
<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                June 30, 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)


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


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

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 August 10, 1999, 25,847,573 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.



<PAGE>   2


                           AMERICAN TELECASTING, INC.

                                      INDEX


<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
PART I - FINANCIAL INFORMATION
<S>        <C>                                                                                               <C>
  Item 1.  Financial Statements

    Condensed Consolidated Balance Sheets -
     December 31, 1998 and June 30, 1999........................................................................3

    Condensed Consolidated Statements of Operations -
     Three months ended June 30, 1998 and 1999 and the Six months ended June 30, 1998 and 1999..................4

    Condensed Consolidated Statements of Cash Flows -
     Six months ended June 30, 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...............13


PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings...................................................................................24

  Item 2.  Changes in Securities...............................................................................25

  Item 3.  Not applicable

  Item 4.  Submission of Matters to a Vote of Security Holders.................................................26

  Item 5.  Not applicable

  Item 6.  Exhibits and Reports on Form 8-K....................................................................27
</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,         June 30,
                                                                           1998               1999
                                                                        -----------        -----------
                                                                                           (Unaudited)
ASSETS
<S>                                                                     <C>                <C>
Current Assets:
 Cash and cash equivalents ......................................       $    11,155        $     8,819
 Trade accounts receivable, net .................................               971                859
 Prepaid expenses and other current assets ......................             1,472              2,099
                                                                        -----------        -----------
        Total current assets ....................................            13,598             11,777
Property and equipment, net .....................................            28,349             20,803
Deferred license and leased license acquisition costs, net ......            81,141             78,787
Cash available for debt repayment ...............................                --              1,523
Restricted escrowed funds .......................................             1,828              1,865
Deferred financing costs, net ...................................             2,523              2,334
Other assets, net ...............................................               226                219
                                                                        -----------        -----------
        Total assets ............................................       $   127,665        $   117,308
                                                                        ===========        ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
 Accounts payable and accrued expenses ..........................       $    11,338        $    11,946
 Current portion of long-term obligations .......................               271              1,277
 Subscriber deposits ............................................               186                148
                                                                        -----------        -----------
        Total current liabilities ...............................            11,795             13,371
2004 Notes ......................................................           134,130            143,040
2005 Notes ......................................................           105,383            113,376
Other long-term obligations, net of current portion .............               527              3,692
                                                                        -----------        -----------
        Total liabilities .......................................           251,835            273,479

COMMITMENTS AND CONTINGENCIES (see Note 4)

STOCKHOLDERS' DEFICIT:
Class A Common Stock, $.01 par value; 45,000,000 shares
 authorized; 25,743,607 and 25,847,573 shares issued and
 outstanding, respectively ......................................               257                259
Class B Common Stock, $.01 par value; 10,000,000 shares
 authorized; no shares issued and outstanding ...................                --                 --
Additional paid-in capital ......................................           189,413            195,197
Deferred compensation ...........................................                --               (153)
Common Stock warrants ...........................................            10,129              5,479
Accumulated deficit .............................................          (323,969)          (356,953)
                                                                        -----------        -----------
        Total stockholders' deficit .............................          (124,170)          (156,171)
                                                                        -----------        -----------
        Total liabilities and stockholders' deficit .............       $   127,665        $   117,308
                                                                        ===========        ===========
</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 shares and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                            Three Months Ended                      Six Months Ended
                                                                 June 30,                                June 30,
                                                         1998               1999                1998                1999
                                                     ------------        ------------        ------------        ------------
<S>                                                  <C>                 <C>                 <C>                 <C>
Revenues:
  Service and other ..........................       $     12,456        $      9,531        $     24,956        $     19,712
  Installation ...............................                236                 135                 457                 253
                                                     ------------        ------------        ------------        ------------
Total revenues ...............................             12,692               9,666              25,413              19,965
Costs and expenses:
  Operating ..................................              8,027               6,581              15,797              13,088
  Marketing ..................................                708                  85               1,409                 191
  General and administrative .................              5,664               5,882              11,336               9,645
  Noncash compensation expense ...............                 --                 657                  --                 883
  Depreciation and amortization ..............             10,375               6,177              20,019              11,421
                                                     ------------        ------------        ------------        ------------
Total costs and expenses .....................             24,774              19,382              48,483              35,228
                                                     ------------        ------------        ------------        ------------
Loss from operations .........................            (12,082)             (9,716)            (23,148)            (15,263)
Interest expense .............................            (10,301)            (12,648)            (21,276)            (21,485)
Interest income ..............................                615                 322               1,086                 553
Gain on disposition of wireless cable systems
 and assets ..................................                 --               2,772               3,219               2,772
Other (expense) income, net ..................                (39)                131                  42                 439
                                                     ------------        ------------        ------------        ------------
Loss before extraordinary item ...............            (21,807)            (19,139)            (40,077)            (32,984)
Extraordinary gain on extinguishment of debt .             37,011                  --              37,011                  --
                                                     ------------        ------------        ------------        ------------
Net income (loss) ............................       $     15,204        $    (19,139)       $     (3,066)       $    (32,984)
                                                     ============        ============        ============        ============

Basic and diluted net income (loss) per share:
  Loss per share before extraordinary gain on
    extinguishment of debt ...................       $       (.85)       $       (.74)       $      (1.56)       $      (1.28)
  Income per share from extraordinary gain on
    Extinguishment of debt ...................               1.44                  --                1.44                  --
                                                     ------------        ------------        ------------        ------------
  Net income (loss) per share ................       $        .59        $       (.74)       $       (.12)       $      (1.28)
                                                     ============        ============        ============        ============

Weighted average number of shares outstanding          25,743,607          25,829,240          25,743,607          25,785,613
                                                     ============        ============        ============        ============
</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>

                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                   ------------------------
                                                                                     1998            1999
                                                                                   --------        --------
<S>                                                                                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................................       $ (3,066)       $(32,984)
Adjustments to reconcile net loss to net cash used in operating activities:
  Gain on bond tender offer ................................................        (37,011)             --
  Depreciation and amortization ............................................         20,019          11,421
  Amortization of debt discount and deferred financing costs ...............         21,191          17,094
  Bond appreciation rights .................................................           (246)          3,500
  Minority interest income .................................................            (45)           (325)
  Noncash compensation expense .............................................             --             883
  Gain on disposition of wireless cable systems and assets .................         (3,219)         (2,772)
  Other ....................................................................            203             (72)
  Changes in operating assets and liabilities ..............................           (362)          1,653
                                                                                   --------        --------
    Net cash used in operating activities ..................................         (2,536)         (1,602)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........................................         (9,133)         (1,363)
Additions to deferred license and leased license acquisition costs .........         (3,234)           (401)
Proceeds from disposition of wireless cable systems and assets .............          4,377           3,071
Decrease (increase) of cash available for asset purchases and debt
    repayment...............................................................         31,658          (1,523)
Increase in restricted escrowed funds.......................................            (79)             --
Net cash used in acquisitions ..............................................         (2,122)             --
                                                                                   --------        --------
    Net cash provided by (used in) investing activities ....................         21,467            (216)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under term loan for payment of bond appreciation rights .........             --           3,500
Payment of bond appreciation rights ........................................             --          (3,500)
Cash used in bond tender offer  ............................................        (17,593)             --
Principal payments on notes payable ........................................           (407)           (406)
Principal payments on capital lease obligations ............................           (618)           (112)
                                                                                   --------        --------
   Net cash used in financing activities ...................................        (18,618)           (518)
                                                                                   --------        --------
Net increase (decrease) in cash and cash equivalents .......................            313          (2,336)
Cash and cash equivalents, beginning of period .............................          9,125          11,155
                                                                                   --------        --------
Cash and cash equivalents, end of period ...................................       $  9,438        $  8,819
                                                                                   ========        ========
</TABLE>

Supplemental Disclosures of Cash Flow Information:

     A note payable obligation of approximately $652,000 was incurred in the
second quarter of 1999 when the Company renewed its property and casualty
insurance for the policy year. The 1998 renewal of property and casualty
insurance was not financed.

     Cash interest paid for the six months ending June 30, 1998 and June 30,
1999 were approximately $85,000 and $3.5 million, respectively.

     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 June 30, 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
         the Company's Class A Common Stock will be converted into the right to
         receive $6.50 in cash. In conjunction with the merger, ATI adopted the
         Stockholder Rights Plan. Under the Stockholder Rights Plan, preferred
         stock purchase rights were distributed as a dividend at the rate of one
         right ("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, under certain conditions, 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 the
         completion of the Merger or April 30, 2009.

               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. 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 because 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 consummation of the Merger is subject to certain conditions,
         including approval by the stockholders of ATI, satisfaction of the
         Hart-Scott-Rodino Antitrust Improvements Act waiting period and grant
         of applications from the Federal Communications Commission ("FCC")
         approving the transfer of control of FCC authorizations. On June 1,
         1999, the Federal Trade Commission granted early termination of the
         required waiting period under the Hart-Scott-Rodino Antitrust
         Improvements Act. On June 25, 1999, stockholders of the Company
         approved the Company's proposed acquisition by Sprint Corporation.

               Completion of the Merger remains subject to the grant of
         applications from the FCC approving the transfer of control of FCC
         authorizations. Applications for the necessary approvals for the
         proposed transfer of control of the Company to Sprint have been filed
         with the FCC and placed on public notice. One petition to deny certain
         of those applications was filed and all responsive pleadings have been


                                        6

<PAGE>   7

         submitted. The FCC is in the process of reviewing those pleadings and
         is expected to rule on the Petition and the applications. The Company
         cannot predict when the FCC will issue its rulings.

         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.

               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 second 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.

         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. 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 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%.

         Antilles Transaction

               On August 12, 1999, the Company completed the sale of its
         wireless cable channel rights and operating assets in Billings,
         Montana, Grand Island, Nebraska and Rapid City, South Dakota to
         Antilles Wireless, L.L.C. for approximately $5.6 million in cash,


                                        7
<PAGE>   8


         of which $500,000 was placed in escrow for one year for satisfaction of
         any indemnification obligations. As of June 30, 1999, these markets
         represented approximately 142,000 estimated households in the service
         area and served approximately 8,500 subscribers. For the six months
         ended June 30, 1999, these systems generated revenues of approximately
         $1.7 million.

         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
         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. Closings have occurred
         under this agreement during 1997, 1998 and 1999. The Company completed
         the most recent closing on April 23, 1999 for cash consideration of
         approximately $2.7 million for certain wireless cable channels in
         Louisville, Kentucky. Approximately $2.6 million was recorded as a gain
         in the second quarter of 1999. During July 1999, the Company received
         approximately $1.9 million in escrow funds from the sale of the
         Lakeland Wireless system completed in July 1998. Additional closings
         may occur for the Naples, Sebring and Miami, Florida markets. The
         Company estimates the total gross proceeds from such closings will not
         exceed $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 six-month period ended June 30, 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 June 30,
         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 June 30, 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 were released
         to the Company in July 1999.

         Cash available for Debt Repayment

               Cash available for debt repayment represents 57% of the cash
         proceeds received from the closing on the BellSouth Transaction
         completed in April, 1999. During 1998 the Asset Disposition Covenants
         of the 2004 Notes and 2005 Notes were amended for asset sales under the
         BellSouth Agreement. Under the amended covenants, once the aggregate
         cash proceeds from asset sales under the BellSouth Agreement equal or
         exceed $5 million, the Company is obligated to utilize 57% of the cash
         proceeds to make an offer to purchase the outstanding Notes.

         Net Income (Loss) Per Share

               Basic and diluted net income (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 income (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 six months ended June
         30, 1999, the Company recorded compensation expense of approximately
         $883,000 related to vested stock options and a deferred compensation
         equity adjustment related to unvested stock options of approximately
         $153,000. The amount of compensation expense and deferred compensation
         was based upon the difference between the quoted value of the stock on
         June 30, 1999, and the applicable exercise price of certain options
         repriced in April 1998. If the price of the common stock in future
         periods is greater than the price on June 30, 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 June 30 1999, the Company estimates
         that incremental compensation expense of approximately $472,000 could
         be incurred, assuming the Company vests all remaining unvested options
         as part of the Merger with Sprint.

         Reclassifications

               Certain amounts from the prior year's consolidated financial
         statements have been reclassified to conform with the 1999
         presentation.


                                        9



<PAGE>   10


3.       DEBT
             Long-term debt at June 30, 1999 consisted of the following (in
         thousands):

<TABLE>

         <S> <C>                                                  <C>
         2004 Notes.........................................      $ 143,040
         2005 Notes.........................................        113,376
         Notes payable......................................          3,963
         Capital leases.....................................            143
         Current accrued interest payable...................            863
                                                                  ---------
             Total..........................................        261,385
             Less current portion...........................          1,277
                                                                  ---------
             Long-term debt.................................      $ 260,108
                                                                  =========
</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 were exercised in June, 1999, and the
         Company paid to the holders of the BARs $3.5 million in cash. The $3.5
         million was recorded as interest expense during the six months ended
         June 30, 1999.

               Pursuant to the Merger Agreement, Sprint loaned $3.5 million to
         the Company to fund the payment of the BARs. Interest accrues on the
         loan at a rate of 10% per annum, and the aggregate principal amount of
         the loan, 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. The loan made to ATI is secured by the outstanding
         capital stock of a subsidiary of ATI which holds rights to use licenses
         to provide wireless cable services.

               The 2004 Notes are subject to redemption, at the Company's
         option, on or after June 15, 1999 at the face amount plus a 7.25%
         premium in 1999, reducing to 0% in 2002. The 2005 Notes are subject to
         redemption, at the Company's option, on or after August 15, 2000 at the
         face amount plus a 7.25% premium in 2000, reducing to 0% in 2003. In
         any redemption, the Company must pay accrued but unpaid interest.

               The Indentures also have provisions for a Change of Control. The
         Merger with Sprint, if consummated, will constitute a Change of Control
         as defined by the Indentures. 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 Change of Control will give each holder of the notes the
         right to require the Company to purchase all or part of such holder's
         notes. 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 after these dates, the purchase price is 101% of the
         principal amount at stated maturity.


                                       10



<PAGE>   11


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
         Company denies that the channel lease agreement has expired. The
         parties have conducted 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. A trial date of November
         8, 1999 has been set.

               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. The parties have conducted discovery. A trial
         preparation schedule has been ordered by the court. No trial date has
         been set.

               On or about July 2, 1999, Ridley M. Whitaker filed an action
         against the Company and other defendants in an action entitled Ridley
         M. Whitaker v. Fresno Telsat, Inc., James A. Simon, American
         Telecasting, Inc., JAS Partners, Ltd., and Rosenthal, Judell & Uchima,
         in the Supreme Court of the State of New York. On July 13,1999,
         plaintiff served an amended complaint on the Company. On July 29, 1999,
         the action was removed to the District Court for the Southern District
         of New York on the basis of diversity jurisdiction. The complaint
         alleges among other things that the Company was involved in a
         conspiracy to prevent plaintiff from receiving legal fees for services
         rendered to Fresno Telsat, Inc. in connection with a previous lawsuit
         against the Company and other defendants. Plaintiff asks for not less
         than $1.6 million in damages. On August 3, 1999, the Company moved to
         dismiss the case for lack of personal jurisdiction.

               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 providing for maximum aggregate
         retention payments of approximately $320,000. This amount was fully
         accrued as of June 30, 1999 and was paid on July 2, 1999.

               The Executive Program also provided for the payment of
         achievement incentives to certain of these executive officers if the
         average closing price of the Company's Common Stock was $2.00 per share
         or higher for the last 20 trading days of June 1999. The maximum
         aggregate achievement payments that were payable under the Executive
         Program were approximately $910,000. This amount was expensed in the
         second quarter and was paid on July 2, 1999.

               The Board of Directors also approved, effective July 1, 1998, a
         Retention Program ("Key Employee Program") for key employees (other
         than executive officers) providing for maximum aggregate retention
         payments of approximately $280,000. This amount was fully accrued as of
         June 30, 1999 and was paid on July 2, 1999.


                                       11


<PAGE>   12


               The Company implemented, effective as of June 1, 1999, an
         additional Retention Program ("1999 Key Employee Retention Program")
         for key employees, including certain executive officers. Under the 1999
         Key Employee Retention Program, certain key employees will be eligible
         to receive cash retention payments of $10,000 to $25,000 if such
         persons remain in the Company's employment through June 30, 2000 or are
         terminated other than for cause before June 30, 2000. The maximum
         aggregate retention payments presently payable under the 1999 Key
         Employee Retention Program are approximately $410,000. The 1999 Key
         Employee Program is evidenced by agreements between the Company and
         each key employee.

               The Executive, Key Employee and the 1999 Key Employee Programs
         also provide for severance benefits ranging from three to twelve months
         of base salary in the event a participant in these programs is
         terminated without cause on or before December 31, 1999. Amounts
         payable under these programs are independent of any obligations of the
         Company, including severance payments, under employment agreements or
         other bonus programs. These programs are evidenced by agreements
         between the Company and each employee.

               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.

5.       COMMON STOCK WARRANTS

               In conjunction with the issuance of the 2005 Notes, the Company
         issued 201,700 warrants (the "1995 Warrants") to purchase an aggregate
         of 943,956 shares of ATI's Common Stock at an exercise price of $12.65
         per share, subject to adjustment under certain circumstances. Warrant
         holders may exercise the 1995 Warrants at any time prior to August 10,
         2000. The 1995 Warrants will terminate and become void at the close of
         business on August 10, 2000. Approximately $5.5 million of the proceeds
         from the issuance of the 2005 Notes was allocated to the 1995 Warrants.
         As of June 30, 1999, no 1995 Warrants had been exercised.

               In conjunction with the issuance of the 2004 Notes, the Company
         issued 915,000 warrants (the "1994 Warrants") to purchase an equal
         number of shares of ATI's Common Stock. The 1994 Warrants were valued
         at approximately $4.6 million and had an exercise price of $12.68 per
         share. The 1994 Warrants expired at the close of business on June 23,
         1999 and the approximately $4.6 million value of the expired warrants
         was reclassified from common stock warrants to additional
         paid-in-capital.

               During the year ended December 31, 1997, the Company issued
         warrants to purchase 40,000 shares of unregistered Class A Common Stock
         of the Company in connection with an agreement to acquire wireless
         cable channel rights and certain other subscription television assets.
         The warrants have an exercise price of $2.50 per share and expire in
         May 2000.


                                       12



<PAGE>   13

         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 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, the Company entered into the Merger Agreement
         pursuant to which Acquisition would be merged with and into ATI, with
         ATI being the surviving corporation of 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
         the Company's Class A Common Stock will be converted into the right to
         receive $6.50 in cash. In conjunction with the merger, ATI adopted the
         Stockholder Rights Plan. Under the Stockholder Rights Plan, preferred
         stock purchase rights were distributed as a dividend at the rate of one
         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, under certain conditions, 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 the completion
         of the Merger or April 30, 2009.

               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. 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 because a
         person or group acquires 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,


                                       13

<PAGE>   14



         will have a market value of two times the exercise price of the Rights.

               The consummation of the Merger is subject to certain conditions,
         including approval by the stockholders of ATI, satisfaction of the
         Hart-Scott-Rodino Antitrust Improvements Act waiting period and grant
         of applications from the FCC approving the transfer of control of FCC
         authorizations. On June 1, 1999, the Federal Trade Commission granted
         early termination of the required waiting period under the
         Hart-Scott-Rodino Antitrust Improvements Act. On June 25, 1999,
         stockholders of the Company approved the Company's proposed acquisition
         by Sprint Corporation at a special meeting of the stockholders.

               Completion of the Merger remains subject to the grant of
         applications from the FCC approving the transfer of control of FCC
         authorizations. Applications for the necessary approvals for the
         proposed transfer of control of the Company to Sprint have been filed
         with the FCC and placed on public notice. One petition to deny certain
         of those applications was filed and all responsive pleadings have been
         submitted. The FCC is in the process of reviewing those pleadings and
         is expected to rule on the Petition and the applications. The Company
         cannot predict when the FCC will issue its rulings.

         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.

               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 second 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").

         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 adopted rules that permit two-way
         use of the wireless cable spectrum. However, the Company, along with


                                       14

<PAGE>   15


         other entities, petitioned the FCC to refine those rules to permit
         simpler deployment of commercial operations. On July 29, 1999, the
         FCC released a Report and Order on Reconsideration, responding to the
         petitions for reconsideration of its 1998 two-way rules. Therein, the
         FCC also made some additional modifications of its rules that it
         believes will facilitate the provision of two-way services. The FCC is
         expected to announce the initial filing window for two-way
         applications.

               Technology development is another component of the WBA business
         strategy. 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 the first
         quarter of 2000 at the earliest.

               The final 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.

         LIQUIDITY AND CAPITAL RESOURCES

         Sources and Uses of Funds

               The Company currently estimates its remaining costs related to
         the pending Merger with Sprint to be approximately $8.6 million. 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, provided 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 adversely
         affect the Company's financial condition. 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, there
         can be no assurance that the Merger will be completed on the terms set
         forth in the Merger Agreement, if at all.


                                       15





<PAGE>   16


               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 2004 Notes are subject to redemption, at the Company's
         option, on or after June 15, 1999 at the face amount plus a 7.25%
         premium in 1999, reducing to 0% in 2002. The 2005 Notes are subject to
         redemption, at the Company's option, on or after August 15, 2000 at the
         face amount plus a 7.25% premium in 2000, reducing to 0% in 2003. In
         any redemption, the Company must pay accrued but unpaid interest.

               The Indentures also have redemption provisions relating to a
         Change of Control. The Merger with Sprint, if consummated, will
         constitute a Change of Control as defined by the Indentures. 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.

               A Change of Control will give each holder of the notes the right
         to require the Company to purchase all or part of such holder's notes.
         The purchase price for the 2004 Notes is 101% of the principal amount
         at stated maturity plus accrued interest. The purchase price for the
         2005 Notes is 101% of the Accreted Value on any repurchase date prior
         to August 15, 2000. If purchased after August 15, 2000, the repurchase
         price is 101% of the principal amount at stated maturity.

               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 for the purpose, among
         other things, of paying interest due in December 1999 on the 2004



                                       16


<PAGE>   17


         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 with a bank. At closing of the Credit Facility,
         the Company also delivered 4,500 BARs. During 1997, the Credit Facility
         was repaid and terminated. The BARs were exercised on June 23, 1999,
         and the Company paid to the holders of the BARs $3.5 million in cash.

               Pursuant to the Merger Agreement, Sprint loaned $3.5 million to
         the Company to fund the payment of the BARs. Interest accrues on the
         loan at a rate of 10% per annum, and the aggregate principal amount of
         the loan, 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. The loan made to ATI is secured by the outstanding
         capital stock of a subsidiary of ATI which holds rights to use licenses
         to provide wireless cable services

               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 $4.1 million of which
         had been utilized as of June 30, 1999). Although the Company had the
         ability under the Indentures to borrow an additional $13.4 million as
         of June 30, 1999, the Company does not presently intend to incur any
         additional bank or other borrowings other than the current and possible
         additional loans from Sprint.

               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



                                       17



<PAGE>   18


         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 before the end of 1999.
         The Company anticipates completing its testing and installation of this
         patch in six of its 20 billing system locations by the end of August
         1999. All other system locations will be tested and installed prior to
         the end of 1999.

               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.

               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 received responses from all its programmers, and all have
         responded favorably as to being prepared for Year 2000 issues.

               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.

               The Company presently estimates that it will spend approximately
         $1.0 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 $850,000 in remediating
         Year 2000 issues. The costs of the Company's Year 2000 project and the
         timing 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.


                                       18



<PAGE>   19


         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 providing for maximum aggregate
         retention payments of approximately $320,000. This amount was fully
         accrued as of June 30, 1999 and was paid on July 2, 1999.

               The Executive Program also provided for the payment of
         achievement incentives to certain of these executive officers if the
         average closing price of the Company's Common Stock was $2.00 per share
         or higher for the last 20 trading days of June 1999. The maximum
         aggregate achievement payments that were payable under the Executive
         Program were approximately $910,000. This amount was expensed in the
         second quarter and was paid on July 2, 1999.

               The Board of Directors also approved, effective July 1, 1998, a
         Retention Program ("Key Employee Program") for key employees (other
         than executive officers) providing for maximum aggregate retention
         payments of approximately $280,000. This amount was fully accrued as of
         June 30, 1999 and was paid on July 2, 1999.

               The Company implemented, effective as of June 1, 1999, an
         additional Retention Program ("1999 Key Employee Retention Program")
         for key employees, including certain executive officers. Under the 1999
         Key Employee Retention Program, certain key employees will be eligible
         to receive cash retention payments of $10,000 to $25,000 if such
         persons remain in the Company's employment through June 30, 2000 or are
         terminated other than for cause before June 30, 2000. The maximum
         aggregate retention payments presently payable under the 1999 Key
         Employee Retention Program are approximately $410,000. The 1999 Key
         Employee Program is evidenced by agreements between the Company and
         each key employee.

               The Executive, Key Employee and the 1999 Key Employee Programs
         also provide for severance benefits ranging from three to twelve months
         of base salary in the event a participant in these programs is
         terminated without cause on or before December 31, 1999. Amounts
         payable under these programs are independent of any obligations of the
         Company, including severance payments, under employment agreements or
         other bonus programs. These programs are evidenced by agreements
         between the Company and each employee.

               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.

         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


                                       19



<PAGE>   20


         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 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 Naples,
         Sebring and Miami, Florida. Closings have occurred under this agreement
         during 1997, 1998 and 1999. The Company completed the most recent
         closing on April 23, 1999 for cash consideration of approximately $2.7
         million for certain wireless cable channels in Louisville, Kentucky.
         Approximately $2.6 million was recorded as a gain in the second quarter
         of 1999. During July 1999, the Company received approximately $1.9
         million in escrow funds from the sale of the Lakeland Wireless system
         completed in July 1998. Additional closings may occur for the Naples,
         Sebring and Miami, Florida markets. The Company estimates the total
         gross proceeds from such closings will not exceed $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.


                                       20



<PAGE>   21


               Since the last bond tender offer, the Company has received
         approximately $4.6 million in aggregate proceeds from an additional
         BellSouth closing and receipt of escrowed funds from a previous
         BellSouth closing. Once the aggregate proceeds attributable to
         BellSouth closings exceed $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 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 $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.

               In August 1999, the Company completed the sale of its wireless
         cable channel rights and operating assets in Billings, Montana, Grand
         Island, Nebraska and Rapid City, South Dakota to Antilles Wireless,
         L.L.C. for approximately $5.6 million in cash. As of June 30, 1999,
         these markets represented approximately 142,000 estimated households in
         the service area and served approximately 8,500 subscribers. For the
         six months ended June 30, 1999, these systems generated revenues of
         approximately $1.7 million. At closing, the Company received the $5.6
         million in cash less $500,000 which will be held in escrow for one year
         for satisfaction of any indemnification obligations.

               The Company's capital expenditures, exclusive of acquisitions of
         wireless cable systems and additions to deferred license and leased
         license acquisition costs, during the six months ended June 30, 1999
         and 1998 were approximately $1.4 million and $9.1 million,
         respectively.


                                       21

<PAGE>   22


         RESULTS OF OPERATIONS

         Three Months Ended June 30, 1999 Compared to Three Months Ended
         June 30, 1998

               Service revenues decreased $2.9 million, or 23.5%, for the three
         months ended June 30, 1999 to $9.5 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 24,000
         subscribers as a result of the Company's business strategy to not
         replace all of its Subscriber Churn. Approximately $649,000 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 97,400 at June 30,
         1999, compared to 107,000 at December 31, 1998 and 130,000 at June 30,
         1998 (which included approximately 8,400 subscribers in the Lakeland,
         Florida operating system sold to BellSouth Wireless in July 1998).
         Comparing the six month periods ended June 30, 1999 and June 30, 1998,
         subscribers decreased approximately 25.1%. Internet access revenues
         were negligible in the second 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 June 30, 1999 and
         1998), service revenues decreased approximately $2.2 million, or 19.1%,
         to $9.3 million, as compared to $11.5 million for the three-month
         period ended March 31, 1999. Same systems during these periods totaled
         32 systems. 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 19.8% for the three months
         ended June 30, 1999, as compared to the same period of 1998.

               Installation revenues for the three months ended June 30, 1999
         totaled $135,000, compared to $236,000 during the same period of 1998.
         The decrease in installation revenues of approximately $101,000, or
         42.8%, was primarily the net result of fewer subscriber installations
         because a portion of Subscriber Churn was not replaced.

               Operating expenses, principally programming, site costs and other
         direct expenses, aggregated $6.6 million (or 68.1% of total revenues)
         during the three months ended June 30, 1999, compared to $8.0 million
         (or 63.2% of total revenues) during the same period of 1998. These
         expenses decreased approximately $1.4 million because of the sale of
         the Lakeland, Florida system, decreased subscriber levels, and a
         reduction in the number of employees. Programming expense, as a percent
         of service revenues, was 35.9% for the period ended June 30, 1999
         compared to 35.1% for the period ended June 30, 1998.

               Marketing and selling expenses totaled $85,000 (or 0.9% of total
         revenues) during the three months ended June 30, 1999, compared to
         $708,000 (or 5.6% of total revenues) during the same period of 1998.
         The decrease of approximately $623,000 was attributable to the
         Company's continued strategy to replace some, but not all of its
         Subscriber Churn.

               General and administrative expenses were $6.5 million
         (approximately 67.6% of total revenues) for the three months ended June
         30, 1999, compared to $5.7 million (approximately 44.6% of total
         revenues) for the 1998 period. General and administrative expense
         increased approximately $875,000 principally because of transaction
         costs associated with the Sprint merger, additional salary expense from
         the Executive and Key Employee Programs and noncash compensation
         expense of the Company's stock option program. This increase was
         offset, in part, by lower expenses in 1999 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 June 30,
         1999, the Company recorded compensation expense of approximately
         $657,000 related to vested stock options.


                                       22


<PAGE>   23


               The Company's loss before interest, taxes, depreciation and
         amortization was $3.5 million for the three months ended June 30, 1999,
         as compared to a loss of $1.7 million during the same period of 1998.

               Depreciation and amortization expenses decreased approximately
         $4.2 million to $6.2 million for the quarter ended June 30, 1999
         compared to $10.4 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 increased $2.4 million during the quarter ended
         June 30, 1999 to $12.7 million, as compared to $10.3 million during the
         same period of 1998. Interest expense increased principally because
         outstanding BARs were exercised for $3.5 million during the quarter.

               The Company recognized an extraordinary gain of $37.0 million in
         conjunction with its Tender Offer for a portion of it's outstanding
         2004 and 2005 Notes during the second quarter of 1998. There was no
         similar transaction in the corresponding period for 1999.

         Six Months Ended June 30, 1999 Compared to Six Months Ended
         June 30, 1998

               Service revenues decreased $5.2 million, or 21.0%, for the six
         months ended June 30, 1999 to $19.7 million, as compared to $25.0
         million during the same period of 1998. This decrease resulted
         primarily from an overall decline in analog video subscribers as a
         result of the Company's continued business strategy to not replace all
         of its Subscriber Churn.

               On a "same system" basis (comparing systems that were operational
         for all of each of the six-month periods ended June 30, 1999 and 1998),
         service revenues decreased $3.8 million, or 16.6%, to $19.1 million, as
         compared to $22.9 million for the six-month period ended June 30, 1998.
         Same systems during these periods totaled 32 systems. Revenues from the
         Company's Lakeland, Florida hardwire and wireless cable television
         systems were omitted from both periods because the systems were sold
         during the first and second quarters of 1998, respectively. The average
         number of subscribers in these same systems decreased approximately
         18.6% for the six months ended June 30, 1999, as compared to the same
         period of 1998. The Company anticipates the average number of
         subscribers to decline further during the remainder of 1999 at a slower
         rate.

               Installation revenues for the six months ended June 30, 1999
         totaled $253,000, compared to $379,000 during the same period of 1998.
         The decrease in installation revenues of $126,000, or 33.2%, was the
         net result of subscriber installations as a portion of normal
         Subscriber Churn was not replaced.

               Operating expenses, principally programming, site costs and other
         direct expenses, aggregated $13.0 million (or 65.5% of total revenues)
         during the six months ended June 30, 1999, compared to $15.7 million
         (or 62.0% of total revenues) during the same period of 1998. The
         decrease of approximately $2.6 million was primarily attributable to
         the operations of the Lakeland Florida system sold to BellSouth
         Wireless, decreased subscriber levels, and a reduction in the number of
         employees.

               Marketing and selling expenses totaled $191,000 (or 1.0% of total
         revenues) during the six month period ended June 30, 1999, compared to
         $1.4 million (or 5.6% of revenues) during the same period of 1998. The
         decrease of approximately $1.2 million was attributable to the
         Company's continued strategy to replace some, but not all of its
         Subscriber Churn.

               General and administrative expenses totaled $10.5 million (or
         52.7% of total revenues) for the six months ended June 30, 1999,
         compared to $11.3 million (or 44.7% of total revenues) for the same
         period of 1998. This decrease of approximately $808,000 is primarily
         because of consulting expenses in 1998 associated with advanced
         technology trials being conducted by the Company in Eugene, Oregon and


                                       23


<PAGE>   24


         Seattle, Washington. This decrease was offset, in part, by an increase
         in noncash compensation expense of the Company's stock option program.

               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 six months ended June
         30, 1999, the Company recorded compensation expense of approximately
         $883,000 related to vested stock options.

               The Company's loss before interest, taxes, depreciation and
         amortization was $3.8 million during the six-month period ended June
         30, 1999, compared to loss before interest, taxes, depreciation and
         amortization of $3.1 million for the same period of 1998.

               Depreciation and amortization expenses decreased approximately
         $8.6 million to $11.4 million for the six months ended June 30, 1999
         compared to $20.0 million for the same period 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 increased $209,000 during the six months ended
         June 30, 1999 to $21.5 million, as compared to $21.3 million during the
         same period of 1998. The Company incurred additional interest expense
         of $3.5 million associated with the exercise of BARs during the second
         quarter of 1999. This additional expense was offset by lower
         outstanding balances on the Company's 2004 Notes and 2005 Notes
         resulting from two tender offer repurchases completed during the second
         and fourth quarters of 1998.

               The Company recognized an extraordinary gain of $37.0 million in
         conjunction with its Tender Offer for a portion of it's outstanding
         2004 and 2005 Notes during the second quarter of 1998. There was no
         similar transaction in the corresponding period for 1999.


         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
         Company denies that the channel lease agreement has expired. The
         parties have conducted 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. A trial date of
         November 8, 1999 has been set.

               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. The parties have conducted discovery. A trial
         preparation schedule has been ordered by the court. No trial date has
         been set.

               On or about July 2, 1999, Ridley M. Whitaker filed an action
         against the Company and other defendants in an action entitled Ridley
         M. Whitaker v. Fresno Telsat, Inc., James A. Simon, American



                                       24



<PAGE>   25


         Telecasting, Inc., JAS Partners, Ltd., and Rosenthal, Judell & Uchima,
         in the Supreme Court of the State of New York. On July 13, 1999,
         plaintiff served an amended complaint on the Company. On July 29, 1999,
         the action was removed to the District Court for the Southern District
         of New York on the basis of diversity jurisdiction. The complaint
         alleges among other things that the Company was involved in a
         conspiracy to prevent plaintiff from receiving legal fees for services
         rendered to Fresno Telsat, Inc. in connection with a previous lawsuit
         against the Company and other defendants. Plaintiff asks for not less
         than $1.6 million in damages. On August 3, 1999, the Company moved to
         dismiss the case for lack of personal jurisdiction.

               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

               In conjunction with the Company's merger with Sprint, the Company
         adopted the Stockholder Rights Plan. 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
         or 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.


                                       25




<PAGE>   26


         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               The annual meeting of stockholders of American Telecasting, Inc.
         was held on April 22, 1999. At the annual meeting of stockholders, the
         reelection of director nominees and the ratification of the appointment
         of Arthur Andersen LLP as independent public accountants for the
         Company for 1999 were considered and approved. The voting results were
         as follows:

<TABLE>
<CAPTION>

                                                                  Votes
Proposal                    Votes For         Against           Abstained
                          -------------- ----------------- --------------------
<S>                       <C>            <C>                <C>
Election as director:
   Donald R. DePriest     21,887,181           --              320,288
  Richard F. Seney        21,887,188           --              320,282
  Robert D. Hostetler     22,144,631           --              62,838
   Mitchell R. Hauser     22,089,721           --              117,749
   James S. Quarforth     22,089,596           --              117,874
   Carl A. Rosberg        22,089,596           --              117,874

                          -------------- ----------------- --------------------
Ratification of the
  appointment of Arthur
  Andersen LLP as
  independent public
  accountants for the
  Company for 1999         22,182,835          7,735           16,900
</TABLE>


               A special meeting of stockholders of American Telecasting, Inc.
         was held on June 25, 1999. At the special meeting of stockholders, the
         authorization to proceed with the Merger was considered and approved.
         The voting results were as follows:

<TABLE>
<CAPTION>

                                                   Votes
                              Votes For           Against         Abstained
                             -------------- ----------------- -----------------
<S>                           <C>                <C>               <C>
To approve and adopt the
Agreement and Plan of
Merger                        19,146,924         2,293,718         23,290
</TABLE>



                                       26

<PAGE>   27



         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits

                  10.1   First Amendment to Employment agreement made as of
                         April 24, 1999 between the Company and Robert D.
                         Hostetler.

                  10.2   First Amendment to Employment Agreement made as of
                         April 24, 1999 between the Company and Terry J. Holmes.

                  10.3   Third Amendment to Employment Agreement made as of
                         April 24, 1999 between the Company and David K.
                         Sentman.

                  10.4   Employment Agreement dated April 24, 1999 between the
                         Company and Lee G. Haglund.

                  10.5   Agreement dated April 15, 1999 between certain
                         subsidiaries of the Company and Antilles Wireless,
                         L.L.C. to sell Antilles the wireless cable systems in
                         Billings, Montana, Grand Island, Nebraska, and Rapid
                         City, South Dakota.

                  10.6   Borrowing Agreement dated June 10, 1999 between the
                         Company and Sprint Corporation.

                  10.7   Stock Pledge Agreement dated June 10, 1999 between the
                         Company and Sprint Corporation.

                  10.8   Retention Incentive Agreement between the Company and
                         Lee G. Haglund dated June 1, 1999.

                  10.9   Retention Incentive Agreement between the Company and
                         Bryan H. Scott dated June 1, 1999.

                  10.10  Retention Incentive Agreement between the Company and
                         Nasser Sharabianlou dated June 1, 1999.

                  10.11  Retention Incentive Agreement between the Company and
                         Charles A. Spann dated June 1, 1999.

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

         (b)   Reports on Form 8-K.

               The following reports on Form 8-K were filed during the quarter
               ended June 30, 1999:

                  (i)    Current Report on Form 8-K dated April 6, 1999 to
                         report under Item 5, that the Company had entered into
                         an agreement with Antilles Wireless, L.L.C. to sell its
                         wireless cable channel rights and operating assets in
                         Billings, Montana, Grand Island, Nebraska, and Rapid
                         City, South Dakota;

                  (ii)   Current Report on Form 8-K dated April 26, 1999 to
                         report under Item 5, that the Company, DD Acquisition,
                         Corp, a wholly owned subsidiary of Sprint and Sprint
                         Corporation entered into an Agreement and Plan of
                         Merger pursuant to which DD Acquisition would be merged
                         with and into the Company, with the Company being the
                         surviving corporation of such merger.


                                       27


<PAGE>   28


                  (iii)  Current Report on Form 8-K dated April 30, 1999 to
                         report under Item 5, that the Company's Board of
                         Directors authorized and declared a distribution of one
                         right for each share of Class A Common Stock.
                         outstanding as of the close of business on May 10,
                         1999.

                  (iv)   Current Report on Form 8-K dated May 19, 1999 to report
                         under Item 5, that the Company's Board of Directors set
                         May 24, 1999 as the record date for the special meeting
                         of the Company stockholders to vote on the acquisition
                         of the Company by Sprint Corporation.

                  (v)    Current Report on Form 8-K dated June 1, 1999 to report
                         under Item 5, that on June 1, 1999 the Company received
                         notification that the Federal Trade Commission had
                         granted early termination of the required waiting
                         period under the Hart-Scott-Rodino Antitrust
                         Improvements Act applicable to its pending acquisition
                         by Sprint Corporation.

                  (vi)   Current Report on Form 8-K dated June 25, 1999 to
                         report under Item 5, that on June 25, 1999 at the
                         Company's special meeting of the stockholders, the
                         stockholders approved the proposed acquisition by
                         Sprint Corporation.



                                       28


<PAGE>   29



                                   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:     August 13, 1999             By:   /s/ David K. Sentman
     ----------------------------        -----------------------
                                         David K. Sentman
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer
                                         (Principal Financial Officer)


Date:     August 13, 1999             By:   /s/ Fred C. Pattin Jr.
     ----------------------------        -------------------------
                                         Fred C. Pattin Jr.
                                         Controller
                                         (Principal Accounting Officer)



                                       29

<PAGE>   30


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                 DESCRIPTION
-------                -----------
<S>            <C>
10.1           First Amendment to Employment agreement made as of April 24, 1999
               between the Company and Robert D. Hostetler.

10.2           First Amendment to Employment Agreement made as of April 24, 1999
               between the Company and Terry J. Holmes.

10.3           Third Amendment to Employment Agreement made as of April 24, 1999
               between the Company and David K. Sentman.

10.4           Employment Agreement dated April 24, 1999 between the Company and
               Lee G. Haglund.

10.5           Agreement dated April 15, 1999 between certain subsidiaries of
               the Company and Antilles Wireless, L.L.C. to sell Antilles the
               wireless cable systems in Billings, Montana, Grand Island,
               Nebraska, and Rapid City, South Dakota.

10.6           Borrowing Agreement dated June 10, 1999 between the Company and
               Sprint Corporation.

10.7           Stock Pledge Agreement dated June 10, 1999 between the Company
               and Sprint Corporation.

10.8           Retention Incentive Agreement between the Company and Lee G.
               Haglund dated June 1, 1999.

10.9           Retention Incentive Agreement between the Company and Bryan H.
               Scott dated June 1, 1999.

10.10          Retention Incentive Agreement between the Company and Nasser
               Sharabianlou dated June 1, 1999.

10.11          Retention Incentive Agreement between the Company and Charles A.
               Spann dated June 1, 1999.

27             Financial Data Schedule (filed only electronically with the SEC).
</TABLE>

