
         price less $500,000 which will be held in escrow for one year for
         satisfaction of any indemnification obligations.

         AESCO Systems Transaction

         On March 19, 1999, the Company entered into an agreement with AESCO
         Systems, Inc. ("AESCO") to acquire wireless cable channels in Portland,
         Oregon from AESCO for a fixed payment of $2.25 million plus a deferred
         payment based upon the price received in any further transfer of the
         channels within the next five years. In addition, the Company paid
         $250,000 on March 19, 1999 as consideration for a no-shop 


                                       7
<PAGE>   8

         covenant. Payment of the $2.25 million fixed portion of the purchase
         price to AESCO is contingent upon the Company's closing of sale
         transactions of other wireless cable assets, other than the BellSouth
         Transaction (as defined below), for cumulative cash consideration of $5
         million or more, and the FCC's grant by final order of the assignment
         application for the AESCO licenses. The agreement will terminate on
         March 15, 2000 if the transaction has not been completed.


         BellSouth Transaction

                  On March 18, 1997, the Company entered into a definitive
         agreement (the "BellSouth Agreement") with BellSouth Corporation and
         BellSouth Wireless which provides for the sale of all of the Company's
         Florida and Louisville, Kentucky wireless cable assets (the
         "Southeastern Assets") to BellSouth Wireless (the "BellSouth
         Transaction"). The Southeastern Assets include operating wireless cable
         systems in Orlando, Lakeland, Jacksonville, Daytona Beach and Ft.
         Myers, Florida and Louisville, Kentucky and wireless cable channel
         rights in Naples, Sebring and Miami, Florida. Several closings have
         occurred under this agreement during 1997 and 1998. The Company
         completed the most recent closing on April 23, 1999 for cash
         consideration of approximately $2.7 million with respect to certain
         wireless cable channels in Louisville, Kentucky. Approximately $2.6
         million will be recorded as a gain in the second quarter of 1999. The
         Company expects to receive the $1.8 million in escrow funds from the
         1998 sale of the Lakeland Wireless system in July 1999 in the event no
         claims are made against the escrow. The Company may also close on
         wireless cable channels in Sebring and Naples, Florida prior to August
         12, 1999, if all closing conditions are satisfied. There can be no
         assurance the closing conditions will be satisfied and that the
         transaction will close. Upon satisfaction of certain conditions, the
         Company may also become entitled to receive additional compensation for
         wireless cable channel rights in Miami, Florida previously assigned to
         BellSouth. The receipt of such additional compensation for the Miami
         rights is not subject to restrictions on the closing date. Under the
         terms of the BellSouth Agreement, if the additional closings occur with
         respect to Naples, Sebring and Miami, Florida, the total gross proceeds
         are expected to be less than $8 million. There can be no assurance that
         all such closing conditions will be satisfied or that further proceeds
         will be received from BellSouth Wireless.

2.       SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation

                  The accompanying unaudited condensed consolidated financial
         statements have been prepared in accordance with generally accepted
         accounting principles 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 generally accepted accounting principles for complete
         financial statements. In the opinion of management, all adjustments
         (consisting of normal recurring adjustments) considered necessary for a
         fair presentation have been included. All significant intercompany
         accounts and transactions have been eliminated in consolidation.
         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 ending December 31, 1999. For further information, refer to the
         consolidated financial statements and footnotes thereto included in the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1998.

         Cash and Cash Equivalents

                  The Company considers all short-term investments with original
         maturities of 90 days or less to be cash equivalents. As of March 31,
         1999, cash equivalents principally consisted of money market funds,
         commercial paper, federal government/agency debt securities, and other
         short-term, investment-grade, interest-bearing securities. The carrying
         amounts reported in the balance sheet for cash and cash equivalents
         approximate the fair values of those assets.

                                       8
<PAGE>   9


         Restricted Escrowed Funds

                  Restricted escrowed funds as of March 31, 1999 and December
         31, 1998 represent a twelve-month escrow related to the Lakeland
         Wireless system sale, which occurred on July 15, 1998. These funds will
         be released when the Company and BellSouth Wireless jointly submit an
         instruction to the escrow agent for the release of such funds.

         Net Loss Per Share

                  Basic and diluted net loss per share is computed by dividing
         income available to common stockholders by the weighted average number
         of common shares outstanding for the period. Options and warrants to
         purchase shares of Common Stock were not included in the computation of
         loss per share as the effect would be antidilutive. As a result, the
         basic and diluted loss per share amounts are identical.

         Stock Option Plan

                  The Company follows variable plan accounting on certain
         options repriced in April 1998 under its Stock Option Plan. Variable
         plan accounting requires that the Company record compensation expense
         if the market price of the Company's Common Stock exceeds the repriced
         exercise price of certain of the options. For the quarter ended March
         31, 1999, the Company recorded compensation expense of approximately
         $226,000 related to vested stock options and a deferred compensation
         equity adjustment related to unvested stock options of approximately
         $71,000. The amount of compensation expense and deferred compensation
         was based upon the difference between the quoted value of the stock on
         March 31, 1999 and the applicable exercise price of certain options
         repriced in April 1998. If the quoted price of the stock in future
         periods is greater than the quoted price on March 31, 1999, the Company
         will incur additional compensation expense and deferred compensation
         equity adjustments related to these repriced options. Based upon the
         transaction price of $6.50 per Common Share with Sprint and the
         outstanding stock options as of March 31, 1999, the Company estimates
         that the incremental compensation expense and deferred compensation
         equity adjustments could be approximately $1 million and $300,000,
         respectively.

         New Accounting Pronouncements

                  The Company is required to adopt Statement of Financial
         Accounting Standards No. 133 "Accounting for Derivative Instruments and
         Hedging Activities" for fiscal years beginning after June 30, 1999.

3.       DEBT
                  Long-term debt at March 31, 1999 consisted of the following
         (in thousands):

<TABLE>
<CAPTION>
         <S>                                                                                             <C>
         2004 Notes..............................................................................        $138,977
         2005 Notes..............................................................................         109,269
         Notes payable...........................................................................             173
         Capital leases..........................................................................             182
                                                                                                         --------
             Total...............................................................................         248,601
             Less current portion................................................................             164
                                                                                                         --------
             Long-term debt......................................................................        $248,437
                                                                                                         ========
</TABLE>


                  During 1997, the Company entered into a twelve-month $17.0
         million credit facility (the "Credit Facility") with a bank. At closing
         of the Credit Facility, the Company also delivered 4,500 bond
         appreciation rights ("BARs"). During 1997, the Credit Facility was
         repaid and terminated.

                  The BARs remain outstanding as of March 31, 1999. Amounts
         payable in connection with the BARs are based upon the appreciation in
         price of $4.5 million face value of the Company's 2004 Notes. The
         change 


                                       9
<PAGE>   10


         in the value of each BAR, when it occurs, is reflected as interest
         expense in the accompanying financial statements as calculated by the
         difference between the market value of the 2004 Notes at the balance
         sheet date less $290. The BARs are exercisable after the earlier of
         June 15, 1999 or the occurrence of an event of default under the 2004
         Notes. The payment due upon exercise of each BAR is equal to the market
         price of each 2004 Note on the valuation date less $290. The net value
         of the BARs is payable to holders of the BARs in cash. As of March 31,
         1999, the Company had no accrued liability associated with the BARs as
         the market price of the 2004 Notes was below $290. As of the date of
         this filing, the estimated liability of the Company in connection with
         the BARs is approximately $3.5 million.

                  Pursuant to the Merger Agreement, upon the written request of
         ATI, Sprint has agreed to loan funds to the Company, in an aggregate
         amount not to exceed $3.5 million, for the purpose of funding amounts
         required to be paid by ATI to the holders of ATI's BARs upon the
         exercise thereof. Interest will accrue on such loans at a rate of 10%
         per annum, and the aggregate principal amount of such loans, together
         with accrued interest thereon, will be due and payable on the first
         anniversary of any termination of the Merger Agreement; provided, that,
         if (i) the Company enters into an acquisition agreement related to an
         alternative transaction and (ii) the Merger Agreement is terminated by
         Sprint because ATI's Board withdrew, modified or changed in a manner
         adverse to Sprint or Acquisition its approval or recommendation of the
         Merger Agreement or the Merger with Sprint or recommended such
         alternative transaction or executed an agreement relating to such
         alternative transaction with a person or entity other than Sprint,
         Acquisition or their affiliates, then the entire principal amount of
         such loans, together with accrued interest thereon, will be due and
         payable upon demand as of the date of such termination. All such loans
         made to ATI will be secured by the outstanding capital stock of a
         subsidiary of ATI which holds rights to use licenses to provide
         wireless cable services to not less than 150,000 protected service area
         footprint households.

                  The Merger with Sprint, if consummated, will constitute a
         Change of Control as defined by the Indentures. A Change of Control
         gives each holder of the notes the right to require the Company to
         purchase all or part of such holder's notes ("Put Rights"). The
         purchase price is 101% of the Accreted Value of the notes on any
         repurchase date prior to June 15, 1999 (with respect to the 2004 Notes)
         or August 15, 2000 (with respect to the 2005 Notes). If purchased at
         later dates, the purchase price is 101% of the principal amount at
         stated maturity, plus any accrued and unpaid interest. With respect to
         the 2005 Notes, if the Change of Control occurs prior to August 15,
         2000, the Company may elect to redeem all, but not less than all, of
         the 2005 notes at a redemption price equal to 100% of the accreted
         value plus a "Make-Whole-Premium" (the "Call Rights"). The Make-Whole
         Premium of a 2005 Note is the greater of (i) 1% of the outstanding
         accreted value of the note, or (ii) the excess of (A) the present value
         of the remaining interest, premium and principal payments due on the
         note as if it were redeemed on August 15, 2000, computed using a
         discount rate equal to the Treasury Rate plus 75 basis points, over (B)
         the outstanding accreted value of the note.

                  The 2004 Notes and 2005 Notes also have redemption privileges
         after June 15, 1999 and August 15, 2000, respectively, generally as a
         premium to the face amount of each note.

4.       COMMITMENTS AND CONTINGENCIES

         Litigation

                  The Company owns all the partnership interests in Fresno MMDS
         Associates ("FMA"). On or about December 24, 1997, Peter Mehas, Fresno
         County Superintendent of Schools, filed an action against FMA, the
         Company and others in an action entitled Peter Mehas, Fresno County
         Superintendent of Schools v. Fresno Telsat, Inc., an Indiana
         Corporation, et al., Superior Court of the State of California, Fresno,
         California. The complaint alleges that a channel lease agreement
         between FMA and the Fresno County school system has expired. The
         plaintiff seeks a judicial declaration that the lease has expired and
         that the defendants, including the Company, hold no right, title or
         interest in the channel capacity which is the subject of the lease. The
         parties have conducted substantial discovery. The Company removed the
         case to


                                       10
<PAGE>   11



         federal court in December 1998. Plaintiff filed a motion to remand the
         case to state court. The motion was granted. No trial date has been set
         in the case. The Company denies that the channel lease agreement has
         expired.
                  On or about October 13, 1998, Bruce Merrill and Virginia
         Merrill, as Trustees of the Merrill Revocable Trust dated as of August
         20, 1982, filed a lawsuit against the Company entitled Bruce Merrill
         and Virginia Merrill, as Trustees of the Merrill Revocable Trust dated
         as of August 20, 1982 v. American Telecasting, Inc., in the United
         States District Court for the District of Colorado. The complaint
         alleges that the Company owes the plaintiffs $1,250,000 due on a note
         which matured on September 15, 1998. The plaintiffs seek payment of
         $1,250,000 plus attorney fees and interest. The Company has answered
         the complaint and denied any liability. Limited discovery has occurred
         and a trial preparation schedule has been ordered by the court.

                  The Company is occasionally a party to other legal actions
         arising in the ordinary course of its business, the ultimate resolution
         of which cannot be ascertained at this time. However, in the opinion of
         management, resolution of such matters will not have a material adverse
         effect on the Company.

         Executive and Key Employee Retention Program

                  Effective July 1, 1998, the Board of Directors approved a
         Retention and Achievement Incentive Program ("Executive Program") for
         certain of its executive officers. Under the Executive Program, the
         executive officers of the Company are each eligible to receive cash
         retention payments of $40,000-$50,000 if such individuals remain in the
         Company's employment through June 30, 1999, or if the employment of
         such individuals with the Company is terminated by the Company without
         cause before June 30, 1999. The maximum aggregate retention payments
         that are payable under the Executive Program are approximately
         $320,000. In addition, the Executive Program also provides for the
         payment of achievement incentives to certain of these executives if the
         average closing price of the Company's Common Stock is $2.00 per share
         or higher for the last 20 trading days of June 1999. One-half of the
         achievement incentives are payable if such average closing price is
         $2.00 per share or higher, and the full achievement incentives are
         payable if such average closing price per share is $3.00 per share or
         higher. If achievement incentives are payable, the first 40% of such
         incentives are payable by the Company in cash, and the remaining 60%
         may be paid in cash or Common Stock, or a combination thereof, at the
         discretion of the Company. Appropriate adjustments in the achievement
         incentives will be made to give effect to changes in the Common Stock
         resulting from subdivisions, consolidations or reclassifications of the
         Common Stock, the payment of dividends or other distributions by the
         Company (other than in the ordinary course of business), mergers,
         consolidations, combinations or similar transactions or other relevant
         changes in the capital of the Company. The maximum aggregate
         achievement payments that are payable under the Executive Program are
         approximately $910,000. The pending Merger with Sprint is likely to
         result in the distribution of the approximately $910,000 in achievement
         incentives. Certain executive officers covered under the Executive
         Program who do not have employment contracts with the Company have
         severance benefits ranging from nine to twelve months and total a
         maximum of approximately $320,000. Amounts payable under the Executive
         Program are independent of any obligations of the Company, including
         severance payments, under employment agreements or other bonus
         programs. The Executive Program is evidenced by agreements between the
         Company and each executive officer. No amounts have been paid by the
         Company under the Executive Program.

                  The Board of Directors also approved, effective July 1, 1998,
         a Retention Program ("Key Employee Program") for key employees (other
         than executive officers) as designated by the Chief Executive Officer.
         Under the Key Employee Program, certain key employees selected to date
         are each eligible to receive cash retention payments of $10,000-$30,000
         if such individuals remain in the Company's employment through June 30,
         1999, or if the employment of such individuals with the Company is
         terminated by the Company without cause before June 30, 1999. The
         maximum aggregate retention payments presently payable under the Key
         Employee Program are approximately $280,000. In addition, the Key
         Employee Program offers severance benefits ranging from three to nine
         months of base salary to certain key employees in the event that their
         employment with the Company is terminated without 


                                       11
<PAGE>   12

         cause on or before December 31, 1999. The maximum aggregate termination
         payments presently payable under the Key Employee Program are
         approximately $300,000. The Key Employee Program is evidenced by
         agreements between the Company and each key employee. Approximately
         $80,000 has been paid out to date under the Key Employee Program.

                  As of March 31, 1999, $450,000 was accrued for retention
         payments under the Executive Program and Key Employee Program. As of
         March 31, 1999, no amounts were accrued for achievement incentives
         under the Executive Program as the stock was trading below the
         achievement thresholds, and no amounts were accrued for severance
         benefits for the Executive Program and Key Employee Program. All
         amounts for the achievement incentives will be accrued by June 30,
         1999.

                  The Board of Directors approved, effective as of July 1, 1999,
         an additional Retention Program ("1999 Key Employee Retention Program")
         for key employees, including certain executive officers, as approved by
         the Board of Directors. Under the 1999 Key Employee Retention Program,
         certain key employees selected to date will be eligible to receive cash
         retention payments of $10,000-$25,000 if such individuals remain in the
         Company's employment through June 30, 2000. The maximum aggregate
         retention payments presently payable under the 1999 Key Employee
         Retention Program is approximately $410,000. The 1999 Key Employee
         Retention Program does not offer any additional severance benefits
         beyond those provided under the Key Employee Program.

                  No retention, achievement incentives or termination payments
         are payable to any executive officer or key employee who voluntarily
         terminates employment with the Company or whose employment is
         terminated by the Company for cause.

                  The Board of Directors of the Company has authorized cash
         achievement bonuses payable upon the consummation of the Merger to Mr.
         Hostetler, Mr. Sentman, Mr. Holmes and certain other officers and
         employees to be selected by the board. The aggregate amount of payments
         which may be made under this program is a maximum of $2.5 million,
         which is based on the total transaction value of the Merger with
         Sprint. The Company has not yet determined the extent to which the
         anticipated payments to Messrs. Hostetler, Sentman and Holmes, or
         others, constitute "excess parachute payments" within the meaning of
         the Internal Revenue Code Section 280G. These costs will be fully
         accrued and expensed, on or before the date the Merger is closed.

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

                  All statements contained in this filing and elsewhere (such as
         in reports, other filings with the Securities and Exchange Commission,
         press releases, presentations and communications by the Company or its
         management) that are not historical facts, including but not limited to
         statements regarding the pending Merger and the Company's plans for
         future development and operation of its business, are based on current
         expectations. These statements are forward-looking in nature and
         involve a number of known and unknown risks and uncertainties. Actual
         results may differ materially. Among the factors that could cause
         actual results, performance, achievements, plans and objectives to
         differ materially are the following: a lack of sufficient capital to
         finance the Company's business strategy on terms satisfactory to the
         Company; pricing pressures which could affect demand for the Company's
         service; changes in labor, equipment and capital costs; the Company's
         inability to develop and implement new services such as wireless
         broadband access and high-speed Internet access; the Company's
         inability to obtain the necessary authorizations from the Federal
         Communications Commission for such new services; competitive factors,
         such as the introduction of new technologies and competitors into the
         wireless communications business; the failure to complete the Merger
         with Sprint or otherwise to attract strategic partners; general
         business and economic conditions; inexperience of management in
         deploying a wireless broadband access business; and the other risk
         factors described from time to time in the Company's reports filed with
         the Securities and Exchange Commission. The Company wishes to caution
         readers not to place undue reliance on any such forward-looking
         statements, which statements are made pursuant to the Private
         Securities Litigation Reform Act of 1995, and as such, speak only as of
         the date made. The Company expressly disclaims any 



                                       12
<PAGE>   13


         obligation or undertaking to update or revise any forward-looking
         statements to reflect any changes in events or circumstances or in the
         Company's expectations or results. Statements regarding parties other
         than the Company are based upon representations of such other parties.

         INTRODUCTION

                  On April 26, 1999, ATI, Acquisition and Sprint entered into an
         Agreement and Plan of Merger, pursuant to which Acquisition would be
         merged with and into ATI, with ATI being the surviving corporation of
         such Merger, upon the terms and subject to the conditions of the Merger
         Agreement. After the completion of the Merger, the Company would be
         wholly owned by Sprint.

                  At the effective time of the Merger, each outstanding share of
         the Company's Class A Common Stock would be converted into the right to
         receive $6.50 in cash. The consummation of the Merger is subject to
         certain conditions, including approval by the stockholders of ATI and
         the receipt of all necessary regulatory approvals. Pursuant to the
         Merger Agreement, ATI adopted a Stockholder Rights Plan (see Part II,
         Item 2). In accordance with the Merger Agreement, ATI will prepare and
         file a proxy statement to be mailed to stockholders in connection with
         calling a special meeting of the stockholders of ATI to vote on the
         Merger Agreement. In addition to stockholder approval, the Merger is
         subject to, among other conditions, the receipt of all necessary
         regulatory approvals, including approvals pursuant to the
         Communications Act of 1934, as amended, and the Hart-Scott-Rodino
         Antitrust Improvements Act of 1976, as amended. If the stockholders of
         ATI approve the Merger Agreement and the other closing conditions are
         timely met, the Merger is expected to close during the third quarter of
         1999.

         Business Strategy

                   The Company's principal business strategy is to pursue
         implementation of a Wireless Broadband Access ("WBA") capability that
         it believes will eventually be the best use of the wireless cable
         spectrum. The Company believes that market, technological and
         regulatory developments are creating an opportunity for the current
         wireless cable spectrum to be used to serve future customers with
         fixed, two-way, high-speed data and telephony services. The Company is
         not presently offering any WBA services. A key element of the Company's
         principal business strategy has been to seek a relationship with a
         strategic partner who would benefit from this direct broadband "last
         mile" access and facilitate access to technology, markets,
         infrastructure and capital. Over recent years, the Company has engaged
         in discussions with a variety of potential strategic partners,
         including several telecommunications, software, Internet service
         providers and equipment companies, regarding the possibility of an
         investment in or business combination with the Company.

                  The Company's ability to introduce WBA services on a
         commercial basis to future customers depends on a number of factors,
         including the completion of the pending Merger with Sprint, the success
         of the Company's development efforts, competitive factors such as the
         introduction of new technologies, the availability of appropriate
         transmission and reception equipment on satisfactory terms, the
         expertise of the Company's management, and the Company's ability to
         obtain the necessary regulatory changes and approvals in a timely
         fashion. There is also uncertainty regarding the degree of subscriber
         demand for these services, especially at pricing levels at which the
         Company can achieve an attractive return on investment. Moreover, the
         Company expects that the market for any such services will be extremely
         competitive.

                  During the first quarter of 1999, the Company continued
         operating its Developed Markets principally as an analog video
         subscription television business and offering high-speed Internet
         service in three existing markets. The Company is continuing to manage
         its analog video business to maximize operating cash flow while
         pursuing its WBA business strategy, in part, by not investing the
         capital resources necessary to replace all subscribers who choose to
         stop receiving the Company's service ("Subscriber Churn"). As a result,
         the Company has not been increasing its analog video subscriber levels.

                                       13
<PAGE>   14



         Wireless Broadband Access Strategy

                  The execution of the Company's WBA business strategy has two
         principal elements. First, pursue the regulatory, technology and
         strategic investment activities necessary to shift the Company's
         existing analog video business to WBA services. Second, manage the
         Company's existing analog video business to preserve limited cash
         resources and afford the Company additional time to pursue development
         of WBA services. As part of this second element, the Company has not
         been increasing its analog video subscriber levels.

                  Regulatory developments have begun to benefit the WBA business
         strategy. In September 1998 the FCC issued regulations that permit
         two-way use of the wireless cable spectrum. However, the Company, along
         with other entities, has petitioned the FCC to refine its two-way rules
         to permit simpler deployment of commercial operations under the two-way
         rules. Actual implementation of two-way commercial businesses will
         require, among other factors, some changes in the existing rules along
         with filing "windows" by the FCC to submit two-way license
         applications.

                  Another component of the WBA business strategy has been the
         development of technology. There is presently no commercially available
         point-to-multipoint equipment for both two-way data and telephony over
         wireless cable spectrum. In 1997, the Company began working with
         certain equipment vendors and system integrators to construct and test
         broadband, two-way wireless technology to provide "last mile"
         connectivity over wireless cable spectrum for both high-speed data and
         telephony. As a part of this effort, the Company established technology
         trials in Eugene, Oregon and Seattle, Washington and has been testing
         various technologies. The technology trials are not presently intended
         to become full commercial WBA operations. The Company believes that
         point-to-multipoint equipment required for implementing its WBA
         business strategy will not be commercially available until late 1999 at
         the earliest.

                  The third component of the WBA business strategy has been to
         enter into a relationship with one or more strategic partners that
         facilitates access to markets, technologies, products, capital and
         infrastructure. The consummation of the Merger with Sprint would
         achieve this third component.

                  The WBA business strategy has many risks and uncertainties,
         including but not limited to, not receiving the necessary FCC
         authorizations for two-way licenses upon terms acceptable to the
         Company, not having access to two-way equipment for wireless cable
         spectrum upon commercially acceptable terms, not having access to
         sufficient channel capacity upon commercially acceptable terms to
         operate the WBA business, not having sufficient capital resources to
         implement a WBA business strategy, not having sufficient capital
         resources to operate the current analog video subscription business or
         to meet the Company's obligations under its high-yield notes and not
         having the necessary management skill or human resources.

                  There is also uncertainty regarding the degree of subscriber
         demand for WBA services, especially at pricing levels at which the
         Company can achieve an attractive return on investment. There can be no
         assurance that there will be sufficient subscriber demand for such
         services to justify the cost of their introduction, or that the Company
         will be successful in competing against existing or new competitors in
         the market for such broadband services. The Company expects that the
         market for any such services will be extremely competitive.

                                       14
<PAGE>   15




         LIQUIDITY AND CAPITAL RESOURCES

         Sources and Uses of Funds

                  The Company currently estimates costs related to the pending
         Merger with Sprint to be approximately $9.4 million, consisting
         primarily of approximately $6.0 million in financial advisory, legal
         and other costs and approximately $3.4 million in employee achievement
         bonuses. The Company anticipates funding these costs from its existing
         unrestricted cash and investment balances, proceeds from additional
         closings under the BellSouth Agreement, if such closings occur,
         proceeds from other potential asset sales, and, if the Merger occurs,
         funding from Sprint.

                  If the Merger is not completed, the trading price of the
         Company's Common Stock could decline and costs incurred in connection
         with the Merger would negatively impact results from operations. In
         addition, costs incurred in connection with the Merger and a
         transaction termination fee of $11 million, if payable, would
         negatively impact results from operations. The consummation of the
         Merger is subject to the satisfaction or waiver of a number of
         conditions, several of which are beyond the control of the Company and
         Sprint. In addition, the parties to the Merger Agreement may terminate
         the Merger Agreement under certain circumstances. As a result, the
         Company can not be sure that the Merger will be completed on the terms
         set forth in the Merger Agreement, if at all.

                  The Company has outstanding 2004 Notes and 2005 Notes. Both
         the 2004 Notes and the 2005 Notes were issued pursuant to Indentures
         which contain certain restrictive covenants and limitations. Among
         other things, the Indentures limit the incurrence of additional debt,
         limit the making of restricted payments (as defined) including the
         declaration and/or payment of dividends, place limitations on certain
         other payments by ATI's subsidiaries, prohibit ATI and its subsidiaries
         from engaging in any business other than the transmission of video,
         voice and data and related businesses and services, and place
         limitations on liens, certain asset dispositions and merger/sale of
         assets activity.

                  The Indentures prohibit the Company from merging unless
         certain conditions are met. The conditions are (i) Either (a) the
         Company will be the surviving person, or (b) the merged entity is a
         United States corporation and it expressly assumes by a supplemental
         indenture all the obligations of the Company under the 2004 Notes and
         2005 Notes and the Indentures; (ii) immediately after giving effect to
         the merger on a pro forma basis no default or event of default as
         described in the Indentures shall have occurred and be continuing; and
         (iii) the surviving entity, after giving effect to the merger on a pro
         forma basis, is able to incur additional debt (other than Permitted
         Debt, as defined in the Indentures) under the debt limitations in
         Section 1008, and the consolidated net worth of the surviving entity is
         equal to or greater than that of the Company immediately prior to the
         merger.

                  The Merger with Sprint, if consummated, will constitute a
         Change of Control as defined by the Indentures. A Change of Control
         gives each holder of the notes the right to require the Company to
         purchase all or part of such holder's notes ("Put Rights"). The
         purchase price is 101% of the Accreted Value of the notes on any
         repurchase date prior to June 15, 1999 (with respect to the 2004 Notes)
         or August 15, 2000 (with respect to the 2005 Notes). If purchased at
         later dates, the purchase price is 101% of the principal amount at
         stated maturity, plus any accrued and unpaid interest.

                  With respect to the 2005 Notes, if the Change of Control
         occurs prior to August 15, 2000, the Company may elect to redeem all,
         but not less than all, of the 2005 notes at a redemption price equal to
         100% of the accreted value plus a "Make-Whole-Premium" (the "Call
         Rights"). The Make-Whole Premium of a 2005 Note is the greater of (i)
         1% of the outstanding accreted value of the note, or (ii) the excess of
         (A) the present value of the remaining interest, premium and principal
         payments due on the note as if it were redeemed on August 15, 2000,
         computed using a discount rate equal to the Treasury Rate plus 75 basis
         points, over (B) the outstanding accreted value of the note.


                                       15
<PAGE>   16


                  In 1999, additional obligations for capital expenditures
         include purchases of channels and equipment for construction of
         channels pursuant to pre-existing commitments. Cash resources available
         to apply to the Company's cash obligations include existing cash and
         investment balances, proceeds from additional closings under the
         BellSouth Agreement, if such closings occur, and proceeds, if any, from
         other asset sales.

                  Cash interest payments on the 2004 Notes and 2005 Notes are
         required to commence on December 15, 1999 and February 15, 2001,
         respectively. The aggregate interest payments on the 2004 Notes and the
         2005 Notes are approximately $10.5 million, $21.0 million and $40.7
         million in 1999, 2000 and 2001, respectively. Pursuant to the Merger
         Agreement, either ATI or Sprint may terminate the Merger Agreement if
         on September 30, 1999 (or October 31, 1999 if the only condition to the
         closing of the Merger remaining unfulfilled is the receipt of any
         required approval by the FCC) (the "End Date"), the effective date of
         the Merger has not occurred, provided however, that Sprint has the
         option to extend the End Date to December 31, 1999 by delivering to the
         Company on or prior to September 30, 1999 a notice by which Sprint
         agrees to loan to the Company up to $13 million, in cash, for the
         purpose, among other things, of paying interest due in December 1999 on
         the 2004 Notes. Interest would accrue on such loan at a rate of 10% per
         annum, and the aggregate principal amount of such loan, together with
         accrued interest thereon, would be due and payable on the first
         anniversary of any termination of the Merger Agreement, provided, that,
         if (i) the Merger Agreement is terminated in accordance with the terms
         of the Merger Agreement (other than as a result of a breach of the
         Merger Agreement by Sprint or Acquisition) and (ii) the Company enters
         into an acquisition agreement related to an alternative transaction
         that would, if consummated in accordance with its terms, provide to the
         Company or the stockholders ATI a per share cash consideration equal to
         or greater than 90% of the consideration that would have been received
         in the Merger, then the entire principal amount of such loans, together
         with accrued interest thereon, would be due and payable upon demand as
         of the date of such termination. Any such loans made to the Company
         would be secured by the outstanding capital stock of a subsidiary of
         ATI which holds rights to use licenses to provide wireless cable
         services to not less than 500,000 protected service area footprint
         households with at least twenty multichannel multipoint distribution
         service and multipoint distribution service stations and at least
         twenty instructional television fixed service channels.

                  During 1997, the Company entered into a twelve-month $17.0 
         million credit facility (the "Credit Facility") with a bank. At closing
         of the Credit Facility, the Company delivered 4,500 BARs. During 1997,
         the Credit Facility was repaid and terminated.

                  The BARs remain outstanding as of March 31, 1999. Amounts
         payable in connection with the BARs are based upon the appreciation in
         price of $4.5 million face value of the Company's 2004 Notes. The
         change in the value of each BAR, when it occurs, is reflected as
         interest expense in the accompanying financial statements as calculated
         by the difference between the market value of the 2004 Notes at the
         balance sheet date less $290. The BARs are exercisable after the
         earlier of June 15, 1999 or the occurrence of an event of default under
         the 2004 Notes. The payment due upon exercise of each BAR is equal to
         the market price of each 2004 Note on the valuation date less $290. The
         net value of the BARs is payable to holders of the BARs in cash. As of
         March 31, 1999, the Company had no accrued liability associated with
         the BARs as the market price of the 2004 Notes was below $290. As of
         the date of this filing, the estimated liability of the Company in
         connection with the BARs is approximately $3.5 million.

                  Pursuant to the Merger Agreement, upon the written request of
         ATI, Sprint has agreed to loan funds to the Company, in an aggregate
         amount not to exceed $3.5 million, for the purpose of funding amounts
         required to be paid by ATI to the holders of ATI's BARs upon the
         exercise thereof. Interest will accrue on such loans at a rate of 10%
         per annum, and the aggregate principal amount of such loans, together
         with accrued interest thereon, will be due and payable on the first
         anniversary of any termination of the Merger Agreement; provided, that,
         if (i) the Company enters into an acquisition agreement related to an
         alternative transaction and (ii) the Merger Agreement is terminated by
         Sprint because ATI's Board withdrew, modified or changed in a manner
         adverse to Sprint or Acquisition its approval or recommendation of the
         Merger 


                                       16
<PAGE>   17


         Agreement or the Merger with Sprint or recommended such alternative
         transaction or executed an agreement relating to such alternative
         transaction with a person or entity other than Sprint, Acquisition or
         their affiliates, then the entire principal amount of such loans,
         together with accrued interest thereon, will be due and payable upon
         demand as of the date of such termination. All such loans made to ATI
         will be secured by the outstanding capital stock of a subsidiary of ATI
         which holds rights to use licenses to provide wireless cable services
         to not less than 150,000 protected service area footprint households.

                  As a result of certain limitations contained in the Indentures
         relating to the 2004 Notes and the 2005 Notes, the Company's total
         borrowing capacity outside the 2004 Notes and the 2005 Notes is
         currently limited to $17.5 million (approximately $355,000 of which had
         been utilized as of March 31, 1999). Although the Company had the
         ability under the Indentures to borrow an additional $17.1 million as
         of March 31, 1999, the Company does not presently intend to incur any
         additional bank or other borrowings other than the possible loans from
         Sprint, because its cash resources are sufficient to meet its near term
         cash requirements.

                  The Company has experienced negative cash flow from operations
         in each year since inception. Although certain of the Company's more
         established systems currently generate positive cash flow from
         operations, the sale of six operating systems to BellSouth Wireless
         since August 1997, and the Company's strategy to not replace all
         Subscriber Churn has resulted in a decline in revenue and operating
         cash flow. The Company expects this decline in revenue and cash flow to
         continue under the current wireless analog video operations. The
         Company's high-speed Internet access business, technology trials in
         Eugene, Oregon and Seattle, Washington, and activities associated with
         the pending Merger with Sprint also have been and are expected to
         continue to consume cash resources. Unless and until the Merger with
         Sprint is completed, the Company expects to utilize its current capital
         resources and the sale of assets to satisfy its working capital and
         capital expenditure needs.

                  With the introduction of the high-speed Internet access
         business and the development of a WBA business, the Company may
         experience increased competition for the renewal of channel lease
         agreements. As a result, the Company could lose channels or incur
         higher costs to renew and retain its existing channels. Furthermore,
         certain of the Company's channel lease agreements permit only analog
         technologies. Thus, the deployment of businesses such as WBA and
         high-speed Internet access that utilize digital technologies may
         require renegotiations of these channel leases, which could also result
         in increased operating costs.

         Year 2000

                  Many computer systems in use today were designed and developed
         using two digits, rather than four, to specify the year. As a result,
         such systems will recognize the Year 2000 as "00." This could cause
         many computer applications to fail completely or to create erroneous
         results unless corrective measures are taken. The Company utilizes
         software and related computer technologies essential to its operations,
         such as its accounting and subscriber management (including customer
         invoicing) systems, headend equipment, Internet equipment, phone
         systems and network hardware and software servers that will be affected
         by the Year 2000 issue.

                  The Company continues to assess the impact of the Year 2000 on
         its operations using internal staff. The Company is following a six
         step process to evaluate its state of readiness for Year 2000
         compliance -- awareness, inventory, assessment, remediation, testing
         and risk management. To date, the Company has substantially completed
         its inventory/assessment phase with some remediation and testing taking
         place. The inventory/assessment phase includes the accounting software,
         subscriber management systems, headend equipment, Internet equipment,
         phone systems and network hardware and software servers. The Company
         implemented new accounting software during 1998 and the software has
         been certified as Year 2000 compliant by the vendor. The Company
         presently intends to modify its principal subscriber management system
         with a Year 2000 patch from the current vendor by approximately the end



                                       17
<PAGE>   18


         of the third quarter of 1999. The Company expects to test and implement
         this Year 2000 patch on or before the end of 1999.

                  It is possible that the Company will be adversely affected by
         Year 2000 problems encountered by key customers and suppliers. The
         Company's most significant suppliers are its providers of video
         programming, and the Company is soliciting comments from its major
         programmers regarding their Year 2000 compatibility. To date the
         Company has not received responses from all its programmers, but it
         will continue to pursue these vendors in order to obtain the necessary
         information on their Year 2000 compliance.

                  The Company presently estimates that it will spend
         approximately $1.0 to $1.2 million to remediate or replace existing
         accounting, subscriber management, hardware and other systems over the
         course of this project. These costs relate to the replacement of the
         existing accounting software, modification of the principal subscriber
         management system, and adaptation of the headend and addressable
         set-top controller systems. The Company will refine its cost estimates
         as testing and remediation proceeds and as additional information
         becomes available. To date, the Company has spent approximately
         $800,000 in remediating Year 2000 issues for its accounting software.
         The costs of the Company's Year 2000 project and the time frame for its
         completion are based on current estimates. These estimates include
         assumptions about future events, including the timing and effectiveness
         of third-party remediation plans and other factors. The Company gives
         no assurance that these estimates will be achieved, and actual results
         could differ materially from those currently expected.

                  The Company believes that the likely worst case scenario would
         be the failure of the Company's subscriber management system addressing
         the Company's headend equipment, which sends the signals to the
         addressable controller units, as well as the addressable controller
         units themselves. The controller units communicate to the customer's
         set-top box. The loss of the ability to transmit such signals would
         result in the loss of customers and related revenues, among other
         things.

                  The Company does not presently have a contingency plan in the
         event its systems are not Year 2000 compliant. The Company will
         routinely reassess its likely worst case scenario and possible
         responses as new information becomes available and it intends to have
         contingency plans in place. Such contingency plans could include using
         back up systems that do not rely on computers. Although the Company's
         remediation plan for Year 2000 is not yet completed, the Company is not
         aware of any critical systems that cannot be made Year 2000 compliant.

         Executive and Key Employee Retention Program

                  Effective July 1, 1998, the Board of Directors approved a
         Retention and Achievement Incentive Program ("Executive Program") for
         certain of its executive officers. Under the Executive Program, the
         executive officers of the Company are each eligible to receive cash
         retention payments of $40,000-$50,000 if such individuals remain in the
         Company's employment through June 30, 1999, or if the employment of
         such individuals with the Company is terminated by the Company without
         cause before June 30, 1999. The maximum aggregate retention payments
         that are payable under the Executive Program are approximately
         $320,000. In addition, the Executive Program also provides for the
         payment of achievement incentives to certain of these executives if the
         average closing price of the Company's Common Stock is $2.00 per share
         or higher for the last 20 trading days of June 1999. One-half of the
         achievement incentives are payable if such average closing price is
         $2.00 per share or higher, and the full achievement incentives are
         payable if such average closing price per share is $3.00 per share or
         higher. If achievement incentives are payable, the first 40% of such
         incentives are payable by the Company in cash, and the remaining 60%
         may be paid in cash or Common Stock, or a combination thereof, at the
         discretion of the Company. Appropriate adjustments in the achievement
         incentives will be made to give effect to changes in the Common Stock
         resulting from subdivisions, consolidations or reclassifications of the
         Common Stock, the payment of dividends or other distributions by the
         Company (other than in the ordinary course of business), mergers,

                                       18
<PAGE>   19


         consolidations, combinations or similar transactions or other relevant
         changes in the capital of the Company. The maximum aggregate
         achievement payments that are payable under the Executive Program are
         approximately $910,000. The pending Merger with Sprint is likely to
         result in the distribution of the approximately $910,000 in achievement
         incentives. Certain executive officers covered under the Executive
         Program who do not have employment contracts with the Company have
         severance benefits ranging from nine to twelve months and total a
         maximum of approximately $320,000. Amounts payable under the Executive
         Program are independent of any obligations of the Company, including
         severance payments, under employment agreements or other bonus
         programs. The Executive Program is evidenced by agreements between the
         Company and each executive officer. No amounts have been paid by the
         Company under the Executive Program.

                  The Board of Directors also approved, effective July 1, 1998,
         a Retention Program ("Key Employee Program") for key employees (other
         than executive officers) as designated by the Chief Executive Officer.
         Under the Key Employee Program, certain key employees selected to date
         are each eligible to receive cash retention payments of $10,000-$30,000
         if such individuals remain in the Company's employment through June 30,
         1999, or if the employment of such individuals with the Company is
         terminated by the Company without cause before June 30, 1999. The
         maximum aggregate retention payments presently payable under the Key
         Employee Program are approximately $280,000. In addition, the Key
         Employee Program offers severance benefits ranging from three to nine
         months of base salary to certain key employees in the event that their
         employment with the Company is terminated without cause on or before
         December 31, 1999. The maximum aggregate termination payments presently
         payable under the Key Employee Program are approximately $300,000. The
         Key Employee Program is evidenced by agreements between the Company and
         each key employee. Approximately $80,000 has been paid out to date
         under the Key Employee Program.

                  As of March 31, 1999, $450,000 was accrued for retention
         payments under the Executive Program and Key Employee Program. As of
         March 31, 1999, no amounts were accrued for achievement incentives
         under the Executive Program as the stock was trading below the
         achievement thresholds, and no amounts were accrued for severance
         benefits for the Executive Program and Key Employee Program. All
         amounts for the achievement incentives will be accrued by June 30,
         1999.

                  The Board of Directors approved, effective as of July 1, 1999,
         an additional Retention Program ("1999 Key Employee Retention Program")
         for key employees, including certain executive officers, as approved by
         the Board of Directors. Under the 1999 Key Employee Retention Program,
         certain key employees selected to date will be eligible to receive cash
         retention payments of $10,000-$25,000 if such individuals remain in the
         Company's employment through June 30, 2000. The maximum aggregate
         retention payments presently payable under the 1999 Key Employee
         Retention Program is approximately $410,000. The 1999 Key Employee
         Retention Program does not offer any additional severance benefits
         beyond those provided under the Key Employee Program.

                  No retention, achievement incentives or termination payments
         are payable to any executive officer or key employee who voluntarily
         terminates employment with the Company or whose employment is
         terminated by the Company for cause.

                  The Board of Directors of the Company has authorized cash
         achievement bonuses payable upon the consummation of the Merger to Mr.
         Hostetler, Mr. Sentman, Mr. Holmes and certain other officers and
         employees to be selected by the board. The aggregate amount of payments
         which may be made under this program is a maximum of $2.5 million,
         which is based on the total transaction value of the Merger with
         Sprint. The Company has not yet determined the extent to which the
         anticipated payments to Messrs. Hostetler, Sentman and Holmes, or
         others, constitute "excess parachute payments" within the meaning of
         the Internal Revenue Code Section 280G. These costs will be fully
         accrued and expensed, on or before the date the Merger is closed.


                                       19
<PAGE>   20


         OTHER LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS AND LIMITATIONS

                  Both the 2004 Notes and the 2005 Notes were issued pursuant to
         Indentures which contain certain restrictive covenants and limitations.
         Among other things, the Indentures limit the incurrence of additional
         debt, limit the making of restricted payments (as defined) including
         the declaration and/or payment of dividends, place limitations on
         certain payments by the Company's subsidiaries, prohibit the Company
         and its subsidiaries from engaging in any business other than the
         transmission of video, voice and data and related businesses and
         services, and place limitations on liens, certain asset dispositions
         and merger/sale of assets activity.

                  Pursuant to certain restrictive covenants in the Indentures
         relating to the Company's 2004 Notes and 2005 Notes, Net Available
         Proceeds (as defined in the Indentures) from Asset Dispositions (as
         defined in the Indentures) from transactions other than BellSouth must
         be applied within 270 days of such closing: (1) first, to prepay or
         repay outstanding debt of the Company or any Restricted Subsidiary (as
         defined in the Indentures) to the extent the terms of the governing
         documents therefor require such prepayment (2) second, to the extent of
         any such Net Available Proceeds remaining after application thereof
         pursuant to item (1) above, to the acquisition of assets used in the
         transmission of video, voice and data and related businesses and
         services of the Company or a Restricted Subsidiary and (3) third, to
         the extent of any such Net Available Proceeds remaining after the
         application thereof pursuant to items (1) and (2) above, (i) first to
         prepay or repay all outstanding debt of the Company or any Restricted
         Subsidiary that prohibits purchases of the 2004 Notes or 2005 Notes and
         (ii) then, to the extent of any remaining Net Available Proceeds, to
         make an offer to purchase outstanding 2004 Notes and 2005 Notes at a
         purchase price equal to 100% of the accreted value thereof to any
         purchase date prior to maturity.

                  In May 1998, the Company received the consent of holders of
         the majority of outstanding 2004 Notes and 2005 Notes to amendments
         (the "Amendments") to certain provisions of the Indentures (the "Asset
         Disposition Covenants") which require that certain Net Available
         Proceeds from asset sales by the Company that were not used by the
         Company within 270 days following receipt to acquire certain new assets
         or to retire certain indebtedness be used to make a pro rata offer to
         purchase outstanding 2004 Notes and 2005 Notes at a purchase price
         equal to 100% of the accreted value thereof. The Amendments amended the
         Asset Disposition Covenants in the case of any and all Net Available
         Proceeds received by the Company from dispositions under the BellSouth
         Agreement that closed after May 7, 1998.

                  Pursuant to the Amendments, no later than 30 days after the
         aggregate amount of Net Available Proceeds from subsequent asset
         dispositions to BellSouth Wireless is greater than $5 million, the
         Company shall be obligated to utilize 57% of the amount of such Net
         Available Proceeds to make a subsequent required offer at a purchase
         price in cash equal to the greater of (i) $280.50 per $1,000 principal
         amount at maturity in the case of the 2004 Notes and $247.50 per $1,000
         principal amount at maturity in the case of the 2005 Notes and (ii) the
         market value of such notes.

                  The 43% of the Net Available Proceeds not to be utilized for
         such required offer to purchase, as well as the amount of the 57% of
         Net Available Proceeds to be used to purchase 2004 Notes and 2005 Notes
         pursuant to such required offer that is in excess of the amount
         required to purchase the 2004 Notes and 2005 Notes tendered by holders
         thereof, (the "Unencumbered Net Available Proceeds") shall not be
         subject to any such tender obligation and shall be freely available for
         use by the Company as it deems appropriate. The Amendments do not
         restrict the Company from using Unencumbered Net Available Proceeds for
         the purchase or other retirement of 2004 Notes and 2005 Notes on such
         terms as it determines to be appropriate.

                  In March 1997, the Company entered into the BellSouth
         Agreement with BellSouth Corporation and BellSouth Wireless which
         provides for the sale of all of the Southeastern Assets to BellSouth
         Wireless. The Southeastern Assets include operating wireless cable
         systems in Orlando, Lakeland, Jacksonville, Daytona Beach and Ft.
         Myers, Florida and Louisville, Kentucky and wireless cable channel
         rights in 

                                       20
<PAGE>   21



         Naples, Sebring and Miami, Florida. Several closings have occurred
         under this agreement during 1997 and 1998. The Company completed the
         most recent closing on April 23, 1999 for cash consideration of
         approximately $2.7 million with respect to certain wireless cable
         channels in Louisville, Kentucky. The Company expects to receive the
         $1.8 million in escrow funds from the 1998 sale of the Lakeland
         Wireless system in July 1999 in the event no claims are made against
         the escrow. The Company may also close on wireless cable channels in
         Sebring and Naples, Florida prior to August 12, 1999, if all closing
         conditions are satisfied. There can be no assurance the closing
         conditions will be satisfied and that the transaction will close. Upon
         satisfaction of certain conditions, the Company may also become
         entitled to receive additional compensation for wireless cable channel
         rights in Miami, Florida previously assigned to BellSouth. The receipt
         of such additional compensation for the Miami rights is not subject to
         restrictions on the closing date. Under the terms of the BellSouth
         Agreement, if the additional closings occur with respect to Naples,
         Sebring and Miami, Florida, the total gross proceeds are expected to be
         less than $8 million. There can be no assurance that all such closing
         conditions will be satisfied or that further proceeds will be received
         from BellSouth Wireless.

                  The aggregate proceeds from these BellSouth closings, and
         receipt of escrowed funds from a previous BellSouth closing, if they
         all occur, are anticipated to exceed $5 million. Once the aggregate
         proceeds from these closing exceeds $5 million, the Company will be
         required to make a tender offer for a portion of its outstanding 2004
         Notes and 2005 Notes in accordance with the amended Indentures.

                  The Amendments do not apply to net proceeds that may be
         received from dispositions of assets that the Company may undertake
         other than pursuant to the BellSouth Agreement, and with respect to
         such proceeds the Asset Disposition Covenants remain in effect.

                  In April 1999, the Company entered into an agreement with
         Antilles to sell the Company's wireless cable channel rights and
         operating assets in Billings, Montana, Grand Island, Nebraska and Rapid
         City, South Dakota for up to $6.2 million in cash. As of March 31,
         1999, these markets represented approximately 142,000 estimated
         households in the service area and served approximately 8,700
         subscribers. The transaction is contingent upon the grant by final
         order of the FCC of the assignment application for licenses owned and
         upon consents of channel lessors for licenses leased. The transaction
         is also subject to other customary closing conditions. The agreement
         will terminate if the transaction is not consummated by September 30,
         1999. The purchase price is subject to a downward adjustment for
         expected decreases in subscriber levels prior to closing. At closing,
         the Company will receive the adjusted closing price less $500,000 which
         will be held in escrow for one year for satisfaction of any
         indemnification obligations.

                  The Antilles transaction is not part of the BellSouth
         Agreement. As such, the proceeds from the sale of these assets is
         subject to certain restrictive covenants in the Indentures relating to
         the Company's 2004 Notes and 2005 Notes. Net Available Proceeds (as
         defined in the Indentures) from Asset Dispositions (as defined in the
         Indentures) from transactions other than BellSouth must be used in a
         tender offer for 2004 Notes and 2005 Notes at a purchase price equal to
         100% of the accreted value thereof to any purchase date prior to
         maturity unless applied within 270 days of such closing: (1) first, to
         prepay or repay outstanding debt of the Company or any Restricted
         Subsidiary (as defined) to the extent the terms of the governing
         documents therefore require such prepayment (2) second, to the extent
         of any such Net Available Proceeds remaining after application thereof
         pursuant to item (1) above, to the acquisition of assets used in the
         transmission of video, voice and data and related businesses and
         services of the Company or a Restricted Subsidiary and (3) third, to
         the extent of any such Net Available Proceeds remaining after the
         application thereof pursuant to items (1) and (2) above, to prepay or
         repay all outstanding debt of the Company or any Restricted Subsidiary
         that prohibits purchases of the 2004 Notes or 2005.

                  In March 1999, the Company entered into the AESCO agreement to
         acquire wireless cable channels in Portland, Oregon from AESCO for a
         fixed payment of $2.25 million plus a deferred payment based upon the
         price received in any further transfer of the channels within the next
         five years. In addition, the Company paid $250,000 on March 19, 1999 as
         consideration for a no-shop covenant. Payment of the 



                                       21
<PAGE>   22


         $2.25 million fixed portion of the purchase price to AESCO is
         contingent upon the Company's closing of sale transactions of other
         wireless cable assets other than the BellSouth Transaction for
         cumulative cash consideration of $5 million or more, and the FCC's
         grant by final order of the assignment application for the AESCO
         licenses. The agreement will terminate on March 15, 2000 if the
         transaction has not been completed.

                  The Company's capital expenditures, exclusive of acquisitions
         of wireless cable systems and additions to deferred license and leased
         license acquisition costs, during the three months ended March 31, 1999
         and 1998 were approximately $1.0 million and $4.9 million,
         respectively.

         RESULTS OF OPERATIONS

         Three Months Ended March 31, 1999 Compared to Three Months Ended 
         March 31, 1998

                  Service revenues decreased $2.3 million, or 18.6%, for the
         three months ended March 31, 1999 to $10.2 million, as compared to
         $12.5 million during the same period of 1998. The decrease in service
         revenues was primarily attributable to the loss of approximately 22,000
         subscribers as a result of the Company's strategy to not replace all of
         those customers who chose to stop receiving the Company's services
         ("Subscriber Churn"). Approximately $712,000 of the decrease is
         attributable to the sale of the Lakeland, Florida wireless system to
         BellSouth Wireless in July of 1998. The number of subscribers to the
         Company's wireless cable systems decreased to 102,400 at March 31,
         1999, compared to 107,000 at December 31, 1998 and 133,700 at March 31,
         1998 (which included approximately 8,900 subscribers in the Lakeland,
         Florida operating system sold to BellSouth Wireless in July 1998). For
         the comparative period, subscribers decreased approximately 23.4%.
         Internet access revenues were negligible in the first quarters of 1998
         and 1999.

                  On a "same system" basis (comparing systems that were
         operational for all of each of the three-month periods ended March 31,
         1999 and 1998), service revenues decreased approximately $1.5 million,
         or 13.5%, to $9.9 million, as compared to $11.4 million for the
         three-month period ended March 31, 1998. Same systems during these
         periods totaled 32 systems. Revenue from Internet operations in Denver
         and Portland are excluded from the analysis because these operations
         were launched in the second quarter of 1998. The revenues from the
         Company's Lakeland, Florida, hardwire and wireless cable television
         systems were omitted from both periods because the systems were sold by
         the Company during the first and second quarters, respectively. The
         ending number of subscribers in these same systems decreased
         approximately 17.9% for the three months ended March 31, 1999, as
         compared to the same period of 1998.

                  Installation revenues for the three months ended March 31,
         1999 totaled $118,000, compared to $213,000 during the same period of
         1998. The decrease in installation revenues of approximately $95,000,
         or 44.6%, was primarily the net result of fewer subscriber
         installations because a portion of normal Subscriber Churn was not
         replaced.

                  Operating expenses, principally programming, site costs and
         other direct expenses, aggregated $6.5 million (or 63.2% of total
         revenues) during the three months ended March 31, 1999, compared to
         $7.8 million (or 61.0% of total revenues) during the same period of
         1998. The decrease of approximately $1.3 million was primarily
         attributable to the sale of the Lakeland, Florida systems, decreased
         subscriber levels, and a reduction in the number of employees.
         Programming expense, as a percent of service revenues, was 34.6% for
         the period ended March 31, 1999 compared to 35.6% for the period ended
         March 31, 1998.

                  Marketing and selling expenses totaled $106,000 (or 1.0% of
         total revenues) during the three months ended March 31, 1999, compared
         to $701,000 (or 5.5% of total revenues) during the same period of 1998.
         The decrease of approximately $595,000 was attributable to the
         Company's continued strategy to replace some, but not all of its
         Subscriber Churn.


                                       22
<PAGE>   23

                  General and administrative expenses were $4.0 million
         (approximately 38.7% of total revenues) for the three months ended
         March 31, 1999, compared to $5.7 million (approximately 44.6% of total
         revenues) for the 1998 period. General and administrative expenses
         decreased approximately $1.7 million. The expense decreased principally
         because of reduced legal expenses related to litigation with Fresno
         Telsat, Inc., lower salary costs resulting from a reduction in the
         number of employees, and decreased expenses related to the technology
         trials conducted by the Company in Eugene, Oregon and Seattle,
         Washington.

                    The Company is following variable plan accounting on certain
         options repriced in April 1998 which requires that the Company record
         compensation expense if the quoted value of the stock exceeds the
         repriced exercise price of the options. For the quarter ended March 31,
         1999, the Company recorded compensation expense of approximately
         $226,000 related to vested stock options. If the quoted price of the
         stock in future periods is greater than the quoted price on March 31,
         1999, the Company will incur additional compensation expense related to
         these repriced options. Based upon the transaction price of $6.50 per
         Common Share with Sprint and the outstanding stock options as of March
         31, 1999, the Company estimates that the incremental compensation
         expense could be approximately $1 million.

                  The Company's loss before interest, taxes, depreciation and
         amortization was $303,000 for the three months ended March 31, 1999, as
         compared to a loss of $1.4 million during the same period of 1998. The
         reduction of losses is predominantly related to decreased marketing and
         general administrative costs, offset, in part, by decreased revenues.

                  Depreciation and amortization expenses decreased approximately
         $4.4 million to $5.2 million for the quarter ended March 31, 1999
         compared to $9.6 million for the first quarter of 1998. The decrease
         reflects the effects of the Company's decreased depreciable asset base
         resulting from an impairment adjustment of $52.4 million in the fourth
         quarter of 1998.

                  Interest expense decreased $2.1 million during the quarter
         ended March 31, 1999 to $8.8 million, as compared to $11.0 million
         during the same period of 1998. The Company reduced the outstanding
         debt balance on its 2004 Notes and 2005 Notes during 1998 through two
         tender offers. The lower debt levels resulted in decreased noncash
         interest charges associated with the Company's 2004 Notes and 2005
         Notes.


         PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS

                  The Company owns all the partnership interests in Fresno MMDS
         Associates ("FMA"). On or about December 24, 1997, Peter Mehas, Fresno
         County Superintendent of Schools, filed an action against FMA, the
         Company and others in an action entitled Peter Mehas, Fresno County
         Superintendent of Schools v. Fresno Telsat, Inc., an Indiana
         Corporation, et al., Superior Court of the State of California, Fresno,
         California. The complaint alleges that a channel lease agreement
         between FMA and the Fresno County school system has expired. The
         plaintiff seeks a judicial declaration that the lease has expired and
         that the defendants, including the Company, hold no right, title or
         interest in the channel capacity which is the subject of the lease. The
         parties have conducted substantial discovery. The Company removed the
         case to federal court in December 1998. Plaintiff filed a motion to
         remand the case to state court. The motion was granted. No trial date
         is set in the case. The Company denies that the channel lease agreement
         has expired.


                                       23
<PAGE>   24

                  On or about October 13, 1998, Bruce Merrill and Virginia
         Merrill, as Trustees of the Merrill Revocable Trust dated as of August
         20, 1982, filed a lawsuit against the Company entitled Bruce Merrill
         and Virginia Merrill, as Trustees of the Merrill Revocable Trust dated
         as of August 20, 1982 v. American Telecasting, Inc., in the United
         States District Court for the District of Colorado. The complaint
         alleges that the Company owes the plaintiffs $1,250,000 due on a note
         which matured on September 15, 1998. The plaintiffs seek payment of
         $1,250,000 plus attorney fees and interest. The Company has answered
         the complaint and denied any liability. Limited discovery has occurred
         and a trial preparation schedule has been ordered by the court.

                  The Company is occasionally a party to other legal actions
         arising in the ordinary course of its business, the ultimate resolution
         of which cannot be ascertained at this time. However, in the opinion of
         management, resolution of such matters will not have a material adverse
         effect on the Company.


         ITEM 2.  CHANGES IN SECURITIES

                  Under the Stockholder Rights Plan, preferred stock purchase
         rights were distributed as a dividend at the rate of one right (a
         "Right") for each share of Common Stock outstanding as of the close of
         business on May 10, 1999. Each Right entitles the holder to purchase
         from ATI one one-hundredth of a share of Series A Junior Participating
         Preferred Stock of ATI at an exercise price of $27. The Rights will
         expire on the earlier of April 30, 2009 and the completion of the
         Merger.

                  The Rights are not exercisable unless a person or group
         acquires, or announces the intent to acquire, beneficial ownership of
         15% or more of outstanding Common Stock. The Rights are redeemable for
         $.001 per Right at the option of the Board of Directors at any time
         prior to the close of business on the tenth business day after the
         announcement that a person or group has acquired, or intends to
         acquire, beneficial ownership of 15% or more of outstanding Common
         Stock. Prior to the date upon which the rights would become exercisable
         under the Stockholder Rights Plan, ATI's outstanding stock certificates
         represent both the shares of Common Stock and the Rights, and the
         Rights trade only with the shares of Common Stock.

                  Generally, if the Rights become exercisable by virtue of a
         person or group acquiring beneficial ownership of 15% or more of ATI's
         Common Stock, then each stockholder, other than the acquirer, is
         entitled to purchase, for the exercise price, that number of shares of
         Common Stock that, at the time of the transaction, will have a market
         value of two times the exercise price of the Rights. In addition, if,
         after the Rights become exercisable, the Company is acquired in a
         Merger or other business combination, or 50% or more of its assets or
         earning power are sold, each Right will entitle the holder to purchase,
         at the exercise price of the Rights, that number of shares of common
         stock of the acquiring company that, at the time of the transaction,
         will have a market value of two times the exercise price of the Rights.

                  The Stockholder Rights Plan contains provisions which permit
         Sprint and Acquisition to acquire beneficial ownership of 15% or more
         of the ATI's Common Stock; provided, that such shares are acquired
         pursuant to the Merger and the transactions contemplated by the Voting
         Agreements.

         ITEM 5.  OTHER INFORMATION

                  None

                                       24
<PAGE>   25


         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

              3     Certificate of Designation, Preferences and Rights of 
                    Series A Junior Participating Preferred Stock of American 
                    Telecasting Inc.

              4     Rights Agreement, dated as of April 26, 1999, between
                    American Telecasting Inc. and First Union National Bank, as
                    Rights Agent, which includes as Exhibit A the Certificate of
                    Designations, Preferences and Rights of Series A Junior
                    Participating Preferred Stock and as Exhibit B the Form of
                    Rights Certificate (incorporated by reference to Exhibit 1
                    to the Company's Form 8-A filed May 3, 1999).

             10     Asset Purchase Agreement dated as of March 19, 1999 by
                    and among AESCO Systems, Inc., American Telecasting of
                    Portland, Inc., and American Telecasting, Inc.

             27     Financial Data Schedule (filed only electronically with the
                    SEC).

         (b)      Reports on Form 8-K.

                    None


                                       25

<PAGE>   26




                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        AMERICAN TELECASTING, INC.



Date:          May 17, 1999             By: /s/ David K. Sentman     
          ---------------------             ------------------------------------
                                            David K. Sentman
                                            Senior Vice President, Chief 
                                            Financial Officer and Treasurer
                                            (Principal Financial Officer)


Date:          May 17, 1999             By: /s/ Fred C. Pattin Jr.   
          ---------------------             ------------------------------------
                                            Fred C. Pattin Jr.
                                            Controller
                                            (Principal Accounting Officer)

                                       26
<PAGE>   27



                                  EXHIBIT INDEX


  Exhibit                          Description
  -------                          -----------

     3     Certificate of Designation, Preferences and Rights of Series A 
           Junior Participating Preferred Stock of American Telecasting Inc.

     4     Rights Agreement, dated as of April 26, 1999, between
           American Telecasting Inc. and First Union National Bank, as
           Rights Agent, which includes as Exhibit A the Certificate of
           Designations, Preferences and Rights of Series A Junior
           Participating Preferred Stock and as Exhibit B the Form of
           Rights Certificate (incorporated by reference to Exhibit 1
           to the Company's Form 8-A filed May 3, 1999).

    10     Asset Purchase Agreement dated as of March 19, 1999 by and among 
           AESCO Systems, Inc., American Telecasting of Portland, Inc., and 
           American Telecasting, Inc.

    27     Financial Data Schedule (filed only electronically with the SEC).







                                       27
