SPRINT CORP, 424B5, 1998-11-02

SPRINT CORP
424B5, 1998-11-02
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE>

RULE NO. 424(b)(5)
REGISTRATION NO. 333-65649
333-65649-01

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+CHANGED. WE WILL DELIVER A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS TO +
+PURCHASERS OF THESE SECURITIES. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES NOR ARE +
+THEY SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE +
+OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS SUPPLEMENT
(To Prospectus Dated October 23, 1998)
$

SPRINT CAPITAL CORPORATION
$ % NOTES DUE
$ % NOTES DUE
$ % NOTES DUE
$ % NOTES DUE
UNCONDITIONALLY GUARANTEED BY
SPRINT CORPORATION

--------

The Notes will mature on , the Notes will mature on , the
Notes will mature on and the Notes will mature on .
Interest on the Notes is payable semiannually on and , beginning
, 1999. Sprint Capital may redeem some or all of the Notes at any time.
The redemption price is described under the heading "Description of Notes--
Optional Redemption" on page S-35 of this Prospectus Supplement. There is no
sinking fund. Sprint Capital has applied to list the longest maturity Notes on
the New York Stock Exchange.

--------
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Prospectus Supplement or the related Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

--------
<TABLE>
<CAPTION>
PUBLIC
OFFERING PROCEEDS TO
PRICE UNDERWRITING DISCOUNTS SPRINT
------------ ---------------------- ------------
<S> <C> <C> <C>
Per Note % % %
Total $ $ $
Per Note % % %
Total $ $ $
Per Note % % %
Total $ $ $
Per Note % % %
Total $ $ $
Combined Total $ $ $
(before expenses)
</TABLE>

Interest on the Notes will accrue from , 1998 to the date of delivery.

--------

The Underwriters are offering the Notes subject to various conditions. The
Underwriters expect to deliver the Notes to purchasers on or about ,
1998.

--------

SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
WARBURG DILLON READ LLC
CHASE SECURITIES INC.
LEHMAN BROTHERS
NATIONSBANC MONTGOMERY SECURITIES LLC

, 1998
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1998
<PAGE>

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE RELATED
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS SUPPLEMENT.

------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement Summary............................................. S-3
Risk Factors ............................................................. S-10
Special Note Regarding Forward-Looking Statements ........................ S-18
Use of Proceeds........................................................... S-19
Capitalization of Sprint Corporation...................................... S-20
Capitalization of the FON Group........................................... S-21
Capitalization of the PCS Group........................................... S-21
Sprint Corporation Selected Financial Data................................ S-22
FON Group Selected Financial Data......................................... S-23
Historical PCS Group Selected Financial Data.............................. S-24
Sprint Spectrum Holding Company Combined with MinorCo and PhillieCo
Selected Financial Data.................................................. S-25
Sprint Corporation........................................................ S-26
Description of Notes...................................................... S-35
United States Federal Income Tax Considerations........................... S-41
Underwriting.............................................................. S-44
Legal Matters............................................................. S-45
Experts................................................................... S-46
Glossary.................................................................. G-1
Index to Financial Statements............................................. F-1
Annex A--The Tracking Stock Proposal and Related Information.............. A-1

PROSPECTUS
Where You Can Find More Information....................................... 2
Sprint Capital Corporation................................................ 3
Sprint Corporation........................................................ 3
Use of Proceeds........................................................... 4
Ratios of Earnings to Fixed Charges....................................... 4
Description of Debt Securities............................................ 4
Description of Guarantees................................................. 13
Validity of the Debt Securities and Guarantees............................ 13
Experts................................................................... 13
Plan of Distribution...................................................... 14
</TABLE>
<PAGE>

PROSPECTUS SUPPLEMENT SUMMARY

The following summary highlights selected information from this Prospectus
Supplement and may not contain all of the information that you should consider
before investing in the Notes. This Prospectus Supplement, the accompanying
Prospectus and the documents incorporated by reference include specific terms
of the Notes, as well as information regarding our business and detailed
financial data. We encourage you to read this Prospectus Supplement, the
accompanying Prospectus and the documents incorporated by reference.
Capitalized terms that are not defined in the text have the meanings given to
them in the Glossary.

SPRINT CORPORATION

Sprint Corporation is a diversified telecommunications service provider. Our
principal activities include long distance service, local service, wireless
personal communications services ("PCS"), product distribution and directory
publishing activities, and other telecommunications activities, investments and
alliances.

At a special meeting of stockholders to be held November 13, 1998, we are
asking our stockholders to vote upon and approve our tracking stock proposal,
which provides for, among other things:

. the creation of the PCS Group and the FON Group, which are described
below;

. Sprint's acquisition of 100% of the ownership and control of the wireless
telephony businesses currently operating under the Sprint PCS(R) brand
name, other than a 40.8% minority interest in the wireless telephone
business that serves the Los Angeles, San Diego and Las Vegas areas;

. the recapitalization of Sprint's outstanding publicly-traded common stock
into two new classes of common stock of Sprint: PCS Stock and FON Stock
(together with a similar recapitalization of Sprint's outstanding Class A
common stock); and

. subject to market conditions, the issuance of additional PCS Stock in an
underwritten IPO.

Pursuant to the tracking stock proposal, Sprint may elect to complete either
the IPO or the recapitalization at the closing of the acquisition described
above. Sprint has decided to delay the IPO due to current general market
conditions. Therefore, at the closing of the acquisition, Sprint will complete
the recapitalization of its outstanding common stock and Class A common stock.
Sprint will continue to evaluate market conditions and may proceed with the IPO
at a later date. There is no assurance that the IPO will be completed.

The trading price of the PCS Stock should reflect separately the performance
of the PCS Group. The trading price of the FON Stock should reflect separately
the performance of the FON Group. We refer to the transactions described above
as the "Tracking Stock Proposal." Details about the Tracking Stock Proposal and
other information relating to the Tracking Stock Proposal can be found in Annex
A. The Notes offering is not conditioned upon completion of the transactions
contemplated by the Tracking Stock Proposal.

S-3
<PAGE>

THE FON GROUP

The FON Group consists of all of Sprint's businesses and assets not included
in the PCS Group.

Sprint's long distance division is the nation's third-largest provider of
long distance telephone services. In this division, Sprint operates a
nationwide, all-digital long distance telecommunications network that uses
state-of-the-art fiber-optic and electronic technology. This division provides
domestic and international voice, video and data communications services.

Sprint's local telecommunications division consists primarily of regulated
local exchange carriers serving more than 7.5 million access lines in 18
states. This division provides local services and access for telephone
customers and other carriers to our local exchange facilities and sells
telecommunications equipment and long distance services within specified
geographical areas.

Sprint's product distribution and directory publishing businesses consist of
wholesale distribution of telecommunications equipment and publishing and
marketing white and yellow page telephone directories.

Other telecommunications activities of the FON Group include

. emerging businesses, which consist of the development of new integrated
communications services, integration management and support services for
computer networks and international development activities outside the
scope of Global One;

. Sprint's interest in the Global One international strategic alliance, a
joint venture with France Telecom S.A. and

THE PCS GROUP

The PCS Group markets its wireless telephony products and services under the
Sprint(R) and Sprint PCS(R) brand names. The PCS Group operates the only 100%
digital PCS wireless network in the United States with licenses to provide
service nationwide utilizing a single frequency band and a single technology.
The PCS Group owns licenses to provide service to the entire United States
population, including Puerto Rico and the U.S. Virgin Islands. As of October
30, 1998, the PCS Group operates PCS systems in 176 metropolitan markets within
the United States, including 39 of the 50 largest metropolitan areas. By the
end of the first half of 1999, the PCS Group expects to operate PCS systems in
all of the 50 largest metropolitan areas and 80 of the 100 largest metropolitan
areas in the United States.

The PCS Group currently provides nationwide service through a combination of

. operating its own digital network in major metropolitan areas;

. affiliating with other companies, primarily in and around smaller
metropolitan areas;

. roaming on analog cellular networks of other providers using Dual-
Band/Dual-Mode Handsets; and

. roaming on digital PCS networks of other CDMA-based providers.

Since launching the first commercial PCS service in the United States in
November 1995, the PCS Group has experienced rapid customer growth, providing
service to more than 1.75 million customers as of September 30, 1998.

S-4
<PAGE>

Deutsche Telekom AG (France Telecom and Deutsche Telekom are European
telephone companies with a combined 20% equity investment in Sprint); and

. other telecommunications investments and alliances, such as Sprint's
investment in EarthLink Network, Inc., an Internet service provider.

RISK FACTORS

You should consider carefully all of the information set forth in this
Prospectus Supplement and the accompanying Prospectus and, in particular, the
information set forth under "Risk Factors" before deciding to invest in the
Notes.

RATIOS OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges for Sprint was 5.70 for the nine
months ended September 30, 1998 and 6.41 for the year ended December 31, 1997.

The supplemental ratio of earnings to fixed charges for Sprint, on a pro
forma basis giving effect to the restructuring of the PCS Group, but not to the
refinancing of existing indebtedness with the proceeds from the Notes offering,
was 1.49 for the year ended December 31, 1997. Pro forma earnings, as adjusted,
were inadequate to cover fixed charges by $217.3 million for the nine months
ended September 30, 1998.

The ratio of earnings to fixed charges for Sprint, on a pro forma basis
giving effect to the assumed refinancing of existing indebtedness with the
proceeds from the Notes offering (see "Use of Proceeds"), but not to the
restructuring of the PCS Group, was for the nine months ended September 30,
1998 and for the year ended December 31, 1997.

The above ratios were computed by dividing fixed charges into the sum of
earnings (after certain adjustments) and fixed charges. Earnings include income
from continuing operations before taxes, plus equity in the net losses of
entities that are less than 50% owned by Sprint, less capitalized interest.
Fixed charges include (1) interest on all debt of continuing operations
(including amortization of debt issuance costs), (2) the interest component of
operating rents, and (3) the pre-tax cost of subsidiary preferred stock
dividends.

S-5
<PAGE>

THE OFFERING

Issuer...................... Sprint Capital Corporation

Guarantor................... Sprint Corporation

Notes Offered............... principal amount of % Notes due

principal amount of % Notes due

Interest.................... Interest will accrue on the Notes from ,
1998 and will be payable on and of
each year, beginning , 1999.

Sinking Fund................ None

Optional Redemption......... The Notes will be redeemable, as a whole or
in part, at the option of Sprint Capital, at
any time or from time to time. The redemption
prices will be equal to the greater of (1)
100% of the principal amount of the Notes to
be redeemed or (2) the sum of the present
values of the remaining scheduled principal
and interest payments discounted, on a
semiannual basis, at a rate equal to the sum
of the Treasury rate and:
. basis points for the Notes
. basis points for the Notes
. basis points for the Notes
. basis points for the Notes
In the case of clauses (1) and (2), accrued
interest will be payable to the redemption
date.

Ranking..................... The Notes will be senior unsecured
obligations of Sprint Capital and will rank
equally with all other senior unsecured and
unsubordinated indebtedness of Sprint
Capital. The Guarantees will be senior
unsecured obligations of Sprint and will rank
equally with all other senior unsecured and
unsubordinated indebtedness of Sprint.

S-6
<PAGE>

Use of Proceeds............. The net proceeds to Sprint Capital from the
Notes offering will be approximately $ .
Sprint intends that such proceeds will be
used to repay existing indebtedness.

Under the policies adopted by the Sprint
Board, loans from Sprint or the FON Group to
the PCS Group must be made at interest rates
and on other terms and conditions
substantially equivalent to the interest
rates and other terms and conditions that the
PCS Group would be able to obtain from third
parties (including the public markets) as a
direct or indirect wholly-owned subsidiary of
Sprint, but without the benefit of any
guaranty by Sprint or any member of the FON
Group. Sprint or the FON Group will make
loans to the PCS Group on the basis set forth
above regardless of the interest rates and
other terms and conditions on which Sprint or
the FON Group may have acquired the subject
funds. These provisions will apply before
December 31, 2001 and cannot be modified,
suspended or rescinded, nor can any exception
be made to such provisions, prior to December
31, 2001. The Sprint Board currently does not
expect to amend these policies in any
material way after December 31, 2001. See
"The Tracking Stock Proposal and Related
Information-- Tracking Stock Policies" in
Annex A.

S-7
<PAGE>

SPRINT CORPORATION

SUMMARY FINANCIAL DATA

The following unaudited table sets forth summary financial data of Sprint. It
is important that you read the summary financial data presented below along
with the Sprint Consolidated Financial Statements and notes thereto included
elsewhere in this Prospectus Supplement. The summary financial data at December
31, 1997, 1996, 1995, 1994 and 1993, and for each of the five years in the
period ended December 31, 1997, were prepared using the consolidated financial
statements of Sprint, which have been audited by Ernst & Young LLP, independent
auditors. The summary financial data at September 30, 1998, and for the nine
months ended September 30, 1998 and 1997, were prepared using the unaudited
consolidated financial statements of Sprint. The unaudited consolidated
financial statements of Sprint have been prepared on the same basis as Sprint's
audited consolidated financial statements and, in the opinion of management,
contain all adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation of the financial position and results of
operations for these periods. Results for the nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
entire year.

(1) During the nine months ended September 30, 1997 and the year ended December
31, 1996, Sprint recorded nonrecurring charges of $20 and $60 million,
respectively, related to litigation within the long distance division.
These charges reduced income from continuing operations by $13 million
($0.03 per share) for the nine months ended September 30, 1997 and the year
ended December 31, 1997 and $36 million ($0.09 per share) for the year
ended December 31, 1996.
During 1995, Sprint recorded a nonrecurring charge of $88 million related to
a restructuring within the local telecommunications division, which reduced
income from continuing operations by $55 million ($0.16 per share).
During 1993, Sprint recorded nonrecurring charges of $293 million related to
(a) transaction costs from the merger with Centel Corporation and expenses
of integrating and restructuring the operations of the two companies and (b)
a realignment and restructuring within the long distance division. These
charges reduced income from continuing operations by $193 million ($0.57 per
share).
(2) During 1997, Sprint recognized gains of $45 million on sales of local
exchanges and a $26 million gain on the sale of an equity investment in an
equipment provider. These gains increased income from continuing operations
by $27 million ($0.06 per share) and $17 million ($0.04 per share),
respectively.
During 1994, Sprint recognized a $35 million gain on the sale of equity
securities, which increased income from continuing operations by $22 million
($0.06 per share).
During 1993, due to the enactment of the Revenue Reconciliation Act of 1993,
Sprint adjusted its deferred income tax assets and liabilities to reflect
the increased tax rate. This adjustment reduced income from continuing
operations by $11 million ($0.03 per share).
(3) The 1996 amount was reduced by $600 million for cash required to terminate
an accounts receivable sales agreement.

S-8
<PAGE>

SPRINT CORPORATION

SUMMARY PRO FORMA FINANCIAL DATA

The following unaudited table sets forth summary pro forma statement of
income data of Sprint for the year ended December 31, 1997 and the nine months
ended September 30, 1998 and summary pro forma balance sheet data at September
30, 1998. The summary pro forma data were prepared using the unaudited pro
forma condensed combined financial statements of Sprint included elsewhere in
this Prospectus Supplement. The pro forma statement of income data are intended
to give you a better picture of what Sprint's business might have looked like
if the following transactions had occurred on January 1, 1997: (1) the
restructuring of the PCS Group, including the sale of shares of PCS Stock to
France Telecom and Deutsche Telekom in connection with the restructuring of the
PCS Group, and (2) the recapitalization of Sprint's common stock. The pro forma
balance sheet data are intended to give you a better picture of what Sprint's
business might have looked like if the following transactions had occurred on
September 30, 1998: (1) the restructuring of the PCS Group, including the sale
of shares of PCS Stock to France Telecom and Deutsche Telekom in connection
with the restructuring of the PCS Group, and (2) the recapitalization of
Sprint's common stock. It is important that you read the summary pro forma data
presented below along with the Sprint Corporation Unaudited Pro Forma Condensed
Combined Financial Statements and related notes thereto included elsewhere in
this Prospectus Supplement. The following pro forma information is not
necessarily indicative of (1) the results that Sprint would have reported if
such events had actually occurred on the dates specified or (2) the financial
results of Sprint after the restructuring of the PCS Group. Further, pro forma
results for the nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the entire year.

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------------ -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF INCOME DATA
Net operating revenues............. $12,728.2 $15,131.9
Operating income................... 373.2 823.3
Earnings (loss) from continuing op-
erations applicable to common
stock:
FON Group........................ $ 1,132.0 $ 1,373.6
PCS Group........................ (1,187.0) (1,186.1)
--------- ---------
Total Sprint..................... $ (55.0) $ 187.5
========= =========
Basic earnings (loss) per common
share from continuing operations
FON Group........................ $ 2.63 $ 3.19
PCS Group........................ $ (2.86) $ (2.86)
Basic weighted average common
shares
FON Group........................ 430.7 430.2
PCS Group........................ 415.4 415.1
Diluted earnings (loss) per common
share from continuing operations
FON Group........................ $ 2.58 $ 3.15
PCS Group........................ $ (2.86) $ (2.86)
Diluted weighted average common
shares
FON Group........................ 438.7 436.5
PCS Group........................ 415.4 415.1
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
---------------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA
Total assets............................................. $31,950.5
Property, plant and equipment, net....................... 18,034.1
Total debt (including construction obligations and short-
term borrowings)........................................ 12,091.0
Common stock and other stockholders' equity.............. 12,897.0
</TABLE>

S-9
<PAGE>

RISK FACTORS

An investment in the Notes offered hereby involves certain risks. You should
consider the following risk factors and the other information in this
Prospectus Supplement carefully before purchasing any of the Notes. See
"Special Note Regarding Forward-Looking Statements."

SUBSTANTIAL CAPITAL REQUIREMENTS AND EXPENDITURES

The FON Group and the PCS Group will continue to require substantial
additional capital after the Notes offering. Sprint estimates that the FON
Group's capital expenditures for 1999 will total between $3.7 and $4.2 billion,
with additional capital requirements for investments in affiliates. Sprint
currently estimates that the PCS Group's capital expenditures during the period
from July 1, 1998 through December 31, 1999 will total approximately $3.2 to
$4.0 billion. Sprint expects that such expenditures will fund further network
buildout and marketing and distribution costs. Actual amounts required may vary
materially from these estimates. Additional funds could be required in the
event of significant departures from either Group's current business plan,
unforeseen delays, cost overruns, unanticipated expenses, regulatory changes,
engineering design changes and technological and other factors. The PCS Group
may require substantial additional capital for, among other uses, license or
system acquisitions, system development, volume-driven network capacity, and
technological developments or issues. In addition, Cox Communications, Inc. has
"put" rights with respect to its remaining interest in Cox Communications PCS,
L.P. pursuant to which Cox may elect to require Sprint to purchase all or a
portion of Cox's remaining interest in Cox PCS, which could involve significant
cash requirements. See "The Tracking Stock Proposal and Related Information--
Amendments to the Cox PCS Agreements" in Annex A. Sprint may not be able to
arrange additional financing to fund its capital requirements on terms
acceptable to Sprint and may not be willing or able to provide such financing
to the PCS Group. Failure to obtain any such financing could result in the
delay or abandonment of the PCS Group's development or expansion plans or the
failure to meet regulatory buildout requirements.

SIGNIFICANT INCREASE IN INDEBTEDNESS

Sprint will have significant outstanding indebtedness after it completes the
restructuring of the PCS Group and the Notes offering. As of September 30,
1998, Sprint had approximately $5.5 billion of indebtedness. If Sprint had
completed the restructuring of the PCS Group as of September 30, 1998, then on
a pro forma basis Sprint would have had approximately $12.1 billion of
indebtedness at that time, an increase of approximately $6.6 billion. Sprint
intends to incur significant additional indebtedness in the future as it
implements the business plans of the PCS Group and the FON Group. A portion of
Sprint's future cash flow from operations will be required for the payment of
principal and interest on its indebtedness, which would reduce the funds
available for its operations, including acquisitions, capital investments and
business expenses. This could hinder its ability to adjust to changing market
and economic conditions. In addition, if Sprint incurs significant
indebtedness, its credit rating could be adversely affected. As a result
Sprint's borrowing costs would likely increase.

Both the FON Group and the PCS Group have substantial indebtedness. The PCS
Group's ability to make scheduled payments of principal and interest on or to
refinance its indebtedness depends on its future performance and successful
implementation of its business plan, which is

S-10
<PAGE>

subject not only to its own actions but also to general economic, financial,
competitive, legislative, regulatory and other factors beyond its control. The
PCS Group's business may not generate sufficient cash flow from operations and
future credit may not be available to enable the PCS Group to service its
indebtedness. In addition, Sprint may not be able to arrange additional
financing to fund the PCS Group's debt service on terms acceptable to Sprint
and may not be willing to provide such financing itself.

PCS GROUP OPERATING LOSSES AND NEGATIVE CASH FLOW FROM OPERATIONS

As of September 30, 1998, the entities that comprise the PCS Group had
incurred more than $3.9 billion in pre-tax cumulative losses. Sprint expects
that the PCS Group will continue to incur significant operating losses and to
generate significant negative cash flow from operating activities during the
next several years while it continues to build its network and customer base.
The PCS Group may never achieve or sustain operating profitability or positive
cash flow from operating activities. If the PCS Group does not achieve and
maintain positive cash flow from operating activities and operating
profitability on a timely basis, the PCS Group may be unable to make capital
expenditures necessary to implement its business plan, meet its debt service
requirements or otherwise conduct its business in an effective and competitive
manner. Such events could have a material adverse effect on the financial
condition of the PCS Group and Sprint as a whole.

COMPETITION

There is substantial competition in the telecommunications industry. The
traditional dividing lines between long distance, local, wireless and Internet
services are increasingly becoming blurred. Through mergers and various service
integration strategies, all major players, including Sprint, are striving to
provide integrated solutions both within and across all geographical markets.

Sprint expects competition to intensify as a result of the entrance of new
competitors and the rapid development of new technologies, products and
services. Sprint cannot predict which of many possible future technologies,
products or services will be important to maintain its competitive position or
what expenditures will be required to develop and provide such technologies,
products or services. Sprint's ability to compete successfully will depend on
marketing and on its ability to anticipate and respond to various competitive
factors affecting the industry, including new services that may be introduced,
changes in consumer preferences, demographic trends, economic conditions and
discount pricing strategies by competitors.

PCS Group. Each of the markets in which the PCS Group competes is served by
other two-way wireless service providers, including cellular and PCS operators
and resellers. A majority of markets will have five or more CMRS service
providers, and each of the top 50 metropolitan markets have at least one other
PCS competitor in addition to two cellular incumbents. Many of these
competitors have been operating for a number of years, currently serve a
substantial subscriber base, have significantly greater financial and technical
resources than those available to the PCS Group and offer attractive pricing
options for service and a wider variety of handset options. A major competitor
recently introduced a nationwide flat-rate pricing plan that may be viewed as
more attractive than the PCS Group plans. Competition also may increase to the
extent that licenses are transferred from

S-11
<PAGE>

smaller stand-alone operations to larger, better capitalized and more
experienced wireless communications operations that may be able to offer
customers network features not offered by the PCS Group.

The PCS Group is relying on agreements to provide automatic roaming
capability to PCS Group customers in many of the areas of the United States not
served by the PCS Group's network, which primarily serves metropolitan areas.
Certain competitors may be able to offer coverage in areas not served by the
PCS network or, because of their call volumes or their affiliations with, or
ownership of, wireless providers, may be able to offer roaming rates that are
lower than those offered by the PCS Group. For a discussion of the technology
risks associated with roaming and handsets, see "--PCS Group Technology Risks.

The PCS Group also expects that existing cellular providers, some of which
have an infrastructure in place and have been operating for a number of years,
will upgrade their systems and provide expanded and digital services to compete
with the PCS Group's PCS system. Many of these wireless providers require their
customers to enter into long term contracts, which may make it more difficult
for the PCS Group to attract these customers away from such wireless providers.
In addition, the PCS Group does not require its customers to enter into long
term contracts, which may make it easier for other wireless providers to
attract these customers away from the PCS Group.

The PCS Group anticipates that market prices for two-way wireless services
generally will decline in the future based upon increased competition. The
significant competition among wireless providers, including from new entrants,
is expected to continue to drive service and equipment prices lower. The PCS
Group also expects that there will be increases in advertising and promotion
spending, along with increased demands on access to distribution channels. All
of this may lead to greater choices for customers, possible consumer confusion
and increasing churn.

FON Group. The long distance division, as the nation's third largest provider
of long distance services, competes with AT&T and MCI WorldCom, as well as a
host of smaller competitors. Recently, a class of new entrants has emerged
(such as Qwest Communications International Inc. and Level 3 Communications,
Inc.) that are building high-capacity fiber-optic networks capable of
supporting tremendous amounts of bandwidth. Although these new entrants have
not captured significant market share, they and others with a strategy of
utilizing Internet-based networks claim certain cost structure advantages
which, among other factors, may position them well for the future. In any
event, the significant increase in capacity resulting from such new networks
may drive prices down further. Trials of low-cost, low-price Internet-based
long distance services are currently being conducted by the FON Group and other
telecommunications companies.

Although the Telecommunications Act of 1996 (the "Telecom Act") allows the
Regional Bell Operating Companies ("RBOCs") to provide long distance services
in their respective regions if certain conditions are met, to date none of them
have been found to meet the criteria necessary for entry. Once approved, the
RBOCs could prove to be formidable long distance competitors due to, among
other things, geographic coverage and customer loyalty.

Because Sprint's local division operations are largely in rural markets,
competition in the local division's markets is occurring more gradually. There
is already significant competition in urban areas served by the FON Group and
for business customers located in all areas. Certain proposed

S-12
<PAGE>

combinations involving competitors, such as the proposed merger of AT&T and
Tele-Communications, Inc. ("TCI"), would likely accelerate competition in the
areas served by the FON Group. The merger with TCI would enable AT&T to bypass
the local exchange company and reach local customers through the cable of TCI.
In addition, wireless services will continue to grow as an alternative to
wireline services as a means of reaching local customers.

PCS GROUP TECHNOLOGY RISKS

CDMA technology has only recently been deployed in the United States and
internationally. Although the PCS Group has selected CDMA technology because it
believes such technology will offer several advantages over other technologies,
CDMA may not provide the advantages expected by the PCS Group.

Existing analog cellular and other digital networks are not compatible with
the PCS Group's network. The PCS Group's network operates at a different
frequency or uses a different technology than analog cellular or other digital
systems. For the PCS Group's customers to access automatically another
provider's analog cellular or digital system, that provider must agree to allow
the PCS Group's customers to roam on its network, and customers roaming on
analog systems are required to utilize Dual-Mode/Dual-Band Handsets compatible
with that system to take advantage of roaming agreements. Generally, Dual-
Mode/Dual-Band Handsets are more costly than single-mode/single-band handsets
because of the need for two radios rather than one radio, and currently the
smallest Dual-Mode/Dual-Band Handset is larger and heavier than the smallest
single-mode/single-band handset. Roaming agreements with other providers may
not be obtained or maintained on terms acceptable to the PCS Group. The PCS
Group's network does not allow for call hand-off between the PCS Group's
network and another wireless network, thus requiring a customer to end a call
in progress and initiate a new call when leaving the PCS Group's network and
entering another wireless network. In addition, the quality of the service
provided by a network provider during a roaming call may not approximate the
quality of the service provided by the PCS Group and its affiliated companies,
the price of a roaming call may not be competitive with prices of other
wireless companies for such call and the PCS Group customer may not be able to
use any of the advanced features (e.g., voicemail notification) the customer
enjoys when making calls from within the PCS Group network.

PCS GROUP BUSINESS RISKS MAY ADVERSELY AFFECT OVERALL SPRINT PERFORMANCE

PCS Group Network Buildout. The PCS Group has significant buildout activities
to complete, including in the SprintCom markets. The SprintCom markets include
Chicago, Houston and Atlanta. As the PCS Group continues the buildout of its
PCS network, it must:

. obtain rights to a large number of cell and switch sites;

. obtain zoning variances or other approvals or permits for network
construction;

. complete the radio frequency design, including cell site design,
frequency planning and network optimization, for each of its remaining
markets; and

. complete the fixed network implementation, which includes designing and
installing network switching systems, radio systems, interconnecting
facilities and systems, and operating support systems.

S-13
<PAGE>

These events may not occur at the times that the PCS Group has scheduled,
when the FCC requires, at the cost that the PCS Group has scheduled, or at all.
Additionally, problems in vendor equipment availability or performance could
delay the launch of operations in new markets or result in increased costs in
all markets. Failure or delay to complete the buildout of the network and
launch operations, or increased costs of such buildout and launch of
operations, could have a material adverse effect on the operations and
financial condition of the PCS Group or Sprint as a whole.

Maintenance, Expansion and Integration of PCS Group Internal Support
Systems. The successful expansion of the PCS Group's network is dependent on
its ability to expand and maintain customer care, network management, billing
and other financial and management systems (collectively referred to as
"Internal Support Systems"), some of which are provided by third party vendors.
In the past, vendors have often not had systems available to fully meet the PCS
Group's requirements. The failure to maintain, expand, integrate or deploy
these Internal Support Systems in a timely manner could have a material adverse
effect on the PCS Group's competitive position and its ability to grow, retain
and service its customer base, collect revenues from its customers, and provide
critical management and financial information on a timely and accurate basis.

For example, increases in the capacity of the PCS Group's billing system are
dependent upon the timely development and deployment of future software
releases. Assuming that a fourth quarter 1998 software release, which is
currently in testing, meets expectations, management estimates that the PCS
Group's billing system will have sufficient capacity for anticipated customer
growth through mid-year 1999. Additional software releases are scheduled to be
delivered and installed by mid-year 1999, which are expected to meet estimated
billing capacity requirements through mid-year 2000. Although contingency plans
exist in the event that these releases are late, do not perform as planned or
are delayed due to other business priorities, these contingency plans may not
be adequate. Ensuring adequate billing system capacity is dependent on a number
of factors including forecasts of customer growth and usage patterns and
adequate software releases from third-party vendors. In addition, the rapid
expansion of the PCS Group's operations has placed increasing demands on the
PCS Group's customer care systems and processes as well as management
information and financial systems and controls. For example, American PCS, L.P.
was experiencing certain internal control problems prior to the time that the
PCS Group acquired management control.

The rapid expansion of the PCS Group's business and the PCS Group's reliance
on third-party vendors for a significant number of important functions and
components of its Internal Support Systems could have a material adverse effect
on the PCS Group or Sprint as a whole.

Limited PCS Operating History in the United States; Significant Change in
Wireless Industry. PCS systems have a limited operating history in the United
States, so it is difficult to estimate the potential demand in the PCS Group's
markets with any degree of certainty. The wireless telecommunications industry
is experiencing significant technological change, including ongoing
improvements in the capacity and quality of digital technology, which causes
uncertainty about future customer demand for the PCS Group's services. There is
also uncertainty as to the extent to which airtime charges and monthly
recurring charges may continue to decline. As a result, the future prospects of
the wireless industry and the PCS Group and the success of PCS and other
competitive services remain uncertain. Also, these rapid changes may lead to
the development of wireless

S-14
<PAGE>

telecommunications service or alternative service that consumers prefer over
PCS. The PCS Group's limited operating history and the industry's rapid
technological developments may have a material adverse effect on the PCS Group
or Sprint as a whole.

Customer Churn, Dependence on Fourth Quarter Results and Radio Frequency
Emissions. The PCS Group has experienced a higher rate of customer churn as
compared to cellular industry averages. Although the PCS Group has implemented
and plans to implement strategies to address customer churn, such strategies may
not be successful and the rate of customer churn may not decline. Additionally,
the PCS Group and the wireless industry as a whole have experienced a trend of
generating a significantly higher number of customer additions and handset sales
in the fourth quarter of each year as compared to the other three fiscal
quarters. Strong fourth quarter results for customer additions and handset sales
may not continue for the PCS Group or the wireless industry. Finally, media
reports have suggested that certain radio frequency emissions from wireless
handsets may be linked to various health concerns and may interfere with various
electronic medical devices. Although management does not believe radio frequency
emissions raise health concerns, concerns over radio frequency emissions may
discourage the use of wireless handsets or expose Sprint to litigation.

A high rate of customer churn, failure to significantly improve upon customer
additions and handset sales in the fourth quarter, and concerns over radio
frequency emissions could all have a material adverse effect on the operations
and financial condition of the PCS Group or Sprint as a whole.

GOVERNMENT REGULATION

PCS Group. The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the Federal Communications Commission (the "FCC") and, depending on
the jurisdiction, state and local regulatory agencies. In addition, the FCC, in
conjunction with the Federal Aviation Administration (the "FAA"), regulates
tower marking and lighting. The FCC, the FAA or those state agencies having
jurisdiction over the PCS Group's business may adopt regulations or take other
actions that would adversely affect the business of the PCS Group.

FCC licenses to provide PCS services are subject to renewal and revocation.
The PCS Group's MTA licenses will expire in 2005 and the BTA licenses will
expire in 2007. There may be competition for the licenses held by the PCS Group
upon their expiration, and the PCS Group's licenses might not be renewed. FCC
rules require all PCS licensees to meet certain buildout requirements. The PCS
Group may not be able to obtain the requisite coverage in each market. Failure
to comply with these requirements in a given license area could cause
revocation or forfeiture of the PCS Group's PCS license for that license area
or the imposition of fines on the PCS Group by the FCC.

FON Group. The Telecom Act is designed to eliminate certain barriers to entry
into local telephone markets. In accordance with the Telecom Act, the FCC has
adopted numerous rules relating to competition, including rules regarding
interconnection to incumbent local networks by new market entrants. Many of
these rules and certain provisions of the Telecom Act have been

S-15
<PAGE>

challenged in court and, at least initially, struck down. Most of the decisions
have been appealed and in some cases the decision of the lower court has been
overturned. The impact of the Telecom Act on Sprint remains unclear because the
rules for competition are still being decided by regulators and courts.
Decisions by the FCC or courts may impose material costs on Sprint's efforts to
enter new markets.

The Telecom Act also requires incumbent local exchange carriers ("ILECs"),
among other things, to allow local resale at wholesale rates, negotiate
interconnection agreements, provide nondiscriminatory access to unbundled
network elements and allow collocation of interconnection equipment by
competitors. Sprint owns ILECs operating in 18 states. In those areas in which
Sprint is the ILEC, management expects local competition to result in loss of
market share. The extent of market share that will be lost cannot be estimated
at this time.

YEAR 2000 RISK

Failure by either the FON Group, the PCS Group or any of Sprint's significant
third-party service providers to be Year 2000 compliant in a timely manner
could have a material adverse effect on Sprint's operations. The "Year 2000"
issue affects Sprint's installed computer systems, network elements, software
applications, and other business systems that have time sensitive programs that
may not properly reflect or recognize the year 2000. Because many computers and
computer applications define dates by the last two digits of the year, "00" may
not be properly identified as the year 2000. This error could result in
miscalculations or system errors. The Year 2000 issue may also affect the
systems and applications of Sprint's customers, vendors, resellers or other
service providers.

PCS Group. The PCS Group is undertaking an inventory of its computer systems,
network elements, software applications, products and other business systems.
These inventories are targeted to be completed by year-end 1998. Once an item
is identified through the inventory process, its Year 2000 impact is assessed
and a plan is developed to address any required renovation. The PCS Group is
using both internal and external resources to identify, correct or reprogram,
and test its systems for Year 2000 compliance. The PCS Group is planning that
Year 2000 compliance for these critical systems will be achieved in 1999. The
PCS Group is also contacting third parties with whom it conducts business to
receive the appropriate warranties and assurances that those third parties are
or will be Year 2000 compliant. However, full compliance may not be achieved as
planned by the PCS Group and such third parties, and the PCS Group may not
receive warranties and assurances from such third parties. The PCS Group relies
on third-party vendors for a significant number of its important operating and
computer system functions and therefore is highly dependent on such third-party
vendors for the remediation of network elements, computer systems, software
applications, and other business systems. In addition, the PCS Group uses
publicly-available services that are acquired without contract (e.g., global
positioning system timing signal) that may be subject to the Year 2000 issue.
While management believes these systems will be Year 2000 compliant, the PCS
Group has no contractual or other right to compel compliance. Based upon
management's evaluations to date, it believes that the total cost of
modifications and conversions of the PCS Group's systems will not be material,
but such cost could become material because of the various reasons described
above, many of which are out of the PCS Group's control.

S-16
<PAGE>

FON Group. The FON Group started a program in 1996 to identify and address
the Year 2000 issue. It has completed an inventory and Year 2000 assessment of
its principal computer systems, network elements, software applications and
other business systems. Sprint expects to substantially complete the renovation
of these computer systems, software applications and the majority of the
network elements and other business systems by year end 1998. Year 2000 testing
commenced in the third quarter of 1998 and will be completed during 1999. The
FON Group is using both internal and external sources to identify, correct or
reprogram, and test its systems for Year 2000 compliance. The FON Group is also
contacting others with whom it conducts business to receive the appropriate
warranties and assurances that those third parties are, or will be, Year 2000
compliant.

Sprint expects to incur approximately $250 million in 1998 and 1999 to
complete its Year 2000 compliance program. Although Sprint intends to develop
and implement, if necessary, appropriate contingency plans to mitigate to the
extent possible the effects of any Year 2000 noncompliance, such plans may not
be adequate and the cost of Year 2000 compliance may be higher than $250
million.

Affiliates. Sprint's results of operations and financial condition could also
be materially adversely affected by the failure of its affiliates, including
Global One, to achieve Year 2000 compliance in a timely manner.

S-17
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus Supplement includes and incorporates by reference "forward-
looking statements" within the meaning of the securities laws. All statements
regarding the expected financial position, business and financing plans of
Sprint, the FON Group and the PCS Group and statements that are not historical
facts are "forward-looking statements." Such forward-looking statements,
including statements relating to the future business prospects, revenues,
working capital, liquidity, capital needs, PCS network buildout, interest costs
and income, in each case relating to Sprint; Sprint Spectrum Holding Company,
L.P. and MinorCo, L.P., together with their subsidiaries (collectively, "Sprint
Spectrum Holdings"); SprintCom, Inc. and SprintCom Equipment Company, L.P.
(collectively, "SprintCom"); PhillieCo Partners I, L.P. and PhillieCo Partners
II, L.P., together with their subsidiaries ("PhillieCo"); the FON Group; and
the PCS Group, are estimates and projections reflecting the best judgment of
the senior management of Sprint and Sprint Spectrum, L.P. and its subsidiaries
("Sprint Spectrum") and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the forward-
looking statements. Although Sprint believes that the estimates and projections
reflected in the forward-looking statements are reasonable, such expectations
may prove to be incorrect. Important factors that could cause actual results to
differ materially from estimates or projections contained in the forward-
looking statements include:

. the effects of vigorous competition in the markets in which these entities
operate;

. the costs and business risks associated with entering new markets
necessary to provide nationwide services and providing new services;

. the ability of the PCS Group to establish a significant market presence;

. the uncertainties related to Sprint's investments in Global One and other
joint ventures;

. the impact of any unusual items resulting from ongoing evaluations of the
business strategies of these entities;

. requirements imposed on these entities or latitude allowed to their
competitors by the FCC or state regulatory commissions under the Telecom
Act or other applicable laws and regulations;

. unexpected results of litigation filed against these entities;

. the impact of the Year 2000 issue and any related non-compliance;

. the possibility of one or more of the markets in which these entities
compete being impacted by changes in political, economic or other factors
such as monetary policy, legal and regulatory changes or other external
factors over which these entities have no control; and

. those factors listed in this Prospectus Supplement under "Risk Factors."
See "Risk Factors."

The words "estimate," "project," "intend," "expect," "believe" and similar
expressions identify forward-looking statements. These forward-looking
statements are found at various places throughout this Prospectus Supplement
and the other documents incorporated by reference in this Prospectus
Supplement. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this Prospectus Supplement.
Sprint has no obligation to revise these forward-looking statements to reflect
events or circumstances after the date of this Prospectus Supplement or to
reflect the occurrence of unanticipated events. Moreover, in the future,
Sprint, through senior management, may make forward-looking statements about
the matters described in this Prospectus Supplement or other matters concerning
Sprint, Sprint Spectrum Holdings, SprintCom, PhillieCo, the FON Group or the
PCS Group.

S-18
<PAGE>

USE OF PROCEEDS

The net proceeds to Sprint Capital from the Notes offering will be
approximately $ billion. Sprint intends that such proceeds will be used to
repay existing indebtedness bearing interest at annual rates from % to %,
with maturities ranging from to . Sprint has used the amounts of such
existing indebtedness that were borrowed in the past 12 months for working
capital, capital expenditures, funding of affiliates and other purposes,
including funding the buildout of the PCS network.

A portion of the net proceeds may be loaned to the PCS Group. Such loans will
be made at interest rates and on other terms and conditions substantially
equivalent to those that the PCS Group would be able to obtain from third
parties (including the public markets) as a wholly-owned subsidiary of Sprint,
but without the benefit of any guaranty by Sprint or any member of the FON
Group. Accordingly, such interest rates are expected to be higher than the
interest rates for the Notes. The difference in the rates between the Notes and
the rate charged to the PCS Group will accrue to the benefit of the FON Group.
See "The Tracking Stock Proposal and Related Information--Tracking Stock
Policies" in Annex A.

Certain of the underwriters or their affiliates are lenders under credit
facilities that may be repaid with net proceeds from the Notes offering. See
"Underwriting."

S-19
<PAGE>

CAPITALIZATION OF SPRINT CORPORATION

The following table sets forth as of September 30, 1998 (1) the historical
consolidated capitalization of Sprint; (2) the consolidated capitalization of
Sprint on a pro forma basis to give effect to (a) the restructuring of the PCS
Group, including the sale of shares of PCS Stock to France Telecom and
Deutsche Telekom in connection with the restructuring of the PCS Group and (b)
the recapitalization of Sprint's common stock; and (3) the consolidated
capitalization of Sprint on a pro forma basis, as adjusted to give effect to
the Notes offering and the application of the net proceeds of the offering.
See "Use of Proceeds" and the Sprint Corporation Unaudited Pro Forma Condensed
Combined Financial Statements and related notes thereto included elsewhere in
this Prospectus Supplement.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- --------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Cash and equivalents...................... $ 47.7 $ 346.5 $
========= ========= =======
Short-term debt (includes current maturi-
ties of long-term debt).................. $ 80.6 $ 205.1 $
Long-term debt
Notes ............................. -- --
Notes ............................. -- --
Notes ............................. -- --
Notes ............................. -- --
Other long-term debt..................... 5,039.8 10,881.2
--------- --------- -------
Total.................................... 5,039.8 10,881.2 1,004.7
Construction obligations.................. 429.0 1,004.7 957.5
Redeemable preferred stock................ 9.5 9.5 9.5
Common stock, $2.50 par value, 1.0 billion
shares authorized, 344.5 million shares
outstanding (Historical), 0 shares
outstanding (Pro Forma and Pro Forma As
Adjusted)................................ 875.7 -- --
Class A common stock, $2.50 par value,
500.0 million shares authorized
(Historical), 200.0 million shares
authorized (Pro Forma and Pro Forma As
Adjusted), 86.2 million shares issued and
outstanding (Historical, Pro Forma and
Pro Forma As Adjusted) .................. 215.6 215.6(1) 215.6(1)
FON Stock, $2.00 par value, 4.2 billion
shares authorized, 0 shares outstanding
(Historical), 350.3 million shares issued
and 344.5 million shares outstanding (Pro
Forma and Pro Forma As Adjusted)......... -- 700.6(1) 700.6(1)
PCS Stock, $1.00 par value, 2.35 billion
shares authorized, 0 shares outstanding
(Historical), 375.1 million shares issued
and outstanding (Pro Forma and Pro Forma
As Adjusted)............................. -- 375.1(1) 375.1(1)
PCS preferred stock....................... -- 240.0 240.0
Capital in excess of par or stated value.. 4,490.8 7,663.1 7,663.1
Retained earnings......................... 4,012.7 4,010.7
Treasury stock, at cost................... (396.1) (396.1) (396.1)
Other..................................... 103.6 88.0 88.0
--------- --------- -------
Total capitalization..................... $14,861.2 $24,997.5 $
========= ========= =======
</TABLE>
- --------
(1) After the recapitalization, each share of Class A common stock will
represent an equity interest in the FON Group and an equity interest in
the PCS Group, together with a right to cause Sprint to initially issue
one share of FON Stock and 1/2 share of PCS Stock. The FON Stock and PCS
Stock shown in the table do not include such shares issuable to France
Telecom and Deutsche Telekom.

S-20
<PAGE>

CAPITALIZATION OF THE FON GROUP

The following table sets forth as of September 30, 1998 (1) the historical
capitalization of the FON Group; (2) the capitalization of the FON Group on a
pro forma basis to give effect to the restructuring of the PCS Group; and (3)
the capitalization of the FON Group on a pro forma basis, as adjusted to give
effect to the Notes offering and the application of the net proceeds of the
offering. See "Use of Proceeds" and the FON Group Unaudited Pro Forma Condensed
Combined Financial Statements and related notes thereto included elsewhere in
this Prospectus Supplement.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- --------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Cash and equivalents.......................... $ 47.7 $ 21.2 $
========= ========= =====
Short-term debt (includes current maturities
of long-term debt)........................... $ 38.1 $ 38.1 $
Long-term debt................................ 4,651.6 4,651.6
Group equity.................................. 8,471.3 8,604.8
--------- --------- -----
Total capitalization......................... $13,161.0 $13,294.5 $
========= ========= =====
</TABLE>

CAPITALIZATION OF THE PCS GROUP

The following table sets forth as of September 30, 1998 (1) the historical
capitalization of the PCS Group; (2) the capitalization of the PCS Group on a
pro forma basis to give effect to the restructuring of the PCS Group, including
the sale of shares of PCS Stock to France Telecom and Deutsche Telekom in
connection with the restructuring of the PCS Group; and (3) the capitalization
of the PCS Group on a pro forma basis, as adjusted to give effect to the Notes
offering and the application of the net proceeds of the offering. See "Use of
Proceeds" and the PCS Group Unaudited Pro Forma Condensed Combined Financial
Statements and related notes thereto included elsewhere in this Prospectus
Supplement.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- ---------------- -----------
<S> <C> <C> <C>
(IN MILLIONS)
Cash and equivalents.................. $ -- $ 325.3 $
======== ================ ====
Short-term debt (includes current
maturities of long-term debt)........ $ 42.5 $ 167.0 $
Capital lease obligations............. 388.2 6,367.6
Construction obligations.............. 429.0 1,004.7
Group equity.......................... 831.0 4,578.4
-------- ---------------- ----
Total capitalization................ $1,690.7 $ 12,117.7 $
======== ================ ====
</TABLE>

S-21
<PAGE>

SPRINT CORPORATION

SELECTED FINANCIAL DATA

The following unaudited table sets forth the selected financial data of
Sprint. It is important that you read the selected financial data presented
below along with the Sprint Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus Supplement. The selected
financial data at December 31, 1997, 1996, 1995, 1994 and 1993, and for each
of the five years in the period ended December 31, 1997, were prepared using
the consolidated financial statements of Sprint, which have been audited by
Ernst & Young LLP, independent auditors. The selected financial data at
September 30, 1998, and for the nine months ended September 30, 1998 and 1997,
were prepared using the unaudited consolidated financial statements of Sprint.
The unaudited consolidated financial statements of Sprint have been prepared
on the same basis as Sprint's audited consolidated financial statements and,
in the opinion of management, contain all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position and results of operations for these periods. Results for the nine
months ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the entire year.

CERTAIN PRIOR-YEAR AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO THE CURRENT-
YEAR PRESENTATION. THESE RECLASSIFICATIONS HAD NO EFFECT ON THE RESULTS OF
OPERATIONS OR STOCKHOLDERS' EQUITY AS PREVIOUSLY REPORTED.
(1) During the nine months ended September 30, 1997 and the year ended
December 31, 1996, Sprint recorded nonrecurring charges of $20 and $60
million, respectively, related to litigation within the long distance
division. These charges reduced income from continuing operations by $13
million ($0.03 per share) for the nine months ended September 30, 1997 and
the year ended December 31, 1997 and $36 million ($0.09 per share) for the
year ended December 31, 1996.
During 1995, Sprint recorded a nonrecurring charge of $88 million related
to a restructuring within the local telecommunications division, which
reduced income from continuing operations by $55 million ($0.16 per share).
During 1993, Sprint recorded nonrecurring charges of $293 million related
to (a) transaction costs from the merger with Centel Corporation and
expenses of integrating and restructuring the operations of the two
companies and (b) a realignment and restructuring within the long distance
division. These charges reduced income from continuing operations by $193
million ($0.57 per share).
(2) During 1997, Sprint recognized gains of $45 million on sales of local
exchanges and a $26 million gain on the sale of an equity investment in an
equipment provider. These gains increased income from continuing
operations by $27 million ($0.06 per share) and $17 million ($0.04 per
share), respectively.
During 1994, Sprint recognized a $35 million gain on the sale of equity
securities, which increased income from continuing operations by $22
million ($0.06 per share).
During 1993, due to the enactment of the Revenue Reconciliation Act of
1993, Sprint adjusted its deferred income tax assets and liabilities to
reflect the increased tax rate. This adjustment reduced income from
continuing operations by $11 million ($0.03 per share).
(3) The 1996 amount was reduced by $600 million for cash required to terminate
an accounts receivable sales agreement.

S-22
<PAGE>

FON GROUP

SELECTED FINANCIAL DATA

The following unaudited table sets forth selected financial data of the FON
Group. It is important that you read the selected financial data presented
below along with the FON Group Combined Financial Statements and notes thereto
included elsewhere in this Prospectus Supplement. The selected financial data
at December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, were prepared using the FON Group combined financial
statements, which have been audited by Ernst & Young LLP, independent auditors.
The selected financial data at December 31, 1995, 1994 and 1993, at September
30, 1998, for each of the two years in the period ended December 31, 1994 and
for the nine months ended September 30, 1998 and 1997, were prepared using the
unaudited FON Group combined financial statements. The unaudited FON Group
combined financial statements have been prepared on the same basis as the
audited FON Group combined financial statements and, in the opinion of
management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for these periods. Results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year.

<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS AT OR FOR THE
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA
Net operating revenues.. $11,940.3 $11,024.9 $14,873.9 $13,887.5 $12,735.3 $11,964.8 $10,894.9
Operating income(1)..... 2,097.9 1,848.3 2,469.9 2,267.7 1,834.3 1,690.7 1,214.1
Income from continuing
operations(1) (2)...... 1,141.1 1,014.9 1,371.6 1,310.6 966.0 899.2 517.1
CASH FLOW DATA
Net cash from operating
activities--continuing
operations(3).......... $ 2,791.4 $ 2,033.0 $ 2,906.8 $ 2,267.3 $ 2,590.1 $ 2,339.6 $ 2,007.8
Capital expenditures.... 2,320.0 1,835.7 2,708.9 2,433.6 1,857.3 1,751.6 1,429.8
BALANCE SHEET DATA
Total assets............ $18,369.6 $16,491.7 $15,566.6 $14,100.6 $14,374.1 $13,781.8
Property, plant and
equipment, net......... 12,175.0 11,316.8 10,464.1 9,715.8 10,258.8 9,883.1
Total debt (including
short-term borrowings). 4,689.7 3,879.6 3,273.9 5,668.9 4,927.7 5,084.1
Group equity............ 8,471.3 7,639.3 7,332.3 3,676.9 4,473.7 3,918.3
</TABLE>
- --------
(1) During the nine months ended September 30, 1997 and the year ended December
31, 1996, the FON Group recorded nonrecurring charges of $20 and $60
million, respectively, related to litigation within the long distance
division. These charges reduced income from continuing operations by $13
million for the nine months ended September 30, 1997 and the year ended
December 31, 1997 and $36 million for the year ended December 31, 1996.
During 1995, the FON Group recorded a nonrecurring charge of $88 million
related to a restructuring within the local telecommunications division,
which reduced income from continuing operations by $55 million.
During 1993, the FON Group recorded nonrecurring charges of $293 million
related to (a) transaction costs from the merger with Centel Corporation
and expenses of integrating and restructuring the operations of the two
companies and (b) a realignment and restructuring within the long distance
division. These charges reduced income from continuing operations by $193
million.
(2) During 1997, the FON Group recognized gains of $45 million on sales of
local exchanges and a $26 million gain on the sale of an equity investment
in an equipment provider. These gains increased income from continuing
operations by $27 million and $17 million, respectively.
During 1994, the FON Group recognized a $35 million gain on the sale of
equity securities, which increased income from continuing operations by $22
million.
During 1993, due to the enactment of the Revenue Reconciliation Act of
1993, the FON Group adjusted its deferred income tax assets and liabilities
to reflect the increased tax rate. This adjustment reduced income from
continuing operations by $11 million.
(3) The 1996 amount was reduced by $600 million for cash required to terminate
an accounts receivable sales agreement.

S-23
<PAGE>

HISTORICAL PCS GROUP

SELECTED FINANCIAL DATA

The following unaudited table sets forth historical selected financial data
of SprintCom and Sprint's investments in Sprint Spectrum Holdings and
PhillieCo. The investments in Sprint Spectrum Holdings (which includes its
subsidiaries, Sprint Spectrum, Cox PCS and APC) and PhillieCo during the
periods shown below have been accounted for on the equity basis. See "Sprint
Corporation--The PCS Group." The results of SprintCom, a wholly-owned
subsidiary of Sprint, are accounted for on a consolidated basis. After the
restructuring of the PCS Group, the results of Sprint Spectrum Holdings and
PhillieCo will be accounted for on the consolidated basis in the PCS Group
combined financial statements. It is important that you read the selected
financial data presented below along with the PCS Group Combined Financial
Statements and notes thereto included elsewhere in this Prospectus Supplement.
The selected financial data at December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997, were prepared using the PCS
Group combined financial statements, which have been audited by Ernst & Young
LLP, independent auditors. The selected financial data at December 31, 1995 and
1994, at September 30, 1998, for the year ended December 31, 1994 and for the
nine months ended September 30, 1998 and 1997, were prepared using the
unaudited PCS Group combined financial statements. The unaudited PCS Group
combined financial statements have been prepared on the same basis as the
audited PCS Group combined financial statements and, in the opinion of
management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for these periods. Results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year.

<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED SEPTEMBER AT OR FOR THE
30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------
1998 1997 1997 1996 1995 1994(1)
-------- ------- -------- -------- ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA
Operating loss.......... $ (80.0) $ (7.4) $ (18.5) $ (0.5) $ -- $ --
Equity in loss of Sprint
Spectrum Holdings and
PhillieCo.............. (686.5) (410.6) (659.6) (191.8) (31.4) --
Net loss................ (471.8) (257.3) (419.1) (119.7) (19.9) --
CASH FLOW DATA
Net cash provided (used)
by operating
activities............. $ (193.0) $ 25.8 $ 37.5 $ (0.5) $ -- $ --
Capital expenditures.... 672.1 68.2 153.7 -- -- --
Purchase of PCS
licenses............... -- 460.1 460.1 84.0 -- --
Investment in Sprint
Spectrum Holdings and
PhillieCo, net......... 193.5 255.5 405.9 297.5 910.9 51.1
BALANCE SHEET DATA
Total assets............ $2,494.2 $1,693.1 $1,259.8 $973.7 $51.1
Property, plant and
equipment, net......... 1,327.2 177.3 -- -- --
Investment in Sprint
Spectrum Holdings and
PhillieCo.............. 475.4 968.4 1,175.8 973.7 51.1
Construction and capital
lease obligations
(including short-term
borrowings)............ 859.7 -- -- -- --
Group equity............ 831.0 1,385.9 1,187.6 965.7 51.1
</TABLE>
- --------
(1) The PCS Group had no operations prior to 1994.

S-24
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

SELECTED FINANCIAL DATA

The following unaudited table sets forth selected financial data of Sprint
Spectrum Holdings, MinorCo and PhillieCo. It is important that you read the
selected financial data presented below along with the Sprint Spectrum Holdings
combined with MinorCo and PhillieCo Financial Statements and notes thereto
included elsewhere in this Prospectus Supplement. The selected financial data
at December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 were prepared using the Sprint Spectrum Holdings
combined with MinorCo and PhillieCo financial statements, which have been
audited by Deloitte & Touche LLP, independent auditors. The selected financial
data at December 31, 1995 and 1994, at September 30, 1998, for the year ended
December 31, 1994, and for the nine months ended September 30, 1998 and 1997,
were prepared using the unaudited Sprint Spectrum Holdings combined with
MinorCo and PhillieCo financial statements. The unaudited Sprint Spectrum
Holdings combined with MinorCo and PhillieCo financial statements have been
prepared on the same basis as the audited Sprint Spectrum Holdings combined
with MinorCo and PhillieCo financial statements and, in the opinion of
management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for these periods. Results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year.

<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS AT OR FOR THE
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------
1998 1997 1997 1996 1995 1994(1)
--------- --------- --------- -------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA
Net operating revenues.. $ 788.0 $ 110.5 $ 258.0 $ 4.2 $ -- $ --
Operating loss.......... (1,455.8) (869.0) (1,379.7) (357.6) (66.9) (3.3)
Net loss................ (1,692.0) (1,021.5) (1,632.7) (444.6) (112.7) (3.3)
CASH FLOW DATA
Net cash used in
operating activities... $ 1,301.4 $ 606.4 $ 848.2 $ 172.4 $ 16.9 $ 0.5
Capital expenditures.... 1,107.7 1,632.8 2,124.6 1,419.2 31.8 0.5
Purchase of PCS
licenses............... -- -- -- -- 2,085.8 118.4
BALANCE SHEET DATA
Total assets............ $ 8,526.4 $ 7,057.9 $4,443.6 $2,329.3 $123.9
Property, plant and
equipment, net......... 4,531.9 3,538.2 1,441.6 32.0 0.4
Long-term debt and
construction
obligations (including
short-term borrowings). 6,701.4 4,273.8 1,401.2 -- --
</TABLE>
- --------
(1) Sprint Spectrum Holding Company, MinorCo and PhillieCo had no operations
prior to 1994.

S-25
<PAGE>

SPRINT CORPORATION

Sprint is a diversified telecommunications company, providing long distance,
local and wireless communications services. Its local and long distance
operations serve more than 16 million business and residential customers.
Sprint also has product distribution and directory publishing activities and
other telecommunications activities, investments and alliances.

TELECOMMUNICATIONS INDUSTRY OVERVIEW

BACKGROUND: THE ADVENT OF COMPETITION

The 1984 break-up of the old Bell System was a significant step toward a
truly competitive telecommunications services market. By creating independent
RBOCs and separating AT&T as a long distance provider, the divestiture laid the
foundation for the eventual elimination of monopoly dominance of the
marketplace.

The divestiture of the RBOCs from AT&T was intended to encourage direct, open
competition in the long distance segment. Since the divestiture, hundreds of
long distance providers have entered the marketplace. This competition
decreased prices, which led to growth in the market. In addition, initiatives
such as Sprint's decision to build a nationwide fiber-optic network spurred
other carriers to upgrade their infrastructures at a faster pace. As a result,
telecommunications users experienced an unprecedented stream of innovative
products and services.

As the long distance market has grown, wireless communications, the Internet
and other technologies have also grown and offered a new range of choices to
telecommunications users. Regulatory policies that enabled competition played a
critical role in the emergence of these new sectors.

CURRENT LANDSCAPE: AN INDUSTRY IN TRANSITION

Sprint divides today's telecommunications environment into five basic
sectors: local exchange, long distance, wireless, Internet access services and
international service.

Local Exchange Services. In general, local exchange carriers provide local
service, including the local portion of most long distance calls. Divestiture
of the RBOCs did not create competition in the local exchange market. However,
several factors have served to promote competition in the years that followed,
including: (1) customer desire for an alternative to the ILECs, including the
RBOCs; (2) technological advances in the transmission of data and video
requiring greater capacity and reliability than ILEC networks could provide;
and (3) the significant fees, called "access charges," that long distance
carriers are required to pay to ILECs for the use of their networks, which
encourage development of alternative means for reaching end user customers.

These pressures for a more competitive market have created a number of
responses in the marketplace and on the part of legislators and regulatory
bodies:

. The mid-1980s saw the emergence of Competitive Access Providers ("CAPs").
Most of the early CAPs were entrepreneurial enterprises that operated
limited networks that provided dedicated, unswitched connections to long
distance carriers and large businesses. These connections allowed high-
volume users to avoid the relatively high prices charged by ILECs for
dedicated, unswitched connections or for switched access.

. During the late 1980s and the 1990s, certain federal and state regulatory
agencies issued rulings which favored competition and were intended to
open local markets to new entrants. This pro-competitive trend continued
with passage of the Telecom Act, which provides a legal framework for
introducing competition to local telecommunications markets across the
United States.

. The FCC is in the process of reforming access charges by removing certain
subsidies paid by long distance companies for local exchange service.

S-26
<PAGE>

Growth in local markets is already strong, driven by expansion of second
lines to homes for Internet access, among other factors. With new entrants to
the market, Sprint anticipates effects similar to those that have occurred in
competitive long distance markets, including increased choice of products and
services and lower prices. In response to competitive pressures, certain of the
ILECs have merged.

Long Distance Services. The United States long distance industry is large and
continues to grow. According to Atlantic-ACM, total long distance industry
revenues have grown 7% a year on average since 1984. For the year 1997,
according to Atlantic-ACM, total domestic long distance revenues were
approximately $92.1 billion. In addition to growth caused by price declines and
improvements in service, long distance growth is also attributable to the
worldwide trend toward deregulation and privatization, technological
improvements, the expansion of telecommunications infrastructure and the
globalization of the world's economies. Recently, a class of new entrants has
emerged that are building high-capacity fiber-optic networks capable of
supporting tremendous amounts of bandwidth. Although these new entrants have
not captured significant market share, they and others with a strategy of
utilizing Internet-based networks claim certain cost structure advantages
which, among other factors, may position them well for the future. In any
event, the significant increase in capacity resulting from such new networks
may drive prices down further. Trials of low-cost, low-price Internet-based
long distance services are currently being conducted by the FON Group and other
telecommunications companies. Once the RBOCs receive approval to provide long
distance services in their respective regions, they could prove to be
formidable competitors.

Wireless Service. As of December 31, 1997, according to the Cellular
Telecommunications Industry Association ("CTIA"), there were 55.3 million
wireless telephone subscribers in the United States, representing an overall
wireless penetration rate of 20.6% and subscriber growth of 25.6% from December
31, 1996.

In the wireless communications industry there are two principal services
licensed by the FCC for transmitting two-way, real-time voice and data signals:
"cellular" and "PCS." Cellular is the predominant form of wireless voice
communications service utilized by carriers established in the early 1980s.
Cellular systems are predominantly analog-based systems, although digital
technology has been introduced into most metropolitan markets. PCS differs from
traditional analog cellular service principally in that PCS systems operate at
a higher frequency and employ advanced digital technology. Digital systems
achieve greater frequency reuse than analog systems, resulting in greater
capacity than analog systems. This enhanced capacity, along with enhancements
in digital protocols, allows digital-based wireless technologies (whether using
PCS or cellular frequencies) to offer greater clarity, better security, new and
enhanced services and more robust data transmission (such as facsimile,
electronic mail and connection of notebook computers to computer/data
networks).

The following table sets forth certain statistics for the domestic wireless
telephone industry as a whole, as published by the CTIA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Total Service Revenues (in billions)... $ 27.5 $ 23.6 $ 19.1 $ 14.2 $ 10.9
Ending Wireless Subscribers (in
millions)............................. 55.3 44.0 33.8 24.1 16.0
Subscriber Growth...................... 25.6% 30.4% 40.0% 50.8% 45.1%
Average Monthly Revenue per Subscriber. $41.12 $44.66 $47.59 $51.48 $58.74
Ending Penetration..................... 20.6% 16.5% 12.8% 9.2% 6.2%
</TABLE>

Paul Kagan Associates estimates that the number of cellular and PCS wireless
service subscribers will reach 89 million by the year 2000. Sprint believes
that a significant portion of the predicted growth for wireless communications
will result from declines in costs of service, increased functional
versatility, and increased awareness of the productivity, convenience and
privacy benefits offered by PCS providers, which are the first direct wireless
competitors of cellular providers to offer all-digital mobile networks. Sprint
also believes that the rapid growth of notebook computers and personal digital
assistants, combined with emerging software applications for delivery of
electronic mail, fax and database searching, will contribute to the growing
demand for wireless service.

S-27
<PAGE>

Internet Access Services. The networks that comprise the Internet are
connected in a variety of ways, including by the public switched telephone
networks and by high-speed, dedicated leased lines. Communications on the
Internet are enabled by Internet Protocol, an inter-networking standard that
enables communication across the Internet regardless of the hardware and
software used and facilitates rapid technological developments.

In the mid-1990s, thousands of providers known as Internet Service Providers
("ISPs") became prevalent. ISPs offer access, electronic mail, customized
content and other specialized services and products to more easily allow both
commercial and residential customers to obtain information from, transmit
information to, and utilize resources available on the Internet.

According to a report issued by the U.S. Department of Commerce, traffic on
the Internet doubled every 100 days in 1997. Sprint anticipates continued rapid
growth in this sector.

International Market. In many countries, traditional telecommunications
services are provided by a monopoly provider, frequently controlled by the
national government. In recent years, there has been a trend toward
liberalization in many of these markets (as well as privatization of the
providers), particularly in Europe. In early 1998, 70 countries (representing
over 90% of the world's telecommunications traffic) entered into the World
Trade Organization Basic Telecommunications Agreement, which contains
commitments to open markets to competition and remove foreign ownership
restrictions. Led by the introduction of competition in the United Kingdom, the
European Union mandated open competition as of January 1998. Similar trends are
emerging, although more slowly, in Asia. Multinational companies continue to
drive growth in international traffic.

CONVERGENCE: THE TREND TOWARD INTEGRATED COMMUNICATIONS

Although the telecommunications industry is experiencing growth in all
sectors in its current form, Sprint believes that the stage has been set for
even stronger expansion in the years ahead. Sprint believes this will occur due
to two main driving forces: 1) a continuation of the substantial growth in data
communications traffic, and 2) the emergence of new service delivery models
based on packaged and integrated communications offerings. Data communications
traffic is already rapidly increasing, changing the mix of traffic on
telecommunications networks. Sprint believes that deregulation of local markets
and technological developments will accelerate the disappearance of
distinctions between long distance, local, wireless and other means of
communications.

CREATION OF THE FON GROUP AND PCS GROUP

At a special meeting of stockholders to be held November 13, 1998 (the
"Special Meeting"), Sprint is asking its stockholders to vote upon and approve
Sprint's Tracking Stock Proposal, which provides for, among other things:

. the creation of the PCS Group and the FON Group;

. Sprint's acquisition of 100% of the ownership and control of the
businesses currently operating under the Sprint PCS brand name, other than
Cox Communications PCS, L.P. which is 59.2% owned by Sprint Spectrum
Holding Company, L.P. (the "PCS Restructuring"), pursuant to the
Restructuring and Merger Agreement, dated as of May 26, 1998, among
Sprint, Tele-Communications, Inc. ("TCI"), Comcast Corporation
("Comcast"), Cox Communications, Inc. ("Cox," and together with TCI and
Comcast, the "Cable Parents") and various subsidiaries of such parties
(the "Restructuring Agreement");

. the recapitalization of Sprint's outstanding publicly-traded common stock
(the "Existing Common Stock") into (A) PCS Common Stock--Series 1 ("Series
1 PCS Stock") and (B) FON Common Stock--Series 1 (the "Series 1 FON
Stock") (together with a similar recapitalization of Sprint's outstanding
Class A common stock (the "Existing Class A Common Stock"), the
"Recapitalization"); and

. subject to market conditions, the issuance of Series 1 PCS Stock in an
underwritten IPO.

S-28
<PAGE>

Pursuant to the Tracking Stock Proposal, Sprint may elect to complete either
the IPO or the Recapitalization at the closing of the PCS Restructuring. Sprint
has decided to delay the IPO due to current general market conditions.
Therefore, at the closing of the PCS Restructuring, Sprint will complete the
Recapitalization of the Existing Common Stock and the Existing Class A Common
Stock. Sprint will continue to evaluate market conditions and may proceed with
the IPO at a later date. There is no assurance that the IPO will be completed.

You should refer to Annex A for further detail concerning the PCS
Restructuring and policies adopted by the Sprint Board in connection with the
Tracking Stock Proposal. The Notes offering is not conditioned upon completion
of the transactions contemplated by the Tracking Stock Proposal.

THE FON GROUP

The FON Group consists of all of Sprint's businesses and assets not included
in the PCS Group. The principal activities of the FON Group include:

. the FON Group's core businesses, consisting of its long distance
services, local services, and product distribution and directory
publishing activities;

. the FON Group's emerging businesses, which consist of the development of
new integrated communications services, integration management and support
services for computer networks ("Sprint Paranet") and international
development activities outside the scope of Global One ("Sprint
International");

. the FON Group's interest in the Global One international strategic
alliance, a joint venture with France Telecom S.A. ("FT") and Deutsche
Telekom AG ("DT"); and

. the FON Group's other telecommunications investments and alliances.

CORE BUSINESSES

Long Distance Division

The FON Group's long distance division ("LDD") is the nation's third-largest
provider of long distance telephone services. LDD operates a nationwide, all-
digital long distance telecommunications network that uses state-of-the-art
fiber-optic and electronic technology. LDD provides domestic and international
voice, video and data communications services.

Strategy. To achieve profitable market share growth in an increasingly
competitive long distance communications environment, LDD intends to leverage
its principal strategic assets, including: its national brand, innovative
marketing and pricing plans, its reputation for superior customer service, its
state-of-the-art technology, and its partnerships with other FON Group
operating divisions and the PCS Group. LDD's growth strategies include the
following:

. expand its presence in the high-growth data communications markets for
services such as ATM and Frame Relay;

. become the provider of choice for delivery of end-to-end service to
companies with complex distributed computing environments;

. continue to deploy network and systems infrastructure which provides
industry-leading reliability, cost effectiveness and technological
improvements; and

. solidify the linkage of LDD with Sprint's other operations (including the
local telecommunications division, Sprint Paranet, the Global One alliance
and the PCS Group), in the areas of sales support, marketing, integration
of systems and the development of common products and services to create
integrated product offerings for the FON Group's customers.

S-29
<PAGE>

Local Telecommunications Division

The local telecommunications division ("LTD") consists primarily of regulated
LECs serving more than 7.5 million access lines in 18 states. LTD provides
local services and access for telephone customers and other carriers to LTD's
local exchange facilities and sells telecommunications equipment and long
distance services within specified geographical areas.

Customers. AT&T is LTD's largest customer for network access services. In
1997 and 1996, services provided to AT&T (mainly network access services)
accounted for 13% of the division's net operating revenues compared with 15% in
1995. On a consolidated basis, revenues from AT&T were 5% of Sprint's revenues
in 1997 and 1996 and 6% in 1995. AT&T is a significant customer, but LTD does
not believe that the division's revenues are dependent on AT&T, since any long
distance provider must pay access charges to LTD related to inter-LATA long
distance telephone service.

Strategy. LTD has embarked on a growth strategy whereby it plans to
aggressively market Sprint's entire product portfolio to its local customers as
well as its core product line of advanced network features and data products.

LTD has reorganized around its principal market segments:

. Consumer and Small Business Markets ("CSB");

. Business Markets; and

. Carrier Markets.

Sprint believes this new structure provides a more efficient and focused
approach to sales and service for these market segments. Along with this market
focus, LTD has centralized the management of support organizations to provide
operational efficiencies and to enhance support of LTD's end-users.

CSB focuses on increasing voice and data product penetration in the consumer
and small business markets, including small office/home office customers.
Consumer initiatives (including aggressive marketing of advanced network
features such as Caller ID, Caller ID-based telephone sets, and usage-sensitive
features) strongly contributed to growth in 1997. CSB is developing as a full-
service provider and currently sells the Sprint portfolio of products and
services in each state in which LTD operates. LTD offers its customers who
establish new local service with LTD a "bundle" of products and services,
including traditional local service, vertical services, long distance service,
Internet access, paging and wireless service, where available.

Business Markets focuses on (1) selling high-capacity data networking
solutions such as ATM and Frame Relay, and (2) marketing the network's SONET
survivability characteristics. Business Markets is partnering with LDD to
provide end-to-end solutions for medium to large business customers.

Carrier Markets sells and markets LTD's network to emerging resellers of
local telephone services as well as wireless and interexchange carriers.
Efforts are under way to leverage existing strengths, including database,
Signaling System 7, and billing and collection services, to increase revenues.
Carrier Markets is also focusing on growing in the recently deregulated pay
phone business.

Product Distribution and Directory Publishing

The product distribution and directory publishing businesses consist of
Sprint North Supply Company ("North Supply") and Sprint Publishing and
Advertising ("SPA").

North Supply is one of the nation's largest distributors of
telecommunications equipment to wireline and wireless service companies, cable
TV operators, and system resellers. SPA publishes and markets white and yellow
page telephone directories in certain of LTD's local exchange areas, as well as
in the greater metropolitan areas of Milwaukee, Wisconsin and Chicago,
Illinois.

S-30
<PAGE>

EMERGING BUSINESSES

The FON Group's emerging businesses consist of National Integrated Services
("NIS"), Sprint Paranet and Sprint International.

NIS. The objective of NIS is to enable the FON Group to be a national
provider of fully integrated telecommunications services across all customer
segments. Its efforts are directed toward the development and deployment of an
Integrated On-demand Network ("ION") which is expected to extend the FON
Group's existing advanced network capabilities to customer premises and enable
the FON Group to (1) provide the network infrastructure to meet demands for
data, Internet, and video use and (2) provide the foundation for competitive
local service. NIS believes that this integrated services capability will
generate increased demand for the FON Group's products and services, while at
the same time substantially reducing the costs to provide such services. The
incremental capital expenditures required to develop this capability are
projected to approximate $400 million through 1999. Cisco Systems and Bellcore
will be contributing their expertise and assisting in the funding of these
efforts. In addition to the capital for development, the initial deployment of
ION is expected to require approximately $400 million for network upgrades
through 1999.

In implementing ION, Sprint intends to rely substantially on the transmission
infrastructure of the LDD and to a lesser extent on the transmission
infrastructure of the LTD. Where Sprint facilities currently do not exist,
Sprint will evaluate whether facilities should be built, leased or acquired for
ION. Because a significant amount of future investment will be associated with
specific customer contracts, Sprint believes it will be able to manage its
investment in ION to be consistent with customer demand.

Sprint Paranet. In September 1997, Sprint acquired Paranet, Inc., a leading
provider of integration, management, and support services for distributed
computing environments. Sprint believes the acquisition strengthens Sprint's
position as a leading data carrier by augmenting its wide area network data
products and services with Paranet's expertise in local area networks and
distributed network systems.

Sprint International. Sprint International ("SI") was established to pursue
business opportunities in key countries and markets around the world outside
the scope of Sprint's Global One alliance. Complementing the strategies of
Global One will continue to be an important component in selecting
opportunities.

SI is a 25% owner of Barak, an Israeli joint venture that was awarded a
license for the Israeli international long distance market and has since
captured approximately 20% of that market. In China, SI has invested in Tianjin
Global Communications, a fixed wireline network operator, and is pursuing other
opportunities. In Europe, SI is concentrating on developing opportunities with
Sprint's Global One partners, FT and DT, in several markets outside France and
Germany.

GLOBAL ONE

Sprint is a partner in Global One, a joint venture with FT and DT which
provides global telecommunications services to business, consumer and carrier
markets worldwide. Sprint is a one-third partner in Global One's operating
group serving Europe (excluding France and Germany) and a 50% partner in Global
One's operating group for the worldwide activities outside the United States
and Europe.

Global One's strategic objective is to be the premier provider of global
telecommunications services. To achieve this objective, the Global One business
strategy is designed to achieve maximum global coverage and seamless global
connectivity. Under a single global brand and through a single interface to
customers in each country, Global One offers a comprehensive array of state-of-
the-art telecommunications services, delivered through its advanced global
network infrastructure.

Global One currently has a sales presence in 65 countries; more than 1,400
points of presence (switching centers) outside of Germany, France and the
United States; four network management sites monitoring traffic on the global
backbone networks; and 29 customer service centers. Global One's 1997 revenues
were in excess of $1.1 billion. Sprint's proportional share of these revenues
was $474 million.

S-31
<PAGE>

OTHER INVESTMENTS AND ALLIANCES

Sprint's other investments and alliances include the following:

. a 3.7% interest in Iridium LLC, a satellite-based mobile communications
provider;

. a 25% equity interest in Call-Net Enterprises, Inc., a long distance
telecommunications company in Canada operating under the Sprint brand name
which, at the end of 1997, had a 10% share of the long distance market in
Canada; and

. a 50% interest in a joint venture with Telefonos de Mexico, the dominant
telecommunications provider in Mexico, that markets international long
distance services between the U.S. and Mexico with products and services
tailored to the Hispanic community.

In addition, in June 1998, Sprint entered into a long-term strategic alliance
with EarthLink Network, Inc., a leading Internet service provider. As part of
the transaction, Sprint purchased an approximate 30% economic interest in
EarthLink and contributed to EarthLink all of Sprint's 130,000 Sprint Internet
Passport customers. EarthLink will manage the operations, customer service,
technical support and product development for the unified Internet service.
Leveraging the brands of both companies, EarthLink and Sprint will work
together on product development, sales and marketing.

THE PCS GROUP

The PCS Group markets its wireless telephony products and services under the
Sprint and Sprint PCS brand names. The PCS Group operates the only 100% digital
PCS wireless network in the United States with licenses to provide service
nationwide utilizing a single frequency band and a single technology. The PCS
Group owns licenses to provide service to the entire United States population,
including Puerto Rico and the U.S. Virgin Islands. As of October 30, 1998, the
PCS Group operates PCS systems in 176 metropolitan markets within the United
States, including 39 of the 50 largest metropolitan areas. By the end of the
first half of 1999, the PCS Group expects to operate PCS systems in all of the
50 largest metropolitan areas and 80 of the 100 largest metropolitan areas in
the United States.

The PCS Group currently provides nationwide service through a combination of

. operating its own digital network in major metropolitan areas;

. affiliating with other companies, primarily in and around smaller
metropolitan areas;

. roaming on analog cellular networks of other providers using Dual-
Band/Dual-Mode Handsets; and

. roaming on digital PCS networks of other CDMA-based providers.

The PCS Group consists of the following entities: (1) Sprint Spectrum Holding
Company, L.P. and MinorCo, L.P., together with their subsidiaries
(collectively, "Sprint Spectrum Holdings"), including Sprint Spectrum, L.P. and
its subsidiaries ("Sprint Spectrum") and American PCS, L.P. and its
subsidiaries ("APC"), as well as a 59.2% interest in Cox Communications PCS,
L.P. and its subsidiaries ("Cox PCS"); (2) PhillieCo Partners I, L.P. and
PhillieCo Partners II, L.P., together with their subsidiaries (collectively,
"PhillieCo"); and (3) SprintCom, Inc. and SprintCom Equipment Company, L.P.
(collectively, "SprintCom"). Sprint Spectrum Holding Company, L.P. and MinorCo,
L.P. have no independent operations other than through their subsidiaries and
are the general partner and limited partner, respectively, of Sprint Spectrum
and APC.

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The chart below sets forth certain information concerning the PCS Group
(after giving effect to the Tracking Stock Proposal), including the number of
Pops covered by licenses held by the PCS Group:

<TABLE>
<CAPTION>
POPS (1) SPRINT
ENTITY OWNERSHIP (2) LICENSES
------ ------------- ------------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Sprint Spectrum Holdings
Sprint Spectrum........ 155.9 100.0% 30 MTAs
Cox PCS(3)............. 21.0 59.2 Los Angeles-San Diego-Las Vegas MTA
APC.................... 8.3 100.0 Washington D.C.-Baltimore MTA
PhillieCo............... 9.2 100.0 Philadelphia MTA
SprintCom............... 74.9 100.0 139 BTAs
-----
Total................... 269.3
=====
</TABLE>
- --------
(1) Based upon 1997 population data supplied by Equifax Inc.
(2) Assumes that the transactions contemplated by the Tracking Stock Proposal
are completed. See "The Tracking Stock Proposal and Related Information"
in Annex A.
(3) Pops data for Cox PCS includes 100% of its Pops, not the PCS Group's
proportional interest. Sprint Spectrum Holdings' current 59.2% ownership
interest in Cox PCS will not be affected by the Tracking Stock Proposal.
Sprint Spectrum Holdings and Cox, the holder of the remaining 40.8%
partnership interest in Cox PCS, have entered into an arrangement whereby
Cox may require Sprint Spectrum Holdings to purchase Cox's remaining
partnership interest in Cox PCS. Commencing in 2001, Sprint Spectrum
Holdings will have the right to require that Cox sell all of its remaining
partnership interest in Cox PCS to Sprint Spectrum Holdings. See "The
Tracking Stock Proposal and Related Information--Amendments to the Cox PCS
Agreements" in Annex A.

STRATEGY OF THE PCS GROUP

The business objective of the PCS Group is to expand network coverage and
increase market penetration by aggressively marketing competitively priced PCS
services and products under the Sprint PCS and Sprint brand names, offering
enhanced services and seeking to provide superior customer service. The
principal elements of the PCS Group's strategy for achieving these goals are:

Operate a Nationwide Digital Wireless Network. The PCS Group is the only PCS
provider in the United States with a 100% digital PCS wireless network with
licenses to provide services nationwide utilizing a single frequency band and
a single technology. Management believes that the PCS Group's all-digital
network provides its customers with consistency of service and features in all
of its markets. The scope of its network also allows the PCS Group to provide
its customers with flexible pricing and promotions on a national basis while
retaining local flexibility. In addition, the operating scale of the PCS
Group's network is expected to result in significant cost advantages in
purchasing power, operations and marketing. The PCS Group plans to complete
the initial phase of construction in its SprintCom markets, including Chicago,
Atlanta and Houston, by the end of the first half of 1999.

Leverage Sprint's National Brand. Management believes that using the
established Sprint brand contributes significantly to consumer confidence in,
and acceptance of, the PCS Group's products and services. As competition in
the wireless industry intensifies, management believes that the power of a
strong national brand will play an increasingly important role in consumers'
purchase decisions.

Utilize State-of-the-Art CDMA Technology. The PCS Group utilizes a state-of-
the-art PCS network using CDMA digital technology which, management believes,
provides significant operating and customer benefits relative to analog and
other digital technologies. Management believes, based on studies by CDMA
manufacturers, that its implementation of CDMA digital technology will
eventually provide system capacity that is approximately 7 to 10 times greater
than that of analog technology and approximately 3 times greater than that of
TDMA and GSM systems, resulting in significant operating and cost efficiencies
which can be passed on to customers. Additionally, management believes that
CDMA technology provides call quality that is superior to that of other
wireless technologies.

S-33
<PAGE>

Deliver Superior Value to its Customers. In marketing its services, the PCS
Group emphasizes the superior voice quality and functional capabilities of its
wireless service compared to that of analog cellular service. In addition, the
PCS Group bundles its basic service offering with a package of sophisticated
features which either cannot be offered by analog cellular providers or for
which they typically charge their customers separately. The PCS Group also
offers several innovative pricing plans that allow its customers to select
billing plans that suit their usage patterns, none of which requires customers
to sign a long-term service contract. The PCS Group recently introduced new
all-inclusive nationwide service plans that offer a single rate for local and
long distance calls to anywhere in the United States made on the Sprint PCS
network. Management believes that its ability to provide wireless service at
competitive prices without long-term contracts is an important marketing
advantage.

Grow Customer Base Using Multiple Distribution Channels. The PCS Group seeks
to maximize customer growth in each market by utilizing multiple distribution
channels. As of October 5, 1998, the PCS Group had its products for sale in
approximately 6,385 third-party retail locations nationwide, including
retailers such as RadioShack, Circuit City and Best Buy. The PCS Group plans to
have approximately 8,000 third-party retail locations by the end of the first
half of 1999. The PCS Group also seeks innovative distribution channels through
which to market its products, such as the Sprint Store-Within-A-Store at
RadioShack which includes an exclusive arrangement pursuant to which the only
PCS products offered by RadioShack-owned stores in the markets in which the
PCS Group has launched operations are the PCS Group's products. In addition, as
of September 30, 1998, the PCS Group operated 135 Sprint PCS retail locations.
The PCS Group plans to operate approximately 200 Sprint PCS retail locations by
the end of the first half of 1999. The PCS Group also uses telemarketing,
direct sales and cross-marketing and continually evaluates other alternative
distribution channels including sales agency, resale and other arrangements.

Continue Network Expansion. The PCS Group plans to continue the expansion of
its existing network. In addition, the PCS Group is expanding its wireless
coverage, primarily in and around smaller metropolitan areas in the United
States where it does not intend to serve customers with its own network, by
pursuing affiliation arrangements with other companies. These companies will
build networks in portions of the PCS Group's licensed coverage area at such
companies' own expense. Such networks are expected to be built using the same
technological standards as those of the PCS Group network. These companies will
sell PCS Group services under the Sprint PCS brand name in exchange for a fee
and will be required to maintain certain quality standards to be established by
the PCS Group. As of October 20, 1998, the PCS Group had entered into
agreements with 10 companies covering an aggregate of approximately 24.5
million Pops in 18 states.

S-34
<PAGE>

DESCRIPTION OF NOTES

The Notes, the Notes, the Notes, and the Notes will be
issued as separate series of Debt Securities under an Indenture, dated as of
October 1, 1998 (the "Sprint Capital Indenture"), among Sprint Capital, Sprint
and Bank One, N.A., as trustee (the "Trustee"). The provisions of the Sprint
Capital Indenture are more fully described under "Description of Debt
Securities" and "Description of Guarantees" in the accompanying Prospectus.
Capitalized terms not otherwise defined in this section have the meanings given
to them in the accompanying Prospectus and the Sprint Capital Indenture. As of
the date of this Prospectus Supplement, no Debt Securities have been previously
issued under the Sprint Capital Indenture.

GENERAL

The Notes will have the following terms:

<TABLE>
<S> <C> <C> <C>
Principal Amount Interest Rate Maturity Date
---------------- ------------- -------------
Notes $ % ,
Notes $ % ,
Notes $ % ,
Notes $ % ,
</TABLE>

In each case, interest will accrue from , 1998, or from the most recent
interest payment date to which interest has been paid or duly provided for.
Interest will be payable semiannually on and of each year, commencing
, 1999, to the persons in whose names the Notes are registered at the close
of business on the or , as the case may be, next preceding such
interest payment date. Interest will be calculated on the basis of a 360-day
year of twelve 30-day months.

The Notes will not have the benefit of a sinking fund.

RANKING

The Notes will be senior unsecured obligations of Sprint Capital and will
rank equally with all other senior unsecured and unsubordinated indebtedness of
Sprint Capital. The Guarantees will be senior unsecured obligations of Sprint
and will rank equally with all other senior unsecured and unsubordinated
indebtedness of Sprint.

The Notes and the Guarantees will be effectively subordinated to any secured
indebtedness of Sprint Capital or Sprint, as the case may be, to the extent of
the value of the assets securing such indebtedness. The Sprint Capital
Indenture permits Sprint and its Restricted Subsidiaries to incur or permit to
be outstanding secured indebtedness plus attributable debt with respect to any
sale and leaseback transaction in an aggregate amount not exceeding 15% of the
Consolidated Net Tangible Assets of Sprint and its subsidiaries, in addition to
Permitted Liens, all as described under "Description of Debt Securities--
Restrictive Covenant--Sprint" in the accompanying Prospectus. Sprint's assets
consist principally of the stock of and advances to its subsidiaries. Almost
all the operating assets of Sprint and its consolidated subsidiaries are owned
by such subsidiaries and Sprint relies primarily on interest and dividends from
such subsidiaries to meet its obligations for payment of principal and interest
on its outstanding debt obligations, including guarantees, and corporate
expenses. The Notes and the Guarantees will be structurally subordinated to all
obligations, including trade payables, of subsidiaries of Sprint Capital or
Sprint, as the case may be.

OPTIONAL REDEMPTION

The Notes will be redeemable, as a whole or in part, at the option of Sprint
Capital, at any time or from time to time, on at least 30 days, but not more
than 60 days, prior notice mailed to the registered address of each holder of
Notes. The redemption prices will be equal to the greater of (1) 100% of the
principal amount of

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<PAGE>

the Notes to be redeemed or (2) the sum of the present values of the Remaining
Scheduled Payments (as defined below) discounted, on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months), at a rate equal
to the sum of the Treasury Rate (as defined below) and:

<TABLE>
<S> <C> <C> <C>
. basis points for the Notes
. basis points for the Notes
. basis points for the Notes
. basis points for the Notes
</TABLE>

In the case of each of clause (1) and (2), accrued interest will be payable to
the redemption date.

"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.

"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes, the Notes, the Notes or the
Notes, as the case may be, to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by Sprint Capital.

"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Trustee obtains fewer than five such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the
third business day preceding such redemption date.

"Reference Treasury Dealer" means each of Salomon Smith Barney Inc., Credit
Suisse First Boston Corporation, J.P. Morgan Securities Inc., Warburg Dillon
Read LLC, Chase Securities Inc., Lehman Brothers, Inc. and NationsBanc
Montgomery Securities LLC and their respective successors. If any of the
foregoing shall cease to be a primary U.S. Government securities dealer (a
"Primary Treasury Dealer"), Sprint Capital shall substitute another nationally
recognized investment banking firm that is a Primary Treasury Dealer.

"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of principal of and interest on such
Note that would be due after the related redemption date but for such
redemption. If such redemption date is not an interest payment date with
respect to such Note, the amount of the next succeeding scheduled interest
payment on such Note will be reduced by the amount of interest accrued on such
Note to such redemption date.

On and after the redemption date, interest will cease to accrue on the Notes
or any portion of the Notes called for redemption (unless Sprint Capital
defaults in the payment of the redemption price and accrued interest). On or
before the redemption date, Sprint Capital will deposit with a paying agent (or
the Trustee) money sufficient to pay the redemption price of and accrued
interest on the Notes to be redeemed on such date. If less than all of the
Notes of any series are to be redeemed, the Notes to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.

GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES

Investors in the Global Securities representing any of the Debt Securities
issued under the Prospectus may hold a beneficial interest in such Global
Securities through DTC, CEDEL S.A. or Euroclear (as defined below) or through
participants. The Global Securities may be traded as home market instruments in
both the European

S-36
<PAGE>

and U.S. domestic markets. Initial settlement and all secondary trades will
settle as set forth below or in the accompanying Prospectus under "Description
of Debt Securities--Same-Day Settlement and Payment."

CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its participants, among
other things, services for safekeeping, administration, clearance, and
settlement of internationally traded securities and securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations
and may include the underwriters named in this Prospectus Supplement. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers,
and trust companies that clear through or maintain a custodial relationship
with a CEDEL participant, either directly or indirectly.

The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, eliminating the need for physical movement of certificates and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 32 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing, and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC. The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers, and other professional financial intermediaries
and may include the underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.

The Euroclear Operator is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Federal Reserve Board and the New
York State Banking Department, as well as the Belgian Banking Commission.

Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear participants,
and has no record of or relationship with persons holding through Euroclear
participants.

Principal, premium, if any, and interest payments with respect to Debt
Securities held through CEDEL or Euroclear will be credited to the cash
accounts of CEDEL participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by its
depository. Such distributions will be subject to tax reporting in accordance
with relevant United States tax laws and regulations as described below. CEDEL
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a holder under the Sprint Capital Indenture on behalf
of a CEDEL participant or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depository's ability to effect
such actions on its behalf through DTC, as Depositary.

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<PAGE>

INITIAL SETTLEMENT

All Global Securities will be registered in the name of Cede & Co. as nominee
of DTC. Investors' interests in the Global Securities will be represented
through financial institutions acting on their behalf as direct and indirect
participants in the Depositary. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
depositories, Citibank, N.A. ("Citibank") and Morgan Guaranty Trust Company of
New York ("Morgan"), which in turn will hold such positions in accounts as
participants of DTC.

Global Securities held through DTC will follow the settlement practices
described under "Description of Debt Securities--Same Day Settlement and
Payment" in the accompanying Prospectus. Investor securities custody accounts
will be credited with their holdings against payment on the settlement date.
Global Securities held through CEDEL or Euroclear accounts will follow the
settlement procedures applicable to conventional eurobonds, except that there
will be no temporary global security and no "lock-up" or restricted period.
Global Securities will be credited to the securities custody accounts on the
settlement date against payment.

SECONDARY MARKET TRADING

Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.

Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures described under "Description
of Debt Securities--Same Day Settlement and Payment" in the accompanying
Prospectus.

Trading between CEDEL and/or Euroclear Participants. Secondary market trading
between CEDEL participants and/or Euroclear participants will be settled using
the procedures applicable to conventional eurobonds.

Trading between DTC Seller and CEDEL or Euroclear Purchaser. When beneficial
interests in the Global Securities are to be transferred from the account of a
DTC participant to the account of a CEDEL participant or a Euroclear
participant, the purchaser will send instructions to CEDEL or Euroclear through
a participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct Citibank or Morgan, as the case may be, to receive a beneficial
interest in the Global Securities against payment. Unless otherwise set forth
in this Prospectus Supplement, payment will include interest accrued on the
beneficial interest in the Global Securities so transferred from and including
the last coupon payment date to and excluding the settlement date, on the basis
on which interest is calculated on the Debt Securities. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by
Citibank or Morgan to the DTC participant's account against delivery of the
beneficial interest in the Global Securities. After settlement has been
completed, the beneficial interest in the Global Securities will be credited to
the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the CEDEL or Euroclear participant's account. The
securities credit will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the beneficial interest in Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (that is, the trade fails), the CEDEL or Euroclear cash
debit will be valued instead as of the actual settlement date.

CEDEL participants and Euroclear participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.

S-38
<PAGE>

As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, CEDEL
participants or Euroclear participants purchasing a beneficial interest in the
Global Securities would incur overdraft charges for one day, assuming they
cleared the overdraft when the beneficial interests in the Global Securities
were credited to their accounts. However, interest on the beneficial interests
in the Global Securities would accrue from the value date. Therefore, in many
cases the investment income on the Global Securities earned during that one-day
period may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each participant's particular cost of
funds.

Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending a beneficial
interest in the Global Securities to Citibank or Morgan for the benefit of
CEDEL participants or Euroclear participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
participant a cross-market transaction will settle no differently than a trade
between two DTC participants.

Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time zone
differences in their favor, CEDEL and Euroclear participants may employ their
customary procedures in transactions in which the beneficial interest in the
Global Securities is to be transferred by the respective clearing system,
through Citibank or Morgan, to a DTC participant. The seller will send
instructions to CEDEL or Euroclear through a participant at least one business
day prior to settlement. In these cases, CEDEL or Euroclear will instruct
Citibank or Morgan, as appropriate, to deliver the beneficial interest in the
Global Securities to the DTC participant's account against payment. Payment
will include interest accrued on the beneficial interests in the Global
Securities from and including the last coupon payment date to and excluding the
settlement date on the basis on which interest is calculated on the Global
Securities. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the CEDEL or Euroclear
participant the following day, and receipt of the cash proceeds in the CEDEL or
Euroclear participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL or Euroclear participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (that is, the trade fails), receipt of the cash
proceeds in the CEDEL or Euroclear participant's account would instead be
valued as of the actual settlement date.

Finally, day traders that use CEDEL or Euroclear and that purchase beneficial
interests in Global Securities from DTC participants for credit to CEDEL
participants or Euroclear participants should note that these trades would
automatically fail on the sale side unless affirmative action is taken. At
least three techniques should be readily available to eliminate this potential
problem:

(1) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;

(2) borrowing beneficial interests in the Global Securities in the United
States from a DTC participant no later than one day prior to settlement,
which would give beneficial interests in the Global Securities sufficient
time to be reflected in the appropriate CEDEL or Euroclear account in order
to settle the sale side of the trade; or

(3) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the CEDEL participant or
Euroclear participant.

Although the DTC, CEDEL, and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of beneficial interests in Global
Securities among participants of the DTC, CEDEL, and Euroclear, they are under
no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.

S-39
<PAGE>

YEAR 2000

The following information has been provided by DTC:

DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes
a testing phase, which is expected to be completed within appropriate time
frames.

DTC's ability to perform properly its services is also dependent upon other
parties, including but not limited to issuers and their agents, as well as
third party vendors from whom DTC licenses software and hardware, and third
party vendors on whom DTC relies for information or the provision of services,
including telecommunication and electrical utility service providers, among
others. DTC has informed the Industry that it is contacting (and will continue
to contact) third party vendors from whom DTC acquires services to: (i) impress
upon them the importance of such services being Year 2000 complaint; and (ii)
determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.

According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.

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<PAGE>

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of Notes by persons
that acquire Notes pursuant to the initial public offering of Notes. Unless
otherwise stated, this summary deals only with Notes held as capital assets by
U.S. Holders (as defined below). It does not deal with special classes of
holders such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currency or
tax-exempt investors. This summary also does not address the tax consequences
to persons that have a functional currency other than the U.S. Dollar, persons
that hold Notes as part of a straddle, hedging, constructive sale or conversion
transaction, or shareholders, partners or beneficiaries of a holder of Notes.
It also does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Notes. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
under the Code (the "Treasury Regulations") and administrative and judicial
interpretations of the Code, as of the date of this Prospectus Supplement, all
of which are subject to change, possibly on a retroactive basis.

As used in this section, the term "U.S. Holder" means any beneficial owner of
Notes that is, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation or other entity taxable as a
corporation or partnership created or organized in or under the laws of the
United States, any state thereof or the District of Columbia (other than a
partnership that is not treated as a United States person under any applicable
Treasury Regulations), (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if (A)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (B) one or more United States persons have
the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be treated
as United States persons also will be U.S. Holders. As used herein, the term
"Non-U.S. Holder" means a beneficial owner of Notes that is not a U.S. Holder.

INTEREST INCOME

Interest on a Note will be includible in a U.S. Holder's gross income as
ordinary U.S. source interest income at the time it is accrued or received in
accordance with the U.S. Holder's method of accounting for United States
federal income tax purposes.

SALE, EXCHANGE OR RETIREMENT OF NOTES

Upon sale, exchange or retirement of a Note, a U.S. Holder generally will
recognize gain or loss equal to the difference between the U.S. Holder's
adjusted tax basis in the Note and the amount realized on such sale, exchange
or retirement, except to the extent such amount represents accrued interest. A
U.S. Holder's adjusted tax basis in a Note generally will equal the U.S.
Holder's purchase price for such Note (net of accrued interest) less any
principal payments received by the U.S. Holder. Gain or loss so recognized will
be capital gain or loss and will be long-term capital gain or loss, if, at the
time of the sale, exchange or retirement, the Note was held for more than one
year. Under current law, net capital gains of individuals are, under certain
circumstances, taxed at lower rates than items of ordinary income. The
deduction of capital losses is subject to certain limitations.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note and the proceeds of the sale
of a Note and a 31% backup withholding tax may apply to such payments to a
noncorporate U.S. Holder if such U.S. Holder (i) fails to furnish or certify
his correct taxpayer identification number to the payor in the manner required,
(ii) is notified by the IRS that he has failed to report

S-41
<PAGE>

payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that
he is subject to backup withholding for failure to report interest payments.
Any amounts withheld under the backup withholding rules from a payment to a
U.S. Holder will be allowed as a credit against such U.S. Holder's United
States federal income tax and may entitle the holder to a refund, provided that
the required information is furnished to the IRS.

NON-U.S. HOLDERS

The rules governing United States federal income taxation of a beneficial
owner of Notes that, for United States federal income tax purposes, is a Non-
U.S. Holder are complex and no attempt will be made in this Prospectus
Supplement to provide more than a summary of such rules. NON-U.S. HOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS, AS WELL AS TREATIES, WITH REGARD TO
AN INVESTMENT IN THE NOTES, INCLUDING ANY REPORTING REQUIREMENTS.

Interest Income. Generally, interest income of a Non-U.S. Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate (or, if applicable, a lower tax rate specified
by a treaty). However, interest income earned on the Notes by a Non-U.S. Holder
will qualify for the "portfolio interest" exemption and therefore will not be
subject to United States federal income tax or withholding tax, provided that
such interest income is not effectively connected with a United States trade or
business of the Non-U.S. Holder and provided that (i) the Non-U.S. Holder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Sprint Capital or Sprint entitled to vote,
(ii) the Non-U.S. Holder is not a controlled foreign corporation that is
related to Sprint Capital or Sprint through stock ownership, (iii) the Non-U.S.
Holder is not a bank which acquired the Notes in consideration for an extension
of credit made pursuant to a loan agreement entered into in the ordinary course
of business and (iv) either (A) the Non-U.S. Holder certifies to Sprint Capital
or its agent, under penalties of perjury, that it is not a U.S. Holder and
provides its name and address or (B) a securities clearing organization, bank
or other financial institution that holds customer securities in the ordinary
course of its trade or business (a "Financial Institution"), and holds Notes in
such capacity, certifies to Sprint Capital or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by it
or by a Financial Institution between it and the beneficial owner and furnishes
Sprint Capital or its agent with a copy of such certification.

Recently finalized Treasury Regulations would modify the certification
requirements on payments of interest made after December 31, 1998. In Notice
98-16, the IRS announced that the Treasury Department and the IRS intend to
amend these regulations by delaying the effective date, so that the regulations
will apply to payments made after December 31, 1999, subject to certain
transition rules. Prospective investors should consult their own tax advisors
as to the effect, if any, of the final regulations and Notice 98-16 on their
purchase, ownership and disposition of the Notes.

Except to the extent that an applicable treaty otherwise provides, a Non-U.S.
Holder generally will be taxed in the same manner as a U.S. Holder with respect
to interest if the interest income is effectively connected with a United
States trade or business of the Non-U.S. Holder. Effectively connected interest
received or accrued by a corporate Non-U.S. Holder may also, under certain
circumstances, be subject to an additional "branch profits" tax at a 30% rate
(or, if applicable, a lower tax rate specified by a treaty). Even though such
effectively connected interest is subject to income tax, and may be subject to
the branch profits tax, it is not subject to withholding tax if the holder
delivers a properly executed IRS Form 4224 (or successor form) to the payor.

Sales, Exchange or Retirement of Notes. A Non-U.S. Holder of Notes generally
will not be subject to United States federal income tax or withholding tax on
any gain realized on the sale, exchange or retirement of Notes unless (i) the
gain is effectively connected with a United States trade or business of the
Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual,
such holder is present in the United States for a period or periods aggregating
183 days or more during the taxable year of the disposition, and either such

S-42
<PAGE>

holder has a "tax home" in the United States or the disposition is attributable
to an office or other fixed place of business maintained by such holder in the
United States or (iii) the Non-U.S. Holder is subject to tax pursuant to the
provisions of the Code applicable to certain United States expatriates.

Information Reporting and Backup Withholding Tax. Sprint Capital must report
annually to the IRS and to each Non-U.S. Holder the amount of any interest paid
on the Notes in such year and the amount of tax withheld, if any, with respect
to such payments. Copies of those information returns also may be made
available, under the provisions of a specific treaty or agreement, to the
taxing authorities of the country in which the Non-U.S. Holder resides or is
incorporated. United States information reporting requirements and backup
withholding tax will not apply to payments of interest on Notes to a Non-U.S.
Holder if the statement described in "--Interest Income" is duly provided by
such holder, provided that the payor does not have actual knowledge that the
holder is a U.S. Holder.

Information reporting requirements and backup withholding tax will not apply
to any payment of the proceeds of the sale of Notes effected outside the United
States by a foreign office of a "broker" (as defined in applicable Treasury
Regulations), unless such broker (i) is a United States person, (ii) is a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or (iii) is a
controlled foreign corporation for United States federal income tax purposes.
Payment of the proceeds of any such sale effected outside the United States by
a foreign office of any broker that is described in (i), (ii) or (iii) of the
preceding sentence will not be subject to backup withholding tax, but will be
subject to information reporting requirements, unless such broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or
through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of
the Notes provides the statement described in "--Interest Income" or otherwise
establishes an exemption.

S-43
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), among Sprint Capital, Sprint and Salomon Smith
Barney Inc., Credit Suisse First Boston Corporation, J.P. Morgan Securities
Inc., Warburg Dillon Read LLC, Chase Securities Inc., Lehman Brothers, Inc.
and NationsBanc Montgomery Securities LLC on behalf of themselves and the
others named in the table below (the "Underwriters"), Sprint Capital has
agreed to sell to each of the Underwriters, and each of the Underwriters has
severally agreed to purchase, the principal amount of the Notes (including the
accompanying Guarantees issued by Sprint) set forth opposite its name below.
See "Plan of Distribution" in the accompanying Prospectus.

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER NOTES NOTES NOTES NOTES
----------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Salomon Smith Barney
Inc. ..................
Credit Suisse First
Boston Corporation.....
J.P. Morgan Securities
Inc. ..................
Warburg Dillon Read LLC.
Chase Securities Inc. ..
Lehman Brothers, Inc. ..
NationsBanc Montgomery
Securities LLC.........
ABN AMRO Incorporated...
Deutsche Bank Securities
Inc. ..................
Fleet Securities Inc. ..
RBC Dominion Securities
Inc. ..................
WestLB Westdeutsche
Landesbank
Girozentrale...........
Wheat First Securities
Inc. ..................
---- ---- ---- ----
Total................. $ $ $ $
==== ==== ==== ====
</TABLE>

Sprint Capital has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the public offering prices set
forth on the cover page of this Prospectus Supplement, and to certain dealers
at such price less a concession not in excess of:

. % of the principal amount in the case of the Notes

The Underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of:

. % of the principal amount in the case of the Notes

After the initial public offering, the public offering prices and such
concessions may be changed from time to time. In addition to underwriting
discounts, Sprint Capital and Sprint estimate they will have expenses of $
in connection with the offering of the Notes.

S-44
<PAGE>

The Notes are a new issue of securities with no established trading market.
Sprint Capital does not presently intend to list the Notes on any securities
exchange, except for the Notes. Sprint Capital has applied for listing of
the Notes on the New York Stock Exchange. Sprint Capital has been advised
by the Underwriters that they intend to make a market in the Notes, but the
Underwriters are not obligated to do so and may discontinue any market making
at any time without notice. No assurance can be given as to the liquidity of
the trading market for the Notes.

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all the Notes if any are purchased.

In connection with the offering, certain Underwriters and their respective
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the Notes. Such transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation
M, pursuant to which such persons may bid for or purchase Notes for the purpose
of stabilizing their market price. The Underwriters also may create a short
position for the account of the Underwriters by selling more Notes in
connection with the offering than they are committed to purchase from Sprint
Capital, and in such case may purchase Notes in the open market following
completion of this offering to cover such short position. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Notes at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph are required,
and, if they are undertaken, they may be discontinued at any time.

Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), special considerations apply to a public
offering of debt securities where more than 10% of the net proceeds thereof
will be paid to members of the NASD that are participating in the offering, or
persons affiliated or associated with such members. Because Sprint Capital
expects that more than 10% of the proceeds of the offering will be used to
repay money lent to Sprint or a member of the FON Group or the PCS Group under
existing credit facilities by , which are affiliates of , respectively,
the offering will be conducted in conformity with Rule 2710(c)(8).

Certain of the Underwriters or their affiliates have provided banking and
other financial services to Sprint or its affiliates for which they have
received customary compensation. Sprint has retained Salomon Smith Barney Inc.
and Warburg Dillon Read LLC to act as financial advisors in connection with the
restructuring of the PCS Group. Certain of the Underwriters or their affiliates
will in the future continue to provide banking and other financial services to
Sprint or its affiliates for which they will receive customary compensation.
Harold S. Hook, a director of Sprint, is a director of The Chase Manhattan
Corporation and The Chase Manhattan Bank, affiliates of Chase Securities Inc.

The Underwriting Agreement provides that Sprint Capital and Sprint will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, or contribute to payments the Underwriters
may be required to make in respect of such liabilities.

LEGAL MATTERS

Don A. Jensen, Esq., Vice President and Secretary of Sprint, will issue an
opinion about the validity of the Notes for Sprint and Sprint Capital. King &
Spalding, New York, New York will also issue an opinion for Sprint and Sprint
Capital. Cravath, Swaine & Moore, New York, New York will issue an opinion for
the underwriters. As of September 30, 1998, Mr. Jensen beneficially owned
approximately 31,000 shares of Sprint common stock and had options to purchase
in excess of 60,000 shares of Sprint common stock.

S-45
<PAGE>

EXPERTS

The consolidated financial statements of Sprint and the combined financial
statements of the FON Group and the PCS Group as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997 appearing
in this Prospectus Supplement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein which, as to the year 1997 for the consolidated financial statements of
Sprint and the years 1997, 1996, and 1995 for the combined financial statements
of the PCS Group, are based in part on the reports of Deloitte & Touche LLP,
independent auditors. The financial statements referred to above are included
in reliance upon such reports given upon the authority of such firms as experts
in accounting and auditing.

The combined financial statements of Sprint Spectrum Holding Company, L.P.
and subsidiaries, MinorCo, L.P. and subsidiaries, PhillieCo Partners I, L.P.
and subsidiaries and PhillieCo Partners II, L.P. and subsidiaries as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, included in this Prospectus Supplement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein (which expresses an unqualified opinion and includes an
explanatory paragraph referring to the emergence from the development stage)
and has been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

The consolidated financial statements of Sprint Spectrum Holding Company,
L.P. and subsidiaries as of December 31, 1997 and 1996, not separately
presented in this Prospectus Supplement, incorporated in the accompanying
Prospectus by reference to the Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1997, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report (which expresses an
unqualified opinion and includes an explanatory paragraph referring to the
emergence from the development stage) appearing herein, and have been so
incorporated by reference in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

S-46
<PAGE>

GLOSSARY

"ATM" means Asynchronous Transfer Mode, a high speed transmission technology.
ATM is a high bandwidth, low-delay connection-oriented packet-like switching
and multiplexing technique used to transfer voice, video, images and character-
based data.

"BTA" means Basic Trading Area, a wireless telecommunications term. The
United States is broken down into 493 BTAs for economic purposes. These areas
were defined by the FCC for the purpose of issuing licenses for PCS. Several
BTAs make up each MTA.

"CDMA" means Code Division Multiple Access, a digital spread-spectrum
wireless technology which allows a large number of users to access a single
frequency band that assigns a code to all speech bits, sends a scrambled
transmission of the encoded speech over the air and reassembles the speech into
its original format.

"CMRS" means Commercial Mobile Radio Service provider, an FCC term for
cellular and PCS providers.

"CLEC" means a competitive local exchange carrier, a company that competes
with local exchange carriers in the local services market.

"Dual-Band Handset" means a handset that will transmit and receive on either
the 800 MHz or 1,900-MHz frequencies.

"Dual-Mode Handset" means a handset that will transmit and receive for both
analog and digital telecommunications systems.

"ESMR" means Enhanced Specialized Mobile Radio communications services,
supplied by converting analog SMR services into an integrated, digital
transmission system providing for call hand-off, frequency reuse and wide-call
delivery networks.

"Frame Relay" means a service which employs a form of packet switching
similar to a streamlined version of X.25 networks. The packets are in the form
of "frames" which vary in length and is completely protocol independent.
Because the "frame" is undisturbed and the conversions are the responsibility
of the user, the transmission speed is faster, up to 1.544 mbps, and less
expensive.

"GSM" means Global System for Mobile Communications or Groupe Special Mobile,
an international digital cellular radio standard first developed in Western
Europe. The GSM standard defines the components of the cellular radio network
infrastructure, including base stations, switching centers, signaling system
and interfaces and the radio access protocol. In Europe, GSM operates in the
900 MHz frequency range. It has been upgraded to function in the 1.8 GHz (DCN)
and 1.9 GHz (PCS-1900) frequency ranges.

"ILEC" means an Incumbent Local Exchange Carrier, a company historically
providing local telephone service. Often refers to one of the Regional Bell
Operating Companies (RBOCs) or GTE. Often referred to as "LEC" (Local Exchange
Carrier).

"LATA" means Local Access Transport Area, a geographic area in the United
States within which a local telephone company may offer telecommunications
services.

"LEC" means a local exchange carrier, a company providing local telephone
service.

"MTA" means Metropolitan Trading Area, an area defined by the FCC for the
purpose of issuing licenses for PCS. Each MTA consists of several BTAs. The
United States is broken down into 51 MTAs.

G-1
<PAGE>

"PCS" means personal communications service. In Canada and the United States,
PCS spectrum has been allocated for use by public systems at the 1.9 GHz
frequency range. It is expected that PCS will initially consist primarily of
enhanced voice, two-way data and text messaging services. Such PCS applications
are expected to be followed over time by services offering integrated voice,
data, image and eventually perhaps video capability. PCS systems operate in a
similar manner to cellular systems.

"Pops" means population equivalent. One person residing in a license area
equals one Pop.

"RBOC" means Regional Bell Operating Company, the five remaining local
telephone companies (formerly part of AT&T) established as a result of the AT&T
Divestiture.

"SONET" means an electronics and network architecture for variable bandwidth
products which enables transmission of voice, data and video (multimedia) at
very high speeds. SONET ring architecture provides for virtually instantaneous
restoration of service in the event of a fiber cut by automatically rerouting
traffic in the opposite direction around the ring.

"Signaling System 7" means a sophisticated network signaling system that
utilizes out-of-band signaling where signaling information is sent over a
separate channel than the call itself. Improves call processing set-up times
and frees circuits for voice, data and video transmissions.

"TDMA" means Time Division Multiple Access, a digital spread-spectrum
technology which allocates a discrete amount of frequency bandwidth to each
user in order to permit more than one simultaneous conversation on a single RF
channel.

"X.25" means a standard protocol suite for packet-switched networks, with
which mainframe computers, word processors, mini-computers, VDUs,
microcomputers and a wide variety of specialized terminal equipment from many
manufacturers can be made to work.

G-2
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
SPRINT CORPORATION
Report of Independent Auditors.......................................... F-2
Independent Auditors' Report............................................ F-3
Consolidated Statements of Income for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-4
Consolidated Balance Sheets as of September 30, 1998 and December 31,
1997 and 1996.......................................................... F-5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 and for the years ended December 31, 1997,
1996 and 1995.......................................................... F-6
Consolidated Statements of Common Stock and Other Stockholders' Equity
for the nine months ended September 30, 1998 and for the years ended
December 31, 1997, 1996 and 1995....................................... F-7
Notes to Consolidated Financial Statements.............................. F-8
Unaudited Pro Forma Condensed Combined Financial Statements............. F-30
FON GROUP
Report of Independent Auditors.......................................... F-37
Combined Statements of Income for the nine months ended September 30,
1998 and 1997 and for the years ended December 31, 1997, 1996 and 1995. F-38
Combined Balance Sheets as of September 30, 1998 and December 31, 1997
and 1996............................................................... F-39
Combined Statements of Cash Flows for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-40
Notes to Combined Financial Statements.................................. F-41
Unaudited Pro Forma Condensed Combined Financial Statements............. F-57
PCS GROUP
Report of Independent Auditors.......................................... F-62
Combined Statements of Operations for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-63
Combined Balance Sheets as of September 30, 1998 and December 31, 1997
and 1996............................................................... F-64
Combined Statements of Cash Flows for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-65
Notes to Combined Financial Statements.................................. F-66
Unaudited Pro Forma Condensed Combined Financial Statements............. F-72
SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO
Independent Auditors' Report............................................ F-79
Combined Balance Sheets as of September 30, 1998 and December 31, 1997
and 1996............................................................... F-80
Combined Statements of Operations for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-81
Combined Statements of Changes in Partners' Capital for the nine months
ended September 30, 1998 and 1997 and for the years ended December 31,
1997, 1996 and 1995.................................................... F-82
Combined Statements of Cash Flows for the nine months ended September
30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995................................................................... F-83
Notes to Combined Financial Statements.................................. F-84
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Sprint Corporation

We have audited the accompanying consolidated balance sheets of Sprint
Corporation ("Sprint") as of December 31, 1997 and 1996, and the related
consolidated statements of income, cash flows, and common stock and other
stockholders' equity for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the management
of Sprint. Our responsibility is to express an opinion on these financial
statements based on our audits. The 1997 financial statements of Sprint
Spectrum Holding Company, L.P., a partnership in which Sprint has a 40%
interest, have been audited by other auditors whose report has been furnished
to us; insofar as our opinion on the 1997 consolidated financial statements
relates to data included for Sprint Spectrum Holding Company, L.P., it is
based solely on their report. In the consolidated financial statements,
Sprint's equity in Sprint Spectrum Holding Company, L.P. is stated at $749
million at December 31, 1997, and Sprint's equity in the net loss of Sprint
Spectrum Holding Company, L.P. is stated at $625 million for the year then
ended.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Sprint at December
31, 1997 and 1996, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

As discussed in Note 14 to the consolidated financial statements, Sprint
discontinued accounting for the operations of its local telecommunications
division in accordance with Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation," in 1995.

Ernst & Young LLP

Kansas City, Missouri
February 3, 1998, except for Note 1, as
to which the date is May 26, 1998

F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

Partners of Sprint Spectrum Holding Company, L.P.
Kansas City, Missouri

We have audited the consolidated balance sheets of Sprint Spectrum Holding
Company, L.P. and subsidiaries ("the Partnership") as of December 31, 1997 and
1996, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Sprint Spectrum
Holding Company, L.P. and subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for the three years then
ended, in conformity with generally accepted accounting principles.

The Partnership was in the development stage at December 31, 1996; during
the year ended December 31, 1997, the Partnership completed its development
activities and commenced its planned principal operations.

Deloitte & Touche LLP
Kansas City, Missouri

February 3, 1998

F-3
<PAGE>

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET OPERATING REVENUES.. $11,940.3 $11,024.9 $14,873.9 $13,887.5 $12,735.3
OPERATING EXPENSES
Costs of services and
products............. 5,691.3 5,523.7 7,451.0 6,912.9 6,504.9
Selling, general and
administrative....... 2,802.0 2,395.1 3,245.2 3,116.4 2,842.1
Depreciation and
amortization......... 1,429.1 1,265.2 1,726.3 1,591.0 1,466.4
Restructuring costs... -- -- -- -- 87.6
--------- --------- --------- --------- ---------
Total operating
expenses............. 9,922.4 9,184.0 12,422.5 11,620.3 10,901.0
--------- --------- --------- --------- ---------
OPERATING INCOME........ 2,017.9 1,840.9 2,451.4 2,267.2 1,834.3
Interest expense........ (185.6) (133.3) (187.2) (196.7) (260.7)
Equity in loss of Global
One.................... (120.0) (88.3) (162.1) (82.1) (22.9)
Equity in loss of Sprint
Spectrum Holdings and
PhillieCo.............. (686.5) (410.6) (659.6) (191.8) (31.4)
Other income (expense),
net.................... 48.6 51.8 140.5 115.3 (38.9)
--------- --------- --------- --------- ---------
Income from continuing
operations before
income taxes........... 1,074.4 1,260.5 1,583.0 1,911.9 1,480.4
Income taxes............ (405.1) (502.9) (630.5) (721.0) (534.3)
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS............. 669.3 757.6 952.5 1,190.9 946.1
Discontinued operation,
net.................... -- -- -- (2.6) 14.5
Extraordinary items,
net.................... (4.4) -- -- (4.5) (565.3)
--------- --------- --------- --------- ---------
NET INCOME.............. 664.9 757.6 952.5 1,183.8 395.3
Preferred stock
dividends.............. (0.8) (0.8) (1.0) (1.3) (2.6)
--------- --------- --------- --------- ---------
Earnings applicable to
common stock........... $ 664.1 $ 756.8 $ 951.5 $ 1,182.5 $ 392.7
========= ========= ========= ========= =========
BASIC EARNINGS PER
COMMON SHARE
Continuing operations. $ 1.55 $ 1.76 $ 2.21 $ 2.82 $ 2.71
Discontinued
operation............ -- -- -- (0.01) 0.04
Extraordinary items... (0.01) -- -- (0.01) (1.62)
--------- --------- --------- --------- ---------
Total................... $ 1.54 $ 1.76 $ 2.21 $ 2.80 $ 1.13
========= ========= ========= ========= =========
Basic weighted average
common shares.......... 430.7 430.3 430.2 421.7 348.7
========= ========= ========= ========= =========
DILUTED EARNINGS PER
COMMON SHARE
Continuing operations. $ 1.52 $ 1.74 $ 2.18 $ 2.79 $ 2.69
Discontinued
operation............ -- -- -- (0.01) 0.04
Extraordinary items... (0.01) -- -- (0.01) (1.61)
--------- --------- --------- --------- ---------
Total................... $ 1.51 $ 1.74 $ 2.18 $ 2.77 $ 1.12
========= ========= ========= ========= =========
Diluted weighted average
common shares.......... 438.7 436.1 436.5 427.0 351.3
========= ========= ========= ========= =========
DIVIDENDS PER COMMON
SHARE.................. $ 0.75 $ 0.75 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE>

SPRINT CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- --------------------
1998 1997 1996
------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents..................... $ 47.7 $ 101.7 $ 1,150.6
Accounts receivable, net of allowance for
doubtful accounts of $166.0 (unaudited),
$146.7 and $117.4....................... 2,515.8 2,495.6 2,343.6
Inventories.............................. 349.9 352.0 305.3
Prepaid expenses......................... 216.3 159.1 150.0
Notes and other receivables.............. 407.8 443.4 101.9
Other.................................... 206.4 199.6 181.5
--------- --------- ---------
Total current assets................... 3,743.9 3,751.4 4,232.9
Investments in equity securities........... 420.2 303.0 254.5
Property, plant and equipment
Long distance communications services.... 9,133.0 8,245.5 7,467.8
Local communications services............ 14,817.2 14,011.5 13,368.7
Other.................................... 2,309.2 953.9 574.3
--------- --------- ---------
Total property, plant and equipment...... 26,259.4 23,210.9 21,410.8
Less accumulated depreciation............ 12,757.2 11,716.8 10,946.7
--------- --------- ---------
Net property, plant and equipment...... 13,502.2 11,494.1 10,464.1
Investment in and advances to Sprint
Spectrum Holdings and PhillieCo........... 610.1 989.6 1,242.9
Investments in and advances to other
affiliates................................ 634.0 459.1 284.2
Other assets............................... 1,543.4 1,187.6 347.8
--------- --------- ---------
Total.................................. $20,453.8 $18,184.8 $16,826.4
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt..... $ 80.6 $ 131.0 $ 99.1
Short-term borrowings.................... -- -- 200.0
Accounts payable......................... 1,099.0 1,100.1 1,026.7
Accrued interconnection costs............ 564.7 672.7 709.0
Accrued taxes............................ 399.2 270.7 189.2
Advance billings......................... 213.3 202.9 199.7
Other.................................... 849.0 699.4 770.6
--------- --------- ---------
Total current liabilities.............. 3,205.8 3,076.8 3,194.3
Construction obligations................... 429.0 -- --
Long-term debt............................. 5,039.8 3,748.6 2,974.8
Deferred credits and other liabilities
Deferred income taxes and investment tax
credits................................. 1,029.2 1,016.5 846.9
Postretirement and other benefit
obligations............................. 1,067.4 947.4 919.7
Other.................................... 370.8 358.8 359.0
--------- --------- ---------
Total deferred credits and other
liabilities........................... 2,467.4 2,322.7 2,125.6
Redeemable preferred stock................. 9.5 11.5 11.8
Common stock and other stockholders' equity
Common stock, par value $2.50 per share,
1,000.0 shares authorized, 350.3 shares
issued, and 344.5 (unaudited), 343.8 and
343.9 shares outstanding................ 875.7 875.7 875.7
Class A common stock, par value $2.50 per
share, 500.0 shares authorized, 86.2
shares issued and outstanding........... 215.6 215.6 215.6
Capital in excess of par or stated value. 4,490.8 4,457.7 4,425.9
Retained earnings........................ 4,012.7 3,693.1 3,222.4
Treasury stock, at cost, 5.8 (unaudited),
6.5 and 6.4 shares...................... (396.1) (292.9) (262.2)
Other.................................... 103.6 76.0 42.5
--------- --------- ---------
Total common stock and other
stockholders' equity.................. 9,302.3 9,025.2 8,519.9
--------- --------- ---------
Total.................................. $20,453.8 $18,184.8 $16,826.4
========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE>

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER YEAR ENDED
30, DECEMBER 31,
------------------ ----------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................. $ 664.9 $ 757.6 $ 952.5 $1,183.8 $ 395.3
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in net losses of
affiliates............... 824.9 506.9 843.7 273.7 39.1
Extraordinary items, net.. 1.1 -- -- 4.9 565.3
Depreciation and
amortization............. 1,429.1 1,265.2 1,726.3 1,591.0 1,466.4
Deferred income taxes and
investment tax credits... 20.8 217.2 165.7 (10.3) 5.8
Net (gains) losses on
sales of assets.......... -- -- (93.2) 7.5 4.2
Changes in assets and
liabilities:
Accounts receivable,
net.................... (20.2) (92.9) (127.0) (982.1) (135.4)
Inventories and other
current assets......... (28.0) (37.2) (94.4) 15.7 (38.6)
Accounts payable and
other current
liabilities............ 124.1 (195.5) 18.0 362.0 178.1
Noncurrent assets and
liabilities, net....... (69.0) (14.3) (18.4) (25.5) 123.0
Other, net................ 2.3 3.7 5.8 (17.1) 6.4
-------- -------- -------- -------- --------
Net cash provided by
continuing operations...... 2,950.0 2,410.7 3,379.0 2,403.6 2,609.6
Net cash provided (used) by
cellular division.......... -- -- -- (0.1) 162.5
-------- -------- -------- -------- --------
Net cash provided by
operating activities....... 2,950.0 2,410.7 3,379.0 2,403.5 2,772.1
-------- -------- -------- -------- --------
INVESTING ACTIVITIES
Capital expenditures........ (2,992.1) (1,903.9) (2,862.6) (2,433.6) (1,857.3)
Purchase of PCS licenses.... -- (460.1) (460.1) (84.0) --
Investments in and loans to
Sprint Spectrum Holdings
and PhillieCo.............. (307.1) (410.0) (706.3) (561.0) (954.1)
Investments in and advances
to other affiliates, net... (395.3) (98.5) (385.5) (81.4) (37.8)
Paranet acquisition......... -- (375.0) (375.0) -- --
Proceeds from sales of
assets..................... -- -- 292.3 2.1 6.7
Other, net.................. (14.0) 33.8 (2.3) 42.4 (17.1)
-------- -------- -------- -------- --------
Net cash used by continuing
operations................. (3,708.5) (3,213.7) (4,499.5) (3,115.5) (2,859.6)
Repayment by cellular
division of intercompany
advances................... -- -- -- 1,400.0 --
Net cash used by cellular
division................... -- -- -- (140.7) (324.6)
-------- -------- -------- -------- --------
Net cash used by investing
activities................. (3,708.5) (3,213.7) (4,499.5) (1,856.2) (3,184.2)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES
Payments on long-term debt.. (246.7) (110.6) (135.0) (433.1) (630.0)
Proceeds from long-term
debt....................... 945.6 -- 866.5 9.4 260.7
Change in construction
obligations................ 429.0 -- -- -- --
Net change in short-term
borrowings................. -- 194.7 (200.0) (1,986.8) 1,109.5
Proceeds from Class A common
stock issued............... -- -- -- 3,661.3 --
Dividends paid.............. (291.6) (274.5) (430.0) (419.6) (351.5)
Treasury stock purchased.... (235.4) (128.8) (144.5) (407.2) --
Other, net.................. 103.6 81.0 114.6 55.1 33.9
-------- -------- -------- -------- --------
Net cash provided (used) by
financing activities....... 704.5 (238.2) 71.6 479.1 422.6
-------- -------- -------- -------- --------
Increase (Decrease) in Cash
and Equivalents............ (54.0) (1,041.2) (1,048.9) 1,026.4 10.5
Cash and Equivalents at
Beginning of Period........ 101.7 1,150.6 1,150.6 124.2 113.7
-------- -------- -------- -------- --------
Cash and Equivalents at End
of Period.................. $ 47.7 $ 109.4 $ 101.7 $1,150.6 $ 124.2
======== ======== ======== ======== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-6
<PAGE>

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CAPITAL IN
EXCESS OF
COMMON CLASS A PAR OR
SHARES COMMON COMMON STATED RETAINED TREASURY
OUTSTANDING STOCK STOCK VALUE EARNINGS STOCK OTHER TOTAL
----------- ------- ------- ---------- --------- -------- ------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING 1995 BALANCE.. 348.3 $ 871.4 $ -- $ 942.9 $ 2,730.6 $ (9.6) $ (10.5) $ 4,524.8
Net income.............. -- -- -- -- 395.3 -- -- 395.3
Common stock dividends.. -- -- -- -- (348.9) -- -- (348.9)
Common stock issued..... 0.6 1.4 -- 13.5 -- -- -- 14.9
Treasury stock issued... 0.3 -- -- -- (3.5) 9.6 -- 6.1
Change in unrealized
holding gains on
investments, net....... -- -- -- -- -- -- 54.6 54.6
Other, net.............. -- 0.1 -- 3.6 (0.6) -- (7.3) (4.2)
----- ------- ------- --------- --------- -------- ------- ---------
ENDING 1995 BALANCE..... 349.2 872.9 -- 960.0 2,772.9 -- 36.8 4,642.6
Net income.............. -- -- -- -- 1,183.8 -- -- 1,183.8
Common stock dividends.. -- -- -- -- (346.1) -- -- (346.1)
Class A common stock and
preference stock
dividends.............. -- -- -- -- (74.9) -- -- (74.9)
Common stock issued..... 1.1 2.5 -- 17.5 -- -- -- 20.0
Class A common stock
issued................. 86.2 -- 215.6 3,436.3 -- -- -- 3,651.9
Treasury stock
purchased.............. (10.1) -- -- -- -- (407.2) -- (407.2)
Treasury stock issued... 3.7 -- -- -- (52.9) 145.0 -- 92.1
Spinoff of cellular
division............... -- -- -- -- (260.2) -- -- (260.2)
Other, net.............. -- 0.3 -- 12.1 (0.2) -- 5.7 17.9
----- ------- ------- --------- --------- -------- ------- ---------
ENDING 1996 BALANCE..... 430.1 875.7 215.6 4,425.9 3,222.4 (262.2) 42.5 8,519.9
Net income.............. -- -- -- -- 952.5 -- -- 952.5
Common stock dividends.. -- -- -- -- (343.3) -- -- (343.3)
Class A common stock
dividends.............. -- -- -- -- (86.2) -- -- (86.2)
Treasury stock
purchased.............. (3.0) -- -- -- -- (144.5) -- (144.5)
Treasury stock issued... 2.9 -- -- -- (48.8) 113.8 -- 65.0
Tax benefit from stock
options exercised...... -- -- -- 26.2 -- -- -- 26.2
Other, net.............. -- -- -- 5.6 (3.5) -- 33.5 35.6
----- ------- ------- --------- --------- -------- ------- ---------
ENDING 1997 BALANCE..... 430.0 875.7 215.6 4,457.7 3,693.1 (292.9) 76.0 9,025.2
Net income (unaudited).. -- -- -- -- 664.9 -- -- 664.9
Common stock dividends
(unaudited)............ -- -- -- -- (258.6) -- -- (258.6)
Class A common stock
dividends (unaudited).. -- -- -- -- (64.7) -- -- (64.7)
Treasury stock purchased
(unaudited)............ (3.9) -- -- -- -- (260.2) -- (260.2)
Treasury stock issued
(unaudited)............ 4.6 -- -- 0.5 (12.8) 149.4 -- 137.1
Other, net (unaudited).. -- -- -- 32.6 (9.2) 7.6 27.6 58.6
----- ------- ------- --------- --------- -------- ------- ---------
SEPTEMBER 30, 1998
BALANCE (unaudited).... 430.7 $ 875.7 $ 215.6 $ 4,490.8 $ 4,012.7 $ (396.1) $ 103.6 $ 9,302.3
===== ======= ======= ========= ========= ======== ======= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-7
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. RESTRUCTURING AND RECAPITALIZATION PLANS

Sprint Corporation ("Sprint") has entered into a restructuring agreement
with Tele-Communications, Inc. ("TCI"), Comcast Corporation ("Comcast") and
Cox Communications, Inc. ("Cox," and together with TCI and Comcast the "Cable
Parents") to restructure Sprint's wireless personal communications services
("PCS") operations (the "PCS Restructuring"). Sprint will acquire the joint
venture interests of TCI, Comcast and Cox in Sprint Spectrum Holding Company,
L.P. and MinorCo, L.P. (together, "Sprint Spectrum Holdings") and the joint
venture interests of TCI and Cox in PhillieCo Partners I, L.P. and PhillieCo
Partners II, L.P. (together, "PhillieCo"). In exchange for these joint venture
interests, Sprint will issue to the Cable Parents a newly created class of
Sprint Common Stock (the "PCS Stock"). The PCS Stock is intended to reflect
separately the performance of these joint ventures and the domestic PCS
operations of Sprint's wholly-owned subsidiaries, SprintCom, Inc. and
SprintCom Equipment Company, L.P. (together, "SprintCom"). These operations,
which after the PCS Restructuring will be 100% owned by Sprint (subject to a
40.8% minority interest in the entity holding the PCS license for and
conducting operations in the Los Angeles/San Diego/Las Vegas MTA), will be
referred to as the PCS Group.

The FON Stock, which will be created in the Recapitalization, is intended to
reflect the performance of all of Sprint's other operations, including its
long distance, local telecommunications and product distribution and directory
publishing divisions, emerging businesses and its interest in Global One.
These operations will be referred to as the FON Group.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of Sprint and its
wholly-owned and majority-owned subsidiaries. Investments in entities in which
Sprint exercises significant influence, but does not control, are accounted
for using the equity method (see Note 3).

The consolidated financial statements are prepared according to generally
accepted accounting principles ("GAAP"). These principles require management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.

The unaudited interim financial information presented has been prepared
according to GAAP and the rules and regulations of the Securities and Exchange
Commission. In management's opinion, the information presented reflects all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly Sprint's consolidated financial position, results of operations
and cash flows.

Certain prior-year amounts have been reclassified to conform to the current-
year presentation. These reclassifications had no effect on the results of
operations or stockholders' equity as previously reported.

Sprint applied Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation," to its financial
statements until December 1995. Under SFAS 71, revenues and related net income
resulting from transactions between Sprint's nonregulated operations and its
regulated local exchange carriers were not eliminated from the consolidated
financial statements. Revenues from these intercompany transactions were $262
million in 1995. All other significant intercompany transactions have been
eliminated.

Classification of Operations

FON GROUP

The principal activities of the FON Group include (i) its core businesses
consisting of domestic and international long distance communications, local
exchange communications, and product distribution and

F-8
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

directory publishing activities, (ii) its emerging businesses, which consist
of the development of new integrated communications services, consumer
internet access services, Sprint Paranet and Sprint International and (iii)
Sprint's Global One strategic international alliance, as well as other
telecommunications investments and partnerships.

PCS GROUP

The PCS Group includes Sprint's domestic wireless mobile telephony
activities and any other domestic PCS services, which include (i) the
investment in Sprint Spectrum Holdings and the investment in PhillieCo, both
of which are reflected on the equity basis and (ii) SprintCom. Upon completion
of the PCS Restructuring, the results of Sprint Spectrum Holdings and
PhillieCo will be reflected on the consolidated basis in the PCS Group
Combined Financial Statements.

Revenue Recognition

Sprint recognizes operating revenues as services are rendered or as products
are delivered to customers. Sprint records operating revenues net of an
estimate for uncollectible accounts.

Cash and Equivalents

Cash equivalents generally include highly liquid investments with original
maturities of three months or less. They are stated at cost, which
approximates market value. Sprint uses controlled disbursement banking
arrangements as part of its cash management program. Outstanding checks in
excess of cash balances, which were included in accounts payable, totaled $225
million at year-end 1997 and $127 million at year-end 1996. Sprint had
sufficient funds available to fund these outstanding checks when they were
presented for payment.

Investments in Debt and Equity Securities

Investments in debt and equity securities are classified as available for
sale and reported at fair value (estimated based on quoted market prices).
Gross unrealized holding gains and losses are reflected as adjustments to
"Common stock and other stockholders' equity--Other," net of related income
taxes.

Inventories

Inventories are stated at the lower of cost (principally first-in, first-out
method) or market.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Generally, ordinary asset
retirements and disposals are charged against accumulated depreciation with no
gain or loss recognized. Repairs and maintenance costs are expensed as
incurred.

Depreciation

The cost of property, plant and equipment is generally depreciated on a
straight-line basis over estimated economic useful lives. Prior to Sprint's
discontinued use of SFAS 71 at year-end 1995, the cost of property, plant and
equipment for the local division had been generally depreciated on a straight-
line basis over lives prescribed by regulatory commissions.

Income Taxes

Sprint records deferred income taxes based on certain temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for tax purposes. Investment tax credits

F-9
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

related to regulated telephone property, plant and equipment have been
deferred and are being amortized over the estimated useful lives of the
related assets.

Capitalized Interest

Sprint capitalizes interest costs related to constructing capital assets,
and to its investments in Sprint Spectrum Holdings and affiliates and its
directly owned PCS licenses. Sprint stopped capitalizing interest on its
investment in Sprint Spectrum Holdings and affiliates in July 1997 because
Sprint Spectrum Holdings and affiliates no longer qualified as development-
stage companies. Capitalized interest totaled $93 million in 1997, $104
million in 1996 and $57 million in 1995.

3. INVESTMENTS

INVESTMENTS IN EQUITY SECURITIES

The cost of investments in equity securities was $105 million at year-end
1997 and 1996. Gross unrealized holding gains were $198 million at year-end
1997 and $149 million at year-end 1996.

INVESTMENTS IN AND LOANS TO AFFILIATES

Investments accounted for using the equity method mainly consist of Sprint's
investments in Sprint Spectrum Holdings, PhillieCo and Global One.

Sprint is a 40% partner in Sprint Spectrum Holdings, a partnership with TCI,
Comcast and Cox and a 47.1% partner in PhillieCo, a partnership with TCI and
Cox. Sprint Spectrum Holdings and PhillieCo are building the nation's first
single-technology, state-of-the-art wireless network to provide PCS across the
United States. See Note 1 for more information regarding the PCS
Restructuring, which will result in Sprint acquiring the interests of TCI,
Comcast and Cox in Sprint Spectrum Holdings and TCI and Cox in PhillieCo.

Combined, summarized financial information (100% basis) for Sprint Spectrum
Holdings and PhillieCo accounted for using the equity method is as follows (in
millions):

<TABLE>
<CAPTION>
NINE MONTHS AT OR FOR THE
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------
1998 1997 1997 1996 1995
--------- --------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Results of operations
Net operating revenues.... $ 788.0 $ 110.5 $ 258.0 $ 4.2 $ --
========= ========= ========= ======== =======
Operating loss............ $(1,455.8) $ (869.0) $(1,379.7) $ (357.6) $ (66.9)
========= ========= ========= ======== =======
Net loss.................. $(1,692.0) $(1,021.5) $(1,632.7) $ (444.6) $(112.7)
========= ========= ========= ======== =======
Financial position
Current assets............ $ 417.9 $ 401.8
Noncurrent assets......... 6,640.0 4,041.8
--------- --------
Total..................... $ 7,057.9 $4,443.6
========= ========
Current liabilities....... $ 834.5 $ 471.2
Noncurrent liabilities.... 4,289.4 1,412.5
Partners' equity.......... 1,934.0 2,559.9
--------- --------
Total..................... $ 7,057.9 $4,443.6
========= ========
</TABLE>

F-10
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At year-end 1997 and 1996, Sprint's investment in Sprint Spectrum Holdings,
including advances and a vendor financing loan, totaled $1.2 billion.

In 1996, Sprint purchased $183 million (face value) of Sprint Spectrum
Senior Discount notes for $100 million. The bonds mature in 2006. At year-end
1997 and 1996, the accreted cost of the notes was $118 and $104 million and
gross unrealized holding gains totaled $24 and $18 million, respectively. This
investment has been included in "Current assets--Other" on the Consolidated
Balance Sheets.

Sprint is also a partner in Global One, a joint venture with France Telecom
S.A. ("FT") and Deutsche Telekom AG ("DT") formed to provide seamless global
telecommunications services to business, residential and carrier markets
worldwide. Sprint is a one-third partner in Global One's operating group
serving Europe (excluding France and Germany), and is a 50% partner in Global
One's operating group for the worldwide activities outside the United States
and Europe. At year-end 1997, Sprint's share of underlying equity in Global
One's net assets exceeded the carrying value of Sprint's investment in Global
One by $158 million. This difference is being amortized through January 2001.

Combined, summarized financial information (100% basis) for Global One and
all other affiliates accounted for using the equity method is as follows (in
millions):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER AT OR FOR THE
30, YEAR ENDED DECEMBER 31,
------------------ --------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Results of operations
Net operating revenues........ $1,680.6 $1,535.4 $1,937.6 $1,723.7 $779.5
======== ======== ======== ======== ======
Operating income (loss)....... $ (375.9) $ (473.1) $ (782.5) $ (436.4) $ 8.6
======== ======== ======== ======== ======
Net income (loss)............. $ (495.4) $ (494.4) $ (826.3) $ (399.7) $ 22.1
======== ======== ======== ======== ======
Financial position
Current assets................ $1,913.6 $ 958.9
Noncurrent assets............. 4,221.0 2,737.5
-------- --------
Total......................... $6,134.6 $3,696.4
======== ========
Current liabilities........... $1,965.7 $ 714.3
Noncurrent liabilities........ 2,105.8 629.6
Partners' equity.............. 2,063.1 2,352.5
-------- --------
Total......................... $6,134.6 $3,696.4
======== ========
</TABLE>

Sprint's investment in Global One, including advances, totaled $93 and $38
million at year-end 1997 and 1996, respectively.

4. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PENSION PLAN

Substantially all Sprint employees are covered by a noncontributory defined
benefit pension plan. Benefits for plan participants represented by collective
bargaining units are based on negotiated schedules of defined amounts. For
participants not covered by collective bargaining agreements, the plan
provides pension benefits based on years of service and participants'
compensation.

F-11
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Sprint's policy is to make annual plan contributions equal to an actuarially
determined amount consistent with applicable federal tax regulations. The
funding objective is to accumulate funds at a relatively stable rate over the
participants' working lives so benefits are fully funded at retirement. At
year-end 1997, the plan's assets consisted mainly of investments in corporate
equity securities and U.S. government and corporate debt securities.

The net pension cost (credit) consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost--benefits earned during the period..... $ 61.7 $ 65.4 $ 51.8
Interest cost on projected benefit obligation....... 148.9 138.5 129.7
Actual return on plan assets........................ (448.5) (353.0) (472.1)
Net amortization and deferral....................... 240.0 159.4 287.9
------- ------- -------
Net pension cost (credit)........................... $ 2.1 $ 10.3 $ (2.7)
======= ======= =======
Discount rate....................................... 7.75% 7.25% 8.50%
Expected long-term rate of return on plan assets.... 9.50% 9.50% 9.50%
Anticipated composite rate of future compensation
increases.......................................... 4.75% 4.25% 5.00%
</TABLE>

At year-end, the funded status and amounts recognized in the Consolidated
Balance Sheets for the plan were as follows:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation.............................. $(1,966.7) $(1,713.6)
========= =========
Accumulated benefit obligation......................... $(2,129.6) $(1,864.1)
========= =========
Projected benefit obligation............................. $(2,240.9) $(1,967.0)
Plan assets at fair value................................ 2,929.4 2,584.2
--------- ---------
Plan assets in excess of the projected benefit
obligation.............................................. 688.5 617.2
Unrecognized net gains................................... (585.2) (481.8)
Unrecognized prior service cost.......................... 105.4 100.4
Unamortized transition asset............................. (122.1) (147.1)
--------- ---------
Prepaid pension cost..................................... $ 86.6 $ 88.7
========= =========
Discount rate............................................ 7.25% 7.75%
Anticipated composite rate of future compensation
increases............................................... 4.25% 4.75%
</TABLE>

DEFINED CONTRIBUTION PLANS

Sprint sponsors defined contribution employee savings plans covering
substantially all employees. Participants may contribute portions of their pay
to the plans. For employees represented by collective bargaining units, Sprint
matches contributions based on negotiated amounts. Sprint also matches
contributions of employees not covered by collective bargaining agreements.
For those participants, Sprint matches their contributions in Sprint common
stock. The matching is equal to 50% of participants' contributions up to 6% of
their pay. In addition, Sprint may, at the discretion of the Board of
Directors, provide matching contributions based on the performance of Sprint
common stock compared to other telecommunications companies' stock. Sprint's
matching contributions were $54 million in 1997, $56 million in 1996 and $51
million in 1995. At year-end 1997, the plans held 20 million Sprint common
shares.

F-12
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

POSTRETIREMENT BENEFITS

Sprint provides postretirement benefits (principally medical benefits) to
substantially all employees. Employees retiring before certain dates are
eligible for benefits at no cost, or at a reduced cost. Employees retiring
after certain dates are eligible for benefits on a shared-cost basis. Sprint
funds the accrued costs as benefits are paid.

The net postretirement benefits cost consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost--benefits
earned during the year. $20.8 $21.7 $22.2
Interest on accumulated
postretirement benefit
obligation............. 52.3 49.9 58.7
Net amortization and
deferral............... (19.4) (13.7) (9.4)
----- ----- -----
Net postretirement
benefits cost.......... $53.7 $57.9 $71.5
===== ===== =====
Discount rate........... 7.75% 7.25% 8.50%
</TABLE>

For measurement purposes, the assumed 1997 weighted average annual health
care cost trend rate was 9%, gradually decreasing to an ultimate level of 5%
by 2005. A 1% increase in the rate would have increased the 1997 net
postretirement benefits cost by an estimated $12 million.

Amounts included in the Consolidated Balance Sheets at year-end are as
follows:

<TABLE>
<CAPTION>
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees...................................................... $328.3 $277.9
Active plan participants--
Fully eligible.............................................. 145.2 127.6
Other....................................................... 269.9 320.7
------ ------
743.4 726.2
Unrecognized prior service benefit.............................. 5.4 5.7
Unrecognized net gains.......................................... 190.0 178.7
------ ------
Accrued postretirement benefits cost............................ $938.8 $910.6
====== ======
Discount rate................................................... 7.25% 7.75%
</TABLE>

The assumed 1998 annual health care cost trend rate was 8.5%, gradually
decreasing to an ultimate level of 5% by 2005. A 1% increase in the rate would
have increased the 1997 accumulated postretirement benefit obligation by an
estimated $61 million.

F-13
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. INCOME TAXES

Income tax expense allocated to continuing operations consists of the
following:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Current income tax expense
Federal............................................... $385.9 $655.4 $437.4
State................................................. 78.9 75.9 91.1
------ ------ ------
Total current........................................... 464.8 731.3 528.5
------ ------ ------
Deferred income tax expense (benefit)
Federal............................................... 174.3 (22.2) 45.9
State................................................. (4.8) 23.5 (23.6)
Amortization of deferred investment tax credits......... (3.8) (11.6) (16.5)
------ ------ ------
Total deferred.......................................... 165.7 (10.3) 5.8
------ ------ ------
Total................................................... $630.5 $721.0 $534.3
====== ====== ======
</TABLE>

The differences that caused Sprint's effective income tax rates to vary from
the statutory federal rate of 35% were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Income tax expense at the statutory rate............... $554.1 $669.2 $518.1
Less investment tax credits included in income......... 3.8 11.6 16.5
------ ------ ------
Expected federal income tax expense after investment
tax credits........................................... 550.3 657.6 501.6
Effect of state income taxes, net of federal income tax
effect................................................ 48.2 64.6 43.9
Equity in losses of foreign joint ventures............. 36.4 8.6 --
Other, net............................................. (4.4) (9.8) (11.2)
------ ------ ------
Income tax expense, including investment tax credits... $630.5 $721.0 $534.3
====== ====== ======
Effective income tax rate.............................. 39.8% 37.7% 36.1%
====== ====== ======
</TABLE>

Income tax expense (benefit) allocated to other items was as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C>
Discontinued operation................................ $ -- $ 7.0 $ 31.2
Extraordinary items................................... -- (2.9) (437.4)
Unrealized holding gains on investments (1)........... 4.4 1.7 30.7
Stock ownership, purchase and options arrangements
(1).................................................. (26.2) (14.1) (7.5)
</TABLE>
- --------
(1) These amounts have been recorded directly to "Common stock and other
stockholders' equity--Other."

F-14
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Sprint recognizes deferred income taxes for the temporary differences
between the carrying amounts of its assets and liabilities for financial
statement purposes and their tax bases. The sources of the differences that
give rise to the deferred income tax assets and liabilities at year-end 1997
and 1996, along with the income tax effect of each, were as follows:

<TABLE>
<CAPTION>
1997 DEFERRED 1996 DEFERRED
INCOME TAX INCOME TAX
------------------ ------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Property, plant and equipment............. $ -- $1,488.8 $ -- $1,304.3
Postretirement and other benefits......... 376.1 -- 360.3 --
Reserves and allowances................... 111.3 -- 115.6 --
Unrealized holding gains on investments... -- 61.7 -- 57.3
Other, net................................ 108.5 -- 106.8 --
------ -------- ------ --------
595.9 1,550.5 582.7 1,361.6
Less valuation allowance.................. 11.8 -- 13.7 --
------ -------- ------ --------
Total..................................... $584.1 $1,550.5 $569.0 $1,361.6
====== ======== ====== ========
</TABLE>

The valuation allowance related to deferred income tax assets decreased $2
million in 1997 and $4 million in 1996 and 1995.

Management believes it is more likely than not that these deferred income
tax assets, net of the allowance, will be realized based on current income tax
laws and expectations of future taxable income stemming from the reversal of
existing deferred tax liabilities or ordinary operations. Uncertainties
surrounding income tax law changes, shifts in operations between state taxing
jurisdictions, and future operating income levels may, however, affect the
ultimate realization of all or some of these deferred income tax assets.

At year-end 1997, Sprint had available for income tax purposes $4 million of
state alternative minimum tax credit carryforwards to offset state income tax
payable in future years. In addition, Sprint had tax benefits of $49 million
related to state operating loss carryforwards. The loss carryforwards expire
in varying amounts per year from 1998 through 2012.

F-15
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. BORROWINGS

LONG-TERM DEBT

Long-term debt at year-end was as follows:

<TABLE>
<CAPTION>
MATURING 1997 1996
------------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Corporate
Senior notes
8.1% to 9.8%............................... 1998 to 2002 $ 475.3 $ 475.3
9.5%....................................... 2003 to 2007 200.0 200.0
Debentures
9.0% to 9.3%............................... 2019 to 2022 350.0 350.0
Notes payable and commercial paper -- 866.5 --
Other
5.4% to 8.9% (1)........................... 1998 to 2006 237.5 194.9
Long Distance Division
Vendor financing agreements
7.4% to 8.9%............................... 1997 to 1999 23.8 44.8
Other
6.2% to 8.4%............................... 1997 to 2007 16.5 23.1
Local Telecommunications Division
First mortgage bonds
2.0% to 7.8%............................... 1997 to 2002 452.3 487.0
4.0% to 7.8%............................... 2003 to 2007 346.0 346.8
6.9% to 9.8%............................... 2008 to 2012 116.7 116.7
6.9% to 8.8%............................... 2013 to 2017 169.6 169.8
8.8% to 9.9%............................... 2018 to 2022 244.9 245.7
7.1% to 8.4%............................... 2023 to 2027 145.0 145.0
Debentures and notes
5.8% to 9.6%............................... 1998 to 2020 237.0 275.3
Other
2.0% to 9.8%............................... 1998 to 2006 4.6 6.2
Unamortized debt discount...................... (6.1) (6.7)
-------- --------
3,879.6 3,073.9
Less current maturities........................ 131.0 99.1
-------- --------
Long-term debt................................. $3,748.6 $2,974.8
======== ========
</TABLE>
- --------
(1) Notes may be exchanged at maturity for Southern New England
Telecommunications Corporation ("SNET") common shares owned by Sprint, or
for cash. Based on SNET's closing market price, had the notes matured at
year-end 1997, they could have been exchanged for 3.8 million SNET shares.
At year-end 1997, Sprint held 4.2 million SNET shares, which have been
included in "Investments in equity securities" on the Consolidated Balance
Sheets.

F-16
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Long-term debt maturities, excluding reclassified short-term borrowings,
during each of the next five years are as follows (in millions):

Property, plant and equipment with a total cost of $12.9 billion is either
pledged as security for first mortgage bonds and certain notes or is
restricted for use as mortgaged property.

During 1996, Sprint redeemed, prior to scheduled maturities, $190 million of
debt with interest rates ranging from 6.0% to 9.5%. This resulted in a $5
million after-tax extraordinary loss.

SHORT-TERM BORROWINGS

At year-end 1997, Sprint had borrowed $618 million of bank notes payable and
$249 million of commercial paper. Though these borrowings are renewable at
various dates throughout the year, they have been classified as long-term debt
because of Sprint's intent and ability, through unused credit facilities, to
refinance these borrowings. Commercial paper and certain bank notes payable
are supported by Sprint's revolving credit facility with a syndicate of
domestic and international banks. Other notes payable relate to a separate
revolving credit facility that Sprint executed with a bank in 1997. At year-
end 1997, Sprint's unused lines of credit totaled $1.1 billion.

Bank notes outstanding at year-end 1997 and 1996 had weighted average
interest rates of 6.1% and 5.9%, respectively. At year-end 1997, the weighted
average interest rate of commercial paper was 6.8%.

OTHER

Sprint was in compliance with all restrictive or financial covenants
relating to its debt arrangements at year-end 1997.

7. REDEEMABLE PREFERRED STOCK

Sprint has approximately 22 million authorized preferred shares, including
nonredeemable preferred stock. The redeemable preferred stock outstanding, at
year-end, is as follows:

<TABLE>
<CAPTION>
1997 1996
----- -----
(IN
MILLIONS,
EXCEPT PER
SHARE AND
SHARE DATA)
<S> <C> <C>
Fifth series--stated value $100,000 per share, shares--95, voting,
cumulative 6% annual dividend rate................................ $ 9.5 $ 9.5
Other--stated value $100 per share, shares--19,493 and 22,800, 4.7%
annual dividend rate.............................................. 2.0 2.3
----- -----
Total.......................................................... $11.5 $11.8
===== =====
</TABLE>

Sprint's Fifth series preferred stock must be redeemed in full in 2003. If
less than full dividends have been paid for four consecutive dividend periods,
or if dividends in arrears exceed an amount equal to the dividends for six
dividend periods, the Fifth series preferred stockholder may elect a majority
of directors standing for election until all dividends in arrears have been
paid.

F-17
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. COMMON STOCK

COMMON STOCK

At year-end 1997, common stock reserved for future grants under stock option
plans or for future issuances under various other arrangements was as follows:

<TABLE>
<CAPTION>
SHARES
-------------
(IN MILLIONS)
<S> <C>
Employees Stock Purchase Plan............................... 6.4
Employee savings plans...................................... 3.4
Automatic Dividend Reinvestment Plan........................ 1.2
Officer and key employees' and directors' stock options..... 8.2
Conversion of preferred stock and other..................... 1.4
----
Total................................................... 20.6
====
</TABLE>

Under a Shareholder Rights Plan, one preferred stock purchase right is
attached to each common and Class A common share. Each right is exercisable
only if certain takeover events occur. Each right will initially entitle the
holder to purchase 1/1000 of a share (a "Unit") of a no par Preferred Stock-
Sixth Series, Junior Participating (Preferred Stock) at $225 per Unit or, in
certain cases, common stock. The Preferred Stock is voting, cumulative and
accrues dividends on a quarterly basis generally equal to the greater of $100
per share or 1,000 times the total per share amount of all common dividends.
No Preferred Stock shares were issued or outstanding at year-end 1997. The
rights may be redeemed by Sprint at $0.01 per right and will expire in June
2007, unless extended. On June 29, 1998, the Sprint Board approved an
amendment to Sprint's Shareholder Rights Plan to be effective on the filling
of the PCS Stock Amendment with the Kansas Secretary of State. See Note 1 for
a discussion of the PCS Restructuring, which necessitated the PCS Stock
Amendment.

During 1997, 1996 and 1995, Sprint declared and paid annual common stock
dividends of $1.00 per share. The most restrictive covenant related to common
dividends results from Sprint's $1.5 billion revolving credit agreement. Among
other restrictions, this agreement requires Sprint to maintain specified
levels of consolidated net worth. Due to this requirement, $2.7 billion of
Sprint's $3.7 billion consolidated retained earnings was effectively
restricted from the payment of dividends at year-end 1997. The indentures and
financing agreements of certain of Sprint's subsidiaries contain provisions
limiting cash dividend payments on subsidiary common stock held by Sprint. As
a result, $567 million of those subsidiaries' $1.3 billion total retained
earnings was restricted at year-end 1997. The flow of cash in the form of
advances from the subsidiaries to Sprint is generally not restricted.

During 1990, the Savings Plan Trust, an employee savings plan, acquired
common stock from Sprint in exchange for a $75 million promissory note payable
to Sprint. The note bears interest at 9% and is to be repaid from common stock
dividends received by the plan and contributions made to the plan by Sprint
according to plan provisions. The remaining $34 million note receivable
balance at year-end 1997 is reflected as a reduction to "Common stock and
other stockholders' equity--Other."

CLASS A COMMON STOCK

In January 1996, FT and DT acquired shares of a new class of convertible
preference stock for a combined total of $3.0 billion. This resulted in FT and
DT each holding 7.5% of Sprint's voting power. In April 1996, following the
spinoff of Sprint's cellular division ("Cellular") (see Note 15), the
preference stock was converted into Class A common stock, and FT and DT each
acquired additional Class A common shares. Following their combined investment
of $3.7 billion, FT and DT each own Class A common shares with 10% of Sprint's
voting power. During 1997, Sprint declared and paid Class A common dividends
of $1.00 per share. During 1996, preference dividends totaled $0.16 per share,
and Class A common dividends totaled $0.75 per share.

F-18
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FT and DT, as Class A common stockholders, have the right in most
circumstances to proportionate representation on Sprint's Board of Directors.
They may also purchase additional Class A common shares from Sprint to keep
their ownership level at 10% each. FT and DT have entered into a standstill
agreement with Sprint restricting their ability to acquire Sprint voting
shares (other than as intended by their investment agreement with Sprint and
related agreements). The standstill agreement also contains customary
provisions restricting FT and DT from initiating or participating in any
proposal with respect to the control of Sprint.

9. STOCK-BASED COMPENSATION

Sprint's Management Incentive Stock Option Plan ("MISOP") provides for the
granting of stock options to employees who are eligible to receive annual
incentive compensation. Eligible employees are entitled to receive stock
options in lieu of a portion of the target incentive under Sprint's management
incentive plans. The options generally become exercisable on December 31 of
the year granted and have a maximum term of 10 years. MISOP options are
granted with exercise prices equal to the market price of Sprint's common
stock on the grant date. At year-end 1997, authorized shares under this plan
approximated 11 million. This amount increased by approximately 3 million
shares on January 1, 1998.

The Sprint Corporation Stock Option Plan ("SOP") provides for the granting
of stock options to officers and key employees. The options generally become
exercisable at the rate of 25% per year, beginning one year from the grant
date, and have a maximum term of 10 years. SOP options are granted with
exercise prices equal to the market price of Sprint's common stock on the
grant date. At year-end 1997, authorized shares under this plan approximated
20 million.

Every two years, the Employees Stock Purchase Plan ("ESPP") offers all
employees the election to purchase Sprint common stock at a price equal to 85%
of the market value on the grant or exercise date, whichever is less. At year-
end 1997, authorized shares under this plan approximated 18 million.

In 1996, Sprint adopted the pro forma disclosure requirements under SFAS No.
123, "Accounting for Stock-based Compensation," and continued to apply
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," to its stock option and employee stock purchase plans.
Under APB 25, Sprint has recognized no compensation expense related to these
plans.

Pro forma net income and earnings per share ("EPS") have been determined as
if Sprint had used the fair value method of accounting for its stock option
grants and ESPP share elections after 1994. Under this method, compensation
expense is recognized over the applicable vesting periods and is based on the
shares under option and their related fair values on the grant date.

The following pro forma information will not likely represent the
information reported in future years because options granted and ESPP shares
elected after 1994 will continue to vest over the next several years. In
addition, compensation expense resulting from the spinoff of Cellular (the
"Spinoff") (see Note 15) will decline over the next several years.

Sprint's pro forma net income and EPS were as follows:

<TABLE>
<CAPTION>
1997(1) 1996(1) 1995
------- ------- -----
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Pro forma net income...................................... $ 908 $1,158 $ 388
===== ====== =====
Pro forma basic EPS....................................... $2.11 $ 2.74 $1.11
===== ====== =====
</TABLE>
- --------
(1) Pro forma net income was reduced by $3 million ($0.01 per share) in 1997
and $6 million ($0.01 per share) in 1996 due to additional compensation
resulting from modifications to terms of options and ESPP share elections
made in connection with the Spinoff.

F-19
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During 1996, Sprint employees elected to purchase 2.8 million ESPP shares
with a weighted average fair value (using the Black-Scholes pricing model) of
$10.06 per share. No ESPP shares were offered in 1997 or 1995.

The following tables reflect the weighted average fair value per option
granted during the year, as well as the significant weighted average
assumptions used in determining those fair values using the Black-Scholes
pricing model:

<TABLE>
<CAPTION>
MISOP SOP
----- ------
<S> <C> <C>
1997
Fair value on grant date....................................... $9.66 $11.74
Risk-free interest rate........................................ 6.2% 6.2%
Expected volatility............................................ 22.8% 22.8%
Expected dividend yield........................................ 2.3% 2.3%
Expected life (years).......................................... 4 6
1996
Fair value on grant date....................................... $9.17 $10.96
Risk-free interest rate........................................ 5.2% 5.2%
Expected volatility............................................ 23.3% 23.3%
Expected dividend yield........................................ 2.5% 2.5%
Expected life (years).......................................... 4 6
1995
Fair value on grant date....................................... $6.67 $ 8.73
Risk-free interest rate........................................ 6.9% 7.2%
Expected volatility............................................ 23.3% 23.3%
Expected dividend yield........................................ 2.5% 2.5%
Expected life (years).......................................... 4 6
</TABLE>

Stock option plan activity was as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
PER SHARE
SHARES (1) EXERCISE PRICE (1)
---------- ------------------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Outstanding, beginning of 1995.............. 9.3 $24.67
Granted................................... 4.3 24.69
Exercised................................. (0.8) 19.81
Forfeited/Expired......................... (0.5) 27.06
----
Outstanding, year-end 1995.................. 12.3 24.88
Granted................................... 4.9 36.94
Exercised................................. (2.6) 22.28
Forfeited/Expired......................... (1.0) 29.22
----
Outstanding, year-end 1996.................. 13.6 29.42
Granted................................... 9.4 46.14
Exercised................................. (3.4) 27.17
Forfeited/Expired......................... (0.9) 38.10
----
Outstanding, year-end 1997.................. 18.7 $37.85
==== ======
</TABLE>
- --------
(1) Due to the Spinoff, the shares and related exercise prices have been
adjusted to maintain both the total fair market value of common stock
underlying the options, and the relationship between the market value of
Sprint's common stock and the option's exercise price.
Outstanding options held by Cellular employees were converted into options
and grants to purchase Cellular common stock and are not included in the
above table.

F-20
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

After adjustment for the Spinoff, options exercisable at year-end 1996 and
1995 were 8.4 and 6.4 million, respectively. At year-end 1996, the weighted
average exercise price for exercisable options was $27.77. The following table
summarizes outstanding and exercisable options at year-end 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- ----------------------
WEIGHTED
AVERAGE
NUMBER REMAINING WEIGHTED WEIGHTED
OUTSTANDING CONTRACTUAL AVERAGE NUMBER AVERAGE
RANGE OF (IN LIFE EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES MILLIONS) (IN YEARS) PRICE (IN MILLIONS) PRICE
- --------------- ----------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
$11.92--$14.96 0.1 2.2 $14.31 0.1 $14.31
$15.18--$19.24 0.1 3.7 17.91 0.1 17.91
$20.08--$24.50 2.7 6.2 23.71 1.7 23.30
$25.11--$29.96 1.8 4.7 27.38 1.4 26.80
$30.22--$39.94 5.0 7.6 35.16 3.0 34.28
$40.06--$49.88 7.3 8.5 44.88 1.9 43.33
$50.31--$58.38 1.7 7.4 51.92 0.1 51.69
</TABLE>

10. COMMITMENTS AND CONTINGENCIES

LITIGATION, CLAIMS AND ASSESSMENTS

In December 1996, an arbitration panel entered a $61 million award in favor
of Network 2000 Communications Corporation ("Network 2000") on its breach of
contract claim against Sprint. The arbitrators directed Sprint to pay one-half
of this award to Network 2000. The remainder was directed to be paid to the
Missouri state court in which a proposed class action by Network 2000's
independent marketing representatives against Network 2000 and Sprint is
pending.

Sprint filed an action in federal district court seeking to have the
arbitration panel's award struck down, modified, or corrected, and asking the
court to enter an order regarding the distribution of the award. In April
1997, the court denied Sprint's request that the arbitration award be struck
down and granted Network 2000's request that the award be confirmed.

In June 1997, Sprint recorded an additional $20 million charge in connection
with the settlement of both the class action lawsuit against Sprint and
Network 2000 and the related claims of Network 2000 against Sprint. In June
1998, the court approved the class action settlement; however, a number of
potential class members have decided not to participate in the settlement and
another group of potential class members have appealed from the order
approving the class action settlement.

Various other suits arising in the ordinary course of business are pending
against Sprint. Management cannot predict the final outcome of these actions
but believes they will not result in a material effect on Sprint's
consolidated financial statements.

CONTINGENCIES

On January 1, 1998, a "Deadlock Event" occurred due to the failure of the
Sprint Spectrum Holdings partnership board to approve the proposed Sprint
Spectrum Holdings budget and business plan. Under the partnership agreement,
if a partner refers the issue for resolution pursuant to specified procedures
and it remains unresolved, buy/sell provisions can be triggered, which could
result in Sprint either increasing or selling its partnership interest.
Discussions among the partners about restructuring their interests in Sprint
Spectrum Holdings have resulted in the partners entering into a restructuring
agreement (see Note 1).

F-21
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

OPERATING LEASES

Minimum rental commitments at year-end 1997 for all noncancelable operating
leases, consisting mainly of leases for data processing equipment and real
estate, are as follows (in millions):

<TABLE>
<S> <C>
1998............................................................... $324.1
1999............................................................... 276.4
2000............................................................... 174.2
2001............................................................... 119.1
2002............................................................... 97.1
Thereafter......................................................... 243.7
</TABLE>

Gross rental expense totaled $410 million in 1997, $401 million in 1996 and
$402 million in 1995. Rental commitments for subleases, contingent rentals and
executory costs were not significant.

11. FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

Sprint estimates the fair value of its financial instruments using available
market information and appropriate valuation methodologies. As a result, the
following estimates do not necessarily represent the values Sprint could
realize in a current market exchange. Although management is not aware of any
factors that would affect the estimated fair values presented at year-end
1997, those amounts have not been comprehensively revalued for purposes of
these financial statements since that date. Therefore, estimates of fair value
after year-end 1997 may differ significantly from the amounts presented below.
The carrying amounts and estimated fair values of Sprint's financial
instruments at year-end were as follows:

<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Financial assets
Cash and equivalents............... $ 101.7 $ 101.7 $1,150.6 $1,150.6
Investment in affiliate debt
securities........................ 142.4 142.4 122.5 122.5
Investments in equity securities... 303.0 303.0 254.5 254.5
Financial liabilities
Short-term borrowings.............. -- -- 200.0 200.0
Long-term debt
Corporate........................ 2,129.3 2,301.8 1,220.2 1,348.9
Long distance division........... 40.3 41.7 67.9 69.0
Local telecommunications
division........................ 1,710.0 1,812.3 1,785.8 1,846.9
Other financial instruments
Interest rate swap agreements...... -- 0.3 -- 0.2
Foreign currency contracts......... (0.6) (0.6) (0.5) (0.5)
</TABLE>

The carrying values of Sprint's cash and equivalents approximate fair value
at year-end 1997 and 1996. The estimated fair value of Sprint's investments in
debt and equity securities is based on quoted market prices. The estimated
fair value of Sprint's long-term debt is based on quoted market prices for
publicly traded issues. The estimated fair value of all other issues is based
on the present value of estimated future cash flows using a discount rate
based on the risks involved. The estimated fair value of interest rate swap
agreements is the amount Sprint would receive to terminate the swap agreements
at year-end 1997 and 1996, taking into account the then-current interest
rates. The estimated fair value of foreign currency contracts is the
replacement cost of the contracts at year-end 1997 and 1996, taking into
account the then-current foreign currency exchange rates.

F-22
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONCENTRATIONS OF CREDIT RISK

Sprint's accounts receivable are not subject to any concentration of credit
risk. Sprint controls credit risk of its interest rate swap agreements and
foreign currency contracts through credit approvals, dollar exposure limits
and internal monitoring procedures. In the event of nonperformance by the
counterparties, Sprint's accounting loss would be limited to the net amount it
would be entitled to receive under the terms of the applicable interest rate
swap agreement or foreign currency contract. However, Sprint does not
anticipate nonperformance by any of the counterparties related to these
agreements.

INTEREST RATE SWAP AGREEMENTS

Sprint uses interest rate swap agreements as part of its interest rate risk
management program. Net interest paid or received related to these agreements
is recorded using the accrual method and is recorded as an adjustment to
interest expense. Sprint had interest rate swap agreements with notional
amounts of $150 and $350 million outstanding at year-end 1997 and 1996,
respectively. Net interest expense (income) related to interest rate swap
agreements was $(200,000) in 1997, $2 million in 1996 and $(400,000) in 1995.
There were no deferred gains or losses related to any terminated interest rate
swap agreements at year-end 1997, 1996 or 1995.

FOREIGN CURRENCY CONTRACTS

As part of its foreign currency exchange risk management program, Sprint
purchases and sells over-the-counter forward contracts and options in various
foreign currencies. Sprint had outstanding $29 and $46 million of open forward
contracts to buy various foreign currencies at year-end 1997 and 1996,
respectively. Sprint had $14 and $3 million of outstanding open purchase
option contracts to call various foreign currencies at year-end 1997 and 1996,
respectively. The premium paid for an option is expensed as incurred. The fair
value of an option is recorded as an asset at the end of each period. The
forward contracts and options open at year-end 1997 and 1996 all had original
maturities of six months or less. The net gain or loss recorded to reflect the
fair value of these contracts is recorded in the period incurred. Total net
losses of $40,000 in 1997, $400,000 in 1996 and $1 million in 1995 were
recorded related to foreign currency transactions and contracts.

12. EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share." This new standard simplifies the EPS
calculation and makes the U.S. standard for computing EPS more consistent with
international accounting standards. Sprint adopted SFAS 128 at year-end 1997.
EPS for prior years has been restated to comply with SFAS 128.

Under SFAS 128, primary EPS was replaced with a simpler calculation called
basic EPS. Basic EPS is calculated by dividing income available to common
stockholders by the weighted average common shares outstanding. Previously,
primary EPS was based on the weighted average of both outstanding and issuable
shares assuming all dilutive options had been exercised. Under SFAS 128, fully
diluted EPS has not changed significantly, but has been renamed diluted EPS.
Diluted EPS includes the effect of all potentially dilutive securities, such
as options and convertible preferred stock.

Sprint's convertible preferred stock dividends were $0.5 million in 1997,
1996 and 1995. Dilutive securities, such as options (see Note 9), included in
the calculation of diluted weighted average common shares were 6.3 million
shares in 1997, 5.3 million shares in 1996 and 2.6 million shares in 1995.
Dilutive securities represented 8.0 and 5.8 million shares (unaudited) for the
nine months ended September 30, 1998 and 1997, respectively.

F-23
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. PARANET ACQUISITION

On September 30, 1997, Sprint paid $375 million to purchase the net assets
of Houston-based Paranet, Inc., a provider of integration, management and
support services for computer networks. Sprint could pay up to an additional
$70 million if Sprint Paranet meets certain financial targets through 1998.

The transaction was accounted for using the purchase method of accounting.
As a result, Sprint's financial statements reflect Sprint Paranet's results of
operations beginning in October 1997.

The excess of the purchase price over the tangible net assets acquired was
$357 million. This excess was allocated to noncompete agreements and goodwill,
and will be amortized on a straight-line basis over four to 10 years.

14. ADOPTION OF ACCOUNTING PRINCIPLES FOR A COMPETITIVE MARKETPLACE

At year-end 1995, Sprint determined that its local telecommunications
division no longer met the criteria necessary for the continued use of SFAS
71. As a result, 1995 operating results included a noncash, extraordinary
charge of $565 million, net of income tax benefits of $437 million. The
decision to discontinue using SFAS 71 was based on changes in the regulatory
framework and the convergence of competition in the telecommunications
industry.

The 1995 extraordinary charge recognized when Sprint discontinued using SFAS
71 consisted of the following:

<TABLE>
<CAPTION>
PRETAX AFTER-TAX
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Increase in accumulated depreciation.................. $ 979.1 $607.9
Recognition of switch software asset.................. (99.5) (61.7)
Elimination of other net regulatory asset............. 123.1 76.3
-------- ------
Total............................................. $1,002.7 622.5
========
Tax-related net regulatory liabilities................ (43.9)
Accelerated amortization of investment tax credits.... (13.3)
------
Extraordinary charge.................................. $565.3
======
</TABLE>

15. SPINOFF OF CELLULAR DIVISION

In March 1996, Sprint completed the tax-free spinoff of Cellular to Sprint
common stockholders. To complete the Spinoff, Sprint distributed all Cellular
common shares at a rate of one share for every three Sprint common shares
held. In addition, Cellular repaid $1.4 billion of its intercompany debt owed
to Sprint. Sprint also contributed to Cellular's equity capital $185 million
of debt owed by Cellular in excess of the amount repaid.

F-24
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cellular's net operating results, as summarized below, were separately
classified as a discontinued operation in the Consolidated Statements of
Income. Interest expense was allocated to Cellular based on the assumed
repayment of intercompany debt to Sprint by Cellular. The operating expenses
as presented below do not include Cellular's share of Sprint's general
corporate overhead expenses. These expenses, totaling $2 million in 1996 and
$13 million in 1995, were reallocated to Sprint's other operating segments.

<TABLE>
<CAPTION>
1996(1) 1995
------- -------
(IN MILLIONS)
<S> <C> <C>
Net operating revenues.................................. $190.2 $ 834.4
Operating expenses...................................... 156.0 675.6
------ -------
Operating income........................................ 34.2 158.8
Interest expense........................................ (21.5) (124.0)
Other income (expense), net............................. (8.3) 10.9
------ -------
Income before income taxes.............................. 4.4 45.7
Income taxes............................................ (7.0) (31.2)
------ -------
Income (Loss) from cellular division.................... $ (2.6) $ 14.5
====== =======
</TABLE>
- --------
(1) 1996 reflects Cellular's operating results only through the date of the
Spinoff.

16. SEGMENT INFORMATION

The FON Group operates in four industry segments: the long distance
division, the local telecommunications division, the product distribution and
directory publishing division and emerging businesses. Sprint's corporate
assets mainly included investments and loans to affiliates, cash and temporary
investments and general corporate assets. In 1995, corporate assets also
included the net assets of the discontinued cellular division. The long
distance division provides domestic and international voice, video and data
communications services. The local telecommunications division provides local
exchange services, access to Sprint's local exchange facilities, sales of
telecommunications equipment and long distance within specified geographical
areas. The product distribution and directory publishing division provides
wholesale distribution services of telecommunications products and publishes
and markets white and yellow page telephone directories. Emerging businesses,
which consists of the development of new integrated communications services,
consumer Internet access services, Sprint Paranet and Sprint International.

The businesses comprising the PCS Group operate in a single segment. The PCS
Group is building the nation's first single-technology, all-digital, state-of-
the-art wireless network to provide PCS across the United States. PCS uses
digital technology, which has sound quality superior to existing cellular
technology and is less susceptible to interference and eavesdropping. PCS also
offers features such as voice mail and Caller ID.

F-25
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Industry segment financial information follows:

<TABLE>
<CAPTION>
PRODUCT
DISTRIBUTION
LONG LOCAL & DIRECTORY
DISTANCE TELECOMMUNICATIONS PUBLISHING EMERGING INTERSEGMENT
DIVISION DIVISION DIVISION BUSINESSES PCS CORPORATE ELIMINATIONS TOTAL
-------- ------------------ ------------ ---------- ------- --------- ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
Net operating
revenues(1)........... $8,954.8 $5,290.2 $1,454.3 $ 57.4 $ -- $ -- $(882.8) $14,873.9
Depreciation and
amortization.......... 716.7 934.1 8.2 23.3 -- 44.0 -- 1,726.3
Operating expenses..... 7,857.3 3,896.2 1,274.4 221.9 18.5 -- (845.8) 12,422.5
Operating income(loss). 1,097.5 1,394.0 179.9 (164.5) (18.5) -- (37.0) 2,451.4
Operating margin....... 12.3% 26.4% 12.4% -- -- -- -- 16.5%
Capital expenditures... 1,218.1 1,258.4 10.5 79.6 153.7 142.3 -- 2,862.6
Identifiable assets.... 6,464.6 7,609.7 519.0 585.9 1,693.1 1,312.5 -- 18,184.8
1996
Net operating
revenues(2)........... $8,302.1 $5,126.8 $1,225.4 $ 0.5 $ -- $ -- $(767.3) $13,887.5
Depreciation and
amortization.......... 633.3 909.1 7.2 0.5 -- 40.9 -- 1,591.0
Operating expenses..... 7,378.1 3,789.8 1,123.8 63.8 0.5 -- (735.7) 11,620.3
Operating income(loss). 924.0 1,337.0 101.6 (63.3) (0.5) -- (31.6) 2,267.2
Operating margin....... 11.1% 26.1% 8.3% -- -- -- -- 16.3%
Capital expenditures... 1,133.7 1,142.6 9.4 49.9 -- 98.0 -- 2,433.6
Identifiable assets.... 5,997.7 7,425.4 446.1 54.3 1,259.8 1,643.1 -- 16,826.4
1995
Net operating
revenues(3)........... $7,277.4 $4,690.0 $1,147.6 $ -- $ -- $ -- $(379.7) $12,735.3
Depreciation and
amortization.......... 581.6 835.6 7.4 -- -- 41.8 -- 1,466.4
Operating expenses..... 6,570.6 3,649.2 1,060.9 -- -- -- (379.7) 10,901.0
Operating income....... 706.8 1,040.8 86.7 -- -- -- -- 1,834.3
Operating margin....... 9.7% 22.2% 7.6% -- -- -- -- 14.4%
Capital expenditures... 861.7 950.8 7.8 -- -- 37.0 -- 1,857.3
Identifiable assets.... 4,799.0 6,962.0 395.4 -- 973.7 1,944.2 -- 15,074.3
</TABLE>

(1) Includes intercompany revenues eliminated in consolidation in 1997 of $3.3
million, $309.0 million and $570.5 million for the long distance division,
local telecommunications division and product distribution and directory
publishing division, respectively.
(2) Includes intercompany revenues eliminated in consolidation in 1996 of
$30.9 million, $410.5 million and $325.9 million for the long distance
division, local telecommunications division and product distribution and
directory publishing division, respectively.
(3) Includes intercompany revenues eliminated in consolidation in 1995 of
$38.9 million, $266.4 million and $336.8 million for the long distance
division, local telecommunications division and product distribution and
directory publishing division, respectively. Also included in 1995 were
intercompany revenues of $262.4 million not eliminated under SFAS 71.

Operating income (loss) represents sales and other revenues less operating
expenses, and excludes interest expense, equity in losses of unconsolidated
ventures, other income (expense) and income taxes.

Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. The
main effect of the pricing change was to reduce "net operating revenues" of
the local telecommunications division and reduce "operating expenses" of the
product distribution and directory publishing division. Had this change been
effective as of January 1, 1995, the operating income for the local
telecommunications division would have been $1.3 billion, $1.2 billion and
$1.1 billion in 1997, 1996 and 1995, respectively. The operating income for
the product distribution and directory publishing division would have been
$228 million, $198 million and $180 million in 1997, 1996 and 1995,
respectively.

F-26
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. ADDITIONAL FINANCIAL INFORMATION

SUPPLEMENTAL CASH FLOWS INFORMATION (IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
------------------- --------------------
1998 1997 1997 1996 1995
--------- --------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for:
Interest (net of amounts
capitalized)
Continuing operations............. $ 174.1 $ 133.2 $197.9 $212.1 $263.5
========= ========= ====== ====== ======
Cellular division................. $ -- $ -- $ -- $ 21.5 $124.0
========= ========= ====== ====== ======
Income taxes........................ $ 279.1 $ 288.5 $365.8 $695.3 $532.8
========= ========= ====== ====== ======
Noncash activities:
Capital lease obligations........... $ 438.1 $ 30.1 $ 30.1 $ -- $ --
========= ========= ====== ====== ======
Tax benefit from stock options
exercised.......................... $ 37.8 $ 19.5 $ 26.2 $ 14.1 $ 7.5
========= ========= ====== ====== ======
Net book value of assets and
liabilities contributed to Global
One................................ $ -- $ -- $ -- $ 73.3 $ --
========= ========= ====== ====== ======
Common stock issued under Sprint's
ESPP............................... $ 73.8 $ -- $ 5.2 $ 65.2 $ 3.0
========= ========= ====== ====== ======
</TABLE>

During 1996, Sprint completed the Spinoff (see Note 15) which had no
immediate effect on cash flows other than Cellular's repayment of $1.4 billion
in intercompany debt owed to Sprint.

SUPPLEMENTAL RELATED PARTY TRANSACTIONS

Sprint provided various voice, data and administrative services to Global
One totaling $415 million in 1997 and $361 million in 1996. In addition,
Global One provided data and administrative services to Sprint totaling $114
million in 1997 and $130 million in 1996. At year-end 1997 and 1996, Sprint's
receivable from Global One was $154 and $163 million, respectively, and
Sprint's payable to Global One was $104 and $49 million, respectively.

RESTRUCTURING CHARGE

In 1995, Sprint's local telecommunications division recorded an $88 million
restructuring charge, which reduced income from continuing operations by $55
million ($0.16 per share). The restructuring plan included the planned
elimination over several years of approximately 1,600 positions, mainly in the
network and finance functions. Through 1997, most of the positions have been
eliminated resulting in termination benefit payments of $42 million, with the
remainder to be paid in 1998 and 1999.

18. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This new standard requires companies
to disclose segment data based on how management makes decisions about
allocating resources to segments and how it measures segment performance. SFAS
131 requires companies to disclose a measure of segment profit or loss
(operating income, for example), segment assets, and reconciliations to
consolidated totals. It also requires entity-wide disclosures about a
company's products and services, its major customers and the material
countries in which it holds assets and reports revenues. Sprint will adopt
SFAS 131 in its 1998 year-end financial statements. This statement is not
expected to have a significant effect on Sprint's reported segments.

F-27
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS 132 standardizes the
disclosure requirements for pensions and postretirement benefits where
practical. It also eliminates certain disclosures and requires additional
information on changes in benefit obligations and fair values of plan assets.
Sprint will adopt SFAS 132 in its 1998 year-end financial statements. SFAS 132
is not expected to have a significant effect on Sprint's pension and
postretirement benefit plan disclosures.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives to be
recorded on the balance sheet as either assets or liabilities and measured at
fair value. Gains or losses resulting from changes in the values of the
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. Sprint will adopt SFAS 133
beginning January 1, 2000. This statement is not expected to have a material
impact on Sprint.

19. SUBSEQUENT EVENTS (UNAUDITED)

BORROWINGS

During the first nine months of 1998, Sprint increased its short-term
borrowings by $946 million. These borrowings, however, have been classified as
long-term debt because of Sprint's intent and ability, through unused credit
facilities, to refinance them on a long-term basis. The borrowings have
weighted average interest rates of 5.8%. Sprint also increased its
construction obligations by $429 million since year-end 1997.

In August 1998, Sprint entered into new revolving credit facilities with
syndicates of banks totaling $5.0 billion. These facilities support Sprint's
commercial paper operations and replace its previous $1.5 billion revolving
credit facility. At September 30, 1998, $3.6 billion was available under these
facilities.

In October 1998, Sprint filed a shelf registration statement with the SEC
for $8.0 billion of debt securities. This replaced $1.0 billion of Sprint's
previous shelf registration statements totaling $1.1 billion. Sprint currently
expects to offer up to $3 billion under the new shelf at approximately the
same time as the PCS Restructuring.

OTHER

In April 1998, Sprint signed an agreement to sell approximately 80,000
residential and business access lines in rural Illinois. Sprint expects to
complete the sale of these properties, which is subject to regulatory
approval, and record the related gain in November 1998.

In October 1998, Sprint's Board of Directors declared common and Class A
common stock dividends of $0.25 per share payable December 28, 1998.

20. COMPREHENSIVE INCOME (UNAUDITED)

In 1998, Sprint adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS
130 establishes standards for the reporting and display of comprehensive
income and its components. Comprehensive income includes all changes in equity
during a period except those due to owner investments and distributions. It
includes items such as foreign currency translation adjustments, and
unrealized gains and losses on available-for-sale securities. This standard
does not change the display or components of present-day net income; rather,
comprehensive income is displayed as a separate statement in the Consolidated
Statements of Comprehensive Income and as an additional component in the
Consolidated Balance Sheets, and the Consolidated Statement of Common Stock
and Other Shareholders' Equity.

Total comprehensive income amounted to $671 million during the first nine
months of 1998 and $770 million during the first nine months of 1997.

F-28
<PAGE>

SPRINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

21. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
-----------------------------------
1ST 2ND 3RD 4TH
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1997
Net operating revenues(1)................ $3,578.5 $3,667.5 $3,778.9 $3,849.0
Operating income(1), (2)................. 604.7 595.5 640.7 610.5
Income before extraordinary items(2),
(3)..................................... 290.0 255.9 211.7 194.9
Net income............................... 290.0 255.9 211.7 194.9
EPS from income before extraordinary
items(4)
Basic.................................. $ 0.67 $ 0.59 $ 0.49 $ 0.45
Diluted................................ $ 0.67 $ 0.59 $ 0.49 $ 0.45
<CAPTION>
QUARTER
-----------------------------------
1ST 2ND 3RD 4TH
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1996
Net operating revenues(1)................ $3,335.3 $3,471.3 $3,502.5 $3,578.4
Operating income(1), (2)................. 574.9 580.9 598.9 512.5
Income before extraordinary items(2)..... 309.3 316.8 316.2 246.0
Net income............................... 309.3 316.8 312.4 245.3
EPS from income before extraordinary
items(4)
Basic.................................. $ 0.78 $ 0.74 $ 0.73 $ 0.57
Diluted................................ $ 0.77 $ 0.73 $ 0.73 $ 0.56
</TABLE>
- --------
(1) Consolidated net operating revenues and operating expenses reflect certain
reclassifications to conform to the current presentation. These
reclassifications had no effect on operating income or net income.
(2) In the 1997 second quarter and the 1996 fourth quarter, Sprint recorded
nonrecurring charges of $20 and $60 million, respectively, related to
litigation within the long distance division. These charges reduced income
from continuing operations by $13 million ($0.03 per share) and $36
million ($0.09 per share), respectively (see Note 10).
(3) In the 1997 fourth quarter, Sprint recognized gains of $45 million on
sales of local exchanges and a $26 million gain on the sale of an equity
investment in an equipment provider. These gains increased income from
continuing operations by $27 million ($0.06 per share) and $17 million
($0.04 per share), respectively.
(4) Sprint adopted SFAS 128 at year-end 1997 (see Note 12). All EPS amounts
comply with this new standard.

F-29
<PAGE>

SPRINT CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements
are presented to give effect to (1) the PCS Restructuring, whereby Sprint will
acquire the joint venture interests of the Cable Parents in Sprint Spectrum
Holdings and the joint venture interests of TCI and Cox in PhillieCo, in
exchange for shares of PCS Common Stock--Series 2 ("Series 2 PCS Stock") and
the exercise of equity purchase rights by FT and DT in connection with the PCS
Restructuring and (2) the tax-free Recapitalization of Sprint's common stock
to be effected by reclassifying each share of Sprint's Existing Common Stock
into 1/2 share of Series 1 PCS Stock and one share of Series 1 FON Stock and
by reclassifying each share of Class A common stock so that each share
represents an equity interest in the FON Group and an equity interest in the
PCS Group, together with a right to cause Sprint to initially issue one share
of FON Common Stock--Series 3 ("Series 3 FON Stock") and 1/2 share of PCS
Common Stock--Series 3 ("Series 3 PCS Stock"). The acquisitions of the Cable
Parents' interests in Sprint Spectrum Holdings and PhillieCo will be accounted
for using the purchase method of accounting. The pro forma condensed combined
financial statements included herein do not give effect to the Notes offering
or the IPO of Series 1 PCS Stock.

The unaudited pro forma condensed combined statements of income include the
historical results of Sprint and the historical combined results of Sprint
Spectrum Holdings and PhillieCo for the year ended December 31, 1997 and the
nine months ended September 30, 1998, and include the effect of the PCS
Restructuring, the exercise of equity purchase rights by FT and DT in
connection with the PCS Restructuring and the Recapitalization as though such
transactions had occurred on January 1, 1997. The unaudited pro forma
condensed combined balance sheet is based upon the historical balance sheet of
Sprint and the historical combined balance sheet of Sprint Spectrum Holdings
and PhillieCo as of September 30, 1998. The historical balance sheet amounts
have been adjusted to reflect the PCS Restructuring, the exercise of equity
purchase rights by FT and DT in connection with the PCS Restructuring and the
Recapitalization as though such transactions had occurred on September 30,
1998. Certain historical amounts have been reclassified to conform to the pro
forma presentation. These reclassifications had no effect on the results of
operations or stockholders' equity as previously reported.

The pro forma condensed combined statements of income are not necessarily
indicative of what actual results of operations would have been had the
transactions occurred at the beginning of the periods presented nor do they
purport to indicate the results of future operations. The unaudited pro forma
condensed combined financial statements should be read in conjunction with the
historical financial statements of Sprint and the historical combined
financial statements of Sprint Spectrum Holdings and PhillieCo included
elsewhere in this Prospectus Supplement.

F-30
<PAGE>

SPRINT CORPORATION

PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited, in millions)

<TABLE>
<CAPTION>
HISTORICAL COMBINED PRO FORMA ADJUSTMENTS
HISTORICAL SPRINT SPECTRUM ------------------------------
SPRINT HOLDINGS AND PCS
CORP. PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------------- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents... $ 47.7 $ 325.3 $ (26.5)A $ 346.5
Accounts receivable,
net................... 2,515.8 195.3 (47.1)D 2,664.0
Inventories............ 349.9 177.8 527.7
Notes and other
receivables........... 407.8 -- 407.8
Prepaid expenses and
other current assets.. 422.7 44.1 (153.6)C 313.2
--------- -------- -------- ---------
Total current assets... 3,743.9 742.5 (227.2) 4,259.2
Investments in equity
securities............ 420.2 -- 420.2
Property, plant and
equipment, net........ 13,502.2 4,531.9 18,034.1
Investment in and
advances to Sprint
Spectrum Holdings and
PhillieCo............. 610.1 -- (293.4)B --
(182.0)B
(134.7)E
Investments in and
advances to other
affiliates............ 634.0 -- 634.0
Intangibles, net
PCS licenses........... 544.5 2,829.1 3,373.6
Customer base.......... -- -- 500.0 A 500.0
Goodwill............... 346.6 -- 3,127.6 A 3,474.2
Other assets........... 652.3 422.9 182.0 B 1,255.2
(2.0)I
--------- -------- -------- -------- ---------
Total.................. $20,453.8 $8,526.4 $2,970.3 $ -- $31,950.5
========= ======== ======== ======== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt........ $ 80.6 $ 124.5 $ 205.1
Partner advances....... -- 185.0 $ (134.7)E 50.3
Accounts payable....... 1,099.0 287.1 1,386.1
Accrued interconnection
costs................. 564.7 -- 564.7
Accrued taxes.......... 399.2 -- 399.2
Advance billings....... 213.3 -- 213.3
Other.................. 849.0 476.4 (47.1)D 1,278.3
--------- -------- -------- ---------
Total current
liabilities........... 3,205.8 1,073.0 (181.8) 4,097.0
Construction
obligations........... 429.0 575.7 1,004.7
Long-term debt......... 5,039.8 6,001.2 60.5 A 10,881.2
(138.0)C
(82.3)F
Deferred credits and
other liabilities
Deferred income taxes
and investment tax
credits............... 1,029.2 -- 443.0 A 1,472.2
Postretirement and
other benefit
obligations........... 1,067.4 -- 1,067.4
Other.................. 370.8 84.9 455.7
--------- -------- -------- ---------
Total deferred credits
and other liabilities. 2,467.4 84.9 443.0 2,995.3
Redeemable preferred
stock................. 9.5 -- 9.5
Limited partner
interest in
consolidated
subsidiary............ -- 65.8 65.8
Common stock and other
stockholders' equity
Common stock
Common stock.......... 875.7 -- $ (875.7)H --
Class A common stock.. 215.6 -- 215.6
FON Group............. -- -- 700.6 H 700.6
PCS Group............. -- -- 195.1 A 175.1 H 375.1
4.9 F
Preferred stock........ -- -- 240.0 G 240.0
Capital in excess of
par or stated value... 4,490.8 4,611.0 3,094.9 A 7,663.1
(2,526.6)A
(1,844.4)B
77.4 F
(240.0)G
Retained earnings...... 4,012.7 (3,885.2) 2,334.2 A 4,010.7
1,551.0 B
(2.0)I
Treasury stock, at
cost.................. (396.1) -- (396.1)
Other.................. 103.6 -- (15.6)C 88.0
--------- -------- -------- -------- ---------
Total common stock and
other stockholders'
equity................ 9,302.3 725.8 2,868.9 -- 12,897.0
--------- -------- -------- -------- ---------
Total.................. $20,453.8 $8,526.4 $2,970.3 $ -- $31,950.5
========= ======== ======== ======== =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-31
<PAGE>

SPRINT CORPORATION

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
HISTORICAL
COMBINED
SPRINT PRO FORMA ADJUSTMENTS
HISTORICAL SPECTRUM ------------------------------
SPRINT HOLDINGS AND PCS
CORP. PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------ ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
NET OPERATING REVENUES.. $11,940.3 $ 787.9 $12,728.2
OPERATING EXPENSES
Costs of services and
products............... 5,691.3 783.0 6,474.3
Selling, general and
administrative......... 2,802.0 931.6 3,733.6
Depreciation and amor-
tization............... 1,429.1 529.2 $ 5.2 J 2,147.1
58.6 K
125.0 L
--------- --------- ------ ---------
Total operating ex-
penses................. 9,922.4 2,243.8 188.8 12,355.0
--------- --------- ------ ---------
OPERATING INCOME
(LOSS)................. 2,017.9 (1,455.9) (188.8) 373.2
Interest expense........ (185.6) (358.3) 5.1 M (486.8)
36.0 N
11.2 O
4.8 P
Equity in loss of
Global One............. (120.0) -- (120.0)
Equity in loss of
Sprint Spectrum Hold-
ings and PhillieCo..... (686.5) -- 681.3 J --
5.2 J
Other income............ 48.6 23.2 (11.2)O 60.6
Minority interest....... -- 99.0 99.0
--------- --------- ------ ---------
Income (loss) before
income taxes and
extraordinary item..... 1,074.4 (1,692.0) 543.6 (74.0)
Income taxes............ (405.1) -- 399.0 Q 25.2
31.3 R
--------- --------- ------ ---------
INCOME (LOSS) FROM
CONTINUING OPERATIONS.. 669.3 (1,692.0) 973.9 (48.8)
Preferred stock divi-
dends.................. (0.8) -- (5.4)S (6.2)
--------- --------- ------ ---------
Earnings (loss) appli-
cable to common stock.. $ 668.5 $(1,692.0) $968.5 $ (55.0)
========= ========= ====== =========
Earnings (loss) appli-
cable to common stock:
Sprint Corporation..... $ 668.5 $ --
FON Group.............. -- 1,132.0
PCS Group.............. -- (1,187.0)
--------- ---------
$ 668.5 $ (55.0)
========= =========
BASIC EARNINGS (LOSS)
PER COMMON SHARE FROM
CONTINUING OPERATIONS:
Sprint Corporation..... $ 1.55 $ --
========= =========
FON Group.............. $ -- $ 2.63
========= =========
PCS Group.............. $ -- $ (2.86)
========= =========
Basic weighted average
common shares:
Sprint Corporation..... 430.7 -- T
========= =========
FON Group.............. -- 430.7 U
========= =========
PCS Group.............. -- 415.4 V
========= =========
DILUTED EARNINGS (LOSS)
PER COMMON SHARE FROM
CONTINUING OPERATIONS:
Sprint Corporation..... $ 1.52 $ --
========= =========
FON Group.............. $ -- $ 2.58
========= =========
PCS Group.............. $ -- $ (2.86)
========= =========
Diluted weighted aver-
age common shares:
Sprint Corporation..... 438.7 -- T
========= =========
FON Group.............. -- 438.7 U
========= =========
PCS Group.............. -- 415.4 V
========= =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-32
<PAGE>

SPRINT CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
HISTORICAL COMBINED PRO FORMA ADJUSTMENTS
SPRINT SPECTRUM ------------------------------
HISTORICAL HOLDINGS AND PCS
SPRINT CORP. PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
------------ ------------------- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
NET OPERATING REVENUES.. $14,873.9 $ 258.0 $15,131.9
OPERATING EXPENSES
Costs of services and
products............... 7,451.0 574.3 8,025.3
Selling, general and
administrative......... 3,245.2 747.1 3,992.3
Depreciation and
amortization........... 1,726.3 316.3 $ 3.5 J 2,291.0
78.2 K
166.7 L
--------- --------- ------ ---------
Total operating
expenses............... 12,422.5 1,637.7 248.4 14,308.6
--------- --------- ------ ---------
OPERATING INCOME (LOSS). 2,451.4 (1,379.7) (248.4) 823.3
Interest expense........ (187.2) (123.5) 7.5 M (270.7)
12.6 N
13.5 O
6.4 P
Equity in loss of Global
One.................... (162.1) -- (162.1)
Equity in loss of Sprint
Spectrum Holdings and
PhillieCo.............. (659.6) -- 656.1 J --
3.5 J
Equity in loss of
unconsolidated
partnership............ -- (168.9) (168.9)
Other income............ 140.5 39.4 (13.5) O 166.4
--------- --------- ------ ---------
Income (loss) before
income taxes........... 1,583.0 (1,632.7) 437.7 388.0
Income taxes............ (630.5) -- 383.1 Q (192.3)
55.1 R
--------- --------- ------ --- ---------
NET INCOME (LOSS)....... 952.5 (1,632.7) 875.9 195.7
Preferred stock
dividends.............. (1.0) -- (7.2) S (8.2)
--------- --------- ------ ---------
Earnings applicable to
common stock........... $ 951.5 $(1,632.7) $868.7 $ 187.5
========= ========= ====== =========
Earnings (loss)
applicable to common
stock:
Sprint Corporation...... $ 951.5 $ --
FON Group............... -- 1,373.6
PCS Group............... -- (1,186.1)
--------- ---------
$ 951.5 $ 187.5
========= =========
BASIC EARNINGS (LOSS)
PER COMMON SHARE:
Sprint Corporation...... $ 2.21 $ --
========= =========
FON Group............... $ -- $ 3.19
========= =========
PCS Group............... $ -- $ (2.86)
========= =========
Basic weighted average
common shares:
Sprint Corporation ..... 430.2 -- T
========= =========
FON Group............... -- 430.2 U
========= =========
PCS Group............... -- 415.1 V
========= =========
DILUTED EARNINGS (LOSS)
PER COMMON SHARE:
Sprint Corporation...... $ 2.18 $ --
========= =========
FON Group............... $ -- $ 3.15
========= =========
PCS Group............... $ -- $ (2.86)
========= === =========
Diluted weighted average
common shares:
Sprint Corporation...... 436.5 -- T
========= =========
FON Group............... -- 436.5 U
========= =========
PCS Group............... -- 415.1 V
========= =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
F-33
<PAGE>

SPRINT CORPORATION

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS

The following adjustments have been made in the preparation of the unaudited
pro forma condensed combined financial statements:

Pro Forma Balance Sheet Adjustments

A To record the purchase of the remaining 60% of Sprint Spectrum Holdings and
52.9% of PhillieCo. The consideration given in connection with the purchase
will be shares of Series 2 PCS Stock (195.1 million shares, par value
$1.00) and warrants to purchase additional shares of Series 2 PCS Stock.
The preliminary purchase price is based on the estimated market value of
the PCS Group and will be updated at the time of the PCS Restructuring. The
market value of the PCS Group will be determined based on the market value
of the securities issued in the Recapitalization. The excess of the
purchase price over the fair value of net assets to be acquired has been
preliminarily calculated as follows (in millions):

<TABLE>
<S> <C>
Preliminary purchase price....................................... $3,290.0
Transaction costs................................................ 26.5
Net assets to be acquired........................................ (192.4)
Customer base.................................................... (500.0)
Step-up in long-term debt to fair value.......................... 60.5
Deferred taxes on acquired assets and liabilities................ 443.0
--------
Goodwill......................................................... $3,127.6
========
</TABLE>

The carrying amounts of the assets to be acquired and liabilities to be
assumed are assumed for purposes of the preliminary purchase price
allocation to approximate fair market value, except for certain long-term
debt of Sprint Spectrum that has been recorded at fair value. A portion of
the purchase price was attributed to the customers acquired in the Sprint
Spectrum Holdings and PhillieCo acquisitions. In addition, deferred taxes
have been recorded for the difference in the book and tax bases of the
assets acquired and liabilities assumed. The above assumptions as to the
fair value of the net assets acquired are based upon information available
at the time of the preparation of these pro forma condensed combined
financial statements.

A final allocation of the purchase price to the assets acquired and
liabilities assumed is dependent on a study and analysis of the fair value
of such assets and liabilities, including such items as the PCS licenses
and in-process research and development projects, as well as the size of
the customer base at the closing date. Management expects the only
assumptions that could potentially be subject to material change are those
regarding customer base and in-process research and development. The amount
of the purchase price allocated to the customer base in the pro forma
condensed combined financial statements is based on the size of the
customer base at September 30, 1998. To the extent the customer base at the
closing date exceeds the size of the customer base at September 30, 1998,
the purchase price allocated to the customer base will likely increase
along with a corresponding increase in the amortization of the customer
base. Based on current projections of an increase in the customer base at
November 30, 1998, pro forma net income (loss) from continuing operations
for the nine months ended September 30, 1998 and the year ended December
31, 1997 would be $(60.5) million and $180.0 million, respectively, and the
respective loss per share of the PCS Group would be $(2.89) and $(2.90) for
the same periods. Sprint is undertaking an analysis to determine whether
in-process research and development projects acquired in the PCS
Restructuring should be capitalized or expensed. This analysis is expected
to be finalized prior to the completion of the final purchase price
allocation. To the extent that it is determined through this analysis that
some of the in-process research and development projects should be
expensed, a portion of the purchase price will be allocated to these in-
process research and development projects and a nonrecurring, noncash
charge will be recognized in the period in which the charge

F-34
<PAGE>

SPRINT CORPORATION

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

occurs. Sprint is unable to determine the potential amount of such charge
at this time. However, such a charge could be material to Sprint's results
of operations for the period in wich the charge occurs. Such a write-off
would reduce the amount of purchase price allocated to goodwill, which
would result in lower amortization expense being recognized over the life
assigned to the goodwill. Such a write-off would not impact future cash
flows. At the present time, Sprint anticipates completing its final
purchase price allocation prior to year-end 1998.

B To eliminate Sprint's historical investment in Sprint Spectrum Holdings and
PhillieCo, accounted for by Sprint on the equity method of accounting
($293.4 million), and to reclassify interest capitalized as part of that
investment to other assets ($182.0 million).

C To eliminate Sprint's investment in Sprint Spectrum bonds ($153.6 million)
and the related unrealized gain ($15.6 million).

D To eliminate Sprint's payable to Sprint Spectrum Holdings.

E To eliminate Sprint's advances to PhillieCo.

F To record the exercise of equity purchase rights by FT and DT (4.9 million
shares, par value $1.00). As a result of the issuance of Series 2 PCS Stock
to the Cable Parents in exchange for their interests in Sprint Spectrum
Holdings and PhillieCo, the sale of these additional shares is required in
order for FT and DT to maintain their combined 20% voting interest in
Sprint. The net proceeds are assumed to reduce the long-term debt of Sprint
Spectrum Holdings.

G To reflect PCS Preferred Stock issued to the Cable Parents in exchange for
funding provided between the date of the Restructuring Agreement (May 26,
1998) and September 30, 1998. See "The Tracking Stock Proposal--Funding of
the PCS Group Prior to Closing; The PCS Preferred Stock" in the Proxy
Statement/Prospectus incorporated by reference into the accompanying
Prospectus.

H To record the effects of the Recapitalization of Sprint's Existing Common
Stock into one share of Series 1 FON Stock, par value $2.00 (350.3 million
shares) and 1/2 share of Series 1 PCS Stock, par value $1.00 (175.1 million
shares).

I To write off deferred financing costs associated with the assumed repayment
of Sprint Spectrum Holdings debt with proceeds from the exercise of equity
purchase rights by FT and DT in connection with the PCS Restructuring.

Pro Forma Statement of Income Adjustments

J To eliminate Sprint's equity in the losses of Sprint Spectrum Holdings and
PhillieCo, historically accounted for by Sprint on the equity method of
accounting ($681.3 million for the nine months ended September 30, 1998 and
$656.1 million for the year ended December 31, 1997). The amortization of
interest previously capitalized on Sprint's equity investment in Sprint
Spectrum Holdings and PhillieCo has been reclassified to depreciation and
amortization expense ($5.2 million for the nine months ended September 30,
1998 and $3.5 million for the year ended December 31, 1997).

K To reflect the amortization of the goodwill recorded in connection with the
purchase of the remaining interests in Sprint Spectrum Holdings and
PhillieCo, which is being amortized over 40 years. The goodwill associated
with the acquisition of the remaining interests in Sprint Spectrum Holdings
and PhillieCo is directly related to both the acquisition of the PCS
licenses and the ongoing ability of the businesses to provide wireless
telecommunications services using these licenses. The 40-year life for
goodwill is consistent with the 40-year amortization period being used for
the PCS licenses.

F-35
<PAGE>

SPRINT CORPORATION

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

L To reflect the amortization of the customer base recorded in connection
with the purchase of the remaining interests in Sprint Spectrum Holdings
and PhillieCo, which is being amortized over three years.

M To record a reduction in interest expense and amortization of deferred
financing costs as a result of the assumed repayment of debt with the
proceeds from the exercise of equity purchase rights by FT and DT in
connection with the PCS Restructuring. The APC senior secured facilities,
which had weighted-average interest rates of 7.89% for the nine months
ended September 30, 1998 and 8.70% for the year ended December 31, 1997,
are assumed to be repaid with these proceeds.

N To reduce interest expense resulting from the utilization of increased
current tax benefits (related to the acquisition of the remaining interest
in Sprint Spectrum Holdings and PhillieCo and the resulting consolidation
of these entities). The increased current tax benefits are assumed to
reduce Sprint's tax liability and Sprint's required borrowings. The
computation of the current tax benefit is performed on a quarterly basis,
and the resulting amount is applied to reduce the debt balance and,
therefore, interest expense, from that date forward. Interest expense is
computed using the weighted-average interest rate on the debt assumed to be
repaid, or not incurred, as appropriate. Such debt would have amounted to
$762.1 million and $375.3 million as of September 30, 1998 and December 31,
1997, respectively.

O To eliminate interest income recorded by Sprint and interest expense
recorded by Sprint Spectrum Holdings related to Sprint's investment in
Sprint Spectrum bonds.

P To reflect the amortization of the purchase price adjustment related to
long-term debt (see Note A).

Q To record the income tax benefit, using the statutory income tax rate,
relating to the consolidation of the remaining interests in Sprint Spectrum
Holdings and PhillieCo.

R To record the impact on income taxes of pro forma adjustments L through P,
using the statutory income tax rate.

S To reflect dividends at an assumed annual rate of 3% on PCS Preferred Stock
issued to the Cable Parents. As of September 30, 1998, $240.0 million of
funding by the Cable Parents between the date of the Restructuring
Agreement (May 26, 1998) and September 30, 1998 was assumed to be exchanged
for shares of PCS Preferred Stock. For a discussion of how the actual
dividend rate will be determined, see "Description of Capital Stock--
Description of PCS Preferred Stock; Preferred Inter-Group Interest" in the
Proxy Statement/Prospectus incorporated by reference into the accompanying
Prospectus.

T The weighted average common shares outstanding for Sprint are eliminated in
the Recapitalization.

U The weighted average common shares outstanding for the FON Group reflect
the Recapitalization of Sprint's Existing Common Stock into shares of
Series 1 FON Stock on a share for share basis, including the FON Stock
attributes of the Class A common stock.

V The weighted average common shares outstanding for the PCS Group reflect
(1) the issuance of Series 2 PCS Stock to the Cable Parents in the PCS
Restructuring (195.1 million shares), (2) the Recapitalization of Sprint's
Existing Common Stock into 1/2 share of Series 1 PCS Stock, including the
PCS Stock attributes of the Class A common stock (215.4 million shares for
the nine months ended September 30, 1998 and 215.1 million shares for the
year ended December 31, 1997) and (3) the exercise of equity purchase
rights by FT and DT in connection with the PCS Restructuring (4.9 million
shares).

F-36
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Sprint Corporation

We have audited the accompanying combined balance sheets of the FON Group
(as described in Note 2) as of December 31, 1997 and 1996, and the related
combined statements of income and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the management of Sprint Corporation ("Sprint"). Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the FON
Group at December 31, 1997 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.

As discussed in Note 12 to the combined financial statements, the FON Group
discontinued accounting for the operations of its local telecommunications
division in accordance with Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation," in 1995.

As more fully discussed in Note 2, the combined financial statements of the
FON Group should be read in connection with the audited consolidated financial
statements of Sprint.

Ernst & Young LLP

Kansas City, Missouri
February 3, 1998, except for Note 1,
as to which the date is May 26, 1998

F-37
<PAGE>

FON GROUP

COMBINED STATEMENTS OF INCOME

(IN MILLIONS)

See accompanying Notes to Combined Financial Statements.

F-38
<PAGE>

FON GROUP

COMBINED BALANCE SHEETS
(IN MILLIONS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -------------------
1998 1997 1996
------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents..................... $ 47.7 $ 101.7 $ 1,150.6
Accounts receivable, net of allowance for
doubtful accounts of $166.0 (unaudited),
$146.7 and $117.4....................... 2,515.8 2,495.6 2,343.6
Inventories.............................. 349.9 352.0 305.3
Prepaid expenses......................... 183.5 156.2 150.0
Notes and other receivables.............. 407.8 464.6 101.9
Advance to the PCS Group................. 410.0 -- --
Other.................................... 206.4 199.6 181.5
--------- --------- ---------
Total current assets................... 4,121.1 3,769.7 4,232.9
Investments in equity securities........... 420.2 303.0 254.5
Property, plant and equipment
Long distance communications services.... 9,133.0 8,245.5 7,467.8
Local communications services............ 14,817.2 14,011.5 13,368.7
Other.................................... 980.2 776.6 574.3
--------- --------- ---------
Total property, plant and equipment...... 24,930.4 23,033.6 21,410.8
Less accumulated depreciation............ 12,755.4 11,716.8 10,946.7
--------- --------- ---------
Net property, plant and equipment........ 12,175.0 11,316.8 10,464.1
Investments in and advances to affiliates.. 768.7 459.1 351.3
Other assets............................... 884.6 643.1 263.8
--------- --------- ---------
Total.................................. $18,369.6 $16,491.7 $15,566.6
========= ========= =========
LIABILITIES AND GROUP EQUITY
Current liabilities
Current maturities of long-term debt..... $ 38.1 $ 131.0 $ 99.1
Short-term borrowings.................... -- -- 200.0
Accounts payable......................... 1,078.8 1,082.3 1,026.7
Accrued interconnection costs............ 564.7 672.7 709.0
Accrued taxes............................ 399.2 270.7 189.2
Advance billings......................... 213.3 202.9 199.7
Other.................................... 794.6 659.6 770.6
--------- --------- ---------
Total current liabilities.............. 3,088.7 3,019.2 3,194.3
Long-term debt............................. 4,651.6 3,748.6 2,974.8
Deferred credits and other liabilities
Deferred income taxes and investment tax
credits................................. 724.4 767.2 774.7
Postretirement and other benefit
obligations............................. 1,067.4 947.4 919.7
Other.................................... 366.2 370.0 370.8
--------- --------- ---------
Total deferred credits and other
liabilities............................. 2,158.0 2,084.6 2,065.2
Group equity............................... 8,471.3 7,639.3 7,332.3
--------- --------- ---------
Total.................................. $18,369.6 $16,491.7 $15,566.6
========= ========= =========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-39
<PAGE>

FON GROUP

COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............. $ 1,136.7 $ 1,014.9 $ 1,371.6 $ 1,303.5 $ 415.2
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in net losses
of affiliates........ 138.4 96.3 184.1 81.9 7.7
Extraordinary items,
net.................. 1.1 -- -- 4.9 565.3
Depreciation and
amortization......... 1,427.3 1,265.2 1,726.3 1,591.0 1,466.4
Deferred income taxes
and investment tax
credits.............. (36.1) 26.0 (10.0) (74.5) (2.2)
Net (gains) losses on
sales of assets...... -- -- (93.2) 7.5 4.2
Changes in assets and
liabilities:
Accounts receivable,
net................ (20.2) (92.9) (127.0) (982.1) (135.4)
Inventories and
other current
assets............. 1.9 (35.0) (91.5) 15.7 (38.6)
Accounts payable and
other current
liabilities........ 107.1 (230.9) (39.6) 362.0 178.1
Noncurrent assets
and liabilities,
net................ 32.9 (14.3) (19.7) (25.5) 123.0
Other, net.......... 2.3 3.7 5.8 (17.1) 6.4
--------- --------- --------- --------- ---------
Net cash provided by
continuing operations.. 2,791.4 2,033.0 2,906.8 2,267.3 2,590.1
Net cash provided (used)
by cellular division... -- -- -- (0.1) 162.5
--------- --------- --------- --------- ---------
Net cash provided by
operating activities... 2,791.4 2,033.0 2,906.8 2,267.2 2,752.6
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures.... (2,320.0) (1,835.7) (2,708.9) (2,433.6) (1,857.3)
Investments in and loans
to Sprint Spectrum
Holdings and PhillieCo. (113.6) (154.5) (300.4) (263.5) (43.2)
Advance to the PCS
Group.................. (410.0) -- -- -- --
Equity transfer from
(to) the PCS Group..... 124.6 (406.1) (547.5) (245.2) (891.4)
Investments in and loans
to other affiliates,
net.................... (395.3) (98.5) (385.5) (81.4) (37.8)
Paranet acquisition..... -- (375.0) (375.0) -- --
Proceeds from sales of
assets................. -- -- 292.3 2.1 6.7
Other, net.............. (14.0) 33.8 (2.3) 42.4 (17.1)
--------- --------- --------- --------- ---------
Net cash used by
continuing operations.. (3,128.3) (2,836.0) (4,027.3) (2,979.2) (2,840.1)
Repayment by cellular
division of
intercompany advances.. -- -- -- 1,400.0 --
Net cash used by
cellular division...... -- -- -- (140.7) (324.6)
--------- --------- --------- --------- ---------
Net cash used by
investing activities... (3,128.3) (2,836.0) (4,027.3) (1,719.9) (3,164.7)
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Payments on long-term
debt................... (239.3) (110.6) (135.0) (433.1) (630.0)
Proceeds from long-term
debt................... 945.6 194.7 866.5 9.4 260.7
Net change in short-term
borrowings............. -- -- (200.0) (1,986.8) 1,109.5
Dividends............... (291.6) (274.5) (430.0) (419.6) (351.5)
Other net change in
group equity........... (235.4) (128.8) (144.5) 3,254.1 --
Other, net.............. 103.6 81.0 114.6 55.1 33.9
--------- --------- --------- --------- ---------
Net cash provided (used)
by financing
activities............. 282.9 (238.2) 71.6 479.1 422.6
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN
CASH AND EQUIVALENTS... (54.0) (1,041.2) (1,048.9) 1,026.4 10.5
CASH AND EQUIVALENTS AT
BEGINNING OF PERIOD.... 101.7 1,150.6 1,150.6 124.2 113.7
--------- --------- --------- --------- ---------
CASH AND EQUIVALENTS AT
END OF PERIOD.......... $ 47.7 $ 109.4 $ 101.7 $ 1,150.6 $ 124.2
========= ========= ========= ========= =========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-40
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS

1. RESTRUCTURING AND RECAPITALIZATION PLANS

Sprint Corporation (and with its subsidiaries "Sprint") has entered into a
restructuring agreement with Tele-Communications, Inc. ("TCI"), Comcast
Corporation ("Comcast") and Cox Communications, Inc. ("Cox," and together with
TCI and Comcast the "Cable Parents") to restructure Sprint's wireless personal
communications services ("PCS") operations (the "PCS Restructuring"). Sprint
will acquire the joint venture interests of TCI, Comcast and Cox in Sprint
Spectrum Holding Company, L.P. and MinorCo, L.P. (together, "Sprint Spectrum
Holdings") and the joint venture interests of TCI and Cox in PhillieCo
Partners I, L.P. and PhillieCo Partners II, L.P. (together, "PhillieCo"). In
exchange for these joint venture interests, Sprint will issue to the Cable
Parents a newly created class of Sprint Common Stock (the "PCS Stock"). The
PCS Stock is intended to reflect separately the performance of these joint
ventures and the domestic PCS operations of Sprint's wholly-owned
subsidiaries, SprintCom, Inc. and SprintCom Equipment Company, L.P. (together,
"SprintCom"). These operations will be referred to as the PCS Group.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Combination and Presentation

The Combined Financial Statements of the FON Group together with the
Combined Financial Statements of the PCS Group (the "Groups") comprise all of
the accounts included in the corresponding Consolidated Financial Statements
of Sprint. The entities which comprise the FON Group are commonly controlled
companies. Investments in entities in which the FON Group exercises
significant influence, but does not control, are accounted for using the
equity method (see Note 3). The separate Group financial statements give
effect to the accounting policies that will be applicable upon implementation
of the PCS Restructuring. The separate Groups' Combined Financial Statements
have been prepared on a basis that management believes to be reasonable and
appropriate and include: (i) the combined historical balance sheets, results
of operations and cash flows of the businesses that comprise each of the
Groups with all significant intragroup amounts and transactions eliminated and
(ii) in the case of the FON Group Combined Financial Statements, corporate
assets and liabilities and related transactions of Sprint. Transactions
between the FON Group and the PCS Group have not been eliminated.

The Combined Financial Statements of the FON Group provide holders of FON
Stock with financial information regarding the underlying businesses of the
FON Group. Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and stockholders' equity between the FON Group and the
PCS Group for the purpose of preparing the respective financial statements of
such Groups, investors in FON Stock and PCS Stock are stockholders of Sprint
and are subject to risks associated with an investment in a single company and
all of Sprint's businesses, assets and liabilities. Sprint retains all
beneficial ownership and control of the assets and operations of the FON Group
and, after the PCS Restructuring, the PCS Group (subject to a minority
interest). Financial effects arising from either Group that affect Sprint's
results of operations or financial condition could affect the results of
operations or financial position of the other Group or market price of the
class of common stock relating to the other Group. Any net losses of the FON
Group or the PCS Group, and dividends or distributions on, or repurchases of,
FON Stock or PCS Stock, will reduce the funds of Sprint legally available for
payment of dividends on both the FON Stock and the PCS Stock. Accordingly, the
FON Group Combined Financial Statements should be read in conjunction with
Sprint's Consolidated Financial Statements and the PCS Group Combined
Financial Statements.

F-41
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The FON Group Combined Financial Statements are prepared according to
generally accepted accounting principles ("GAAP"). These principles require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.

The unaudited interim financial information presented has been prepared
according to GAAP and the rules and regulations of the Securities and Exchange
Commission for interim reporting. In management's opinion, the information
presented reflects all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the interim combined financial position,
results of operations and cash flows of the FON Group.

The FON Group applied Statement of Financial Accounting Standards ("SFAS")
No. 71, "Accounting for the Effects of Certain Types of Regulation," to its
financial statements until December 1995. Under SFAS 71, revenues and related
net income resulting from transactions between the FON Group's nonregulated
operations and its regulated local exchange carriers were not eliminated from
the combined financial statements. Revenues from these intragroup transactions
were $262 million in 1995. All other significant intragroup transactions have
been eliminated.

Classification of Operations

The long distance division provides domestic and international voice, video
and data communications services. The division offers its services to the
public subject to varying levels of state and federal regulation, but rates
are generally not subject to rate-base regulation.

The local telecommunications division consists of regulated telephone
companies. These operations provide local exchange services, access by
telephone customers and other carriers to local exchange facilities, sales of
telecommunications equipment and long distance services within specified
geographical areas.

The product distribution and directory publishing division provides
wholesale distribution services of telecommunications products, and publishes
and markets white and yellow page telephone directories.

Emerging businesses consists of the development of new integrated
communications services, consumer Internet access services, Sprint Paranet and
Sprint International.

Revenue Recognition

The FON Group recognizes operating revenues as services are rendered or as
products are delivered to customers. The FON Group records operating revenues
net of an estimate for uncollectible accounts.

Earnings Per Share

Historical earnings per share are omitted from the combined statements of
income because the FON Stock was not part of the capital structure of Sprint
for the periods presented. See the Sprint Consolidated Financial Statements
for information regarding earnings per share based on Sprint's existing
capital structure. Following implementation of the PCS Restructuring and the
Recapitalization, the method of calculating earnings per share for the FON
Group will reflect the terms of the proposed amendments to Sprint's articles.
Earnings per share will be computed by dividing the net income of the FON
Group by the weighted average number of shares of FON Stock and dilutive
securities, such as convertible preferred stock and options, outstanding
during the applicable period.

Cash and Equivalents

F-42
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

were included in accounts payable, totaled $225 million at December 31, 1997
and $127 million at December 31, 1996. The FON Group had sufficient funds
available to fund these outstanding checks when they were presented for
payment.

Investments in Debt and Equity Securities

Inventories

Inventories are stated at the lower of cost (principally first-in, first-out
method) or market.

Property, Plant and Equipment

Depreciation

The cost of property, plant and equipment is generally depreciated on a
straight-line basis over estimated economic useful lives. Prior to the FON
Group's discontinued use of SFAS 71 at December 31, 1995, the cost of
property, plant and equipment for the local division had been generally
depreciated on a straight-line basis over lives prescribed by regulatory
commissions.

Income Taxes

The operations of the FON Group are included in the consolidated federal
income tax return of Sprint. Federal income tax is calculated by the FON Group
as if it had filed a separate return. The FON Group's state income tax is
computed using methodology consistent with that used to compute federal income
tax.

The FON Group records deferred income taxes based on certain temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and amounts used for tax purposes.

Investment tax credits related to regulated telephone property, plant and
equipment have been deferred and are being amortized over the estimated useful
lives of the related assets.

Capitalized Interest

The FON Group capitalized interest costs related to constructing capital
assets of $23 million for year-end 1997, $8 million for year-end 1996, and $14
million for year-end 1995.

The FON Group also capitalized interest costs related to Sprint's
investments in Sprint Spectrum Holdings and PhillieCo. The FON Group stopped
capitalizing this interest in July 1997 because Sprint Spectrum Holdings and
PhillieCo no longer qualified as development-stage companies. The capitalized
interest on the investments in Sprint Spectrum Holdings and PhillieCo,
totaling $46 million, $96 million and $43 million for the years ended December
31, 1997, 1996 and 1995, respectively, was contributed to and is being
amortized by the PCS Group.

In addition, Sprint capitalized interest costs related to the buildout of
the SprintCom network. This capitalized interest totaled $24 million in 1997
and was contributed to and will be amortized by the PCS Group.

F-43
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. INVESTMENTS

INVESTMENTS IN EQUITY SECURITIES

The cost of investments in equity securities was $105 million at year-end
1997 and 1996. Gross unrealized holding gains were $198 million at December
31, 1997 and $149 million at year-end 1996.

INVESTMENTS IN AND ADVANCES TO AFFILIATES

Sprint is a partner in Global One, a joint venture with France Telecom S.A.
("FT") and Deutsche Telekom AG ("DT") formed to provide seamless global
telecommunications services to business, residential and carrier markets
worldwide. Sprint is a one-third partner in Global One's operating group
serving Europe (excluding France and Germany), and is a 50% partner in Global
One's operating group for the worldwide activities outside the United States
and Europe. At year-end 1997, Sprint's share of underlying equity in Global
One's net assets exceeded the carrying value of Sprint's investment in Global
One by $158 million. This difference is being amortized through January 2001.

Combined, summarized financial information (100% basis) of Global One and
all other entities accounted for using the equity method by the FON Group is
as follows (in millions):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER AT OR FOR THE YEAR ENDED
30, DECEMBER 31,
------------------ --------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Results of operations
Net operating revenues......... $1,680.6 $1,535.4 $1,937.6 $1,723.7 $779.5
======== ======== ======== ======== ======
Operating loss................. $ (375.9) $ (473.1) $ (782.5) $ (436.4) $ 8.6
======== ======== ======== ======== ======
Net loss....................... $ (495.4) $ (494.4) $ (826.3) $ (399.7) $ 22.1
======== ======== ======== ======== ======
Financial position
Current assets................. $1,913.6 $ 958.9
Noncurrent assets.............. 4,221.0 2,737.5
-------- --------
Total........................ $6,134.6 $3,696.4
======== ========
Current liabilities............ $1,965.7 $ 714.3
Noncurrent liabilities......... 2,105.8 629.6
Owners' equity................. 2,063.1 2,352.5
-------- --------
Total........................ $6,134.6 $3,696.4
======== ========
</TABLE>

The FON Group's investment in Global One, including advances, totaled $93
and $38 million at year-end 1997 and 1996, respectively.

4. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PENSION PLAN

Sprint's policy is to make annual plan contributions equal to an actuarially
determined amount consistent with applicable federal tax regulations. The
funding objective is to accumulate funds at a relatively stable rate over the
participants' working lives so benefits are fully funded at retirement. At
December 31, 1997, the plan's assets consisted mainly of investments in
corporate equity securities and U.S. government and corporate debt securities.

F-44
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The net pension cost (credit) consists of the following for the FON Group:

At December 31, the funded status and amounts recognized in the FON Group
Combined Balance Sheets for the plan were as follows:

DEFINED CONTRIBUTION PLANS

Sprint sponsors defined contribution employee savings plans covering
substantially all employees. Participants may contribute portions of their pay
to the plans. For employees represented by collective bargaining units, Sprint
matches contributions based on negotiated amounts. Sprint also matches
contributions of employees not covered by collective bargaining agreements.
For those participants, Sprint matches their contributions in Sprint common
stock. The matching is equal to 50% of participants' contributions up to 6% of
their pay. In addition, Sprint may, at the discretion of the Board of
Directors, provide matching contributions based on the performance of Sprint
common stock compared to other telecommunications companies' stock. The FON
Group's matching contributions were $54 million in 1997, $56 million in 1996
and $51 million in 1995. At December 31, 1997, the plans held 20 million
Sprint common shares.

POSTRETIREMENT BENEFITS

Sprint provides postretirement benefits (principally medical benefits) to
substantially all employees. Employees retiring before certain dates are
eligible for benefits at no cost, or at a reduced cost. Employees retiring
after certain dates are eligible for benefits on a shared-cost basis. The FON
Group funds the accrued costs as benefits are paid.

F-45
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The net postretirement benefits cost consists of the following for the FON
Group:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost--benefits earned during the year........... $ 20.8 $ 21.7 $22.2
Interest on accumulated postretirement benefit
obligation............................................. 52.3 49.9 58.7
Net amortization and deferral........................... (19.4) (13.7) (9.4)
------ ------ -----
Net postretirement benefits cost........................ $ 53.7 $ 57.9 $71.5
====== ====== =====
Discount rate........................................... 7.75% 7.25% 8.50%
</TABLE>

Amounts included in the FON Group Combined Balance Sheets at year-end are as
follows:

5. INCOME TAXES

Income tax expense allocated to continuing operations consists of the
following:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Current income tax expense
Federal............................................... $800.0 $778.2 $453.7
State................................................. 99.5 89.9 94.3
------ ------ ------
Total current........................................... 899.5 868.1 548.0
------ ------ ------
Deferred income tax expense (benefit)
Federal............................................... (12.7) (81.6) 40.1
State................................................. 6.5 18.7 (25.8)
Amortization of deferred investment tax credits......... (3.8) (11.6) (16.5)
------ ------ ------
Total deferred.......................................... (10.0) (74.5) (2.2)
------ ------ ------
Total................................................... $889.5 $793.6 $545.8
====== ====== ======
</TABLE>

F-46
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The differences that cause the effective income tax rate to vary from the
statutory federal rate of 35% were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Income tax expense at the statutory rate............ $ 791.4 $ 736.5 $ 529.1
Less investment tax credits included in income...... 3.8 11.6 16.5
------- ------- -------
Expected federal income tax expense after investment
tax credits........................................ 787.6 724.9 512.6
Effect of
State income taxes, net of federal income tax
effect........................................... 68.9 70.6 44.6
Equity in losses of foreign joint ventures........ 36.4 8.6 --
Other, net........................................ (3.4) (10.5) (11.4)
------- ------- -------
Income tax expense, including investment tax
credits............................................ $ 889.5 $ 793.6 $ 545.8
======= ======= =======
Effective income tax rate........................... 39.3% 37.7% 36.1%
======= ======= =======
</TABLE>

Income tax expense (benefit) allocated to other items was as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C>
Discontinued operation.. $ -- $ 7.0 $ 31.2
Extraordinary items..... -- (2.9) (437.4)
Unrealized holding gains
on investments(1)...... 4.4 1.7 30.7
Stock ownership,
purchase and options
arrangements(1)........ (26.2) (14.1) (7.5)
</TABLE>
- --------
(1) These amounts have been recorded directly to "Group equity."

The FON Group recognizes deferred income taxes for the temporary differences
between the carrying amounts of its assets and liabilities for financial
statement purposes and their tax bases. The sources of the differences that
give rise to the deferred income tax assets and liabilities at December 31,
1997 and 1996, along with the income tax effect of each, were as follows:

<TABLE>
<CAPTION>
1997 DEFERRED 1996 DEFERRED
INCOME TAX INCOME TAX
------------------ ------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Property, plant and equipment............. $ -- $1,278.0 $ -- $1,275.8
Postretirement and other benefits......... 376.1 -- 360.3 --
Reserves and allowances................... 103.1 -- 113.4 --
Unrealized holding gains on investments... -- 61.7 -- 57.3
Other, net................................ 153.8 -- 152.7 --
------ -------- ------ --------
633.0 1,339.7 626.4 1,333.1
Less valuation allowance.................. 11.8 -- 13.7 --
------ -------- ------ --------
Total................................... $621.2 $1,339.7 $612.7 $1,333.1
====== ======== ====== ========
</TABLE>

The valuation allowance related to deferred income tax assets decreased $2
million in 1997 and $4 million in 1996 and 1995.

F-47
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

changes, shifts in operations between state taxing jurisdictions, and future
operating income levels may, however, affect the ultimate realization of all
or some of these deferred income tax assets.

At December 31, 1997, the FON Group had available for income tax purposes $4
million of state alternative minimum tax credit carryforwards to offset state
income tax payable in future years. In addition, the FON Group had tax
benefits of $12 million related to state operating loss carryforwards. The
loss carryforwards expire in varying amounts per year from 1998 through 2012.

6. BORROWINGS

All of Sprint's borrowings have been allocated to the FON Group and are
reflected on the FON Group Combined Balance Sheets.

LONG-TERM DEBT

Sprint's long-term debt at year-end was as follows:

<TABLE>
<CAPTION>
MATURING 1997 1996
------------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Corporate
Senior notes
8.1% to 9.8%............................... 1998 to 2002 $ 475.3 $ 475.3
9.5%....................................... 2003 to 2007 200.0 200.0
Debentures
9.0% to 9.3%............................... 2019 to 2022 350.0 350.0
Notes payable and commercial paper........... -- 866.5 --
Other
5.4% to 8.9%(1)............................ 1998 to 2006 237.5 194.9
Long Distance Division
Vendor financing agreements
7.4% to 8.9%............................... 1997 to 1999 23.8 44.8
Other
6.2% to 8.4%............................... 1997 to 2007 16.5 23.1
Local Telecommunications Division
First mortgage bonds
2.0% to 7.8%............................... 1997 to 2002 452.3 487.0
4.0% to 7.8%............................... 2003 to 2007 346.0 346.8
6.9% to 9.8%............................... 2008 to 2012 116.7 116.7
6.9% to 8.8%............................... 2013 to 2017 169.6 169.8
8.8% to 9.9%............................... 2018 to 2022 244.9 245.7
7.1% to 8.4%............................... 2023 to 2027 145.0 145.0
Debentures and notes
5.8% to 9.6%............................... 1998 to 2020 237.0 275.3
Other
2.0% to 9.8%............................... 1998 to 2006 4.6 6.2
Unamortized debt discount...................... (6.1) (6.7)
-------- --------
3,879.6 3,073.9
Less current maturities........................ 131.0 99.1
-------- --------
Long-term debt................................. $3,748.6 $2,974.8
======== ========
</TABLE>
- --------
(1) Notes may be exchanged at maturity for Southern New England
Telecommunications Corporation ("SNET") common shares owned by Sprint, or
for cash. Based on SNET's closing market price, had the notes matured at
December 31, 1997, they could have been exchanged for 3.8 million SNET
shares. At December 31, 1997, Sprint held 4.2 million SNET shares, which
have been included in "Investments in equity securities" on the FON Group
Combined Balance Sheets.

F-48
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Sprint's long-term debt maturities, excluding reclassified short-term
borrowings, during each of the next five years are as follows (in millions):

Property, plant and equipment with a total cost of $12.9 billion is either
pledged as security for first mortgage bonds and certain notes or is
restricted for use as mortgaged property.

During 1996, Sprint redeemed, prior to scheduled maturities, $190 million of
debt with interest rates ranging from 6.0% to 9.5%. This resulted in a $5
million after-tax extraordinary loss that was reflected on the FON Group
Combined Statements of Income.

SHORT-TERM BORROWINGS

At December 31, 1997, Sprint had borrowed $618 million of bank notes payable
and $249 million of commercial paper. Though these borrowings are renewable at
various dates throughout the year, they have been classified as long-term debt
because of Sprint's intent and ability, through unused credit facilities, to
refinance these borrowings. Commercial paper and certain bank notes payable
are supported by Sprint's revolving credit facility with a syndicate of
domestic and international banks. Other notes payable relate to a separate
revolving credit facility that Sprint executed with a bank in 1997. At
December 31, 1997, Sprint's unused lines of credit totaled $1.1 billion.

Sprint's bank notes outstanding at December 31, 1997 and 1996 had weighted
average interest rates of 6.1% and 5.9%, respectively. At December 31, 1997,
the weighted average interest rate of commercial paper was 6.8%.

OTHER

Sprint was in compliance with all restrictive or financial covenants
relating to its debt arrangements at December 31, 1997.

7. FON GROUP EQUITY

Following is a reconciliation of the FON Group's equity (in millions):

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER
30, DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period..................... $7,639.3 $7,332.3 $ 7,332.3 $3,676.8 $4,473.7
Net income................ 1,136.7 1,014.9 1,371.6 1,303.5 415.2
Dividends................. (323.3) (323.2) (429.5) (421.0) (348.9)
Equity issuances.......... 137.1 49.1 65.0 3,764.0 21.0
Equity repurchases........ (260.2) (128.8) (144.5) (407.2) --
Spinoff of cellular
division (Cellular)...... -- -- -- (260.2) --
Other, net................ 58.6 40.7 61.8 17.9 50.4
Contributions to the PCS
Group.................... (268.5) (804.3) (1,052.1) (478.3) (954.1)
Equity transfer from the
PCS Group................ 351.6 351.9 434.7 136.8 19.5
-------- -------- --------- -------- --------
Balance at end of period.... $8,471.3 $7,532.6 $ 7,639.3 $7,332.3 $3,676.8
======== ======== ========= ======== ========
</TABLE>

F-49
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

8. STOCK-BASED COMPENSATION

Since the FON Stock was not part of the capital structure of Sprint for the
periods presented, there were no stock options outstanding. See the Sprint
Consolidated Financial Statements and Notes thereto set forth in Annex I for
information regarding stock incentive plans.

9. COMMITMENTS AND CONTINGENCIES

LITIGATION, CLAIMS AND ASSESSMENTS

The holders of FON Stock will be shareholders of Sprint and will continue to
be subject to all of the risks associated with an investment in Sprint,
including any legal proceedings and claims affecting the PCS Group.

In June 1997, the FON Group recorded an additional $20 million charge in
connection with the settlement of both the class action lawsuit against Sprint
and Network 2000 and the related claims of Network 2000 against Sprint. In
June 1998, the court approved the class action settlement; however, a number
of potential class members have decided not to participate in the settlement
and another group of potential class members have appealed from the order
approving the class action settlement.

OPERATING LEASES

Minimum rental commitments at year-end 1997 for all noncancelable operating
leases, consisting mainly of leases for data processing equipment and real
estate, are as follows (in millions):

<TABLE>
<S> <C>
1998.............................. $305.2
1999.............................. 263.1
2000.............................. 160.8
2001.............................. 105.7
2002.............................. 89.1
Thereafter........................ 238.6
</TABLE>

Gross rental expense totaled $406 million in 1997, $401 million in 1996 and
$402 million in 1995. Rental commitments for subleases, contingent rentals and
executory costs were not significant.

10. FINANCIAL INSTRUMENTS

All of Sprint's financial instruments have been allocated to the FON Group,
the carrying amounts of which are reflected on the FON Group Combined Balance
Sheets.

F-50
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The FON Group estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies. As a
result, the following estimates do not necessarily represent the values the
FON Group could realize in a current market exchange. Although management is
not aware of any factors that would affect the estimated fair values presented
at year-end 1997, those amounts have not been comprehensively revalued for
purposes of these financial statements since that date. Therefore, estimates
of fair value after year-end 1997 may differ significantly from the amounts
presented below. The carrying amounts and estimated fair values of the FON
Group's financial instruments at December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Financial assets
Cash and equivalents................ $ 101.7 $ 101.7 $1,150.6 $1,150.6
Investment in affiliate debt
securities......................... 142.4 142.4 122.5 122.5
Investments in equity securities.... 303.0 303.0 254.5 254.5
Financial liabilities
Short-term borrowings............... -- -- 200.0 200.0
Long-term debt
Corporate......................... 2,129.3 2,301.8 1,220.2 1,348.9
Long distance division............ 40.3 41.7 67.9 69.0
Local telecommunications division. 1,710.0 1,812.3 1,785.8 1,846.9
Other financial instruments
Interest rate swap agreements....... -- 0.3 -- 0.2
Foreign currency contracts.......... (0.6) (0.6) (0.5) (0.5)
</TABLE>

The carrying values of the FON Group's cash and equivalents approximate fair
value at year-end 1997 and 1996. The estimated fair value of the FON Group's
investments in debt and equity securities is based on quoted market prices.
The estimated fair value of the FON Group's long-term debt is based on quoted
market prices for publicly traded issues. The estimated fair value of all
other issues is based on the present value of estimated future cash flows
using a discount rate based on the risks involved. The estimated fair value of
interest rate swap agreements is the amount the FON Group would receive to
terminate the swap agreements at year-end 1997 and 1996, taking into account
the then-current interest rates. The estimated fair value of foreign currency
contracts is the replacement cost of the contracts at year-end 1997 and 1996,
taking into account the then-current foreign currency exchange rates.

CONCENTRATIONS OF CREDIT RISK

The FON Group's accounts receivable are not subject to any concentration of
credit risk. The FON Group controls credit risk of its interest rate swap
agreements and foreign currency contracts through credit approvals, dollar
exposure limits and internal monitoring procedures. In the event of
nonperformance by the counterparties, the FON Group's accounting loss would be
limited to the net amount it would be entitled to receive under the terms of
the applicable interest rate swap agreement or foreign currency contract.
However, the FON Group does not anticipate nonperformance by any of the
counterparties related to these agreements.

INTEREST RATE SWAP AGREEMENTS

The FON Group uses interest rate swap agreements as part of its interest
rate risk management program. Net interest paid or received related to these
agreements is recorded using the accrual method and is recorded as

F-51
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

an adjustment to interest expense. The FON Group had interest rate swap
agreements with notional amounts of $150 and $350 million outstanding at year-
end 1997 and 1996, respectively. Net interest expense (income) related to
interest rate swap agreements included on the FON Group's Combined Statements
of Income was $(200,000) in 1997, $2 million in 1996 and $(400,000) in 1995.
There were no deferred gains or losses related to any terminated interest rate
swap agreements at year-end 1997, 1996 or 1995.

FOREIGN CURRENCY CONTRACTS

As part of its foreign currency exchange risk management program, the FON
Group purchases and sells over-the-counter forward contracts and options in
various foreign currencies. The FON Group had outstanding $29 and $46 million
of open forward contracts to buy various foreign currencies at year-end 1997
and 1996, respectively. The FON Group had $14 and $3 million of outstanding
open purchase option contracts to call various foreign currencies at year-end
1997 and 1996, respectively. The premium paid for an option is expensed as
incurred. The fair value of an option is recorded as an asset at the end of
each period. The forward contracts and options open at year-end 1997 and 1996
all had original maturities of six months or less. The net gain or loss
recorded to reflect the fair value of these contracts is recorded in the
period incurred. Total net losses of $40,000 in 1997, $400,000 in 1996 and $1
million in 1995 related to foreign currency transactions and contracts were
recorded and included on the FON Group Combined Statements of Income.

11. PARANET ACQUISITION

The transaction was accounted for using the purchase method of accounting.
As a result, the FON Group's combined financial statements reflect Sprint
Paranet's results of operations beginning in October 1997.

12. ADOPTION OF ACCOUNTING PRINCIPLES FOR A COMPETITIVE MARKETPLACE

At year-end 1995, the FON Group determined that its local telecommunications
division no longer met the criteria necessary for the continued use of SFAS
71. As a result, 1995 operating results included a noncash, extraordinary
charge of $565 million, net of income tax benefits of $437 million. The
decision to discontinue using SFAS 71 was based on changes in the regulatory
framework and the convergence of competition in the telecommunications
industry.

The 1995 extraordinary charge recognized when the FON Group discontinued
using SFAS 71 consisted of the following:

<TABLE>
<CAPTION>
PRETAX AFTER-TAX
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Increase in accumulated depreciation.................. $ 979.1 $607.9
Recognition of switch software asset.................. (99.5) (61.7)
Elimination of other net regulatory asset............. 123.1 76.3
-------- ------
Total............................................... $1,002.7 622.5
========
Tax-related net regulatory liabilities................ (43.9)
Accelerated amortization of investment tax credits.... (13.3)
------
Extraordinary charge................................ $565.3
======
</TABLE>

F-52
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

13. SPINOFF OF CELLULAR DIVISION

In March 1996, Sprint completed the tax-free spinoff of Cellular to Sprint
common stockholders (the "Spinoff"). To complete the Spinoff, Sprint
distributed all Cellular common shares at a rate of one share for every three
Sprint common shares held. In addition, Cellular repaid $1.4 billion of its
intercompany debt owed to Sprint. Sprint also contributed to Cellular's equity
capital $185 million of debt owed by Cellular in excess of the amount repaid.

Cellular's net operating results, as summarized below, were separately
classified as a discontinued operation in the FON Group Combined Statements of
Income. Interest expense was allocated to Cellular based on the assumed
repayment of intercompany debt to Sprint by Cellular. The operating expenses
as presented below do not include Cellular's share of Sprint's general
corporate overhead expenses. These expenses, totaling $2 million in 1996 and
$13 million in 1995, were reallocated to Sprint's other operating segments.

<TABLE>
<CAPTION>
1996(1) 1995
------- ------
(IN MILLIONS)
<S> <C> <C>
Net operating revenues......................................... $190.2 $834.4
Operating expenses............................................. 156.0 675.6
------ ------
Operating income............................................... 34.2 158.8
Interest expense............................................... (21.5) (124.0)
Other income (expense), net.................................... (8.3) 10.9
------ ------
Income before income taxes..................................... 4.4 45.7
Income taxes................................................... (7.0) (31.2)
------ ------
Income (Loss) from cellular division........................... $ (2.6) $ 14.5
====== ======
</TABLE>
- --------
(1) 1996 reflects Cellular's operating results only through the date of the
Spinoff.

14. ADDITIONAL FINANCIAL INFORMATION

SEGMENT INFORMATION

The FON Group operates in four industry segments: the long distance
division, the local telecommunications division, the product distribution and
directory publishing division and emerging businesses. Sprint's corporate
assets mainly include investments and loans to affiliates, cash and temporary
investments and general corporate assets. In 1995, corporate assets also
included the net assets of the discontinued cellular division. The long
distance division provides domestic and international voice, video and data
communications services. The local telecommunications division provides local
exchange services, access to Sprint's local exchange facilities, sales of
telecommunications equipment and long distance within specified geographical
areas. The product distribution and directory publishing division provides
wholesale distribution services of telecommunications products and publishes
and markets white and yellow page telephone directories. Emerging businesses
consists of the development of new integrated communications services,
consumer Internet access services, Sprint Paranet and Sprint International.

F-53
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Industry segment financial information follows:

<TABLE>
<CAPTION>
PRODUCT
DISTRIBUTION
LONG LOCAL & DIRECTORY
DISTANCE TELECOMMUNICATIONS PUBLISHING EMERGING INTERSEGMENT TOTAL FON
DIVISION DIVISION DIVISION BUSINESSES CORPORATE ELIMINATIONS GROUP
-------- ------------------ ------------ ---------- --------- ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
1997
Net operating
revenues(1)........... $8,954.8 $5,290.2 $1,454.3 $ 57.4 $ -- $(882.8) $14,873.9
Depreciation and
amortization.......... 716.7 934.1 8.2 23.3 44.0 -- 1,726.3
Operating expenses..... 7,857.3 3,896.2 1,274.4 221.9 -- (845.8) 12,404.0
Operating income
(loss)................ 1,097.5 1,394.0 179.9 (164.5) -- (37.0) 2,469.9
Operating margin....... 12.3% 26.4% 12.4% -- -- -- 16.6%
Capital expenditures... 1,218.1 1,258.4 10.5 79.6 142.3 -- 2,708.9
Identifiable assets.... 6,464.6 7,609.7 519.0 585.9 1,312.5 -- 16,491.7
1996
Net operating
revenues(2)........... $8,302.1 $5,126.8 $1,225.4 $ 0.5 $ -- $(767.3) $13,887.5
Depreciation and
amortization.......... 633.3 909.1 7.2 0.5 40.9 -- 1,591.0
Operating expenses..... 7,378.1 3,789.8 1,123.8 63.8 -- (735.7) 11,619.8
Operating income
(loss)................ 924.0 1,337.0 101.6 (63.3) -- (31.6) 2,267.7
Operating margin....... 11.1% 26.1% 8.3% -- -- -- 16.3%
Capital expenditures... 1,133.7 1,142.6 9.4 49.9 98.0 -- 2,433.6
Identifiable assets.... 5,997.7 7,425.4 446.1 54.3 1,643.1 -- 15,566.6
1995
Net operating
revenues(3)........... $7,277.4 $4,690.0 $1,147.6 $ -- -- $(379.7) $12,735.3
Depreciation and
amortization.......... 581.6 835.6 7.4 -- 41.8 -- 1,466.4
Operating expenses..... 6,570.6 3,649.2 1,060.9 -- -- (379.7) 10,901.0
Operating income....... 706.8 1,040.8 86.7 -- -- -- 1,834.3
Operating margin....... 9.7% 22.2% 7.6% -- -- -- 14.4%
Capital expenditures... 861.7 950.8 7.8 -- 37.0 -- 1,857.3
Identifiable assets.... 4,799.0 6,962.0 395.4 -- 1,944.2 -- 14,100.6
</TABLE>

F-54
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

SUPPLEMENTAL CASH FLOWS INFORMATION (IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER
SEPTEMBER 30, 31,
------------- --------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for:
Interest (net of amounts capitalized)
Continuing operations................... $174.1 $133.2 $197.9 $212.1 $263.5
====== ====== ====== ====== ======
Cellular division....................... $ -- $ -- $ -- $ 21.5 $124.0
====== ====== ====== ====== ======
Income taxes.............................. $279.1 $288.5 $365.8 $695.3 $532.8
====== ====== ====== ====== ======
Noncash activities:
Capital lease obligations................. $ -- $ 30.1 $ 30.1 $ -- $ --
====== ====== ====== ====== ======
Noncash activity in Group Equity.......... $111.6 $ 19.5 $ 31.4 $ 79.3 $ 10.5
====== ====== ====== ====== ======
Net book value of assets and liabilities
contributed to
Global One............................... $ -- $ -- $ -- $ 73.3 $ --
====== ====== ====== ====== ======
</TABLE>

During 1996, Sprint completed the Spinoff (see Note 13) which had no
immediate effect on the FON Group's cash flows other than Cellular's repayment
of $1.4 billion in intercompany debt owed to Sprint.

SUPPLEMENTAL RELATED PARTY TRANSACTIONS

The FON Group has a vendor financing loan to Sprint Spectrum Holdings for
$300 million at December 31, 1997 as well as advances to PhillieCo of $67
million at year-end 1996. The FON Group also has advances to PhillieCo for $21
million at year-end 1997. In 1996, Sprint purchased $183 million (face value)
of Sprint Spectrum Senior Discount notes for $100 million. The bonds mature in
2006. At December 31, 1997 and 1996, the accreted cost of the notes was $118
and $104 million and gross unrealized holding gains totaled $24 and $18
million, respectively. This investment has been included in "Current assets--
Other" on the FON Group Combined Balance Sheets.

The FON Group provided various voice, data and administrative services to
Global One totaling $415 million in 1997 and $361 million in 1996. In
addition, Global One provided data and administrative services to the FON
Group totaling $114 million in 1997 and $130 million in 1996. At year-end 1997
and 1996, the FON Group's receivable from Global One was $154 and $163
million, respectively, and the FON Group's payable to Global One was $104 and
$49 million, respectively.

Certain members of the FON Group also provide management, printing/mailing
and warehousing services to the PCS Group. Charges to the PCS Group for such
activities totaled $17 million, $12 million and $3 million for the years ended
December 31, 1997, 1996 and 1995.

RESTRUCTURING CHARGE

In 1995, the FON Group's local telecommunications division recorded an $88
million restructuring charge, which reduced income from continuing operations
by $55 million. The restructuring plan included the planned elimination over
several years of approximately 1,600 positions, mainly in the network and
finance functions. Through 1997, most of the positions have been eliminated
resulting in termination benefit payments of $42 million, with the remainder
to be paid in 1998 and 1999.

15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
131, "Disclosures about Segments of an Enterprise and Related Information."
This new standard requires companies to disclose segment data based on how
management makes decisions about allocating resources to segments and how it
measures segment performance. SFAS 131 requires companies to disclose a
measure of segment profit or loss (operating

F-55
<PAGE>

FON GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

income, for example), segment assets, and reconciliations to consolidated
totals. It also requires entity-wide disclosures about a company's products
and services, its major customers and the material countries in which it holds
assets and reports revenues. The FON Group will adopt SFAS 131 in its 1998
year-end financial statements. This statement is not expected to have a
significant effect on the FON Group's reported segments.

In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS 132 standardizes the
disclosure requirements for pensions and postretirement benefits where
practical. It also eliminates certain disclosures and requires additional
information on changes in benefit obligations and fair values of plan assets.
The FON Group will adopt SFAS 132 in its 1998 year-end financial statements.
SFAS 132 is not expected to have a significant effect on the FON Group's
pension and postretirement benefit plan disclosures.

In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives to be
recorded on the balance sheet as either assets or liabilities and measured at
fair value. Gains or losses resulting from changes in the values of the
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. Sprint will adopt SFAS 133
beginning January 1, 2000. This statement is not expected to have a material
impact on Sprint.

16. SUBSEQUENT EVENTS (UNAUDITED)

BORROWINGS

OTHER

In April 1998, Sprint signed an agreement to sell approximately 80,000
residential and business access lines of the FON Group in rural Illinois.
Sprint expects to complete the sale of these properties, which is subject to
regulatory approval, and record the related gain in November 1998.

In October 1998, Sprint's Board of Directors declared common and Class A
common stock dividends of $0.25 per share payable December 28, 1998.

17. COMPREHENSIVE INCOME (UNAUDITED)

Total comprehensive income for the FON Group amounted to $1.1 billion during
the first nine months of 1998 and $1.0 billion during the first nine months of
1997.

F-56
<PAGE>

FON GROUP

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements
are presented to give effect to (1) the PCS Restructuring, whereby Sprint will
acquire the joint venture interests of the Cable Parents in Sprint Spectrum
Holdings and the joint venture interests of TCI and Cox in PhillieCo, in
exchange for shares of Series 2 PCS Stock and (2) the tax-free
Recapitalization of Sprint's common stock to be effected by reclassifying each
share of Sprint's Existing Common Stock into 1/2 share of Series 1 PCS Stock
and one share of Series 1 FON Stock and by reclassifying each share of Class A
common stock so that each share represents an equity interest in the FON Group
and an equity interest in the PCS Group, together with a right to cause Sprint
to initially issue one share of Series 3 FON Stock and 1/2 share of Series 3
PCS Stock. The pro forma condensed combined financial statements included
herein do not give effect to the Notes offering or the IPO of Series 1 PCS
Stock.

The unaudited pro forma condensed combined statements of income include the
historical results of the FON Group for the year ended December 31, 1997 and
the nine months ended September 30, 1998, and include the effect of the PCS
Restructuring and the Recapitalization as though such transactions had
occurred on January 1, 1997. The unaudited pro forma condensed combined
balance sheet is based upon the historical balance sheet of the FON Group as
of September 30, 1998. The historical balance sheet amounts have been adjusted
to reflect the PCS Restructuring and the Recapitalization as though such
transactions had occurred on September 30, 1998.

The pro forma condensed combined statements of income are not necessarily
indicative of what actual results of operations would have been had the
transactions occurred at the beginning of the periods presented nor do they
purport to indicate the results of future operations. The unaudited pro forma
condensed combined financial statements should be read in conjunction with the
historical financial statements of the FON Group included elsewhere in this
Prospectus Supplement.

F-57
<PAGE>

FON GROUP

PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited, in millions)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
HISTORICAL PCS
FON GROUP RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------- ---------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents..... $ 47.7 $(26.5)A $ 21.2
Accounts receivable, net. 2,515.8 2,515.8
Inventories.............. 349.9 349.9
Notes and other
receivables............. 407.8 407.8
Advance to the PCS Group. 410.0 (110.6)B 299.4
Prepaid expenses and
other current assets.... 389.9 389.9
--------- ------ ---------
Total current assets..... 4,121.1 (137.1) 3,984.0
Investments in equity
securities............... 420.2 420.2
Property, plant and
equipment, net........... 12,175.0 12,175.0
Investments in and
advances to affiliates... 768.7 768.7
Preferred inter-group
interest in the PCS
Group.................... -- 270.6 B 270.6
Other assets.............. 884.6 884.6
--------- ------ ---- ---------
Total..................... $18,369.6 $133.5 $-- $18,503.1
========= ====== ==== =========
LIABILITIES AND GROUP
EQUITY
Current liabilities
Current maturities of
long-term debt.......... $ 38.1 $ 38.1
Accounts payable......... 1,078.8 1,078.8
Accrued interconnection
costs................... 564.7 564.7
Accrued taxes............ 399.2 399.2
Advance billings......... 213.3 213.3
Other.................... 794.6 794.6
--------- ---------
Total current
liabilities............. 3,088.7 3,088.7
Long-term debt............ 4,651.6 4,651.6
Deferred credits and other
liabilities
Deferred income taxes and
investment tax credits.. 724.4 724.4
Postretirement and other
benefit obligations..... 1,067.4 1,067.4
Other.................... 366.2 366.2
--------- ---------
Total deferred credits
and other liabilities... 2,158.0 2,158.0
Group equity.............. 8,471.3 $(26.5)A 8,604.8
160.0 B
--------- ------ ---- ---------
Total..................... $18,369.6 $133.5 $-- $18,503.1
========= ====== ==== =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-58
<PAGE>

FON GROUP

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
HISTORICAL PCS
FON GROUP RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------- ---------------- ---------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES... $11,940.3 $11,940.3
OPERATING EXPENSES
Costs of services and
products................ 5,691.3 5,691.3
Selling, general and
administrative.......... 2,723.8 2,723.8
Depreciation and
amortization............ 1,427.3 1,427.3
--------- ---------
Total operating expenses. 9,842.4 9,842.4
--------- ---------
OPERATING INCOME......... 2,097.9 2,097.9
Interest expense......... (185.6) $(24.1)C (209.7)
Equity in loss of Global
One..................... (120.0) (120.0)
Other income............. 48.6 48.6
--------- ------ ---------
Income from continuing
operations before income
taxes................... 1,840.9 (24.1) 1,816.8
Income taxes............. (699.8) 9.7 D (690.1)
--------- ------ ---------
INCOME FROM CONTINUING
OPERATIONS.............. 1,141.1 (14.4) 1,126.7
Preferred stock
dividends............... (0.8) (0.8)
Dividends received on
preferred inter-group
interest................ -- 6.1 E 6.1
--------- ------ ---------
Earnings applicable to
common stock............ $ 1,140.3 $ (8.3) $ 1,132.0
========= ====== =========
BASIC EARNINGS PER COMMON
SHARE FROM CONTINUING
OPERATIONS.............. $ 2.63
=========
Basic weighted average
common shares........... 430.7 F
=========
DILUTED EARNINGS PER
COMMON SHARE FROM
CONTINUING OPERATIONS... $ 2.58
=========
Diluted weighted average
common shares........... 438.7 F
=========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-59
<PAGE>

FON GROUP

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1997
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
HISTORICAL PCS
FON GROUP RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------- ---------------- ---------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES... $14,873.9 $14,873.9
OPERATING EXPENSES
Costs of services and
products................ 7,451.0 7,451.0
Selling, general and
administrative.......... 3,226.7 3,226.7
Depreciation and
amortization............ 1,726.3 1,726.3
--------- ---------
Total operating expenses. 12,404.0 12,404.0
--------- ---------
OPERATING INCOME......... 2,469.9 2,469.9
Interest expense......... (187.2) $ (8.4) C (195.6)
Equity in loss of Global
One..................... (162.1) (162.1)
Other income............. 140.5 140.5
--------- ------- ---------
Income before income
taxes................... 2,261.1 (8.4) 2,252.7
Income taxes............. (889.5) 3.3 D (886.2)
--------- ------- ---------
NET INCOME............... 1,371.6 (5.1) 1,366.5
Preferred stock
dividends............... (1.0) (1.0)
Dividends received on
preferred inter-group
interest................ -- 8.1 E 8.1
--------- ------- ---------
Earnings applicable to
common stock............ $ 1,370.6 $ 3.0 $ 1,373.6
========= ======= =========
BASIC EARNINGS PER COMMON
SHARE................... $ 3.19
=========
Basic weighted average
common shares........... 430.2 F
=========
DILUTED EARNINGS PER
COMMON SHARE............ $ 3.15
=========
Diluted weighted average
common shares........... 436.5 F
=========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-60
<PAGE>

FON GROUP

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS

The following adjustments have been made in the preparation of the unaudited
pro forma condensed combined financial statements:

Pro Forma Balance Sheet Adjustments

A Cash to fund the transaction costs related to the PCS Restructuring will be
contributed by the FON Group to the PCS Group.

B To reflect the Preferred Inter-Group Interest in the PCS Group issued by
the PCS Group to the FON Group in exchange for funding provided to the PCS
Group between the date of the Restructuring Agreement (May 26, 1998) and
September 30, 1998. See "The Tracking Stock Proposal--Funding of the PCS
Group Prior to Closing; The PCS Preferred Stock" in the Proxy
Statement/Prospectus incorporated by reference into the accompanying
Prospectus.

Pro Forma Statement of Income Adjustments

C To increase interest expense resulting from the tax sharing agreement
between the FON Group and the PCS Group. Under this agreement, the FON
Group will "pay" the PCS Group for the use of its current tax benefits that
the FON Group is able to utilize, thereby reducing funds available to the
FON Group and increasing its required borrowings. The computation of the
current tax benefit of the PCS Group utilized by the FON Group is performed
on a quarterly basis, and the resulting amount is applied to increase the
debt balance and, therefore, interest expense, from that date forward.
Interest expense is computed using the weighted-average interest rate on
the debt assumed to be incurred. Such debt would have amounted to $509.2
million and $352.0 million, on a pro forma basis, as of September 30, 1998
and December 31, 1997, respectively.

D To record the impact on income taxes of pro forma adjustment C, using the
statutory income tax rate.

E To reflect dividends received from the PCS Group on the FON Group's
Preferred Inter-Group Interest in the PCS Group, at an assumed annual rate
of 3%. The FON Group had provided $270.6 million of funding between the
date of the Restructuring Agreement (May 26, 1998) and September 30, 1998,
which was assumed to be exchanged for a Preferred Inter-Group Interest. For
a discussion of how the actual dividend rate will be determined, see
"Description of Capital Stock--Description of PCS Preferred Stock;
Preferred Inter-Group Interest" in the Proxy Statement/Prospectus
incorporated by reference into the accompanying Prospectus.

F The weighted average common shares outstanding for the FON Group reflect
the Recapitalization of Sprint's Existing Common Stock into shares of
Series 1 FON Stock on a share for share basis, including the FON Stock
attributes of the Class A common stock.

F-61
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Sprint Corporation

We have audited the accompanying combined balance sheets of the PCS Group
(as described in Note 2) as of December 31, 1997 and 1996, and the related
combined statements of operations and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the management of Sprint Corporation ("Sprint"). Our
responsibility is to express an opinion on these financial statements based on
our audits. The combined financial statements of Sprint Spectrum Holding
Company, L.P., MinorCo., L.P., PhillieCo Partners I, L.P. and PhillieCo
Partners II, L.P., (the "Partnerships") have been audited by other auditors
whose report has been furnished to us; insofar as our opinion on the combined
financial statements of the PCS Group relates to data included for the
Partnerships, it is based solely on their report. The PCS Group has a 40%
interest in Sprint Spectrum Holding Company, L.P. and MinorCo., L.P. and a
47.1% interest in PhillieCo Partners I, L.P. and PhillieCo Partners II, L.P.
In the combined financial statements, the PCS Group's combined equity in the
Partnerships is stated at $781 million and $1,032 million at December 31, 1997
and 1996, respectively, and the PCS Group's combined equity in the net loss of
Sprint Spectrum Holding Company, L.P. and PhillieCo, L.P. is stated at $656
million, $192 million and $31 million for the years ended December 31, 1997,
1996 and 1995, respectively.

In our opinion, based on our audits and the report of other auditors, the
combined financial statements referred to above present fairly, in all
material respects, the combined financial position of the PCS Group at
December 31, 1997 and 1996, and the combined results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.

As more fully discussed in Note 2, the combined financial statements of the
PCS Group should be read in connection with the audited consolidated financial
statements of Sprint.

Ernst & Young LLP

Kansas City, Missouri
May 26, 1998

F-62
<PAGE>

PCS GROUP

COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER YEAR ENDED DECEMBER
30, 31,
---------------- ------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES
Selling, general and
administrative expenses.......... $ 78.2 $ 7.4 $ 18.5 $ 0.5 $ --
Depreciation and amortization..... 1.8 -- -- -- --
------- ------- ------- ------- ------
Total operating expenses......... 80.0 7.4 18.5 0.5 --
------- ------- ------- ------- ------
OPERATING LOSS..................... (80.0) (7.4) (18.5) (0.5) --
Equity in loss of Sprint Spectrum
Holdings and PhillieCo............ (686.5) (410.6) (659.6) (191.8) (31.4)
------- ------- ------- ------- ------
Loss before income taxes........... (766.5) (418.0) (678.1) (192.3) (31.4)
Income tax benefit................. 294.7 160.7 259.0 72.6 11.5
------- ------- ------- ------- ------
NET LOSS .......................... $(471.8) $(257.3) $(419.1) $(119.7) $(19.9)
======= ======= ======= ======= ======
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-63
<PAGE>

PCS GROUP

COMBINED BALANCE SHEETS
(IN MILLIONS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -----------------
1998 1997 1996
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Prepaid expenses and other current assets...... $ 32.8 $ 2.9 $ --
Property, plant and equipment, net............. 1,327.2 177.3 --
Investments in Sprint Spectrum Holdings and
PhillieCo..................................... 475.4 968.4 1,175.8
Investment in PCS licenses..................... 544.5 544.5 84.0
Other noncurrent assets ....................... 114.3 -- --
-------- -------- --------
Total...................................... $2,494.2 $1,693.1 $1,259.8
======== ======== ========
LIABILITIES AND GROUP EQUITY
Current liabilities
Current maturities of long-term debt ........ $ 42.5 $ -- $ --
Accounts payable............................. 20.2 17.8 --
Advance from the FON Group................... 410.0 -- --
Payable to Sprint Spectrum Holdings.......... 47.1 19.0 --
Accrued expenses and other current
liabilities................................. 7.3 20.8 --
-------- -------- --------
Total current liabilities.................. 527.1 57.6 --
Construction obligations....................... 429.0 -- --
Capital lease obligations...................... 388.2 -- --
Deferred income taxes and other liabilities.... 318.9 249.6 72.2
Group equity................................... 831.0 1,385.9 1,187.6
-------- -------- --------
Total...................................... $2,494.2 $1,693.1 $1,259.8
======== ======== ========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-64
<PAGE>

PCS GROUP

COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ----------------------------
1998 1997 1997 1996 1995
-------- -------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss..................... $ (471.8) $ (257.3) $ (419.1) $ (119.7) $ (19.9)
Adjustments to reconcile net
loss to net cash provided
(used) by operating
activities:
Equity in net losses of
affiliates................ 686.5 410.6 659.6 191.8 31.4
Depreciation and
amortization.............. 1.8 -- -- -- --
Deferred income taxes...... 56.9 191.2 175.7 64.2 8.0
Current tax benefit
utilized by the FON Group. (351.6) (351.9) (434.7) (136.8) (19.5)
Changes in assets and
liabilities:
Prepaid expenses and
other current assets.... (29.9) (2.2) (2.9) -- --
Accounts payable and
other current
liabilities............. 17.0 35.4 57.6 -- --
Noncurrent assets and
liabilities, net........ (101.9) -- 1.3 -- --
-------- -------- --------- -------- -------
Net cash provided (used) by
operating activities........ (193.0) 25.8 37.5 (0.5) --
-------- -------- --------- -------- -------
INVESTING ACTIVITIES
Capital expenditures......... (672.1) (68.2) (153.7) -- --
Purchase of PCS licenses..... -- (460.1) (460.1) (84.0) --
Investments in and loans to
Sprint Spectrum Holdings and
PhillieCo................... (193.5) (255.5) (405.9) (297.5) (910.9)
-------- -------- --------- -------- -------
Net cash used by investing
activities.................. (865.6) (783.8) (1,019.7) (381.5) (910.9)
-------- -------- --------- -------- -------
FINANCING ACTIVITIES
Advance from the FON Group... 410.0 -- -- -- --
Contributions from (to) the
FON Group................... (124.6) 406.1 547.5 245.2 891.4
Current tax benefit utilized
by the FON Group............ 351.6 351.9 434.7 136.8 19.5
Change in construction
obligations................. 429.0 -- -- -- --
Other........................ (7.4) -- -- -- --
-------- -------- --------- -------- -------
Net cash provided by
financing activities........ 1,058.6 758.0 982.2 382.0 910.9
-------- -------- --------- -------- -------
INCREASE (DECREASE) IN CASH
AND EQUIVALENTS............. -- -- -- -- --
CASH AND EQUIVALENTS AT
BEGINNING OF PERIOD......... -- -- -- -- --
-------- -------- --------- -------- -------
CASH AND EQUIVALENTS AT END
OF PERIOD................... $ -- $ -- $ -- $ -- $ --
======== ======== ========= ======== =======
NONCASH INVESTING AND
FINANCING ACTIVITIES
Assets acquired under a
capital lease obligation.... $ 438.1 $ -- $ -- $ -- $ --
======== ======== ========= ======== =======
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-65
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS

1. RECAPITALIZATION PLAN

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Combination and Presentation

The Combined Financial Statements of the PCS Group together with the
Combined Financial Statements of the FON Group (the "Groups") comprise all of
the accounts included in the corresponding Consolidated Financial Statements
of Sprint. The entities which comprise the PCS Group are commonly controlled
companies. Investments in entities in which the PCS Group exercises
significant influence, but does not control, are accounted for using the
equity method (see Note 3). The separate Group Combined Financial Statements
give effect to the accounting policies that will be applicable upon
implementation of the PCS Restructuring. The separate Groups' Combined
Financial Statements have been prepared on a basis that management believes to
be reasonable and appropriate and include: (i) the combined historical balance
sheets, results of operations and cash flows of the businesses that comprise
each of the Groups with all significant intragroup amounts and transactions
eliminated and (ii) in the case of the FON Group Combined Financial
Statements, corporate assets and liabilities and related transactions of
Sprint. Transactions between the PCS Group and the FON Group have not been
eliminated.

The Combined Financial Statements of the PCS Group provide holders of PCS
Stock with financial information regarding the underlying businesses of the
PCS Group. Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and stockholders' equity between the PCS Group and the
FON Group for the purpose of preparing the respective financial statements of
such Groups, investors in PCS Stock and FON Stock are stockholders of Sprint
and are subject to risks associated with an investment in a single company and
all of Sprint's businesses, assets and liabilities. Sprint retains all
beneficial ownership and control of the assets and operations of the FON Group
and, after the PCS Restructuring, the PCS Group (subject to a minority
interest). Financial effects arising from either Group that affect Sprint's
results of operations or financial condition could affect the results of
operations or financial position of the other Group or market price of the
class of common stock relating to the other Group. Any net losses of the PCS
Group or the FON Group, and dividends or distributions on, or repurchases of,
PCS Stock or FON Stock, will reduce the funds of Sprint legally available for
payment of dividends on both the PCS Stock and the FON Stock. Accordingly, the
PCS Group Combined Financial Statements should be read in conjunction with
Sprint's Consolidated Financial Statements and the FON Group Combined
Financial Statements.

F-66
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The PCS Group Combined Financial Statements are prepared according to
generally accepted accounting principles ("GAAP"). These principles require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.

Classification of Operations

The PCS Group includes Sprint's domestic wireless mobile telephony
activities and any other domestic PCS services, which includes (i) the
investment in Sprint Spectrum Holdings and the investment in PhillieCo, both
of which are reflected on the equity basis and (ii) SprintCom. Upon completion
of the PCS Restructuring, the results of Sprint Spectrum Holdings and
PhillieCo will be reflected on a consolidated basis in the PCS Group Combined
Financial Statements.

Sprint Spectrum Holdings, PhillieCo and SprintCom are building the nation's
first single-technology, all digital, state-of-the-art wireless network to
provide PCS across the United States operating on one frequency. PCS uses
digital technology, which has sound quality superior to analog cellular
technology and is less susceptible to interference and eavesdropping. PCS also
offers features such as voicemail and Caller ID.

Earnings Per Share

Historical earnings per share are omitted from the Combined Statements of
Operations because the PCS Stock was not part of the capital structure of
Sprint for the periods presented. See the Sprint Consolidated Financial
Statements for information regarding earnings per share based on Sprint's
existing capital structure. Following implementation of the PCS Restructuring,
the method of calculating earnings per share for the PCS Group will reflect
the terms of the proposed amendments to Sprint's articles of incorporation.
Earnings per share will be computed by dividing the net income or loss of the
PCS Group by the weighted average number of shares of PCS Stock and dilutive
securities, such as warrants and options, outstanding during the applicable
period.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost and consists primarily of
construction work in progress. Generally, ordinary asset retirements and
disposals are charged against accumulated depreciation with no gain or loss
recognized. Repairs and maintenance costs are expensed as incurred. Once
operations of SprintCom commence, property, plant and equipment will be
depreciated on a straight-line basis over their estimated economic useful
lives. The PCS Group expects to launch service in certain of the SprintCom
markets during the third quarter of 1998.

Investment in PCS Licenses

The PCS Group has acquired licenses from the Federal Communications
Commission ("FCC") to operate as a PCS service provider. These licenses are
recorded at cost and will be amortized over a 40-year period commencing with
the initiation of service in a specific geographic area. The FCC grants
licenses for terms of up to ten years, and generally grants renewals for
additional 10-year terms if the licensee has complied with its license
obligations. The PCS Group believes it will be able to secure renewal of the
PCS licenses that are held by the entities comprising the PCS Group. The PCS
Group expects to launch service in certain of the SprintCom markets during the
third quarter of 1998.

F-67
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

The PCS Group records deferred income taxes based on certain temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and amounts used for tax purposes.

The operations of the PCS Group are included in the consolidated federal
income tax return of Sprint. The PCS Group's federal income tax represents the
difference between the Sprint consolidated federal income tax and the FON
Group's federal income tax. The related current tax benefits generated from
the inclusion of the PCS Group operating losses in the Sprint consolidated
federal income tax return have been reflected as contributions from the FON
Group to the PCS Group in the PCS Group combined statements of cash flow. The
PCS Group's state tax is computed using a methodology consistent with that
used to compute federal income tax.

Capitalized Interest

Sprint capitalized interest costs related to its investments in Sprint
Spectrum Holdings and PhillieCo until July 1997, at which time Sprint Spectrum
Holdings and PhillieCo no longer qualified as development-stage companies.
Amounts capitalized totaled $46 million, $96 million, and $43 million at
December 31, 1997, 1996, and 1995, respectively. The capitalized interest on
the investments in Sprint Spectrum Holdings and PhillieCo was contributed to
and is being amortized by the PCS Group.

In addition, Sprint capitalizes interest costs associated with the network
buildout of SprintCom. Interest capitalized for the year ended December 31,
1997 was $24 million. Such interest was also contributed to and will be
amortized by the PCS Group.

3. INVESTMENTS IN SPRINT SPECTRUM HOLDINGS AND PHILLIECO

Sprint has a 40% interest in Sprint Spectrum Holdings and a 47.1% interest
in PhillieCo, respectively. These investments are accounted for using the
equity method. Combined, summarized financial information (100% basis) of
these entities is as follows (in millions):

<TABLE>
<CAPTION>
NINE MONTHS AT OR FOR THE
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------
1998 1997 1997 1996 1995
--------- --------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Results of operations
Net operating
revenues............. $ 788.0 $ 110.5 $ 258.0 $ 4.2 $ --
========= ========= ========= ======== =======
Operating loss........ $(1,455.8) $ (869.0) $(1,379.7) $ (357.6) $ (66.9)
========= ========= ========= ======== =======
Net loss.............. $(1,692.0) $(1,021.5) $(1,632.7) $ (444.6) $(112.7)
========= ========= ========= ======== =======
Financial position
Current assets........ $ 417.9 $ 401.8
Noncurrent assets..... 6,640.0 4,041.8
--------- --------
Total................. $ 7,057.9 $4,443.6
========= ========
Current liabilities... $ 834.5 $ 471.2
Noncurrent
liabilities.......... 4,289.4 1,412.5
Partners' equity...... 1,934.0 2,559.9
--------- --------
Total................. $ 7,057.9 $4,443.6
========= ========
</TABLE>

F-68
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

4. INCOME TAXES

Income tax benefit consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Current income tax benefit
Federal...................................... $(414.1) $(122.8) $(16.3)
State........................................ (20.6) (14.0) (3.2)
------- ------- ------
Total current.................................. (434.7) (136.8) (19.5)
------- ------- ------
Deferred income tax expense (benefit)
Federal...................................... 187.0 59.4 5.8
State........................................ (11.3) 4.8 2.2
------- ------- ------
Total deferred................................. 175.7 64.2 8.0
------- ------- ------
Total income tax benefit....................... $(259.0) $ (72.6) $(11.5)
======= ======= ======
</TABLE>

The differences that caused the effective income tax rates to vary from the
statutory federal rate of 35% were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Income tax benefit at the statutory rate........ $(237.3) $(67.3) $(11.0)
Effect of
State income taxes, net of federal income tax
effect....................................... (20.7) (6.0) (0.7)
Other, net.................................... (1.0) 0.7 0.2
------- ------ ------
Income tax benefit.............................. $(259.0) $(72.6) $(11.5)
======= ====== ======
Effective income tax rate....................... 38.2% 37.8% 36.6%
======= ====== ======
</TABLE>

The PCS Group recognizes deferred income taxes for the temporary differences
between the carrying amounts of its assets and liabilities for financial
statement purposes and their tax bases and for its share of similar temporary
differences of Sprint Spectrum Holdings and PhillieCo. The sources of the
differences that give rise to the deferred income tax assets and liabilities
at December 31, 1997 and 1996, along with the income tax effect of each, were
as follows:

<TABLE>
<CAPTION>
1997 DEFERRED 1996 DEFERRED
INCOME TAX INCOME TAX
------------------ ------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Property, plant and equipment.......... $ -- $183.0 $ -- $28.5
Capitalized interest................... -- 83.6 -- 55.8
Reserves and allowances................ 8.2 -- 2.2 --
Operating loss carryforwards........... 24.1 -- 8.9 --
Other, net............................. -- 13.6 1.0 --
----- ------ ----- -----
Total.................................. $32.3 $280.2 $12.1 $84.3
===== ====== ===== =====
</TABLE>

Management believes it is more likely than not that the deferred income tax
asset will be realized based on current income tax laws and expectations of
future taxable income stemming from the reversal of the existing

F-69
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

deferred tax liability. Uncertainties surrounding income tax law changes,
shifts in operations between state taxing jurisdictions, and future operating
income levels may, however, affect the ultimate realization of all or some of
this deferred income tax asset.

At December 31, 1997, the PCS Group had recorded tax benefits of $37 million
related to state operating loss carryforwards. The loss carryforwards expire
in varying amounts per year from 2000 through 2012.

5. PCS GROUP EQUITY

Following is a reconciliation of the PCS Group's equity (in millions):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER YEAR ENDED
30, DECEMBER 31,
------------------ --------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period..................... $1,385.9 $1,187.6 $1,187.6 $ 965.8 $ 51.1
Net loss.................... (471.8) (257.3) (419.1) (119.7) (19.9)
Contributions from the FON
Group...................... 268.5 804.3 1,052.1 478.3 954.1
Equity transfers to the FON
Group...................... (351.6) (351.9) (434.7) (136.8) (19.5)
-------- -------- -------- -------- ------
Balance at end of period.... $ 831.0 $1,382.7 $1,385.9 $1,187.6 $965.8
======== ======== ======== ======== ======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

Litigation, Claims and Assessments

The holders of PCS Stock will be stockholders of Sprint and will continue to
be subject to all of the risks associated with an investment in Sprint,
including any legal proceedings and claims affecting the FON Group.

Various suits arising in the ordinary course of business are pending against
Sprint. Management cannot predict the final outcome of these actions but
believes they will not result in a material effect on the PCS Group's Combined
Financial Statements.

Commitments

In the third and fourth quarters of 1997, SprintCom entered into procurement
and services contracts with Motorola and Nortel, respectively, for equipment,
software and certain engineering services. These contracts provide for an
initial term of five years with renewals for additional one-year periods.
Pricing for the initial equipment, software and engineering services has been
established in the procurement contracts. The procurement contracts provide
for payment terms based on delivery dates and various acceptance milestones.
In the event of delay in delivering equipment or services, the procurement
contracts provide for certain amounts to be paid to SprintCom by the vendor.
The minimum commitments for the initial term are approximately $300 million
and $200 million for Motorola and Nortel, respectively, for PCS CDMA 1900 MHz
equipment and software.

Sprint and the Cable Parents have agreed to loan up to $400 million, based
on respective ownership interests, to fund the capital requirements of Sprint
Spectrum Holdings from the date of the signing of the Restructuring Agreement
through the closing date of the PCS Restructuring. The PhillieCo Partners have
agreed to lend up to $50 million to PhillieCo to fund operating and working
capital requirements and capital expenditures prior to closing. Sprint has
also agreed to loan up to $110.6 million to fund SprintCom's capital
requirements during the same period. Sprint has been financing SprintCom with
cash from operations, commercial paper borrowings and leases on specific
equipment. Sprint intends to continue to fund the buildout of the SprintCom
markets through the closing of this transaction. The above mentioned loans to
Sprint Spectrum Holdings and SprintCom totaling $510.6 million, may be repaid
from the proceeds of an anticipated IPO, but only to the extent the net
proceeds of the IPO exceed $500 million. It is Sprint's intent to complete the
IPO concurrently with the PCS Restructuring.

F-70
<PAGE>

PCS GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

There can be no assurance that the IPO will occur. In the event the loans
remain outstanding after the IPO, the remaining balance will be converted into
10-year preferred stock convertible into PCS Stock (or, in the case or Sprint,
a preferred inter-group interest.)

Operating Leases

Minimum rental commitments at December 31, 1997 for all non-cancelable
operating leases, consisting mainly of leases for cell and switch sites and
office space, are as follows (in millions):

<TABLE>
<S> <C>
1998................................................................ $18.9
1999................................................................ 13.3
2000................................................................ 13.4
2001................................................................ 13.4
2002................................................................ 8.0
Thereafter.......................................................... 5.1
</TABLE>

Gross rental expense aggregated $4 million for the year ended December 31,
1997. Certain cell and switch site leases contain renewal options (generally
for terms of five years) that may be exercised from time to time and are
excluded from the above amounts.

7. ADDITIONAL FINANCIAL INFORMATION

Related Party Transactions

Sprint Spectrum L.P. provides general management, engineering, procurement,
accounting and other related services to SprintCom. Sprint Spectrum L.P. is
currently building out the network infrastructure in certain BTA markets where
SprintCom was awarded licenses. For the year ended December 31, 1997, Sprint
Spectrum L.P. provided $29 million in services to SprintCom, the majority of
which are capitalized as property, plant and equipment within the Combined
Balance Sheets of the PCS Group.

Certain members of the FON Group provide management, printing/mailing and
warehousing services to the PCS Group. Charges to the PCS Group for such
services totaled $17 million, $12 million, and $3 million, for the years ended
December 31, 1997, 1996 and 1995, respectively.

8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This new standard
requires companies to disclose segment data based on how management makes
decisions about allocating resources to segments and how it measures segment
performance. SFAS 131 requires companies to disclose a measure of segment
profit or loss (operating income, for example), segment assets, and
reconciliations to consolidated totals. It also requires entity-wide
disclosures about a company's products and services, its major customers and
the material countries in which it holds assets and reports revenues. Sprint
will adopt SFAS 131 in its December 31, 1998 financial statements. This
statement is not expected to have a significant effect on the PCS Group, as it
only operates within one segment under the new standard.

9. SUBSEQUENT EVENTS (UNAUDITED)

Subsequent to December 31, 1997, SprintCom entered into leveraged lease
arrangements for certain telecommunications equipment. The leveraged leases
are accounted for as capital leases. Lease obligations of $438 million have
been recorded under these arrangements as of September 30, 1998. The PCS Group
has also increased its construction obligations by $429 million since December
31, 1997.

F-71
<PAGE>

PCS GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements
are presented to give effect to (1) the PCS Restructuring, whereby Sprint will
acquire the joint venture interests of the Cable Parents in Sprint Spectrum
Holdings and the joint venture interests of TCI and Cox in PhillieCo, in
exchange for shares of Series 2 PCS Stock, and the exercise of equity purchase
rights by FT and DT in connection with the PCS Restructuring and (2) the tax-
free Recapitalization of Sprint's common stock to be effected by reclassifying
each share of Sprint's Existing Common Stock into 1/2 share of Series 1 PCS
Stock and one share of Series 1 FON Stock and by reclassifying each share of
Class A common stock so that each share represents an equity interest in the
FON Group and an equity interest in the PCS Group, together with a right to
cause Sprint to initially issue one share of Series 3 FON Stock and 1/2 share
of Series 3 PCS Stock. The acquisitions of the Cable Parents' interests in
Sprint Spectrum Holdings and PhillieCo will be accounted for using the
purchase method of accounting. The pro forma condensed combined financial
statements included herein do not give effect to the Notes offering or the IPO
of Series 1 PCS Stock.

The unaudited pro forma condensed combined statements of operations include
the historical results of the PCS Group and the historical combined results of
Sprint Spectrum Holdings and PhillieCo for the year ended December 31, 1997
and the nine months ended September 30, 1998, and include the effect of the
PCS Restructuring, the exercise of equity purchase rights by FT and DT in
connection with the PCS Restructuring and the Recapitalization as though such
transactions had occurred on January 1, 1997. The unaudited pro forma
condensed combined balance sheet is based upon the historical balance sheet of
the PCS Group and the historical combined balance sheet of Sprint Spectrum
Holdings and PhillieCo as of September 30, 1998. The historical balance sheet
amounts have been adjusted to reflect the PCS Restructuring, the exercise of
equity purchase rights by FT and DT in connection with the PCS Restructuring
and the Recapitalization as though such transactions had occurred on September
30, 1998. The historical PCS Group amounts include Sprint's investment in
Sprint Spectrum Holdings and its investment in PhillieCo, both of which are
reflected on the equity basis, and SprintCom.

The pro forma condensed combined statements of operations are not
necessarily indicative of what actual results of operations would have been
had the transactions occurred at the beginning of the periods presented nor do
they purport to indicate the results of future operations. The unaudited pro
forma condensed combined financial statements should be read in conjunction
with the historical financial statements of the PCS Group and the historical
combined financial statements of Sprint Spectrum Holdings and PhillieCo
included elsewhere in this Prospectus Supplement.

F-72
<PAGE>

PCS GROUP

PRO FORMA CONDENSED COMBINED BALANCE SHEET

SEPTEMBER 30, 1998
(Unaudited, in millions)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------
HISTORICAL
COMBINED
SPRINT
SPECTRUM
HISTORICAL HOLDINGS AND PCS
PCS GROUP PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------ ------------- ---------------- ---------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets
Cash and equivalents...... $ -- $ 325.3 $ 325.3
Accounts receivable, net.. -- 195.3 $ (47.1) C 148.2
Inventories............... -- 177.8 177.8
Other..................... 32.8 44.1 76.9
-------- -------- -------- ---------
Total current assets...... 32.8 742.5 (47.1) 728.2
Property, plant and
equipment, net............ 1,327.2 4,531.9 5,859.1
Investments in Sprint
Spectrum Holdings and
PhillieCo ................ 475.4 -- (293.4) B --
(182.0) B
Intangibles, net
PCS licenses.............. 544.5 2,829.1 3,373.6
Customer base............. -- -- 500.0 A 500.0
Goodwill.................. -- -- 3,127.6 A 3,127.6
Other assets............... 114.3 422.9 182.0 B 717.2
(2.0) F
-------- -------- -------- ------- ---------
Total...................... $2,494.2 $8,526.4 $3,285.1 $ -- $14,305.7
======== ======== ======== ======= =========
<CAPTION>
LIABILITIES AND
GROUP EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities
Current maturities of
long-term debt........... $ 42.5 $ 124.5 $ 167.0
Partner advances.......... -- 185.0 185.0
Accounts payable.......... 20.2 287.1 307.3
Advance from the FON
Group.................... 410.0 -- $ (110.6) E 299.4
Payable to Sprint Spectrum
Holdings................. 47.1 -- (47.1) C --
Accrued expenses and other
current liabilities...... 7.3 476.4 483.7
-------- -------- -------- ---------
Total current liabilities. 527.1 1,073.0 (157.7) 1,442.4
Construction obligations... 429.0 575.7 1,004.7
Long-term debt............. 388.2 6,001.2 60.5 A 6,367.6
(82.3) D
Deferred income taxes and
other liabilities......... 318.9 84.9 443.0 A 846.8
Limited partner interest in
consolidated subsidiary .. -- 65.8 65.8
Group equity............... 831.0 725.8 3,124.1 A 4,578.4
(293.4) B
82.3 D
510.6 E
(400.0) E
(2.0) F
-------- -------- -------- ------- ---------
Total...................... $2,494.2 $8,526.4 $3,285.1 $ -- $14,305.7
======== ======== ======== ======= =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-73
<PAGE>

PCS GROUP

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
HISTORICAL
COMBINED
SPRINT PRO FORMA ADJUSTMENTS
SPECTRUM ------------------------------
HISTORICAL HOLDINGS AND PCS
PCS GROUP PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------ ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
NET OPERATING REVENUES.. $ -- $ 787.9 $ 787.9
OPERATING EXPENSES
Costs of services and
products............... -- 783.0 783.0
Selling, general and
administrative......... 78.2 931.6 1,009.8
Depreciation and
amortization........... 1.8 529.2 $ 5.2 G 719.8
58.6 H
125.0 I
------- --------- ------- ---------
Total operating ex-
penses................. 80.0 2,243.8 188.8 2,512.6
------- --------- ------- ---------
OPERATING LOSS.......... (80.0) (1,455.9) (188.8) (1,724.7)
Interest expense........ -- (358.3) 5.1 J (288.3)
60.1 K
4.8 L
Equity in loss of Sprint
Spectrum Holdings and
PhillieCo.............. (686.5) -- 681.3 G --
5.2 G
Other income............ -- 23.2 23.2
Minority interest ...... -- 99.0 99.0
------- --------- ------- ---------
Loss before income
taxes.................. (766.5) (1,692.0) 567.7 (1,890.8)
Income tax benefit...... 294.7 -- 399.0 M 715.3
21.6 N
------- --------- ------- ---------
NET LOSS................ (471.8) (1,692.0) 988.3 (1,175.5)
Preferred stock divi-
dends.................. -- -- (11.5)O (11.5)
------- --------- ------- ---------
Loss applicable to com-
mon stock.............. $(471.8) $(1,692.0) $ 976.8 $(1,187.0)
======= ========= ======= =========
BASIC AND DILUTED LOSS
PER
COMMON SHARE........... $ (2.86)
=========
Weighted average common
shares................. 415.4 P
=========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-74
<PAGE>

PCS GROUP

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(Unaudited, in millions, except per share data)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
HISTORICAL
COMBINED
SPRINT
SPECTRUM
HISTORICAL HOLDINGS AND PCS
PCS GROUP PHILLIECO RESTRUCTURING RECAPITALIZATION PRO FORMA
---------- ------------ ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
NET OPERATING REVENUES.. $ -- $ 258.0 $ 258.0
OPERATING EXPENSES
Costs of services and
products............... -- 574.3 574.3
Selling, general and ad-
ministrative........... 18.5 747.1 765.6
Depreciation and amorti-
zation................. -- 316.3 $ 3.5 G 564.7
78.2 H
166.7 I
------- --------- ------ ---------
Total operating ex-
penses................. 18.5 1,637.7 248.4 1,904.6
------- --------- ------ ---------
OPERATING LOSS.......... (18.5) (1,379.7) (248.4) (1,646.6)
Interest expense........ -- (123.5) 7.5 J (88.6)
21.0 K
6.4 L
Equity in loss of Sprint
Spectrum Holdings and
PhillieCo.............. (659.6) -- 656.1 G --
3.5 G
Equity in loss of
unconsolidated
partnership............ -- (168.9) (168.9)
Other income............ -- 39.4 39.4
------- --------- ------ ---------
Loss before income tax-
es..................... (678.1) (1,632.7) 446.1 (1,864.7)
Income tax benefit...... 259.0 -- 383.1 M 693.9
51.8 N
------- --------- ------ ---------
NET LOSS................ (419.1) (1,632.7) 881.0 (1,170.8)
Preferred stock divi-
dends.................. -- -- (15.3)O (15.3)
------- --------- ------ --- ---------
Loss applicable to com-
mon stock.............. $(419.1) $(1,632.7) $865.7 $(1,186.1)
======= ========= ====== === =========
BASIC AND DILUTED LOSS
PER COMMON SHARE....... $ (2.86)
=========
Weighted average common
shares................. 415.1 P
=========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.

F-75
<PAGE>

PCS GROUP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following adjustments have been made in the preparation of the unaudited
pro forma condensed combined financial statements:

Pro Forma Balance Sheet Adjustments

A To record the purchase of the remaining 60% of Sprint Spectrum Holdings and
52.9% of PhillieCo. The consideration given in connection with the purchase
will be shares of Series 2 PCS Stock and warrants to purchase additional
shares of Series 2 PCS Stock. The preliminary purchase price is based on
the estimated market value of the PCS Group and will be updated at the time
of the PCS Restructuring. The market value of the PCS Group will be
determined based on the market value of the securities issued in the
Recapitalization. The excess of the purchase price over the fair value of
net assets to be acquired has been preliminarily calculated as follows (in
millions):

<TABLE>
<S> <C>
Preliminary purchase price..................................... $3,290.0
Transaction costs.............................................. 26.5
Net assets to be acquired...................................... (192.4)
Customer base.................................................. (500.0)
Step-up in long-term debt to fair value........................ 60.5
Deferred taxes on acquired assets and liabilities.............. 443.0
--------
Goodwill....................................................... $3,127.6
========
</TABLE>

The carrying amounts of the assets to be acquired and liabilities to be
assumed are assumed for purposes of the preliminary purchase price
allocation to approximate fair market value, except for certain long-term
debt of Sprint Spectrum that has been recorded at fair value. A portion of
the purchase price was attributed to the customers acquired in the Sprint
Spectrum Holdings and PhillieCo acquisitions. In addition, deferred taxes
have been recorded for the difference in the book and tax bases of the
assets acquired and liabilities assumed. Cash to fund the transaction costs
will be contributed by the FON Group to the PCS Group. The above
assumptions as to the fair value of the net assets acquired are based upon
information available at the time of the preparation of these pro forma
condensed combined financial statements.

A final allocation of the purchase price to the assets acquired and
liabilities assumed is dependent on a study and analysis of the fair value
of such assets and liabilities, including such items as the PCS licenses
and in-process research and development projects, as well as the size of
the customer base at the closing date. Management expects the only
assumptions that could potentially be subject to material change are those
regarding customer base and in-process research and development. The amount
of the purchase price allocated to the customer base in the pro forma
condensed combined financial statements is based on the size of the
customer base at September 30, 1998. To the extent the customer base at the
closing date exceeds the size of the customer base at September 30, 1998,
the purchase price allocated to the customer base will likely increase
along with a corresponding increase in the amortization of the customer
base. Based on current projections of an increase in the customer base at
November 30, 1998, pro forma net loss for the nine months ended September
30, 1998 and the year ended December 31, 1997 would be $1,187.2 million and
$1,186.5 million, respectively, and the respective loss per share would be
$2.89 and $2.90 for the same periods. Sprint is undertaking an analysis to
determine whether in-process research and development projects acquired in
the PCS Restructuring should be capitalized or expensed. This analysis is
expected to be finalized prior to the completion of the final purchase
price allocation. To the extent that it is determined through this analysis
that some of the in-process research and development projects should be
expensed, a portion of the purchase price will be allocated to these in-
process research and development projects and a nonrecurring, noncash
charge will be recognized in the period in which the charge occurs. Sprint
is unable

F-76
<PAGE>

PCS GROUP
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

to determine the potential amount of such a charge at this time. However,
such a charge could be material to the PCS Group's results of operations
for the period in which the charge occurs. Such a write-off would reduce
the amount of purchase price allocated to goodwill, which would result in
lower amortization expense being recognized over the life assigned to the
goodwill. Such a write-off would not impact future cash flows. At the
present time, Sprint anticipates completing its final purchase price
allocation prior to year-end 1998.

B To eliminate the PCS Group's historical investment in Sprint Spectrum
Holdings and PhillieCo, accounted for by the PCS Group on the equity method
of accounting ($293.4 million), and to reclassify interest capitalized as
part of that investment to other assets ($182.0 million).

C To eliminate the PCS Group's payable to Sprint Spectrum Holdings.

D To record the exercise of equity purchase rights by FT and DT. As a result
of the issuance of Series 2 PCS Stock to the Cable Parents in exchange for
their interests in Sprint Spectrum Holdings and PhillieCo, the sale of
these additional shares is required in order for FT and DT to maintain
their combined 20% voting interest in Sprint. The proceeds are assumed to
reduce the long-term debt of Sprint Spectrum Holdings.

E To reflect PCS Preferred Stock ($240.0 million) and Preferred Inter-Group
Interest ($270.6 million) issued to the Cable Parents and the FON Group,
respectively, in exchange for funding provided between the date of the
Restructuring Agreement (May 26, 1998) and September 30, 1998. See "The
Tracking Stock Proposal--Funding of the PCS Group Prior to Closing; The PCS
Preferred Stock" in the Proxy Statement/Prospectus incorporated by
reference into the accompanying Prospectus.

F To write off deferred financing costs associated with the assumed repayment
of Sprint Spectrum Holdings debt with proceeds from the exercise of equity
purchase rights by FT and DT in connection with the PCS Restructuring.

Pro Forma Statement of Operations Adjustments

G To eliminate Sprint's equity in the losses of Sprint Spectrum Holdings and
PhillieCo, historically accounted for by the PCS Group on the equity method
of accounting ($681.3 million for the nine months ended September 30, 1998
and $656.1 million for the year ended December 31, 1997). The amortization
of interest previously capitalized on the investment in Sprint Spectrum
Holdings and PhillieCo has been reclassified to depreciation and
amortization expense ($5.2 million for the nine months ended September 30,
1998 and $3.5 million for the year ended December 31, 1997).

H To reflect the amortization of the goodwill recorded in connection with the
purchase of the remaining interests in Sprint Spectrum Holdings and
PhillieCo, which is being amortized over 40 years. The goodwill associated
with the acquisition of the remaining interests in Sprint Spectrum Holdings
and PhillieCo is directly related to both the acquisition of the PCS
licenses and the ongoing ability of the businesses to provide wireless
telecommunications services using these licenses. The 40-year life for
goodwill is consistent with the 40-year amortization period being used for
the PCS licenses.

I To reflect the amortization of the customer base recorded in connection
with the purchase of the remaining interests in Sprint Spectrum Holdings
and PhillieCo, which is being amortized over three years.

J To record a reduction in interest expense and amortization of deferred
financing costs as a result of the assumed repayment of Sprint Spectrum
Holdings debt with the proceeds from the exercise of equity purchase rights
by FT and DT in connection with the PCS Restructuring. The APC senior
secured facilities, which had weighted-average interest rates of 7.89% for
the nine months ended September 30, 1998 and 8.70% for the year ended
December 31, 1997, are assumed to be repaid with these proceeds.

F-77
<PAGE>

PCS GROUP
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

K To reduce interest expense resulting from the tax sharing agreement between
the PCS Group and the FON Group. Under this agreement, the FON Group will
"pay" the PCS Group for the use of its current tax benefits that the FON
Group is able to utilize, thereby providing funds to the PCS Group and
reducing the PCS Group's required borrowings. The computation of the
current tax benefit is performed on a quarterly basis and the resulting
amount is applied to reduce the debt balance and, therefore, interest
expense, from that date forward. Interest expense is computed using the
weighted-average interest rate on the debt assumed to be repaid, or not
incurred, as appropriate. Such debt would have amounted to $1,271.3 million
and $727.3 million as of September 30, 1998 and December 31, 1997,
respectively.

L To reflect the amortization of the purchase price adjustment related to
long-term debt (see Note A).

M To record the income tax benefit, using the statutory income tax rate,
relating to the consolidation of the remaining interests in Sprint Spectrum
Holdings and PhillieCo.

N To record the impact on income taxes of pro forma adjustments I through L
using the statutory income tax rate.

O To reflect dividends at an assumed annual rate of 3% on PCS Preferred Stock
and Preferred Inter-Group Interest issued to the Cable Parents and the FON
Group, respectively. As of September 30, 1998, $510.6 million of funding by
the Cable Parents and the FON Group between the date of the Restructuring
Agreement (May 26, 1998) and September 30, 1998 was assumed to be exchanged
for shares of PCS Preferred Stock or Preferred Inter-Group Interest. For a
discussion of how the actual dividend rate will be determined, see
"Description of Capital Stock--Description of PCS Preferred Stock;
Preferred Inter-Group Interest" in the Proxy Statement/Prospectus
incorporated by reference into the accompanying Prospectus.

P The weighted average common shares outstanding reflect (1) the issuance of
Series 2 PCS Stock to the Cable Parents in the PCS Restructuring (195.1
million shares), (2) the Recapitalization of Sprint's Existing Common Stock
into 1/2 share of Series 1 PCS Stock, including the PCS Stock attributes of
the Class A common stock (215.4 million shares for the nine months ended
September 30, 1998 and 215.1 million shares for the year ended December 31,
1997) and (3) the exercise of equity purchase rights by FT and DT in
connection with the PCS Restructuring (4.9 million shares).

F-78
<PAGE>

INDEPENDENT AUDITORS' REPORT

Partners of Sprint Spectrum Holding Company, L.P., MinorCo, L.P., PhillieCo
Partners I, L.P. and PhillieCo
Partners II, L.P.
Kansas City, Missouri

We have audited the accompanying combined balance sheets of Sprint Spectrum
Holding Company, L.P. and subsidiaries, MinorCo, L.P. and subsidiaries,
PhillieCo Partners I, L.P. and subsidiaries, and PhillieCo Partners II, L.P.
and subsidiaries (the "Partnerships") as of December 31, 1997 and 1996, and
the related combined statements of operations, changes in partners' capital,
and cash flows for the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Partnerships at December 31,
1997 and 1996, and the results of their operations and their cash flows for
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

The Partnerships were in the development stage at December 31, 1996; during
the year ended December 31, 1997, the Partnerships completed their development
activities and commenced their planned principal operations.

Deloitte & Touche LLP
Kansas City, Missouri

May 26, 1998
(August 6, 1998 as to Note 4)

F-79
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

COMBINED BALANCE SHEETS
(in thousands)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -----------------------
1998 1997 1996
------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 325,325 $ 124,886 $ 71,098
Accounts receivable, net............... 165,508 116,415 3,315
Receivable from affiliates............. 29,754 43,006 13,375
Inventory.............................. 177,859 103,894 72,414
Prepaid expenses and other assets, net. 44,077 29,648 14,951
Note receivable--unconsolidated
partnership........................... -- -- 226,670
----------- ----------- ----------
Total current assets.................. 742,523 417,849 401,823
INVESTMENT IN PCS LICENSES, net......... 2,829,087 2,386,799 2,207,903
INVESTMENTS IN UNCONSOLIDATED
PARTNERSHIP(S)......................... -- 273,541 179,086
PROPERTY, PLANT AND EQUIPMENT, net...... 4,531,850 3,538,238 1,441,627
MICROWAVE RELOCATION COSTS, net......... 325,602 271,612 135,802
MINORITY INTEREST....................... -- 56,667 --
OTHER ASSETS, net....................... 97,310 113,153 77,403
----------- ----------- ----------
TOTAL ASSETS............................ $ 8,526,372 $ 7,057,859 $4,443,644
=========== =========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Advances from partners................. $ 185,000 $ 45,000 $ 167,819
Accounts payable....................... 287,082 446,263 214,205
Payable to affiliate................... 1,648 11,933 5,626
Accrued interest....................... 95,132 59,605 34,057
Accrued expenses....................... 379,638 237,123 49,482
Current maturities of long-term debt... 124,491 34,562 49
----------- ----------- ----------
Total current liabilities............. 1,072,991 834,486 471,238
CONSTRUCTION OBLIGATIONS................ 575,725 705,280 714,934
LONG-TERM DEBT, net..................... 6,001,217 3,533,954 686,192
OTHER NONCURRENT LIABILITIES............ 84,835 50,103 11,356
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNER INTEREST IN CONSOLIDATED
SUBSIDIARY............................. 65,777 -- --
PARTNERS' CAPITAL AND ACCUMULATED
DEFICIT:
Partners' capital...................... 4,611,025 4,127,244 3,120,479
Accumulated deficit.................... (3,885,198) (2,193,208) (560,555)
----------- ----------- ----------
Total partners' capital............... 725,827 1,934,036 2,559,924
----------- ----------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL. $ 8,526,372 $ 7,057,859 $4,443,644
=========== =========== ==========
</TABLE>

See notes to combined financial statements.

F-80
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

COMBINED STATEMENTS OF OPERATIONS
(in thousands)

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
------------------------ ---------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES...... $ 787,953 $ 110,528 $ 258,029 $ 4,175 $ --
OPERATING EXPENSES:
Cost of revenues........ 783,023 308,292 574,343 36,824 --
Selling, general and
administrative......... 931,606 481,290 747,084 313,629 66,719
Depreciation and
amortization........... 529,166 189,924 316,276 11,297 211
----------- ----------- ----------- --------- ---------
Total operating
expenses............ 2,243,795 979,506 1,637,703 361,750 66,930
----------- ----------- ----------- --------- ---------
LOSS FROM OPERATIONS.... (1,455,842) (868,978) (1,379,674) (357,575) (66,930)
OTHER INCOME (EXPENSE):
Interest income........ 24,467 24,636 27,817 8,593 476
Interest expense....... (358,321) (55,568) (123,490) (323) --
Other income (expense). (1,268) 3,907 5,108 1,586 (19)
Equity in loss of
unconsolidated
partnerships.......... -- (125,455) (168,935) (96,850) (46,206)
----------- ----------- ----------- --------- ---------
Total other expense.. (335,122) (152,480) (259,500) (86,994) (45,749)
----------- ----------- ----------- --------- ---------
NET LOSS BEFORE MINORITY
INTEREST............... (1,790,964) (1,021,458) (1,639,174) (444,569) (112,679)
MINORITY INTEREST....... 98,974 -- 6,521 -- --
----------- ----------- ----------- --------- ---------
NET LOSS................ $(1,691,990) $(1,021,458) $(1,632,653) $(444,569) $(112,679)
=========== =========== =========== ========= =========
</TABLE>

See notes to combined financial statements.

F-81
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(in thousands)

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL:
Balance at beginning of
period................. $4,127,244 $3,120,479 $3,120,479 $2,391,801 $ 128,795
Contributions of
capital................ 483,781 648,728 1,018,500 728,678 2,263,006
Return of capital....... -- (11,735) (11,735) -- --
---------- ---------- ---------- ---------- ----------
Balance at end of
period................. 4,611,025 3,757,472 4,127,244 3,120,479 2,391,801
ACCUMULATED DEFICIT:
Balance at beginning of
period................. (2,193,208) (560,555) (560,555) (115,986) (3,307)
Net loss................ (1,691,990) (1,021,458) (1,632,653) (444,569) (112,679)
---------- ---------- ---------- ---------- ----------
Balance at end of
period................. (3,885,198) (1,582,013) (2,193,208) (560,555) (115,986)
---------- ---------- ---------- ---------- ----------
TOTAL PARTNERS' CAPITAL. $ 725,827 $2,175,459 $1,934,036 $2,559,924 $2,275,815
========== ========== ========== ========== ==========
</TABLE>

See notes to combined financial statements.

F-82
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net loss............... $(1,691,990) $(1,021,458) $(1,632,653) $ (444,569) $ (112,679)
Adjustments to recon-
cile net loss to net
cash provided by
(used in) operating
activities:
Equity in loss of
unconsolidated
partnership prior to
acquisition........... -- 125,455 168,935 96,850 46,206
Minority interest...... (98,974) -- (6,521) -- --
Loss on disposition of
non-network
equipment............. 2,161 -- -- -- --
Depreciation and
amortization.......... 529,166 189,924 316,854 11,278 242
Amortization of debt
discount and issuance
costs................. 40,694 35,328 49,061 14,008 --
Changes in assets and
liabilities, net of
effects of
acquisition of APC:
Receivables.......... (7,004) (83,003) (132,026) (16,350) (147)
Inventory............ (64,293) (9,374) (27,398) (72,413) --
Prepaid expenses and
other assets........ (1,120) (10,130) (12,965) (22,513) (178)
Accounts payable and
accrued expenses.... (44,798) 153,182 389,740 251,791 47,836
Other noncurrent
liabilities......... 34,733 13,652 38,747 9,500 1,856
----------- ----------- ----------- ---------- ----------
Net cash used in
operating
activities......... (1,301,425) (606,424) (848,226) (172,418) (16,864)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (1,107,684) (1,632,828) (2,124,556) (1,419,216) (31,806)
Microwave relocation
costs, net............ (45,254) (104,411) (123,816) (135,828) --
Purchase of PCS
licenses.............. -- -- -- -- (2,085,794)
Purchase of APC, net of
cash acquired......... (28,906) -- (6,764) -- --
Purchase of Cox PCS,
net of cash acquired.. (28,300) -- -- -- --
Investment in
unconsolidated
partnerships.......... -- (112,695) (191,171) (190,390) (131,752)
Loan to unconsolidated
partnership........... -- (81,114) (111,468) (231,964) (655)
Payment received on
loan to unconsolidated
partnership........... -- 246,670 246,670 5,949 --
----------- ----------- ----------- ---------- ----------
Net cash used in
investing
activities......... (1,210,144) (1,684,378) (2,311,105) (1,971,449) (2,250,007)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances from partners. 140,000 45,000 45,000 167,819 --
Net borrowing under
revolving credit
agreement............. 1,018,571 370,000 605,000 -- --
Proceeds from issuance
of long-term debt..... 1,314,242 1,327,553 1,763,045 674,200 --
Change in construction
obligations........... (183,193) 176,383 (9,654) 714,934 --
Payments on long-term
debt.................. (61,393) (169,308) (170,809) (24) --
Debt issuance costs.... -- (20,000) (20,000) (71,791) --
Partner capital
contributions......... 483,781 642,499 1,012,272 728,678 2,263,006
Return of capital...... -- (11,735) (11,735) -- --
----------- ----------- ----------- ---------- ----------
Net cash provided by
financing
activities......... 2,712,008 2,360,392 3,213,119 2,213,816 2,263,006
----------- ----------- ----------- ---------- ----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 200,439 69,590 53,788 69,949 (3,865)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 124,886 71,098 71,098 1,149 5,014
----------- ----------- ----------- ---------- ----------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 325,325 $ 140,688 $ 124,886 $ 71,098 $ 1,149
=========== =========== =========== ========== ==========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
. Interest paid, net
of amount capital-
ized................ $ 169,115 $ 12,226 $ 35,629 $ 323 $ --
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
. Accrued interest of
$139,000 and $51,673
related to vendor
financing was con-
verted to long-term
debt during the nine
months ended Septem-
ber 30, 1998 and the
year ended December
31, 1997, respec-
tively.
. A PCS license cover-
ing the Omaha MTA
and valued at $6,229
was contributed to
the Company by Cox
Communications dur-
ing the nine months
ended September 30,
1997 and the year
ended December 31,
1997.
</TABLE>
See notes to combined financial statements.

F-83
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

1. ORGANIZATION

The accompanying combined financial statements present a combination of the
consolidated financial statements of Sprint Spectrum Holding Company, L.P. and
subsidiaries, MinorCo, L.P. and subsidiaries, PhillieCo Partners I, L.P. and
subsidiaries and PhillieCo Partners II, L.P. and subsidiaries (collectively,
the "Company" or the "Partnerships") which offer services as Sprint PCS.

The unaudited interim financial information presented has been prepared
according to generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission for interim reporting.
In management's opinion, the information presented reflects all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
interim financial position, results of operations and cash flows of the
Company.

SPRINT SPECTRUM HOLDING COMPANY, L.P.--Sprint Spectrum Holding Company, L.P.
("Holdings") is a limited partnership formed in Delaware on March 28, 1995, by
Sprint Enterprises, L.P., TCI Spectrum Holdings, Inc., Cox Telephony
Partnership and Comcast Telephony Services (together the "Partners"). Holdings
was formed pursuant to a reorganization of the operations of an existing
partnership, WirelessCo, L.P. ("WirelessCo") which transferred certain
operating functions to Holdings. The Partners are subsidiaries of Sprint
Corporation ("Sprint"), Tele-Communications, Inc. ("TCI"), Cox Communications,
Inc. ("Cox"), and Comcast Corporation ("Comcast", and together with Sprint,
TCI and Cox, the "Parents"), respectively.

The Partners of Holdings and MinorCo, L.P. have the following ownership
interests as of December 31, 1997, and 1996 and September 30, 1998:

<TABLE>
<S> <C>
Sprint Enterprises, L.P.............................................. 40%
TCI Spectrum Holdings, Inc........................................... 30%
Cox Telephony Partnership............................................ 15%
Comcast Telephony Services........................................... 15%
</TABLE>

Each Partner's ownership interest consists of a 99% general partner interest
and a 1% limited partnership interest.

Holdings is the 99% general partner of, and is consolidated with, its
subsidiaries, including NewTelco, L.P. ("NewTelco") and Sprint Spectrum L.P.,
which, in turn, has several subsidiaries. Sprint Spectrum L.P.'s subsidiaries
are Sprint Spectrum Equipment Company, L.P. ("EquipmentCo"), Sprint Spectrum
Realty Company, L.P. ("RealtyCo"), Sprint Spectrum Finance Corporation
("FinCo"), and WirelessCo. On May 15, 1996, EquipmentCo was formed to lease or
own wireless communication network equipment, and RealtyCo was formed to lease
or own real property on which wireless communication facilities are to be
located. FinCo was formed on May 20, 1996 to be a co-obligor of the debt
obligations discussed in Note 5.

The results of American PCS, L.P. ("APC") are consolidated from November
1997, the date the Federal Communications Commission ("FCC") approved Holdings
as the new managing partner (Note 4). APC, through subsidiaries, owns a PCS
license for and operates a broadband GSM (global system for mobile
communications) in the Washington D.C./Baltimore Major Trading Area ("MTA"),
and has launched a code division multiple access ("CDMA") overlay for nearly
all of its existing GSM PCS system. APC includes American PCS Communications,
LLC, APC PCS, LLC, APC Realty and Equipment Company, LLC and American Personal
Communications Holdings, Inc.

As discussed in Note 4, Holdings became the managing partner of Cox
Communications PCS, L.P. ("Cox PCS") in June 1998. Cox PCS results have been
included in the combined statements of operations from January 1, 1998. Cox
PCS, through subsidiaries, holds a PCS license for and operates a PCS system
in the Los Angeles-San Diego-Las Vegas MTA. Cox PCS includes Cox PCS License,
L.L.C., Cox PCS Assets, L.L.C., and PCS Leasing Co., L.P.

F-84
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

MINORCO, L.P. ("MINORCO")--MinorCo holds the minority ownership interests of
1% in NewTelco, Sprint Spectrum L.P., EquipmentCo, RealtyCo and WirelessCo at
September 30, 1998, December 31, 1997 and 1996, and APC at September 30, 1998
and December 31, 1997.

PHILLIECO PARTNERS--The consolidated financial statements of PhillieCo
Partners I, L.P. ("PhillieCo I") and subsidiaries, included in these combined
financial statements, include the accounts of PhillieCo I and its consolidated
subsidiaries, including PhillieCo Sub, L.P. ("PhillieCo Sub") and PhillieCo,
L.P ("PhillieCo").

The consolidated financial statements of PhillieCo Partners II, L.P.
("PhillieCo II") and subsidiaries, included in these combined financial
statements, include the accounts of PhillieCo II and its minority investment
interests in PhillieCo Sub, L.P. and PhillieCo, L.P.

PhillieCo Sub was formed by PhillieCo I and PhillieCo II, both of which were
formed by Sprint Enterprises, L.P., TCI Philadelphia Holdings, Inc. and Cox
Communications Wireless, Inc. (together the "PhillieCo Partners"). PhillieCo
Sub was formed pursuant to a reorganization under which the PhillieCo Partners
transferred their ownership interests in PhillieCo, which was formed in
Delaware on October 24, 1994, to PhillieCo I and PhillieCo II. The PhillieCo
Partners are subsidiaries of Sprint, TCI and Cox, respectively.

The PhillieCo Partners have the following ownership interest as of December
31, 1997 and 1996 and September 30, 1998:

<TABLE>
<S> <C>
Sprint Enterprises, L.P............................................ 47.1%
TCI Philadelphia Holdings, Inc..................................... 35.3%
Cox Communications Wireless, Inc................................... 17.6%
</TABLE>

Each PhillieCo partner's ownership interest consists of a 99% general
partner interest and a 1% limited partnership interest.

VENTURE FORMATION AND AFFILIATED PARTNERSHIPS--A Joint Venture Formation
Agreement (the "Formation Agreement"), dated as of October 24, 1994, and
subsequently amended as of March 28, 1995, and January 31, 1996, was entered
into by the Parents, pursuant to which the Parents agreed to form certain
entities to (i) provide national wireless telecommunications services,
including acquisition and development of PCS licenses, (ii) develop a PCS
wireless system in the Los Angeles-San Diego-Las Vegas MTA, and (iii) take
certain other actions.

On October 24, 1994, WirelessCo was formed and on March 28, 1995, additional
partnerships were formed consisting of Holdings, MinorCo, NewTelco, and Sprint
Spectrum L.P. The Partners' ownership interests in WirelessCo were initially
held directly by the Partners as of October 24, 1994, the formation date of
WirelessCo, but were subsequently contributed to Holdings and then to Sprint
Spectrum L.P. on March 28, 1995.

SPRINT SPECTRUM HOLDING COMPANY, L.P. PARTNERSHIP AGREEMENT--The Amended and
Restated Agreement of Limited Partnership of MajorCo, L.P. (now known as
Holdings), dated as of January 31, 1996 (the "Holdings Agreement"), among
Sprint Enterprises, L.P., TCI Spectrum Holdings, Inc., Comcast Telephony
Services and Cox Telephony Partnership provides that the purpose of Holdings
is to engage in wireless communications services.

The Holdings Agreement generally provides for the allocation of profits and
losses according to each Partner's proportionate percentage interest, after
giving effect to special allocations. After special allocations, profits are
allocated to partners to the extent of and in proportion to cumulative net
losses previously allocated. Losses are allocated, after considering special
allocations, according to each Partner's allocation of net profits previously
allocated.

F-85
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

The Holdings Agreement provides for planned capital contributions by the
Partners ("Total Mandatory Contributions") of $4.2 billion, which includes
agreed upon values attributable to the contributions of certain additional PCS
licenses by a Partner. The Total Mandatory Contributions amount is required to
be contributed in accordance with capital contribution schedules to be set
forth in approved annual budgets. The partnership board of Holdings may
request capital contributions to be made in the absence of an approved budget
or more quickly than provided for in an approved budget, but always subject to
the Total Mandatory Contributions limit. The proposed budget for fiscal 1998
has not yet been approved by the partnership board, which has resulted in the
occurrence of a Deadlock Event (as defined) under the Holdings Agreement as of
January 1, 1998. If the 1998 proposed budget is not approved through
resolution procedures set forth in the Holdings Agreement, certain specified
buy/sell procedures may be triggered which may result in a restructuring of
the partners' interest in Holdings or, in limited circumstances, liquidation
of Holdings. See Note 10 for further discussion regarding a restructuring of
the partnership structure. As of September 30, 1998 and December 31, 1997,
approximately $4.2 billion and $4.0 billion, respectively, of the Total
Mandatory Contributions had been contributed by the Partners to Holdings and
its affiliated partnerships, of which approximately $3.3 billion had been
contributed to Sprint Spectrum L.P.

PHILLIECO PARTNERSHIP AGREEMENT--The Second Amended and Restated Agreement
of Limited Partnership of PhillieCo, L.P., (the "PhillieCo Agreement") dated
as of March 12, 1997, among PhillieCo Sub and PhillieCo II provides that the
purpose of PhillieCo is to engage in wireless communications services in the
Philadelphia MTA. The PhillieCo Agreement provides for the governance and
administration of partnership business, allocation of profits and losses
(including provisions for special and curative allocations), tax allocations,
transactions with partners, disposition of partnership interests and other
matters. The PhillieCo Agreement provides for additional capital contributions
to be made in accordance with capital contribution schedules to be set forth
in approved annual budgets.

The PhillieCo Agreement generally provides for the allocation of profits and
losses according to each Partner's proportionate percentage interest, after
giving effect to special allocations. After special allocations, profits are
allocated to partners to the extent of and in proportion to cumulative net
losses previously allocated. Losses are allocated, after considering special
allocations, according to each Partner's allocation of net profits previously
allocated.

EMERGENCE FROM DEVELOPMENT STAGE COMPANY--Prior to the third quarter of
1997, the Company reported its operations as a development stage enterprise.
The Company has commenced service in all of the MTAs in which it owns a
license. As a result, the Company is no longer considered a development stage
enterprise, and the balance sheets and statements of operations and of cash
flows are no longer presented in development stage format.

Management believes that the Company will incur additional losses in 1998
and require additional financial resources to support the current level of
operations and the remaining network buildout for the year ended December 31,
1998. Management believes the Company has the ability to obtain the required
levels of financing through additional financing arrangements or additional
equity funding from the partners.

DEADLOCK EVENT--The proposed budgets for fiscal year 1998 were not approved
by the Holdings or PhillieCo I partnership boards, which resulted in the
occurrence of a "Deadlock Event" as of January 1, 1998 under the Holdings and
PhillieCo I Partnership Agreements. Holdings is the sole general partner of
Sprint Spectrum L.P. PhillieCo I is the sole general partner of PhillieCo Sub.
Under the Holdings and PhillieCo I Partnership Agreements, if one of the
partners refers the budget issue to the chief executive officers of the
Parents for resolution pursuant to specified procedures and the issue remains
unresolved, buy/sell provisions would be triggered which may result in the
purchase by one or more of the partners of the interest of the other partners,
or, in certain circumstances, the liquidation of Holdings and PhillieCo I and
their subsidiaries. See further discussions regarding a restructuring of the
partnership structure in Note 10.

F-86
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION--The financial statements are presented on a combined
basis as the Partnerships are under common management for all periods
presented. The assets, liabilities, results of operations and cash flows of
entities in which the Company has a controlling interest have been
consolidated. All significant intercompany accounts and transactions have been
eliminated.

MINORITY INTERESTS--In November 1997, concurrent with the APC acquisition
discussed in Note 4, American Personal Communications II, L.P. ("APC II")
became the minority owner in APC. APC II has been allocated approximately $6.5
million in losses in APC since the date of acquisition. Prior to November
1997, APC II, as majority owner, had been allocated approximately $50 million
in losses in excess of its investment. At December 31, 1997, after
consolidation of APC, the total of such losses, approximately $56.7 million,
was recorded as minority interest in the Partnerships' combined balance sheet.
This treatment reflects that APC II continued to be responsible for funding
its share of losses until January 1, 1998 when Holdings and MinorCo acquired
the remaining interest in APC.

In addition, in June 1998, concurrent with the Cox PCS acquisition discussed
in Note 4, Cox Pioneer Partnership ("CPP") became the minority owner in Cox
PCS with CPP's remaining ownership-interest in Cox PCS being recorded as
minority interest in the combined balance sheet. CPP has been allocated
approximately $99.0 million in losses in Cox PCS since the date of
acquisition. Losses attributable to Cox incurred from January 1, 1998 through
May 1998 are included in minority interest in the combined statements of
operations.

TRADEMARK AGREEMENT--Sprint(R) is a registered trademark of Sprint
Communications Company L.P. and Sprint(R) and Sprint PCS(R) are licensed to
Holdings on a royalty-free basis pursuant to a trademark license agreement
between Holdings and Sprint Communications Company L.P.

REVENUE RECOGNITION--Operating revenues for PCS services are recognized as
service is rendered. Operating revenues for equipment sales are recognized at
the time the equipment is delivered to a customer or an unaffiliated agent.

COST OF EQUIPMENT--The Company uses multiple distribution channels for its
inventory, including third-party retailers, Company-owned retail stores, its
direct sales force and telemarketing. Cost of equipment varies by distribution
channel and includes the cost of multiple models of handsets, related
accessory equipment, and warehousing and shipping expenses.

CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
instruments with original maturities of three months or less to be cash
equivalents. The Company maintains cash and cash equivalents in financial
institutions with the highest credit ratings.

ACCOUNTS RECEIVABLE--Accounts receivable are net of an allowance for
doubtful accounts of approximately $23.9 million, $9.3 million and $0.2
million, at September 30, 1998 and December 31, 1997 and 1996, respectively.

INVENTORY--Inventory consists of wireless communication equipment (primarily
handsets). Inventory is stated at lower of cost (on a first-in, first-out
basis) or replacement value. Any losses on the sales of handsets are
recognized at the time of sale.

PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost or fair value at the date of acquisition. Construction work in progress
represents costs incurred to design and construct the PCS network. Repair and
maintenance costs are charged to expense as incurred. When network equipment
is retired, or otherwise disposed of, its book value, net of salvage, is
charged to accumulated depreciation. When non-network equipment is sold,
retired or abandoned, or otherwise disposed of, the cost and accumulated
depreciation are relieved and any gain or loss is recognized. Property, plant
and equipment are depreciated using the straight-line method based on
estimated useful lives of the assets. Depreciable lives range from 3 to 20
years.

F-87
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

EQUIPMENT UNDER CAPITAL LEASES--APC leases certain of its office and other
equipment under capital lease agreements. The assets and liabilities under
capital leases are recorded at the lesser of the present value of aggregate
future minimum lease payments, including estimated bargain purchase options,
or the fair value of the assets under lease. Assets under these capital leases
are depreciated over their estimated useful lives of 5 to 7 years.

INVESTMENT IN PCS LICENSES--During 1994 and 1995, the Federal Communications
Commission ("FCC") auctioned PCS licenses in specific geographic service
areas. The FCC grants licenses for terms of up to ten years, and generally
grants renewals in 10-year terms if the licensee has complied with its license
obligations. The Company believes it will be able to secure renewal of the PCS
licenses held by its subsidiaries. PCS licenses are amortized over estimated
useful lives of 40 years once placed in service. Accumulated amortization for
PCS licenses totaled approximately $91.8 million, $46.8 million and $1.7
million as of September 30, 1998, December 31, 1997, and 1996, respectively.
There was no amortization in 1995.

MICROWAVE RELOCATION COSTS--The Company has also incurred costs associated
with microwave relocation in the construction of the PCS network. Microwave
relocation costs are amortized over the remaining life of the PCS licenses.
Accumulated amortization for microwave relocation costs totaled approximately
$10.6 million and $5.3 million as of September 30, 1998 and December 31, 1997,
respectively. There was no amortization in 1996 or 1995.

INTANGIBLE ASSETS--The ongoing value and remaining useful life of intangible
assets are subject to periodic evaluation. The Company currently expects the
carrying amounts to be fully recoverable. Impairments of intangibles and long-
lived assets are assessed based on an undiscounted cash flow methodology.

CAPITALIZED INTEREST--Interest costs associated with the construction of
capital assets (including the PCS licenses) incurred during the period of
construction are capitalized. The total interest costs capitalized in the nine
months ended September 30, 1998 was approximately $50.9 million, and was
approximately $100.0 million and $30.5 million in 1997 and 1996, respectively.
There were no amounts capitalized in 1995.

DEBT ISSUANCE COSTS--Included in other assets are costs associated with
obtaining financing. Such costs are capitalized and amortized to interest
expense over the term of the related debt instruments using the effective
interest method. Accumulated amortization for the nine months ended September
30, 1998 was approximately $23.8 million, and was approximately $13.4 million
and $1.9 million for the years ended December 31, 1997 and 1996, respectively.
There was no amortization in 1995.

OPERATING LEASES--Rent expense is recognized on the straight-line basis over
the life of the lease agreement, including renewal periods. Lease expense
recognized in excess of cash expended is included in non-current liabilities
in the combined balance sheet.

MAJOR CUSTOMER--The Company markets its products through multiple
distribution channels, including Company-owned retail stores and third-party
retail outlets. The Company's subscribers are disbursed throughout the United
States. Sales to one third-party retail customer represented approximately 21%
and 88% of operating revenues in the combined statements of operations for the
years ended December 31, 1997 and 1996, respectively. The Company reviews the
credit history of retailers prior to extending credit and maintains allowances
for potential credit losses. The Company believes that its risk from
concentration of credit is limited.

INCOME TAXES--The Company has not provided for federal or state income taxes
since such taxes are the responsibility of the individual Partners.

FINANCIAL INSTRUMENTS--The carrying value of the Company's short-term
financial instruments, including cash and cash equivalents, receivables from
customers and affiliates and accounts payable approximates fair value. The
fair value of the Company's long-term debt is based on quoted market prices
for the same issues or current rates offered to the Company for similar debt.
A summary of the fair value of the Company's long-term debt at December 31,
1997 and 1996 is included in Note 5.

F-88
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

The fair value of the interest rate contracts is the estimated net amount
that APC would pay to terminate the contracts at the balance sheet date. The
fair value of the fixed rate loans is estimated using discounted cash flow
analysis based on APC's current incremental borrowing rate at which similar
borrowing agreements would be made under current conditions.

DERIVATIVE FINANCIAL INSTRUMENTS--Derivative financial instruments (interest
rate contracts) are utilized by APC to reduce interest rate risk. APC has
established a control environment which includes risk assessment and
management approval, reporting and monitoring of derivative financial
instrument activities. APC does not hold or issue derivative financial
instruments for trading purposes.

The differentials to be received or paid under interest rate contracts that
are matched against underlying debt instruments and qualify for settlement
accounting are recognized in income over the life of the contracts as
adjustments to interest expense. Gains and losses on terminations of interest
rate contracts are recognized as other income or expense when terminated in
conjunction with the retirement of associated debt. Gains and losses on
terminations of interest rate contracts not associated with the retirement of
debt are deferred and amortized to interest expense over the remaining life of
the associated debt to the extent that such debt remains outstanding.

COMPREHENSIVE INCOME--In June 1997, the Financial Accounting Standards Board
issued Statement of financial Accounting Standards No. 130, Reporting
Comprehensive Income, ("SFAS No. 130") which establishes standards for
reporting and disclosure of comprehensive income and its components (revenues,
expenses, gains and losses). SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997 and requires reclassification of financial
statements for earlier periods to be provided for comparative purposes. The
Company's total comprehensive loss for all periods presented herein did not
differ from those amounts reported as net loss in the combined statements of
operations.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

RECLASSIFICATIONS--Certain reclassifications have been made to the 1996 and
1995 combined financial statements to conform to the 1997 combined financial
statement presentation.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at September 30,
1998, December 31, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------
1998 1997 1996
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Land.................................. $ 3,288 $ 1,445 $ 905
Buildings and leasehold improvements.. 901,164 641,167 86,496
Fixtures and office furniture......... 309,419 168,301 68,520
Network equipment..................... 3,319,669 2,335,965 255,691
Telecommunications plant--construction
work in progress..................... 706,343 653,133 1,039,620
---------- ---------- ----------
5,239,883 3,800,011 1,451,232
Less accumulated depreciation......... (708,033) (261,773) (9,605)
---------- ---------- ----------
$4,531,850 $3,538,238 $1,441,627
========== ========== ==========
</TABLE>

F-89
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

Depreciation expense on property, plant and equipment for the nine months
ended September 30, 1998 was approximately $471.4 million and was
approximately $251.9 million, $9.6 million, and $0.2 million for the years
ended December 31, 1997, 1996 and 1995, respectively.

4. INVESTMENTS IN PARTNERSHIPS

APC--On January 9, 1995, WirelessCo acquired a 49% limited partnership
interest in APC. In September 1997, Holdings increased its ownership in APC to
58.3% through additional capital contributions of approximately $30 million,
and became the managing partner upon FCC approval in November 1997. As of
January 1, 1998, Holdings and MinorCo increased their ownership percentages to
99.75% and 0.25%, respectively, of the partnership interests for approximately
$30 million.

The acquisition increasing ownership to 58.3% and subsequently to 100% was
accounted for as a purchase and, accordingly, the operating results of APC
have been consolidated since the date of the FCC's approval of the
acquisition. In conjunction with the acquisition in November 1997, liabilities
were assumed as follows with the remaining minority interest acquired on
January 1, 1998 (in millions):

<TABLE>
<S> <C>
Assets acquired.................................................... $503
Cash paid.......................................................... (30)
Minority interest.................................................. 50
----
Liabilities assumed................................................ $523
====
</TABLE>

The purchase price was allocated to the assets acquired and the liabilities
assumed based on an estimate of fair value.

The following unaudited pro forma financial information assumes the
acquisition had occurred on January 1 of each year and that Holdings had owned
100% of APC and consolidated its results in the financial statements:

<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Net sales............................................ $ 364,460 $ 76,013
Net loss (before minority interest).................. (1,716,142) (554,976)
</TABLE>

Pro forma data does not purport to be indicative of the results that would
have been obtained had these events actually occurred at the beginning of the
periods presented and is not intended to be a projection of future results.

Prior to acquisition of controlling interest, Holdings' investment in APC
was accounted for under the equity method. The partnership agreement between
Holdings and APC II specified that losses were allocated based on percentage
ownership interests and certain other factors. In January 1997, Holdings and
APC II amended the APC partnership agreement with respect to the allocation of
profits and losses. For financial reporting purposes, profits and losses were
allocated in proportion to Holdings' and APC II's respective partnership
interests, except for costs related to stock appreciation rights and interest
expense attributable to the FCC interest payments which were allocated
entirely to APC II. Losses of approximately $60 million, $97 million and $46
million for the years ended December 31, 1997, 1996 and 1995, respectively,
are included in equity in losses of unconsolidated subsidiaries during the
period prior to the acquisition of controlling interest.

COX PCS--On December 31, 1996, Holdings acquired a 49% limited partner
interest in Cox PCS. CPP held a 50.5% general and a 0.5% limited partner
interest and was the general and managing partner. Holdings increased its
ownership in Cox PCS to 59.2% through an additional capital contribution of
approximately $80.6 million and became managing partner upon FCC approval in
June, 1998. This increase in ownership was the result of CPP exercising its
right under the partnership agreement to require that Holdings acquire all or
part of CPP's interest in Cox PCS based on fair market value at the time of
the transaction. Through December 2008, CPP may put any remaining interest in
Cox PCS to Holdings.

F-90
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

The acquisition increasing ownership to 59.2% was accounted for as a
purchase. The operating results of Cox PCS have been consolidated since
January 1, 1998. The following table reflects the value of Cox PCS' assets and
liabilities at the date of acquisition:

<TABLE>
<S> <C>
Assets acquired.............................. $ 724,834
Cash paid.................................... (80,558)
Minority interest............................ (103,780)
---------
Liabilities assumed.......................... $ 540,496
=========
</TABLE>

The purchase price was allocated to the assets acquired and the liabilities
assumed based on an estimate of fair value.

The following unaudited proforma information assumes the acquisition had
occurred on January 1, 1997, and that Holdings had consolidated the Cox PCS
results in the financial statements:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Net sales................................. $ 295,395
Net loss (before minority interest)....... (1,757,821)
</TABLE>

Prior to the acquisition of controlling interest, Holdings' investment in
Cox PCS was accounted for under the equity method.

Under the terms of the partnership agreement, CPP and the Company are
obligated to, among other things: (a) upon FCC consent to the assumption and
recognition of the license payment obligations by Cox PCS, CPP is obligated to
make capital contributions in an amount equal to such liability and related
interest (the PCS license covering the Los Angeles-San Diego MTA was
contributed to Cox PCS in March 1997) (b) Holdings is obligated to make
capital contributions of approximately $368.9 million to Cox PCS; (c) Holdings
is not obligated to make any cash capital contributions upon the assumption by
Cox PCS of the FCC payment obligations until CPP has contributed cash in an
amount equal to the aggregate principal and interest of such obligations; and,
(d) CPP and Holdings are obligated to make additional capital contributions in
an amount equal to such partner's percentage interest times the amount of
additional capital contributions being requested.

As of December 31, 1997, approximately $348.2 million in equity, including
$2.45 million to PCS Leasing Co, L.P. ("LeasingCo"), a subsidiary of Cox PCS,
had been contributed to Cox PCS by the Company. Through December 31, 1996,
$168 million had been contributed to Cox PCS. Losses are allocated to the
partners based on their ownership percentages. Losses of approximately $108
million for the year ended December 31, 1997, are included in equity in losses
of unconsolidated partnerships during the year prior to the acquisition of
controlling interest. Subsequent to December 31, 1997, Holdings completed its
funding obligation to Cox PCS under the partnership agreement. Concurrent with
this funding, Holdings paid approximately $33.2 million in interest that had
accrued on the unfunded capital obligation.

Additionally, Holdings increased its ownership to 59.2% and became general
partner in LeasingCo. LeasingCo was formed to acquire, construct or otherwise
develop equipment and other personal property to be leased to Cox PCS.
Holdings is not obligated to make additional capital contributions to
LeasingCo beyond the initial funding of approximately $2.45 million.

F-91
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

5. LONG-TERM DEBT AND BORROWING ARRANGEMENTS

Long-term debt consists of the following as of September 30, 1998 and
December 31, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -------------------
1998 1997 1996
------------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C>
11% Senior Notes due in 2006............. $ 250,000 $ 250,000 $250,000
12 1/2% Senior Discount Notes due in
2006, net of unamortized discount of
$147,035 at September 30, 1998; $177,720
and $214,501 at December 31, 1997 and
1996, respectively...................... 352,965 322,280 285,499
Credit Facility--term loans.............. 300,000 300,000 150,000
Credit Facility--revolving credit........ 1,565,000 605,000 --
Vendor Financing......................... 2,527,002 1,612,914 --
APC Senior Secured Term Loan Facility.... 220,000 220,000 --
APC Senior Secured Reducing Revolving
Credit Facility......................... 200,000 141,429 --
APC--Due To FCC, net of unamortized
discount of $8,992 at September 30, 1998
and $11,989 at December 31, 1997........ 77,844 90,355 --
Cox PCS Credit Facility.................. 400,000 -- --
Cox PCS--Due to FCC...................... 213,855 -- --
Other.................................... 19,042 26,538 742
---------- ---------- --------
Total debt............................... 6,125,708 3,568,516 686,241
Less current maturities.................. 124,491 34,562 49
---------- ---------- --------
Long-term debt........................... $6,001,217 $3,533,954 $686,192
========== ========== ========
</TABLE>

SENIOR NOTES AND SENIOR DISCOUNT NOTES--In August 1996, Sprint Spectrum L.P.
and Sprint Spectrum Finance Corporation (together, the "Issuers") issued $250
million aggregate principal amount of 11% Senior Notes due 2006 ("the Senior
Notes"), and $500 million aggregate principal amount at maturity of 12 1/2%
Senior Discount Notes due 2006 (the "Senior Discount Notes" and, together with
the Senior Notes, the "Notes"). The Senior Discount Notes were issued at a
discount to their aggregate principal amount at maturity and generated
proceeds of approximately $273 million. Cash interest on the Senior Notes
accrues at a rate of 11% per annum and is payable semi-annually in arrears on
each February 15 and August 15, commencing February 15, 1997. Cash interest
will not accrue or be payable on the Senior Discount Notes prior to August 15,
2001. Thereafter, cash interest on the Senior Discount Notes will accrue at a
rate of 12 1/2% per annum and will be payable semi-annually in arrears on each
February 15 and August 15, commencing February 15, 2002.

On August 15, 2001, the Issuers will be required to redeem an amount equal
to $384.772 per $1,000 principal amount at maturity of each Senior Discount
Note then outstanding ($192 million in aggregate principal amount at maturity,
assuming all of the Senior Discount Notes remain outstanding at such date).

The Notes are redeemable at the option of the Issuers, in whole or in part,
at any time on or after August 15, 2001 at the redemption prices set forth
below, respectively, plus accrued and unpaid interest, if any, to the
redemption date, if redeemed during the 12 month period beginning on August 15
of the years indicated below:

<TABLE>
<CAPTION>
SENIOR NOTES SENIOR DISCOUNT NOTES
YEAR REDEMPTION PRICE REDEMPTION PRICE
---- ---------------- ---------------------
<S> <C> <C>
2001.................................. 105.500% 110.000%
2002.................................. 103.667% 106.500%
2003.................................. 101.833% 103.250%
2004 and thereafter................... 100.000% 100.000%
</TABLE>

F-92
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)
In addition, prior to August 15, 1999, the Issuers may redeem up to 35% of
the originally issued principal amount of the Notes with the net proceeds of
one or more public equity offerings, provided that at least 65% of the
originally issued principal amount at maturity of the Senior Notes and Senior
Discount Notes would remain outstanding immediately after giving effect to
such redemption. The redemption price of the Senior Notes is equal to 111.0%
of the principal amount of the Senior Notes so redeemed, plus accrued and
unpaid interest, if any, to the redemption date. The redemption price of the
Senior Discount Notes is equal to 112.5% of the accreted value at the
redemption date of the Senior Discount Notes so redeemed.

The Notes contain certain restrictive covenants, including (among other
requirements) limitations on additional indebtedness, limitations on
restricted payments, limitations on liens, and limitations on dividends and
other payment restrictions affecting certain restricted subsidiaries.

BANK CREDIT FACILITY--Sprint Spectrum L.P. (the "Borrower") entered into an
agreement with The Chase Manhattan Bank ("Chase") as agent for a group of
lenders for a $2 billion bank credit facility dated October 2, 1996. The
proceeds of this facility are to be used to finance working capital needs,
subscriber acquisition costs, capital expenditures and other general Borrower
purposes.

The facility consists of a revolving credit commitment of $1.7 billion and a
$300 million term loan commitment. In December 1997, certain terms relating to
the financial and operating conditions were amended. As of September 30, 1998,
$1.6 billion had been drawn under the revolving credit facility at a weighted
average interest rate of 8.19% with $100 million remaining available. As of
December 31, 1997, $605 million had been drawn under the revolving credit
facility at a weighted average interest rate of 8.42%, with $1.1 billion
remaining available. There were no borrowings under the revolving credit
commitment as of December 31, 1996. Commitment fees for the revolving portion
of the agreement are payable quarterly based on average unused revolving
commitments.

The revolving credit commitment expires July 13, 2005. Availability will be
reduced in quarterly installments ranging from $75 million to $175 million
commencing January 2002. Further reductions may be required after January 1,
2002 to the extent that the Borrower meets certain financial conditions.

The term loans are due in sixteen consecutive quarterly installments
beginning January 2002 in aggregate principal amounts of $125,000 for each of
the first fifteen payments with the remaining aggregate outstanding principal
amount of the term loans due as the last installment.

Interest on the term loans and/or the revolving credit loans is at the
applicable LIBOR rate plus 0.625% ("Eurodollar Loans"), or the greater of the
prime rate or 0.5% plus the Federal Funds effective rate ("ABR Loans"), at the
Borrower's option. The interest rate may be adjusted downward for improvements
in the bond rating and/or leverage ratios. Interest on ABR Loans and
Eurodollar Loans with interest period terms in excess of 3 months is payable
quarterly. Interest on Eurodollar Loans with interest period terms of less
than 3 months is payable on the last day of the interest period. As of
September 30, 1998, and December 31, 1997 and 1996, the weighted average
interest rate on the term loans was 8.20%, 8.39% and 8.19%, respectively.

Borrowings under the Bank Credit Facility are secured by the Borrower's
interests in WirelessCo, RealtyCo and EquipmentCo and certain other personal
and real property (the "Shared Lien"). The Shared Lien equally and ratably
secures the Bank Credit Facility, the Vendor Financing agreements (discussed
below) and certain other indebtedness of the Borrower. The credit facility is
jointly and severally guaranteed by WirelessCo, RealtyCo and EquipmentCo and
is non-recourse to the Parents and the Partners.

The Bank Credit Facility agreement and Vendor Financing agreements contain
certain restrictive financial and operating covenants, including (among other
requirements) maximum debt ratios (including debt to total

F-93
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)
capitalization), limitations on capital expenditures, limitations on
additional indebtedness and limitations on dividends and other payment
restrictions affecting certain restricted subsidiaries. The loss of the right
to use the Sprint trademark, the termination or non-renewal of any FCC license
that reduces population coverage below specified limits, or certain changes in
controlling interest in the Borrower, as defined, among other provisions,
constitute events of default.

VENDOR FINANCING--As of October 2, 1996, the Company entered into financing
agreements with Northern Telecom, Inc. ("Nortel") and Lucent Technologies,
Inc. ("Lucent" and together with Nortel, the "Vendors") for multiple drawdown
term loan facilities totaling $1.3 billion and $1.8 billion, respectively. The
proceeds of such facilities are to be used to finance the purchase of goods
and services provided by the Vendors. Additionally, the commitments allow for
the conversion of accrued interest into additional principal. Such conversions
do not reduce the availability under the commitments. Interest accruing on the
debt outstanding at December 31, 1997, can be converted into additional
principal through February 8, 1999 and March 30, 1999, for Lucent and Nortel,
respectively.

In April 1997 and November 1997, the Company amended the terms of its
financing agreement with Nortel. The amendments provide for a syndication of
the financing commitment between Nortel, several banks and other vendors (the
"Nortel Lenders"), and the modification of certain operating and financial
covenants. The commitment provides financing in two phases. During the first
phase, the Nortel Lenders will finance up to $800 million. Under the second
phase, the Nortel Lenders will finance up to an additional $500 million upon
the achievement of certain operating and financial conditions, as amended. As
of September 30, 1998, $856.3 million, including converted accrued interest of
$67.2 million, had been borrowed at a weighted average interest rate 8.78%
with $510.9 million remaining available. At December 31, 1997, $630 million,
including converted accrued interest of $18.6 million, had been borrowed at a
weighted average interest rate of 8.98% with $189 million remaining available
under the first phase. In addition, the Company paid $20 million in
origination fees upon the initial drawdown under the first phase and will be
obligated to pay additional origination fees on the date of the initial
drawdown loan under the second phase. There were no borrowings under the
Nortel facility at December 31, 1996.

In May 1997 and December 1997, the Company amended the terms of its
financing agreement with Lucent. The amendments provide for a syndication of
the financing commitment between Lucent, Sprint and other banks and vendors
(the "Lucent Lenders"), and the modification of certain operating and
financial covenants. The Lucent Lenders have committed to financing up to $1.5
billion through December 31, 1997, and up to an aggregate of $1.8 billion
thereafter. The Company pays a facility fee on the daily amount of certain
loans outstanding under the agreement, payable quarterly. The Lucent agreement
terminates June 30, 2001. As of September 30, 1998, the Company had borrowed
approximately $1.7 billion, including converted accrued interest of $123.5
million, with $252.8 million remaining available under the Lucent facility, at
a weighted average interest rate of 8.70%. As of December 31, 1997, the
Company had borrowed approximately $983 million, including converted accrued
interest of $33.1 million, under the Lucent facility at a weighted average
interest rate of 8.94%, with $850 million remaining available. There were no
borrowings under the Lucent facility at December 31, 1996.

The principal amounts of the loans drawn under both the Nortel and Lucent
agreements are due in twenty consecutive quarterly installments, commencing on
the date which is thirty-nine months after the last day of such "Borrowing
Year" (defined in the agreements as any one of the five consecutive 12-month
periods following the date of the initial drawdown of the loan). The aggregate
amount due each year is equal to percentages ranging from 10% to 30%
multiplied by the total principal amount of loans during each Borrowing Year.

The agreements provide two borrowing rate options. During the first phase of
the Nortel agreement and throughout the term of the Lucent agreement "ABR
Loans" bear interest at the greater of the prime rate or 0.5% plus the Federal
Funds effective rate, plus 2%. "Eurodollar Loans" bear interest at the London
interbank

F-94
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)
(LIBOR) rate (any one of the 30-, 60- or 90-day rates, at the discretion of
the Company), plus 3%. During the second phase of the Nortel agreement, ABR
Loans bear interest at the greater of the prime rate or 0.5% plus the Federal
Funds effective rate, plus 1.5%; and Eurodollar loans bear interest at the
LIBOR rate plus 2.5%. Interest from the date of each loan through one year
after the last day of the Borrowing Year is added to the principal amount of
each loan. Thereafter, interest is payable quarterly.

Borrowings under the Vendor Financing are secured by the Shared Lien. The
Vendor Financing is jointly and severally guaranteed by WirelessCo, RealtyCo,
and EquipmentCo and is non-recourse to the Parents and the Partners.

Certain amounts included under construction obligations on the combined
balance sheets may be financed under the Vendor Financing agreements.

APC DUE TO FCC--The Company is obligated to the FCC for $102 million for the
receipt of the commercial PCS license covering the Washington D.C./Baltimore
MTA. In March 1996, the FCC determined that interest on the amount due would
begin to accrue on March 8, 1996, at an interest rate of 7.75%. Beginning with
the first payment due in April 1996, the FCC granted two years of interest-
only payments followed by three years of principal and interest payments.
Based on the interest and payment provisions determined by the FCC and the
Company's incremental borrowing rate for similar debt at the time the debt was
issued, the Company has accrued interest beginning upon receipt of the license
at an effective rate of 13%.

APC SENIOR SECURED CREDIT FACILITIES--As of February 7, 1997, American PCS
Communications, LLC entered into credit facilities of $420 million, consisting
of a term loan facility of $220 million and a reducing revolving credit
facility of $200 million (together, the "Credit Agreement"). The Credit
Agreement is secured by first priority liens on all the equity interests held
by American PCS Communications LLC in its direct subsidiaries, including the
equity interests of the subsidiaries which will hold APC's PCS license and
certain real property interest and equipment and a first priority security
interest in, and mortgages on, substantially all other intangible and tangible
assets of APC and subsidiaries. The Credit Agreement matures February 7, 2005,
with an interest rate of LIBOR plus 2.25%. The interest rate may be stepped
down over the term of the credit agreement based on the ratio of outstanding
debt to earnings before interest, tax, depreciation and amortization. Proceeds
from the Credit Agreement were used to repay the outstanding financing from
Holdings as of the closing date of the credit agreement, capital expenditures
for the communications systems, general working capital requirements, and net
operating losses.

The Credit Agreement contains covenants which require APC to maintain
certain levels of wireless subscribers, as well as other financial and non-
financial requirements.

In January 1998 APC completed negotiations with its lenders to amend the
Credit Agreement. As amended, the Credit Agreement contains certain covenants
which, among other things, contain certain restrictive financial and operating
covenants including, maximum debt ratios (including debt to total
capitalization) and limitations on capital expenditures. The covenants require
American PCS Communications, LLC to enter into interest rate contracts on a
quarterly basis to protect and limit the interest rate on 40% of its aggregate
debt outstanding.

COX PCS CREDIT FACILITY--On February 25, 1998 Cox PCS entered into a $800
million, nine-year revolving and term loan agreement (the "Cox Credit
Facility") with a bank syndicate. The Cox Credit Facility consists of a
revolving line of credit in an aggregate principal amount of $400 million and
two term loan facilities with aggregate principal amounts of $200 million
each. At September 30, 1998, $400 million had been borrowed under the term
loan facilities at a weighted average interest rate of 8.13%. The Cox Credit
Facility grants Cox PCS an option to expand the credit facility up to an
additional $750 million from time to time, upon Cox PCS meeting certain
requirements. The proceeds from the loan are intended to repay the PCS license
debt, finance working capital needs, subscriber acquisition costs, capital
expenditures and other general purposes of Cox PCS.

F-95
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)
Provisions of the Cox Credit Facility required the transfer of certain of Cox
PCS' assets into the special purpose subsidiaries of Cox PCS to facilitate the
collateralization of substantially all of Cox PCS' assets.

Furthermore, the amounts advanced under the Cox Credit Facility are
guaranteed by each of the special purpose subsidiaries. The Cox Credit
Facility also requires that Cox PCS meet certain operational and financial
covenants. Cox PCS is in compliance as of February 25, 1998 (the funding
date). Amounts borrowed under the facility are to be repaid based on scheduled
repayment dates defined in the credit agreement plus interest at a variable
rate (as defined).

COX PCS DUE TO FCC--In conjunction with the assignment of the PCS license
covering the Los Angeles-San Diego-Las Vegas MTA by CPP to Cox PCS, Cox PCS
assumed the related debt payable to the FCC. The debt requires eight interest-
only payments beginning April 30, 1996 through January 31, 1998. Commencing
April 30, 1998, the debt requires repayment in equal quarterly installments of
$23.7 million representing both principal and interest. The debt is
collateralized by the PCS license above, bears interest at 7.75% per annum and
matures on January 31, 2001.

OTHER DEBT--At December 31, 1997 and September 30, 1998, other debt included
a note payable to Lucent for the financing of debt issuance costs, a note
payable for certain leasehold improvements, and capital leases acquired in the
purchase of APC. Maturities on the debt range from 3 to 10 years, at interest
rates from 8.32% to 21%.

INTEREST RATE CONTRACTS--As of September 30, 1998, APC had entered into ten
interest rate contracts with an aggregate notional value of $134 million. As
of December 31, 1997, APC had entered into nine interest rate contracts (swaps
and a collar), with an aggregate notional amount of $122 million. Under the
agreements APC pays a fixed rate and receives a variable rate such that it
will protect APC against interest rate fluctuations on a portion of its
variable rate debt. The fixed rates paid by APC on the interest rate swap
contracts range from approximately 5.97% to 6.8%. Option features contained in
certain of the swaps operate in a manner such that the interest rate
protection in some cases is effective only when rates are outside a certain
range. Under the collar arrangement, APC will receive 6.19% when LIBOR falls
below 6.19% and pay 8% when LIBOR exceeds 8%. The contracts expire in 2001.
The fair value of the interest rate contracts at September 30, 1998 and
December 31, 1997 was an unrealized loss of approximately $4.8 million and
$1.3 million, respectively. The notional amounts represent reference balances
upon which payments and receipts are based and consequently are not indicative
of the level of risk or cash requirements under the contracts. APC has
exposure to credit risk to the counterparty to the extent it would have to
replace the interest rate swap contract in the market when and if a
counterparty were to fail to meet its obligations. The counterparties to all
contracts are primary dealers that meet APC's criteria for managing credit
exposures.

FAIR VALUE--The estimated fair value of the Company's long-term debt at
December 31, 1997 and 1996 is as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
11% Senior Notes.................... $250,000 $280,650 $250,000 $270,625
12 1/2% Senior Discount Notes....... 322,280 389,300 285,499 337,950
Credit facility--term loans......... 300,000 300,000 150,000 151,343
Credit facility--revolver........... 605,000 605,000 -- --
Vendor facility--Lucent............. 983,299 983,299 -- --
Vendor facility--Nortel............. 629,615 629,615 -- --
APC Senior Secured Term Loan
Facility........................... 220,000 220,000 -- --
APC Senior Secured Reducing
Revolving Credit Facility.......... 141,429 141,429 -- --
FCC debt............................ 90,355 98,470 -- --
</TABLE>

F-96
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)
At December 31, 1997, scheduled maturities of long-term debt and capital
leases during each of the next five years are as follows (in thousands):

<TABLE>
<CAPTION>
LONG-TERM DEBT CAPITAL LEASES
-------------- --------------
<S> <C> <C>
1998........................................... $ 29,800 $5,411
1999........................................... 40,425 3,667
2000........................................... 53,624 591
2001........................................... 395,291 42
2002........................................... 583,113 --
------
9,711
Less interest.................................. (898)
------
Present value of minimum lease payments........ $8,813
======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES--Minimum rental commitments as of December 31, 1997, for
all noncancelable operating leases, consisting principally of leases for cell
and switch sites and office space, for the next five years, are as follows (in
thousands):

Gross rental expense for cell and switch sites aggregated approximately
$106.5 million for the nine months ended September 30, 1998, and $97.1 million
and $13.6 million for the years ended December 31, 1997 and 1996,
respectively. There was no cell or switch site rental expense for the year
ended December 31, 1995. Gross rental expense for office space approximated
$37.4 million for the nine months ended September 30, 1998, and $34.1 million,
$11.7 million, and $0.7 million for the years ended December 31, 1997, 1996,
and 1995, respectively. Certain cell and switch site leases contain renewal
options (generally for terms of 5 years) that may be exercised from time to
time and are excluded from the above amounts.

PROCUREMENT CONTRACTS--On January 31, 1996, the Company entered into
procurement and services contracts with AT&T Corp. (subsequently assigned to
Lucent) and Nortel for the engineering and construction of a PCS network. Each
contract provides for an initial term of ten years with renewals for
additional one-year periods. The Vendors must achieve substantial completion
of the PCS network within an established time frame and in accordance with
criteria specified in the procurement contracts. Pricing for the initial
equipment, software and engineering services has been established in the
procurement contracts. The procurement contracts provide for payment terms
based on delivery dates, substantial completion dates, and final acceptance
dates. In the event of delay in the completion of the PCS network, the
procurement contracts provide for certain amounts to be paid to the Company by
the Vendors. The minimum commitments for the initial term are $0.8 billion and
$1.0 billion from Lucent and Nortel, respectively, which include, but are not
limited to, all equipment required for the establishment and installation of
the PCS network.

On May 8, 1998, the Company amended its procurement and services agreement
with Lucent. The amendment provides for an additional pricing structure for
certain equipment, software and engineering services purchased by the Company
from Lucent after January 1, 1998. Major original contract provisions,
including but not limited to, the length of the contract and the payment
terms, have not been amended. The minimum commitment under the amendment is
approximately $353 million.

F-97
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

HANDSET PURCHASE AGREEMENTS--In June, 1996, the Company entered into a
three-year purchase and supply agreement with a vendor for the purchase of
handsets and other equipment totaling approximately $500 million. During 1997
and 1996, the Company purchased $332.7 million and $85 million under the
agreement, respectively. The total purchase commitment was satisfied during
the second quarter of 1998.

In September, 1996, the Company entered into another three-year purchase and
supply agreement with a second vendor for the purchase of handsets and other
equipment totaling more than $600 million, with purchases that commenced in
April, 1997. During 1997, the Company purchased $147.6 million under the
agreement. The total purchase commitment must be satisfied by April 2000.

SERVICE AGREEMENTS--The Company has entered into an agreement with a vendor
to provide PCS call record and retention services. Monthly rates per
subscriber are variable based on overall subscriber volume. If subscriber fees
are less than specified annual minimum charges, the Company will be obligated
to pay the difference between the amounts paid for processing fees and the
annual minimum. Annual minimums range from $20 million to $60 million through
2001. The agreement extends through December 31, 2001, with two automatic,
two-year renewal periods, unless terminated by the Company. The Company may
terminate the agreement prior to the expiration date, but would be subject to
specified termination penalties.

The Company has also entered into an agreement with a vendor to provide
prepaid calling services. Monthly rates per minute of use are based on overall
call volume. If the average minutes of use are less than monthly specified
minimums, the Company is obligated to pay the difference between the average
minutes used at the applicable rates and the monthly minimum. Monthly minimums
range from $40,000 to $50,000 during the initial term. Certain installation
and setup fees for processing and database centers are also included in the
agreement and are dependent upon a need for such centers. The agreement
extends through July 1999, with successive one-year term renewals, unless
terminated by the Company. The Company may terminate the agreement prior to
the expiration date, but would be subject to specified termination penalties.

In January 1997, the Company entered into a four and one-half year contract
for consulting services. Under the terms of the agreement, consulting services
will be provided at specified hourly rates for a minimum number of hours. The
total commitment is approximately $125 million over the term of the agreement.

LITIGATION--The Company is involved in various legal proceedings incidental
to the conduct of its business. While it is not possible to determine the
ultimate disposition of each of these proceedings, the Company believes that
the outcome of such proceedings, individually and in the aggregate, will not
have a material adverse effect on the Company's financial condition or results
of operations.

7. EMPLOYEE BENEFITS

Employees performing services for the Company were employed by Sprint
through December 31, 1995. Amounts paid to Sprint relating to pension expense
and employer contributions to the Sprint Corporation 401(k) plan for these
employees approximated $0.3 million in 1995.

The Company maintains short-term and long-term incentive plans. All salaried
employees of Sprint Spectrum L.P. are eligible for the short-term incentive
plan commencing at date of hire. Employees of APC are covered by the APC
plans. Short-term incentive compensation is based on incentive targets
established for each position based on the Company's overall compensation
strategy. Targets contain both an objective Company component and a personal
objective component. Charges to operations for the short-term plan
approximated $20.9 million for the nine months ended September 30, 1998, and
$20.3 million, $12.5 million, and $3.5 million for the years ended December
31, 1997, 1996, and 1995, respectively.

F-98
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

LONG-TERM COMPENSATION OBLIGATION--The Company has two long-term incentive
plans, the 1996 Plan and the 1997 Plan. Employees meeting certain eligibility
requirements are considered to be participants in each plan. Participants in
the 1996 Plan will receive 100% of the pre-established targets for the period
from July 1, 1995 to June 30, 1996 (the "Introductory Term"). Participants in
the 1996 Plan elected either a payout of the amount due or converted 50% or
100% of the award to appreciation units. Unless converted to appreciation
units, payment for the Introductory Term of the 1996 Plan was made in the
third quarter of 1998. Under the 1996 plan, appreciation units vest 25% per
year commencing on the second anniversary of the date of grant and expire
after a term of ten years. The 1997 Plan appreciation units vest 25% per year
commencing on the first anniversary of the date of the grant and also expire
after ten years. For the nine months ended September 30, 1998, approximately
$14.2 million had been expensed under both plans. For the years ended December
31, 1997, 1996, and 1995, $18.3 million, $9.5 million, and $1.9 million,
respectively, has been expensed under both plans. At December 31, 1997 a total
of approximately 103 million units have been authorized for grant for both
plans. The Company has applied APB Opinion No. 25, "Accounting for Stock
Issued to Employees" for 1997 and 1996. No significant difference would have
resulted if SFAS No. 123, "Accounting for Stock-Based Compensation" had been
applied. See Note 10 for further discussion.

SAVINGS PLANS--Effective January, 1996, Holdings established a savings and
retirement program (the "Savings Plan") for certain employees, which qualifies
under Section 401(k) of the Internal Revenue Code. Most permanent full-time,
and certain part-time, employees are eligible to become participants in the
plan after one year of service or upon reaching age 35, whichever occurs
first. Participants make contributions to a basic before tax account and
supplemental before tax account. The maximum contribution for any participant
for any year is 16% of such participant's compensation. For each eligible
employee who elects to participate in the Savings Plan and makes a
contribution to the basic before tax account, the Company makes a matching
contribution. The matching contributions equal 50% of the amount of the basic
before tax contribution of each participant up to the first 6% that the
employee elects to contribute. Contributions to the Savings Plan are invested,
at the participant's discretion, in several designated investment funds.
Distributions from the Savings Plan generally will be made only upon
retirement or other termination of employment, unless deferred by the
participant. Expense under the Savings Plan approximated $5.2 million for the
nine months ended September 30, 1998, and $5.0 million and $1.1 million in
1997 and 1996, respectively.

APC also had an employee savings plan that qualified under Section 401(k) of
the Internal Revenue Code (the "APC Plan"). All APC employees completing one
year of service were eligible and could contribute up to 15% of their pretax
earnings. APC matched 100% of the first 3% of the employee's contribution.
Employees were immediately fully vested in APC's contributions. In addition,
APC could make discretionary contributions on behalf of eligible participants
in the amount of 2% of employee's compensation. Expenses relating to the
employee savings plan were not significant since the date of acquisition.

On June 26, 1998, the Partnership Board of Holdings approved the termination
of the APC Plan. The assets of the APC Plan were liquidated, settled and were
transferred to Merrill Lynch Trust Company as trustee of the Plan.
Additionally, APC Plan participants became participants in the Savings Plan.

The Cox PCS Savings and Investment Plan (the "Cox PCS Plan") was established
effective July 1, 1997. Substantially all Cox PCS employees are eligible to
participate in the Cox PCS Plan after completing one year of eligible service
(as defined) and attaining age 21. Employees may make contributions to the Cox
PCS Plan on a pretax basis pursuant to Section 401(k) of the Internal Revenue
Code. Cox PCS makes matching contributions equal to 75% of the employee's
contribution up to a maximum amount equal to 4.5% of the employee's annual
compensation. Employee contributions vest immediately, and Cox PCS' matching
contributions vest over three years of service. Expense under the Cox PCS Plan
approximated $0.9 million for the nine months ended September 30, 1998.

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SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

PROFIT SHARING (RETIREMENT) PLAN--Effective January, 1996, the Company
established a profit sharing plan for its employees. Employees are eligible to
participate in the plan after completing one year of service. Profit sharing
contributions are based on the compensation, age, and years of service of the
employee. Profit sharing contributions are deposited into individual accounts
of the Company's retirement plan. Vesting occurs once a participant completes
five years of service. For the years ended December 31, 1997 and 1996, expense
under the profit sharing plan approximated $2.5 million and $0.7 million,
respectively.

DEFERRED COMPENSATION PLAN FOR EXECUTIVES--Effective January, 1997, the
Company established a non-qualified deferred compensation plan which permits
certain eligible executives to defer a portion of their compensation. The plan
allows the participants to defer up to 80% of their base salary and up to 100%
of their annual short-term incentive compensation. The deferred amounts earn
interest at the prime rate. Payments will be made to participants upon
retirement, disability, death or the expiration of the deferral election under
the payment method selected by the participant.

8. RELATED PARTY TRANSACTIONS

BUSINESS SERVICES--The Company reimburses Sprint for certain accounting and
data processing services, for participation in certain advertising contracts,
for certain cash payments made by Sprint on behalf of the Company and other
management services. The Company is allocated the costs of such services based
on direct usage. Allocated expenses of approximately $10.5 million, $11.9
million, and $2.6 million are included in selling, general and administrative
expense in the combined statements of operations for 1997, 1996, and 1995,
respectively. In addition to the miscellaneous services agreement described
above, the Company has entered into agreements with Sprint for invoicing
services, operator services, and switching equipment. The Company is also
using Sprint as its interexchange carrier, with the agreement for such
services covered under the Holdings partnership agreement. Charges are based
on the volume of services provided, and are similar to those that would be
incurred with an unrelated third-party vendor.

APC--Holdings entered into an affiliation agreement with APC in January 1995
which provides for the reimbursement of certain allocable costs and payment of
affiliation fees by APC. For the year ended December 31, 1997, prior to
acquisition, the reimbursement of allocable costs of approximately $14.0
million is included in selling, general and administrative expenses. There
were no reimbursements recognized in 1996 or 1995. Additionally, affiliation
fees are recognized based on a percentage of APC's net revenues.

COX PCS--Concurrent with the execution of the partnership agreement, the
Company entered into an affiliation agreement with Cox PCS which provides for
the reimbursement of certain allocable costs and payment of affiliate fees by
Cox PCS. For the years ended December 31, 1997 and 1996, allocable costs of
approximately $20.0 million and $7.3 million, respectively, are netted against
selling, general and administrative expenses in the accompanying combined
statements of operations. Of these total allocated costs, approximately $1.6
million and $7.3 million were included in receivables from affiliates in the
respective combined balance sheets for December 31, 1997 and 1996,
respectively. In addition, the Company purchases certain equipment, such as
handsets, on behalf of Cox PCS. Receivables from affiliates for handsets and
related equipment were approximately $31.2 million and $6 million at December
31, 1997 and 1996, respectively.

SPRINTCOM, INC.--The Company provides services to SprintCom, Inc.
("SprintCom"), an affiliate of Sprint. The Company is currently building out
the network infrastructure in certain BTA markets where SprintCom was awarded
licenses. Such services include engineering, management, purchasing,
accounting and other related services. For the nine months ended September 30,
1998 and for the year ended December 31, 1997, costs for services provided of
$36.3 million and $29.1 million, respectively were allocated to SprintCom, and
are included as a reduction of selling, general and administrative expenses in
the accompanying combined statements of operations. Of the total allocated
costs, approximately $23.3 million and $14.0 million are included in
receivables from affiliates at September 30, 1998 and December 31, 1997,
respectively. No such costs were incurred in 1996.

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SPRINT SPECTRUM HOLDING COMPANY COMBINED WITH MINORCO AND PHILLIECO

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1998)

PAGING SERVICES--In 1996, the Company commenced paging services pursuant to
agreements with Paging Network Equipment Company and Sprint Communications
Company L.P. ("Sprint Communications"). For the nine months ended September
30, 1998 and the years ended December 31, 1997 and 1996, Sprint Communications
received agency fees of approximately $6.5 million, $10.6 million and $4.9
million, respectively.

ADVANCES FROM PARTNERS TO HOLDINGS--In December 1996, the Partners advanced
approximately $168 million to the Holdings, which was contributed to Cox PCS
(Note 4). The advances were repaid in February 1997.

ADVANCES FROM PHILLIECO PARTNERS TO PHILLIECO--At December 31, 1997, the
PhillieCo Partners had advanced $45 million to PhillieCo I, for general
operating purposes. The advances accrue interest at prime. Subsequent to
December 31, 1997 and through September 30, 1998, the PhillieCo Partners
advanced an additional $50 million to PhillieCo I. Additionally, during that
same period, Sprint advanced an additional $90 million to PhillieCo I. These
advances accrue interest at rates from prime to prime plus 1 5/8%. All of the
above advances have maturity dates of the earliest of the following events:
(i) the 90th day following the closing date of the restructuring of the
partnership, or (ii) if the restructuring does not occur, the date of the
closing of the buy/sell arrangements that would occur under the partnership
agreement in connection with the deadlock event discussed in Note 1, or (iii)
December 31, 1999.

9. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for 1997 and 1996 is as follows (in
thousands):

<TABLE>
<CAPTION>
1997 FIRST SECOND THIRD FOURTH
---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues....................... $ 9,487 $ 25,813 $ 75,228 $147,501
Operating expenses....................... 202,011 310,958 466,537 658,197
Net loss................................. 217,069 338,719 465,670 611,195
<CAPTION>
1996
----
<S> <C> <C> <C> <C>
Operating revenues....................... $ -- $ -- $ -- $ 4,175
Operating expenses....................... 31,029 47,208 87,568 195,945
Net loss................................. 67,505 91,205 102,035 183,824
</TABLE>

10. SUBSEQUENT EVENTS

PCS RESTRUCTURING--Sprint has entered into a restructuring agreement with
TCI, Comcast, and Cox to restructure Sprint's PCS operations (the "PCS
Restructuring") subject to Sprint stockholder and FCC approvals. If the PCS
Restructuring occurs as planned, Sprint will acquire the joint venture
interests of TCI, Comcast and Cox in Sprint PCS and the joint venture interest
of TCI and Cox in PhillieCo I and PhillieCo II. In exchange for these joint
venture interests, Sprint will issue to TCI, Comcast, and Cox a newly created
class of Sprint common stock (the "PCS Stock"). The PCS Stock will be intended
to reflect separately the performance of these joint ventures and Sprint's
other PCS interests. The operations will be referred to as the PCS Group.

If the PCS Restructuring occurs as planned, the Partners will convert their
advances to the Company as of December 31, 1997 to equity. As of September 30,
1998, the Partners have loaned $400 million, based on respective ownership
interests, to fund the capital requirements of Holdings from the date of the
signing of the Restructuring Agreement, May 26, 1998, through the closing date
of the PCS Restructuring. Additionally, as part of the PCS Restructuring,
certain of Sprint's equity-based incentive plans are intended to replace the
Sprint Spectrum Long-Term Incentive Plans.

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ANNEX A

THE TRACKING STOCK PROPOSAL AND RELATED INFORMATION

Definitions of certain terms used in this Annex A and not previously defined
are included under the heading "Certain Definitions" below.

GENERAL

At the Special Meeting, Sprint's stockholders are being asked to approve the
following in connection with the PCS Restructuring:

A. An amendment to Sprint's existing Articles of Incorporation (the "PCS Stock
Amendment"), which would, among other things:

. define the "PCS Group," which is intended to consist of all business
conducted by Sprint for offering or providing Domestic Wireless Mobile
Telephony Services and any other Domestic PCS Services (other than any
activities of the FON Group pursuant to sales agency, resale or other
arrangements with the PCS Group, which would be implemented pursuant to
the Tracking Stock Policies), as well as all acquisitions of Domestic PCS
Licenses, and will initially include the operations of Sprint Spectrum
Holdings, SprintCom, PhillieCo and Sprint's majority interest in Cox PCS;

. define the "FON Group," which is intended to consist of Sprint's other
operations, including its long distance and local telecommunications
divisions, its product distribution and directory publishing businesses,
its emerging non-PCS businesses, its interest in the Global One
international strategic alliance and other telecommunications investments
and alliances;

. establish the terms of the PCS Stock, a newly created class of common
stock, to be divided into three series: (1) Series 1 PCS Stock, to be
issued to the public; (2) PCS Common Stock--Series 2 (the "Series 2 PCS
Stock"), to be issued to certain subsidiaries of the Cable Parents in the
PCS Restructuring; and (3) PCS Common Stock--Series 3 (the "Series 3 PCS
Stock"), to be issued to FT and DT;

. establish the terms of a new class of preferred stock of Sprint
designated "Preferred Stock--Seventh Series, Convertible" (the "PCS
Preferred Stock"), convertible into shares of Series 1 PCS Stock or Series
2 PCS Stock; and

. reclassify each outstanding share of Existing Class A Common Stock that
is held by DT into one share of Class A Common Stock--Series DT ("DT Class
A Stock").

B. An amendment to Sprint's Articles of Incorporation (the "Recapitalization
Amendment," and together with the PCS Stock Amendment, the "Articles
Amendment"), which would, among other things:

. reclassify each outstanding share of Existing Common Stock into 1/2 share
of Series 1 PCS Stock and one share of Series 1 FON Stock; and

. reclassify each outstanding share of Existing Class A Common Stock held
by FT and DT Class A Stock held by DT so that each such share will
represent an equity interest in the FON Group and an equity interest in
the PCS Group, together with a right to cause Sprint to issue a number of
shares of FON Common Stock--Series 3 (the "Series 3 FON Stock") and Series
3 PCS Stock.

C. The Restructuring Agreement and the performance by Sprint of its
obligations under the Restructuring Agreement, including:

. Sprint's acquisition from the Cable Parents of their respective interests
in Sprint Spectrum Holdings; and

. Sprint's acquisition from TCI and Cox of their respective interests in
PhillieCo.

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D. The following issuances of capital stock by Sprint:

. Series 2 PCS Stock and warrants to acquire shares of Series 2 PCS Stock
(the "Warrants") to certain subsidiaries of the Cable Parents as
consideration for the acquisition of the interests in Sprint Spectrum
Holdings and PhillieCo acquired from such subsidiaries of the Cable
Parents;

. an underwritten initial public offering of Series 1 PCS Stock (the
"IPO");

. PCS Preferred Stock to the Cable Parents to purchase up to $240 million
of indebtedness advanced by the Cable Parents to fund the operations of
Sprint Spectrum Holdings;

. Series 3 PCS Stock to FT and DT in connection with the PCS Restructuring,
and Series 3 PCS Stock or Series 3 FON Stock to FT and DT from time to
time in the future pursuant to certain equity purchase rights; and

. PCS Stock to FT and DT and the Cable Parents (if so elected by the Cable
Parents) upon the exercise of their equity purchase rights in connection
with the IPO and (subject to certain exceptions) any future issuances of
PCS Stock or creation of an Inter-Group Interest.

We refer to the PCS Stock and the FON Stock as the "Tracking Stocks."

STRATEGIC OBJECTIVES OF THE TRACKING STOCK PROPOSAL

The Tracking Stock Proposal is intended to allow Sprint to achieve certain
strategic objectives, including the following:

Management Control of the PCS Group. Upon consummation of the PCS
Restructuring, Sprint will obtain 100% ownership and control of the operations
comprising the PCS Group (subject to the 40.8% equity interest of Cox in Cox
PCS).

Greater Market Recognition of the Value of Sprint. The publicly-traded
Tracking Stocks will be listed securities that are intended to track the
performance of the PCS Group and FON Group separately and are intended to
provide greater market understanding and recognition of the value (individually
and collectively) of Sprint and its individual lines of business represented by
the FON Group and the PCS Group.

Financial Flexibility. The Tracking Stocks will assist in meeting the capital
requirements of the PCS Group by creating an additional publicly-traded equity
security that can be used to raise capital and can be issued in connection with
acquisitions and investments. However, the use of a tracking stock in
connection with a future acquisition could have adverse effects, such as the
possible inability or increased difficulty of receiving a ruling from the IRS
in connection with the acquisition.

Synergies. The Tracking Stocks will retain for Sprint the advantages of doing
business under common ownership. Each group can benefit from synergies with the
other, including certain strategic, financial and operational benefits that
would not be available if the FON Group and the PCS Group were not under common
ownership. In addition, the single consolidated structure provides certain
advantages of tax consolidation.

CREATION OF THE TRACKING STOCKS

Sprint intends to create two new classes of common stock, the PCS Stock and
the FON Stock. The PCS Stock, the PCS Group, the FON Stock and the FON Group
will be created in connection with the PCS Restructuring and the
Recapitalization by the filing of the Articles Amendment.

The PCS Stock is intended to reflect separately the performance of the PCS
Group. The FON Stock is intended to reflect the performance of the FON Group.
Both the PCS Stock and the FON Stock are classes of common stock of Sprint and
are subject to all of the risks of an equity investment in Sprint and all of
Sprint's businesses, assets and liabilities.

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In addition to the Series 1 PCS Stock, Sprint intends to create and issue
two other series of PCS Stock: Series 2 PCS Stock, to be issued to the Cable
Parents, and Series 3 PCS Stock, to be issued to FT and DT. In addition to the
Series 1 FON Stock, Sprint intends to create two other series of FON Stock: FON
Common Stock--Series 2 ("Series 2 FON Stock"), to be issued only if Sprint
converts the outstanding shares of PCS Stock into shares of FON Stock at a time
when shares of Series 2 PCS Stock remain outstanding, and Series 3 FON Stock,
to be issued to FT and DT. See "--The PCS Restructuring" and "--The
Recapitalization."

THE PCS RESTRUCTURING

Sprint currently conducts a substantial portion of its PCS operations through
its 40% interest in Sprint Spectrum Holdings and its approximately 47% interest
in PhillieCo. On May 26, 1998, Sprint entered into the Restructuring Agreement,
pursuant to which it agreed to purchase from the Cable Parents all their
respective interests in Sprint Spectrum Holdings and all the respective
interests of TCI and Cox in PhillieCo in exchange for

. shares of Series 2 PCS Stock;

. the Warrants to acquire shares of Series 2 PCS Stock; and

. under certain circumstances described below, shares of PCS Preferred
Stock.

Pursuant to the Restructuring Agreement, Sprint and the Cable Parents made
loans to finance the operations of Sprint Spectrum Holdings. To the extent that
a Cable Parent elects to contribute its portion of such loans to its subsidiary
holding an interest in Sprint Spectrum Holdings prior to the PCS Restructuring,
it will receive shares of PCS Preferred Stock as consideration for its
corresponding interest in Sprint Spectrum Holdings at the closing of the PCS
Restructuring. If its portion of such loans remains outstanding at the closing,
such Cable Parent will receive shares of PCS Preferred Stock in repayment of
such loans made by such Cable Parent. The FON Group may also, depending upon an
election to be made by Sprint, receive a preferred inter-group interest with
terms similar to those of the PCS Preferred Stock, also convertible into an
additional Inter-Group Interest (the "Preferred Inter-Group Interest") in
repayment of similar loans made by Sprint. For additional information about
such loans, see the Unaudited Pro Forma Condensed Combined Financial Statements
for Sprint, the FON Group and the PCS Group appearing elsewhere in this
Prospectus Supplement.

TIMING OF THE RECAPITALIZATION AND THE IPO

INTER-GROUP INTEREST

Sprint has determined the total number of shares of PCS Stock intended to
track the performance of the PCS Group (excluding the shares to be issued in
the IPO and upon the exercise of equity purchase rights in connection with the
IPO). At the closing of the PCS Restructuring, Sprint will issue 46.5% of those
shares to the Cable Parents and 1.2% of those shares to FT and DT. In exchange
for the shares issued to the Cable Parents, Sprint will become the sole owner
of each entity in the PCS Group (subject to Cox's minority ownership interest
in Cox PCS). The shares of PCS Stock that are issued to holders of Sprint's
Existing Common Stock and Existing Class A Common Stock in the Recapitalization
or issuable in respect of the Class A common stock held by FT and DT after the
Recapitalization ("Class A Common Stock") will represent substantially all of
the remaining unissued 52.3%, or "Inter-Group Interest." The FON Group will
continue to hold the Preferred Inter-Group Interest immediately after the
Recapitalization.

THE RECAPITALIZATION

The filing of the Recapitalization Amendment will result in the tax-free
recapitalization of Sprint's Existing Common Stock and Existing Class A Common
Stock. In the Recapitalization, Sprint will (1) reclassify

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<PAGE>

each outstanding share of its Existing Common Stock to represent one share of
Series 1 FON Stock and 1/2 share of Series 1 PCS Stock and (2) reclassify each
share of its Existing Class A Common Stock held by FT and DT so that each share
represents an equity interest in the FON Group and an equity interest in the
PCS Group, together with a right to cause Sprint to issue, to each holder
thereof, a number of shares of Series 3 FON Stock or Series 3 PCS Stock.

After the Recapitalization, it is intended that the FON Stock will reflect
the performance of the FON Group, and the FON Group's Inter-Group Interest will
be substantially eliminated.

ARRANGEMENTS WITH HOLDERS OF EXISTING CLASS A COMMON STOCK

On May 26, 1998, Sprint entered into a Master Restructuring and Investment
Agreement (the "Master Agreement") with FT and DT which provides that FT and DT
will purchase from Sprint a sufficient number of shares of Series 3 PCS Stock
in connection with the PCS Restructuring and the IPO to maintain their
aggregate voting power of approximately 20% of all Sprint Voting Stock, taking
into account issuances in the IPO, the PCS Restructuring and the exercise by
the Cable Parents of their purchase rights. The Master Agreement also provides
that the existing investment documents among Sprint, FT and DT, including the
existing stockholders agreement and the existing standstill agreement, will be
amended to reflect and address the changes provided for by the Tracking Stock
Proposal.

LOANS TO PHILLIECO

Sprint, TCI and Cox (the parents of the PhillieCo partners) have loaned to
PhillieCo in proportion to their respective interests in PhillieCo an aggregate
of $95 million. Sprint had loaned an additional $90 million to PhillieCo as of
September 30, 1998. Sprint will cause all loans advanced by the parents of the
PhillieCo partners or their respective affiliates to PhillieCo prior to the
closing of the PCS Restructuring to be repaid by PhillieCo (together with
accrued interest) on the 90th day following the closing.

AMENDMENTS TO THE COX PCS AGREEMENTS

Cox PCS is organized as a limited partnership with two partners, Sprint
Spectrum Holdings and a subsidiary of Cox. Sprint Spectrum Holdings holds a
59.2% interest in Cox PCS and is the managing partner. The current Cox PCS
partnership agreement contains provisions (i) granting Cox the right to require
Sprint Spectrum Holdings to purchase Cox's remaining interest in Cox PCS and
(ii) granting Sprint Spectrum Holdings the right to require Cox to sell such
interest to Sprint Spectrum Holdings, in each case over a specified period of
time and for cash or additional partnership interest in Sprint Spectrum
Holdings. In connection with the Restructuring Agreement, Sprint Spectrum
Holdings and Cox have agreed to enter into an amendment to the Cox PCS
partnership agreement (the "Cox PCS Amendment"), effective as of the closing of
the PCS Restructuring, that will modify these put and call provisions to
provide Cox with the right to require that Sprint Spectrum Holdings acquire,
for cash, up to a 10.2% interest in Cox PCS in each of 1998, 1999 and 2000 or,
for Series 2 PCS Stock, up to all of its remaining interest in 1998 and 1999.
Beginning in 2001, through 2005, Cox has the right to require that Sprint
Spectrum Holdings acquire up to all of its interest in Cox PCS in exchange for
Series 2 PCS Stock or cash at the election of Sprint Spectrum Holdings.
Beginning in 2001, through 2005, Sprint Spectrum Holdings has the right to
require that Cox transfer up to all of its interest in Cox PCS in exchange for
Series 2 PCS Stock or cash at the election of Sprint Spectrum Holdings.
Purchases pursuant to the put and call arrangement will be based upon an
appraised market value. In addition, Sprint and Cox agreed that Cox PCS's
obligation to pay an affiliation fee to Sprint Spectrum Holdings under the
affiliation agreement would terminate effective March 31, 1998. The affiliation
fee obligation will be reinstated if the PCS Restructuring is not consummated.

EXPECTED MANNER OF COMPLIANCE WITH VARIOUS REPORTING REQUIREMENTS

After the transactions contemplated by the Tracking Stock Proposal are
completed, securities law reporting requirements applicable to Sprint and its
officers and directors will be satisfied in a manner that the Sprint

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Board determines to be appropriate depending upon the nature of the
requirement. For example, Sprint expects that the individuals considered
officers and directors for purposes of filing reports of beneficial ownership
of Sprint securities pursuant to Section 16 of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act") will be determined at the corporate
level rather than by reference to any individual's duties with the FON Group or
the PCS Group. Sprint expects to provide separate market price performance
information for the FON Group and the PCS Group in its annual Exchange Act
filings and other filings requiring compliance with Item 201 of Regulation S-K.
Sprint will provide, in its Exchange Act filings requiring compliance with Item
403 of Regulation S-K, beneficial ownership information concerning the FON
Stock and the PCS Stock separately for (1) each beneficial owner of more than
five percent of each of the FON Stock or PCS Stock (including any "group" as
that term is used in Section 13(d)(3) of the Exchange Act) and (2) its
executive officers (as that term is defined in Item 402(a)(3) of Regulation S-
K), directors and the directors and executive officers as a group, with the
executive officers to be determined at the corporate level rather than by
reference to any individual's duties with the FON Group or the PCS Group.
Executive compensation, biographical data of management, and certain
relationships and related transactions for directors and officers will be
provided in accordance with securities law disclosure requirements and in a
manner determined to be most meaningful and practicable depending on various
factors including the nature of the filing or report.

ACCOUNTING MATTERS

General Accounting Matters. Sprint will prepare financial statements in
accordance with generally accepted accounting principles, consistently applied,
for each of the groups, and these financial statements, taken together, will
comprise all of the accounts included in the corresponding consolidated
financial statements of Sprint. The financial statements of each of the groups
will principally reflect the financial position, results of operations and cash
flows of the businesses included therein.

Allocation of Shared Services. Certain costs relating to Sprint's general and
administrative services will be directly assigned, where possible, by Sprint to
each group based upon actual utilization of such services. If direct
attribution based upon utilization is not possible or is impracticable, other
methods and criteria will be used that management believes are equitable and
provide a reasonable estimate of the costs attributable to each group,
consistent with certain policies adopted by the Sprint Board in connection with
the Tracking Stock Proposal (the "Tracking Stock Policies").

TRACKING STOCK POLICIES

In connection with the PCS Restructuring, Sprint has adopted and intends to
follow the Tracking Stock Policies.

General. The Sprint Board has determined that all material matters as to
which the holders of FON Stock and the holders of PCS Stock may have
potentially divergent interests will be resolved in a manner that the Sprint
Board (or the Capital Stock Committee of the Sprint Board acting on its behalf)
determines to be in the best interests of Sprint and all of its common
stockholders, after giving fair consideration to the potentially divergent
interests and all other relevant interests of the holders of the separate
classes of Sprint's common stock. Pursuant to the Tracking Stock Policies, the
relationship between the FON Group and the PCS Group and the means by which the
terms of any material transaction between them will be determined will be
governed by a process of fair dealing. The Sprint Board will not recommend any
transaction that would result in a Change in Control, or any Strategic Merger,
without a prior determination that the terms of such transaction are fair to
holders of PCS Stock, taken as a separate class, and the holders of the FON
Stock, taken as a separate class.

Capital Stock Committee. The Sprint Board has adopted an amendment to the
bylaws of Sprint, to become effective on the Closing Date, establishing a
committee of the Sprint Board to be known as the Capital Stock Committee. The
Sprint Board has delegated to the Capital Stock Committee the authority to, and
the Capital Stock Committee will, interpret, make determinations under, and
oversee the implementation of the

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<PAGE>

Tracking Stock Policies. All material commercial transactions between the FON
Group and the PCS Group, including any transaction that results in a change in
the size of any Inter-Group Interest held by the FON Group in the PCS Group,
will be on commercially reasonable terms and will be subject to the review and
approval of the Capital Stock Committee. If such review occurs before the
transaction is undertaken and such transaction is disapproved, the transaction
will not proceed. If such review occurs after such transaction is undertaken
and such transaction is disapproved, appropriate actions will be taken to
reinstate the pre-existing circumstances to the fullest extent practicable. In
making any and all determinations in connection with the Tracking Stock
Policies, either directly or by appropriate delegation of authority, the
members of the Sprint Board and the Capital Stock Committee will act in a
fiduciary capacity and pursuant to legal guidance concerning their respective
obligations under applicable law. The Sprint Board has also provided the
Capital Stock Committee with the authority to engage the services of
accountants, investment bankers, appraisers, attorneys and other service
providers to assist it in discharging its duties.

Each member of the Capital Stock Committee will be an Independent Director or
a person who, except for a relationship with FT or DT or a subsidiary thereof,
would be an Independent Director. Sprint expects that initially the Capital
Stock Committee will consist of each member of the Sprint Board other than Mr.
Esrey and Mr. LeMay.

Pursuant to the bylaws amendment, the Capital Stock Committee will have and
may exercise such powers, authority and responsibilities as the Sprint Board
may delegate to the Capital Stock Committee in connection with the adoption of
general policies governing the relationship between business groups or
otherwise, including with respect to, among other things: (i) the business and
financial relationships between the FON Group and the PCS Group (or any
business or subsidiary allocated to the FON Group or the PCS Group,
respectively), (ii) dividends in respect of, and transactions by Sprint or the
FON Group (or any business or subsidiary allocated to the FON Group) in, shares
of PCS Stock and (iii) any other matters arising in connection with the
relationships or transactions described in clauses (i) and (ii).

As part of the Articles Amendment, Sprint's existing Articles of
Incorporation will be amended to provide that the provisions of the Sprint
bylaws regarding the Capital Stock Committee will not be amended prior to the
fourth anniversary of the closing of the PCS Restructuring by the Sprint Board
without (i) the approval of the holders of a majority of the shares of then
outstanding Common Stock and (ii) the approval of the holders of a majority of
the shares of then outstanding PCS Stock, voting as a separate class.

Scope of the PCS Group; Allocation of Business Opportunities and
Operations. The PCS Stock Amendment sets forth the entities that will comprise
the PCS Group as of the closing of the PCS Restructuring. The Tracking Stock
Policies provide that any business conducted by Sprint for offering or
providing (1) Domestic Wireless Mobile Telephony Services and (2) any other
Domestic PCS Services will be allocated to the PCS Group. In addition, the
Tracking Stock Policies provide that all acquisitions of Domestic PCS Licenses
will be allocated to the PCS Group. To the extent such businesses or licenses
are acquired by the FON Group, the Sprint Board will arrange for an allocation
or transfer of such assets to the PCS Group as soon as reasonably practicable
at a price equivalent to the fair market value of such businesses or licenses.
However, in no event will such allocation or transfer be required at a time
that would adversely affect the availability of pooling-of-interests
accounting. These provisions of the Tracking Stock Policies will not preclude
the formation of commercially reasonable contracts or other arrangements
between the PCS Group and the FON Group or any Other Group for sales agency,
resale, or any other arrangement with respect to businesses conducted by either
the FON Group or the PCS Group. Except as provided above, the Sprint Board may
allocate business opportunities and operations to the FON Group, the PCS Group
or to any Other Group as it considers in the best interests of Sprint and its
stockholders as a whole.

Relationship Between Groups; Long Distance Pricing. All material commercial
transactions between the FON Group and the PCS Group will be on commercially
reasonable terms and shall be subject to the review and approval of the Capital
Stock Committee. With respect to pricing of long distance services (whether
from one calling area to another, or within a calling area) purchased by the
PCS Group for purposes of enabling PCS

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Group customers to complete wireless calls (whether billed separately or as
part of other charges), services will be provided at the best price offered by
the FON Group to third parties in similar situations when taking into account
all relevant factors (e.g., volumes, peak/off-peak usage and length of
commitment). The PCS Group will be permitted to acquire private line capacity
from the FON Group to self-provision long distance services to the extent that
such self-provisioning can be accomplished on terms more favorable to the PCS
Group, and will be at the best price offered by the FON Group to third parties
in similar situations, when taking into account all relevant factors.

Transfers of assets from the FON Group to the PCS Group that are designated
by the Sprint Board to be treated as an equity contribution by the FON Group to
the PCS Group will result in an increase in the Inter-Group Interest held by
the FON Group in the PCS Group in accordance with the Articles Amendment.

Pursuant to the Tracking Stock Policies, the PCS Group will not acquire an
Inter-Group Interest in the FON Group (or in any Other Group). Transfers of
assets from the PCS Group to the FON Group therefore will not be treated as
creating an Inter-Group Interest of the PCS Group in the FON Group, but may be
treated as a reduction of any existing Inter-Group Interest of the FON Group in
the PCS Group, but not below zero.

All other transfers of assets between one group (the "Transferor Group") and
another group (the "Transferee Group"), not designated by the Sprint Board as
equity transfers and not pursuant to a contract for the provision of goods or
services between the groups, will be accompanied by (1) the transfer by the
Transferee Group to the Transferor Group of other assets, (2) the creation of
inter-group debt owed by the Transferee Group to the Transferor Group, or (3)
the reduction of inter-group debt owed by the Transferor Group to the
Transferee Group, in each case in an amount having a fair market value, in the
judgment of the Sprint Board, equivalent to the fair market value of the assets
transferred by the Transferor Group.

Notwithstanding the above, the Sprint Board has determined pursuant to the
Tracking Stock Policies that neither the FON Group nor any Other Group will
acquire in one transaction or in a series of related transactions a significant
portion of the assets of the PCS Group without receiving the consent of the
holders of a majority of the outstanding shares of PCS Stock, voting as a
separate class, and the consent of the holders of a majority of the outstanding
shares of FON Stock or stock of such Other Group, voting as a separate class. A
"significant portion of the business of the PCS Group" is defined as more than
33% of the assets of the PCS Group, based on the fair market value of the
assets, both tangible and intangible, of the PCS Group as of the time that the
proposed transaction is approved by the Sprint Board.

Any inter-group transaction that results in a change in the size of any
Inter-Group Interest held by the FON Group or any Other Group in the PCS Group
will be subject to the review and approval of the Capital Stock Committee. If
such review occurs before such transaction is undertaken and such transaction
is disapproved, the transaction will not proceed. If such review occurs after
such transaction is undertaken and such transaction is disapproved, appropriate
actions will be taken to reinstate the pre-existing circumstances to the
fullest extent practicable.

The Sprint Board has also determined pursuant to the Tracking Stock Policies
that the FON Group will not engage in any transactions, including mergers,
consolidations, recapitalizations, or similar transactions, that have the
effect of circumventing the rights of the holders of PCS Stock with respect to
the time restriction and the benefit of the premium payable or procedure to
ensure fairness on Sprint's exercise of its right to convert outstanding shares
of PCS Stock to FON Stock, or the benefit of the provisions of the Articles
Amendment limiting redemptions of the PCS Stock in exchange for shares of a
subsidiary (a "spin off" of the PCS Group) for two years following the closing
of the PCS Restructuring unless approved by the holders of a majority of the
outstanding shares of PCS Stock. These provisions will not apply to any
transaction involving a third party the terms of which have been determined in
advance by either the Sprint Board or the Capital Stock Committee to be fair to
holders of PCS Stock, taken as a separate class, and holders of FON Stock,
taken as a separate class. The Tracking Stock Policies also provide that Sprint
will not acquire a number of shares of Series 1 PCS Stock such that,
immediately after the acquisition, the number of shares of Series 1 PCS Stock
outstanding is

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less than 80% of the sum of (i) the number of shares of Series 1 PCS Stock
issued to the public in the Recapitalization and (ii) the number of shares of
Series 1 PCS Stock issued to the public in any primary initial public offering
of Series 1 PCS Stock that is completed before the Registration Rights
Commencement Date (all such numbers being appropriately adjusted for any stock
split, stock dividend, recapitalization or similar transaction affecting the
number shares of Series 1 PCS Stock outstanding).

Allocation of Federal and State Income Taxes. Federal and state income taxes
incurred by Sprint which are determined on a consolidated, combined, or unitary
basis will be allocated between the groups in accordance with a Tax Sharing
Agreement to be entered into and undertaken by Sprint. These allocations will
be based principally on the taxable income and tax credits contributed by each
group. Such allocations to or from the PCS Group are intended to reflect its
actual incremental cumulative effect (positive or negative) on Sprint's federal
and state taxable income and related tax liability and tax credit position,
subject to certain adjustments. Tax benefits that cannot be used by a group
generating those benefits but can be used on a consolidated basis will be
credited to the group that generated such benefits. Accordingly, the amounts of
taxes payable or refundable, which will be allocated\ to each group, may not
necessarily be the same as that which would have been payable or refundable had
the group filed a separate income tax return. Sprint expects that significant
payments pursuant to the Tax Sharing Agreement will be made from the FON Group
to the PCS Group in the near future, in light of the substantial operating
losses that the PCS Group is expected to incur during this time. Tax sharing
payments between the groups will be accrued as of the end of the tax period to
which they relate.

The Tax Sharing Agreement includes a procedure pursuant to which tax sharing
payments to or from the PCS Group shall be calculated excluding the effect of
any cumulative combined net loss or credit of (a) all new businesses directly
or indirectly acquired by the FON Group after May 26, 1998 individually having
an acquisition cost in excess of $500 million, taking into account the amount
of any liabilities assumed by the acquiror or to which the acquired business is
subject, and (b) all Other Groups except to the extent that an Other Group
reflects one or more profitable core business(es) of the FON Group that exists
on the date of creation of the FON Group (the "Stacking Procedure").

The initial Tax Sharing Agreement (including the Stacking Procedure) will
apply to tax years ending on or before December 31, 2001, and shall not be
modified, suspended or rescinded, nor will additions or exceptions be made to
the Tax Sharing Agreement, for such periods. For subsequent periods, the Sprint
Board will adopt a tax sharing arrangement that will be designed to allocate
Sprint's tax benefits and burdens fairly between the PCS Group and the FON
Group. Sprint expects that tax benefits that cannot be used by a group
generating those benefits but can be used on a consolidated basis will continue
to result in payments to the group that generated such benefits based on the
value of such benefits to Sprint on a consolidated basis. In addition, Sprint
expects that tax benefits, if any, pertaining to tax loss or tax credit carry
forwards generated by a group but not utilized as of the expiration of the
initial Tax Sharing Agreement will continue to result in payments to the group
that generated such benefits based on the value of such benefits to Sprint on a
consolidated basis when such tax benefits are utilized. Sprint has not
determined whether or not it will continue to utilize the Stacking Procedure
for tax years ending after December 31, 2001.

Allocation of Group Financing. Loans from Sprint or any member of the FON
Group to any member of the PCS Group shall be made at interest rates and on
other terms and conditions substantially equivalent to the interest rates and
other terms and conditions that the PCS Group would be able to obtain from
third parties (including the public markets) as a direct or indirect wholly-
owned subsidiary of Sprint, but without the benefit of any guaranty by Sprint
or any member of the FON Group. This policy contemplates that such loans will
be made on the basis set forth above regardless of the interest rates and other
terms and conditions on which Sprint or members of the FON Group may have
acquired the subject funds. The provisions of this policy will only apply
before December 31, 2001 and will not be modified, suspended or rescinded, nor
shall any exception be made to such provisions, prior to December 31, 2001.
Sprint currently does not expect that the Tracking Stock Policies provision
regarding allocation of debt expense will be amended in any material way after
December 31, 2001.

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Dividend Policy. The Sprint Board will periodically consider appropriate
dividend policies and practices relating to future dividends on the FON Stock
and the PCS Stock. The Sprint Board does not expect to declare any dividends on
the PCS Stock in the foreseeable future.

Pursuant to the Tracking Stock Policies, dividends on FON Stock may be
declared and paid only out of the lesser of (i) the funds of Sprint legally
available therefor and (ii) the FON Group Available Dividend Amount.

Pursuant to the Tracking Stock Policies, dividends on PCS Stock may be
declared and paid only out of the lesser of (i) the funds of Sprint legally
available therefor and (ii) the PCS Group Available Dividend Amount.

As of September 30, 1998, based on their respective financial statements, the
funds of Sprint legally available for the payment of dividends under Kansas law
would have been at least $8.5 billion and the FON Group Available Dividend
Amount and the PCS Group Available Dividend Amount (after giving effect to the
Recapitalization, the PCS Restructuring and the exercise of equity purchase
rights by FT and DT in connection with the PCS Restructuring) would have been
approximately $7.7 billion and $3.7 billion, respectively. No assurance can be
made as to the continued availability of such amounts. Dividend payments on the
FON Stock or on the PCS Stock could be precluded because of the unavailability
of legally available funds under Kansas law, even if the Available Dividend
Amount test with respect to the relevant group is met.

Policies May Be Modified or Rescinded at Any Time. Unless otherwise provided
above, the Tracking Stock Policies may be modified, suspended or rescinded, and
additional policies may be adopted, or exceptions made to such policies in
connection with particular facts and circumstances, all as the Sprint Board may
determine consistent with its fiduciary duties to Sprint and all its common
stockholders at any time with or without the approval of Sprint's stockholders,
although Sprint has no present intention to do so and Sprint has agreed with
the Cable Parents that it will not change such policies prior to the
Recapitalization. Any determination of the Sprint Board to modify, suspend or
rescind such policies, or to make exceptions thereto or adopt additional
policies, including any such decision that would have disparate impacts upon
holders of FON Stock and PCS Stock, would be made by the Sprint Board in a
manner consistent with its fiduciary duties to Sprint and all of its common
stockholders after giving fair consideration to the potentially divergent
interests and all other relevant interests of the holders of the separate
classes of Sprint's common stock, including the holders of FON Stock and the
holders of PCS Stock.

CERTAIN DEFINITIONS

The following terms used in this Annex A have the following respective
meanings:

"Affiliate," as defined in the Restructuring Agreement, means, with respect
to any person, any other person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, such person.

"Amended Articles" means the Amended and Restated Articles of Incorporation
of Sprint as in effect upon the filing of the Articles Amendment with the
Kansas Secretary of State.

"Capital Stock Committee" means a committee of the Sprint Board to which the
Sprint Board has delegated the authority to interpret, make determinations
under, and oversee the implementation of the Tracking Stock Policies.

"Change of Control," as defined in the Amended Articles, means a:

(a) decision by the Sprint Board to sell control of Sprint or not to
oppose a third party tender offer for Sprint Voting Securities representing
more than 35% of the Voting Power of Sprint; or

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(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,

provided that a Strategic Merger shall not be deemed to be a Change of Control
and provided, further, that any transaction between Sprint and FT and DT or
otherwise involving FT and DT and any of their direct or indirect subsidiaries
which are party to a contract therefor shall not be deemed to be a Change of
Control.

"Controlled Affiliates," as defined in the Restructuring Agreement, means the
"Controlled Affiliate" of (i) any person (other than a parent or any subsidiary
of a parent) means the parent of such person as of the date of the PCS
Restructuring and each subsidiary of such parent as of the date of
determination, and (ii) any parent or its subsidiary means such parent and each
subsidiary of such parent as of the date of determination.

"Convertible Securities," as defined in the Amended Articles, means any
securities of Sprint or of any subsidiary thereof (other than shares of FON
Stock or PCS Stock), including warrants and options, outstanding at such time
that by their terms are convertible into or exchangeable or exercisable for or
evidence the right to acquire any shares of any class or series of FON Stock or
PCS Stock, whether convertible, exchangeable or exercisable at such time or a
later time or only upon the occurrence of certain events, pursuant to
antidilution provisions of such securities or otherwise.

"Domestic" means geographically within the 50 states of the United States or
the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

"Domestic PCS License" means a license to use PCS Spectrum within Domestic
areas granted by the FCC or other applicable authority.

"Domestic PCS Services" means any services offered or provided within a
Domestic geographic area using a Domestic PCS License.

"Domestic Wireless Mobile Telephony Services" means a communications service
provided through the use of a wireless connection from the user to a Domestic
terrestrial telecommunications network that is capable of and generally
utilized by Sprint for handing-off calls from one wireless cell to another and
from one wireless sector within a cell to another and which is intended to
allow the continuation of a user's single conversation, without interruption,
as the user travels between cells and/or sectors within such network.

"Fair Value," as defined in the Amended Articles, means, in the case of
equity securities or debt securities of a class that has previously been
Publicly Traded for a period of at least 15 months, the Market Value thereof
(if such value, as so defined, can be determined) or, in the case of an equity
security or debt security that has not been Publicly Traded for at least such
period, means the fair value per share of stock or per other unit of such other
security, on a fully distributed basis, as determined by an independent
investment banking firm experienced in the valuation of securities selected in
good faith by the Sprint Board; provided, however, that in the case of property
other than securities, the "Fair Value" thereof shall be determined in good
faith by the Sprint Board based upon such appraisals or valuation reports of
such independent experts as the Sprint Board shall in good faith determine to
be appropriate in accordance with good business practice. Any such
determination of Fair Value shall be described in a statement filed with the
records of the actions of the Sprint Board.

"FON Group Available Dividend Amount," on any date, as defined in the
Tracking Stock Policies, means the amount, if any, by which (1) the fair market
value of the total assets attributed to the FON Group less the total amount of
the liabilities attributed to the FON Group (provided that Preferred Stock
shall not be treated as a liability), in each case as of such date and
determined on a basis consistent with the determination of the

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FON Group Net Earnings (Loss), exceeds (2) the aggregate par value of, or any
greater amount determined in accordance with applicable corporation law to be
capital in respect of, all outstanding shares of FON Stock and each class or
series of Preferred Stock attributed to the FON Group.

"FON Group Net Earnings (Loss)," for any period through any date, as defined
in the Tracking Stock Policies, means the net income or loss of the FON Group
for such period (or in respect of fiscal periods of Sprint commencing prior to
the Closing Date, the pro forma net income or loss of the FON Group for such
period as if the Closing Date had been the first day of such period) determined
in accordance with generally accepted accounting principles in effect at such
time, reflecting income and expense of Sprint attributed to the FON Group on a
basis substantially consistent with attributions of income and expense made in
the calculation of PCS Group Net Earnings (Loss), including, without
limitation, corporate administrative costs, net interest and other financial
costs and income taxes.

"Independent Director," as defined in the Amended Articles, means any member
of the Sprint Board who (a) is not an officer or employee of Sprint, or any
holder of Class A Stock, or any of their respective subsidiaries, (b) is not a
former officer of Sprint, or any holder of Class A Stock, or any of their
respective subsidiaries, (c) does not, in addition to such person's role as a
Director, act on a regular basis, either individually or as a member or
representative of an organization, serving as a professional adviser, legal
counsel or consultant to Sprint, or any holder of Class A Stock, or their
respective subsidiaries, if, in the opinion of the Compensation Committee of
the Sprint Board or the Sprint Board if a Compensation Committee is not in
existence, such relationship is material to Sprint, any holder of Class A
Stock, or the organization so represented or such person, and (d) does not
represent, and is not a member of the immediate family of, a person who would
not satisfy the requirements of the preceding clauses (a), (b) and (c) of this
sentence. A person who has been or is a partner, officer or director of an
organization that has customary commercial, industrial, banking or underwriting
relationships with Sprint, any holder of Class A Stock, or any of their
respective subsidiaries, that are carried on in the ordinary course of business
on an arms-length basis and who otherwise satisfies the requirements set forth
in clauses (a), (b), (c) and (d) of the first sentence of this definition, may
qualify as an Independent Director, unless, in the opinion of the Compensation
Committee or the Sprint Board if a Compensation Committee is not in existence,
such person is not independent of the management of Sprint, or any holder of
Class A Stock or any of their respective subsidiaries, or the relationship
would interfere with the exercise of independent judgment as a member of the
Sprint Board. A person who otherwise satisfies the requirements set forth in
clauses (a), (b), (c) and (d) of the first sentence of this definition and who,
in addition to fulfilling the customary director's role, also provides
additional services directly for the Sprint Board and is separately compensated
therefor, would nonetheless qualify as an Independent Director. Notwithstanding
anything to the contrary contained in this definition, each Director as of the
date of the execution of the Investment Agreement (as defined in the Amended
Articles) who is not an executive officer of Sprint shall be deemed to be an
Independent Director hereunder.

"Inter-Group Interest" means an interest of the FON Group in the PCS Group
initially determined as follows: Sprint has determined the total number of
shares of PCS Stock intended to track the performance of the PCS Group (without
considering the shares to be issued in the IPO). At the closing of the PCS
Restructuring, Sprint will issue 46.5% of those shares to the Cable Parents and
1.2% of those shares to FT and DT (before giving effect to the IPO and the
issuances of PCS Stock to FT and DT and the Cable Parents in connection with
the IPO). In exchange for the shares to be issued to the Cable Parents, Sprint
will become the sole owner of each entity in the PCS Group (subject to Cox's
minority ownership interest in Cox PCS). The shares of PCS Stock that are
issued to holders of the Existing Common Stock in the Recapitalization or
issuable in respect of the Class A Common Stock held by FT and DT after the
Recapitalization will represent substantially all of the remaining unissued
52.3%, or "Inter-Group Interest." Any remaining Inter-Group Interest and any
Inter-Group Interest created in the future will be represented on the FON Group
financial statements as an ownership interest of the FON Group in the PCS
Group. This interest will be similar to the FON Group holding tracking stock of
the PCS Group. Because Sprint cannot own stock in itself, Sprint will account
for this remaining equity interest in the PCS Group as an Inter-Group Interest.

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"Market Value" of a share of any class or series of capital stock of Sprint
on any day (as defined in the Amended Articles) means the average of the high
and low reported sales prices regular way of a share of such class or series on
such day (if such day is a Trading Day, and if such day is not a Trading Day,
on the Trading Day immediately preceding such day) or, in case no such reported
sale takes place on such Trading Day, the average of the reported closing bid
and asked prices regular way of a share of such class or series on such Trading
Day, in either case as reported on the NYSE Composite Tape or, if the shares of
such class or series are not listed or admitted to trading on such exchange on
such Trading Day, on the principal national securities exchange in the United
States on which the shares of such class or series are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange on such Trading Day, on the National Market tier of The Nasdaq Stock
Market or, if the shares of such class or series are not listed or admitted to
trading on any national securities exchange or quoted on such National Market
System on such Trading Day, the average of the closing bid and asked prices of
a share of such class or series in the over-the-counter market on such Trading
Day as furnished by any NYSE member firm selected from time to time by the
Sprint Board or, if such closing bid and asked prices are not made available by
any such NYSE member firm on such Trading Day, the Fair Value of a share of
such class or series; provided that, for purposes of determining the Market
Value of a share of any class or series of capital stock for any period,

(i) the "Market Value" of a share of capital stock on any day prior to
any "ex-dividend" date or any similar date occurring during such period for
any dividend or distribution (other than any dividend or distribution
contemplated by clause (ii)(B) of this definition) paid or to be paid with
respect to such capital stock shall be reduced by the Fair Value of the per
share amount of such dividend or distribution and

(ii) The "Market Value" of any share of capital stock on any day prior to
(A) the effective date of any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of outstanding shares of
such period or (B) any "ex-dividend" date or any similar date occurring
during such period for any dividend or distribution with respect to such
capital stock to be made in shares of such class or series of capital stock
or Convertible Securities that are convertible, exchangeable or exercisable
for such class or series of capital stock shall be appropriately adjusted,
as determined by the Sprint Board, to reflect such subdivision,
combination, dividend or distribution.

"Number Of Shares Issuable With Respect To The DT Class A Equity Interest In
The FON Group," as defined in the Amended Articles, means, as of the date the
Amended Articles become effective, a number equal to the aggregate number of
outstanding shares of DT Class A Stock as of the date the Amended Articles
become effective; provided, however, that such number shall from time to time
thereafter be:

(A) adjusted, on an equivalent Per Class A FON Share Basis, to reflect
any subdivision (by stock split or otherwise) or combination (by reverse
stock split or otherwise) of the FON Stock or any reclassification of FON
Stock; and

(B) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by the number of certain shares of Series 1
FON Stock or Series 3 FON Stock issued in accordance with the Amended
Articles and any reduction required to reflect the redemption of Shares
Issuable With Respect To The Class A Equity Interest In The FON Group to
the extent allocated to shares of DT Class A Stock; and

(C) adjusted by the Sprint Board to properly reflect any other necessary
changes on an equivalent Per Class A FON Share Basis.

"Number Of Shares Issuable With Respect To The DT Class A Equity Interest In
The PCS Group," as defined in the Amended Articles, means, as of the date the
Amended Articles become effective, a number (rounded up to the nearest whole
share) equal to one-half of the aggregate number of outstanding shares of DT
Class A Stock as of the date the Amended Articles become effective; provided,
however, that such number shall from time to time thereafter be:

(A) adjusted, on an equivalent Per Class A PCS Share Basis, to reflect
any subdivision (by stock split or otherwise) or combination (by reverse
stock split or otherwise) of the PCS Stock or any reclassification of PCS
Stock; and

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(B) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by action of the Sprint Board by (1) the
amount of certain payments made to the holders of DT Class A Stock divided
by the corresponding redemption price per share of PCS Stock, (2) any
reduction required to reflect the redemption of Shares Issuable With
Respect To The Class A Equity Interest In The PCS Group to the extent
allocated to shares of DT Class A Stock, (3) the amount necessary to
reflect the conversion of some or all of this number into a Number Of
Shares Issuable With Respect To The DT Class A Equity Interest In The FON
Group, and (4) the amount necessary to reflect the redemption thereof in
exchange for the issuance of shares of common stock of one or more wholly-
owned subsidiaries of Sprint that hold directly or indirectly all of the
assets and liabilities attributed to the PCS Group; and

(C) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by the number of certain shares of Series 1
PCS Stock or Series 3 PCS Stock issued by Sprint; and

(D) adjusted by the Sprint Board to properly reflect any other necessary
changes on an equivalent Per Class A PCS Share Basis.

"Number Of Shares Issuable With Respect To The FON Group Inter-Group
Interest," as defined in the Amended Articles, means, as of the date the
Amended Articles become effective, a number equal to 220,000,000 less the sum
of (i) the Number Of Shares Issuable With Respect To The Existing Class A
Common Equity Interest In The PCS Group, (ii) the Number Of Shares Issuable
With Respect To The DT Class A Equity Interest In The PCS Group, (iii) one-half
of the number of shares of Common Stock, par value $2.50 per share, outstanding
immediately prior to the date the Amended Articles become effective, and (iv)
one-half of the number of shares of Common Stock, par value $2.50 per share,
held as treasury shares by Sprint immediately prior to the date the Amended
Articles become effective; provided, however, that such number shall from time
to time thereafter be:

(A) adjusted, as determined by the Sprint Board to be appropriate to
reflect equitably any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of the PCS Stock or any
dividend or other distribution of shares of PCS Stock to holders of shares
of PCS Stock or any reclassification of PCS Stock;

(B) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by action of the Sprint Board by (1) the
number of shares of PCS Stock issued or sold by Sprint that, immediately
prior to such issuance or sale, were included (as determined by the Sprint
Board pursuant to paragraph (C) of this definition) in the Number Of Shares
Issuable With Respect To The FON Group Inter-Group Interest, (2) the number
of shares of PCS Stock issued upon conversion, exchange or exercise of
Convertible Securities that, immediately prior to the issuance or sale of
such Convertible Securities, were included in the Number Of Shares Issuable
With Respect To The FON Group Inter-Group Interest, (3) the number of
shares of PCS Stock issued by Sprint as a dividend or other distribution
(including in connection with any reclassification or exchange of shares)
to holders of FON Stock and Class A Common Stock (but only with respect to
any Shares Issuable With Respect To The Class A Equity Interest In The FON
Group) or shares of FON Preferred Stock, as the case may be, (4) the number
of shares of PCS Stock issued upon the conversion, exchange or exercise of
any Convertible Securities issued by Sprint as a dividend or other
distribution (including in connection with any reclassification or exchange
of shares) to holders of FON Stock or Class A Common Stock (but only with
respect to any Shares Issuable With Respect To The Class A Equity Interest
In The FON Group) or shares of FON Preferred Stock, as the case may be, (5)
the quotient of (a) the aggregate Fair Value of any PCS Preferred Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of PCS Preferred Stock) issued by Sprint as a dividend or other
distribution (including in connection with any classification or exchange
of shares) to holders of FON Stock, Class A Common Stock (but only with
respect to any Shares Issuable With Respect To The Class A Equity Interest
In The FON Group), or shares of FON Preferred Stock, as the case may be,
divided by (b) the Market Value of one share of PCS Stock as of the date of
issuance of such PCS Preferred Stock (or Convertible Securities), or (6)
the number (rounded, if necessary, to the nearest whole number) equal to
the quotient of (a) the aggregate Fair Value as of the date of contribution
of properties or assets (including cash) transferred from the PCS Group to
the FON Group in consideration

A-13
<PAGE>

for a reduction in the Number Of Shares Issuable With Respect To The FON
Group Inter-Group Interest divided by (b) the Market Value of one share of
PCS Stock as of the date of such transfer; and

(C) increased by (1) the number of outstanding shares of PCS Stock
repurchased by Sprint for consideration that had been attributed to the FON
Group, (2) the number (rounded, if necessary, to the nearest whole number)
equal to the quotient of (a) the Fair Value of properties or assets
(including cash) theretofore attributed to the FON Group that are
contributed, by action of the Sprint Board, to the PCS Group in
consideration of an increase in the Number Of Shares Issuable With Respect
To The FON Group Inter-Group Interest, divided by (b) the Market Value of
one share of PCS Stock as of the date of such contribution and (3) the
number of shares of PCS Stock into or for which Convertible Securities are
deemed converted, exchanged or exercised pursuant to the Amended Articles;

provided, further, that the Sprint Board may make such subsequent changes to
the calculations made pursuant to subparagraphs (A), (B) and (C) immediately
above as may be required for purposes of accurately determining such number.

"Number Of Shares Issuable With Respect To The Existing Class A Equity
Interest In The FON Group," as defined in the Amended Articles, means, as of
the date the Amended Articles become effective, a number equal to the aggregate
number of outstanding shares of Existing Class A Common Stock as of the date
the Amended Articles becomes effective; provided, however, that such number
shall from time to time thereafter be:

(C) adjusted by the Sprint Board to properly reflect any other necessary
changes on an equivalent Per Class A FON Share Basis.

"Number Of Shares Issuable With Respect To The Existing Class A Equity
Interest In The PCS Group," as defined in the Amended Articles, as of the date
the Amended Articles become effective, means a number (rounded up to the
nearest whole share) equal to one-half of the aggregate number of outstanding
shares of Existing Class A Common Stock as of the date the Amended Articles
become effective; provided, however, that such number shall from time to time
thereafter be:

(B) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by action of the Sprint Board by (1) the
amount of certain payments made to the holder of Existing Class A Common
Stock divided by the corresponding redemption price per share of PCS Stock,
(2) any reduction required to reflect the redemption of Shares Issuable
With Respect To The Class A Equity Interest In The PCS Group to the extent
allocated to shares of Existing Class A Common Stock, (3) the amount
necessary to reflect the conversion of some or all of this number into a
Number Of Shares Issuable With Respect To The Existing Class A Equity
Interest In The FON Group, and (4) the amount necessary to reflect the
redemption thereof in exchange for the issuance of shares of common stock
of one or more wholly-owned subsidiaries of Sprint that hold directly or
indirectly all of the assets and liabilities attributed to the PCS Group;
and

(C) decreased (but not less than zero), if before such decrease such
number is greater than zero, by the number of certain shares of Series 1
PCS Stock or Series 3 PCS Stock issued by Sprint; and

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<PAGE>

(D) adjusted by the Sprint Board to properly reflect any other necessary
changes on an equivalent Per Class A PCS Share Basis.

"Other Group," as defined in the Tracking Stock Policies, means any tracked
group that Sprint may designate by future amendment to the Amended Articles
with respect to which Sprint creates or issues tracking stock to which it
attributes or allocates any present or future assets or businesses.

"Outstanding PCS Fraction," as defined by the Amended Articles, means the
fraction the numerator of which will be the number of shares of PCS Stock
outstanding on such date and the denominator of which will be the sum of (i)
the number of shares of PCS Stock outstanding on such date, (ii) the Number of
Shares Issuable With Respect To The FON Group Inter-Group Interest on such
date, (iii) the Number Of Shares Issuable With Respect To The Existing Class A
Equity Interest In The PCS Group on such date and (iv) the Number Of Shares
Issuable With Respect To The DT Class A Equity Interest In The PCS Group on
such date. A statement setting forth the Outstanding PCS Fraction as of the
record date for the payment of any dividend or distribution on PCS Stock and as
of the end of each fiscal quarter of Sprint shall be filed by Sprint's
Corporate Secretary in the records of the actions of the Board of Directors not
later than fifteen business days after such date.

"PCS Group Available Dividend Amount," on any date, as defined in the
Tracking Stock Policies, means the amount, if any, by which (1) the product of
(a) the Outstanding PCS Fraction as of such date multiplied by (b) an amount
equal to the fair market value of the total assets attributed to the PCS Group
less the total amount of the liabilities attributed to the PCS Group (provided
that Preferred Stock will not be treated as a liability), in each case as of
such date and determined on a basis consistent with the determination of the
PCS Group Net Earnings (Loss), exceeds (2) the aggregate par value of, or any
greater amount determined in accordance with applicable corporation law to be
capital in respect of, all outstanding shares of PCS Stock and each class or
series of Preferred Stock attributed to the PCS Group.

"PCS Group Net Earnings (Loss)," for any period through any date, as defined
in the Tracking Stock Policies, means the net income or loss of the PCS Group
for such period (or in respect of the fiscal periods of Sprint commencing prior
to the closing of the PCS Restructuring, the pro forma net income or loss of
the PCS Group for such period as if the closing of the PCS Restructuring had
been the first day of such period) determined in accordance with generally
accepted accounting principles in effect at such time, reflecting income and
expense of Sprint attributed to the PCS Group on a basis substantially
consistent with attributions of income and expense made in the calculation of
the FON Group Net Earnings (Loss), including, without limitation, corporate
administrative costs, net interest and other financial costs and income taxes.

"PCS Group Percentage Interest," as defined in the Restructuring Agreement,
means, with respect to any person, the percentage of the notional equity
interest in the PCS Group owned by such person, taking into account (i) the
outstanding shares of PCS Stock, (ii) the shares of PCS Stock that would be
outstanding if the Inter-Group Interest in the PCS Group then held by the FON
Group were represented by shares of PCS Stock, (iii) after the
Recapitalization, the shares of PCS Stock that would be outstanding if all of
the outstanding shares of Class A Common Stock were converted into Series 3 PCS
Stock and Series 3 FON Stock pursuant to the Amended Articles, and (iv) the
maximum number of shares of PCS Stock that are issuable upon the exercise,
conversion or exchange of the PCS Options (or that would be issuable in the
case of a PCS Option represented by an Inter-Group Interest held by the FON
Group in the PCS Group), excluding from clause (iv) any Pre-Closing Options to
the extent reflected as part of the Inter-Group Interest referred to in clause
(ii).

"PCS Options," as defined in the Restructuring Agreement, means (i) the
options, warrants or other securities of Sprint or any of its Controlled
Affiliates outstanding at such time that are exercisable or exchangeable for or
convertible into shares of PCS Stock, but excluding (A) any rights of Cox
Pioneer Partnership or its Affiliates under the Agreement of Limited
Partnership of Cox Communications, PCS, L.P., dated as of December 31, 1996, as
it is to be amended pursuant to the amendments to the Cox PCS partnership
agreement, (B) the outstanding shares of Class A Common Stock, and (C) any such
options, warrants or other

A-15
<PAGE>

securities that will be satisfied by Sprint without the allocation of any cost
or expense to the PCS Group or otherwise economically diluting the PCS Group
Percentage Interest of any Cable Parent, and (ii) the Preferred Inter-Group
Interest and any other Inter-Group Interests held by the FON Group in the PCS
Group that have the same effect as the options, warrants and other securities
referred to in clause (i) above.

"PCS Spectrum," means the electromagnetic spectrum between 1850MHz and
1910MHz and between 1930MHz and 1990MHz or such other electromagnetic spectrum
as the FCC may allocate to license holders of electromagnetic spectrum between
1850MHz and 1910MHz and between 1930MHz and 1990MHz in exchange for the
surrender of electromagnetic spectrum within the identified frequencies.

"Per Class A FON Share Basis," as defined in the Amended Articles, means,
with respect to Existing Class A Common Stock or DT Class A Stock, an amount
per share equal to (X / Y) x Z, where "X" equals the Number Of Shares Issuable
With Respect To The Existing Class A Equity Interest In The FON Group or the
Number Of Shares Issuable With Respect To The DT Class A Equity Interest In The
FON Group, respectively, "Y" equals the number of shares outstanding of
Existing Class A Common Stock or DT Class A Stock, respectively, and "Z" equals
the per share number of votes or dividend amount, redemption amount or other
payment paid to the class or series of FON Stock to which the Existing Class A
Common Stock or DT Class A Stock is being compared.

"Per Class A PCS Share Basis," as defined in the Amended Articles, means,
with respect to Existing Class A Common Stock or DT Class A Stock, an amount
per share equal to (X / Y) x Z, where "X" equals the Number Of Shares Issuable
With Respect To The Existing Class A Equity Interest In The PCS Group or the
Number Of Shares Issuable With Respect To The DT Class A Equity Interest In The
PCS Group, respectively, "Y" equals the number of shares outstanding of
Existing Class A Common Stock or DT Class A Stock, respectively, and "Z" equals
the per share number of votes or dividend amount, redemption amount or other
payment paid to the class or series of PCS Stock to which the Existing Class A
Common Stock or DT Class A Stock is being compared.

"Pre-Closing Options," as defined in the Restructuring Agreement, means the
options, warrants and other securities of Sprint or any of its subsidiaries
that were issued prior to and are outstanding as of the closing of the PCS
Restructuring and that are exercisable or exchangeable for or convertible into
shares of Sprint Common Stock, which, in connection with the Recapitalization,
will become, in whole or in part, options, warrants or other securities that
are exercisable or exchangeable for or convertible into shares of Series 1 PCS
Stock (but excluding any PCS Options held by FT or DT).

"Publicly-Traded" with respect to any security, as defined in the Amended
Articles, means (i) registered under Section 12 of the Exchange Act, and (ii)
listed for trading on the New York Stock Exchange or the American Stock
Exchange (or any national securities exchange registered under Section 7 of the
Exchange Act, that is the successor to either such exchange) or quoted in the
National Association of Securities Dealers Inc. Automated Quotations System (or
any successor system).

"Registration Rights Commencement Date" means (i) if the IPO is consummated
concurrently with the closing of the PCS Restructuring, 180 days following the
closing of the PCS Restructuring, (ii) if the IPO is not consummated
concurrently with the closing of the PCS Restructuring but is consummated
within 120 days of the closing of the PCS Restructuring, the later of the
ninetieth day following the IPO or 180 days following the closing of the PCS
Restructuring, or (iii) if the IPO is not consummated concurrently with the
closing of the PCS Restructuring or within 120 days thereafter, the 180th day
following the closing of the PCS Restructuring unless any Cable Parent shall
decide to exercise one of its rights to a demand registration after such 120th
day following the closing of the PCS Restructuring but prior to such 180th day
following the closing of the PCS Restructuring in which case the date the
demand notice is given.

"Shares Issuable With Respect To The Class A Equity Interest In The FON
Group," as defined in the Recapitalization Amendment, means, at any time, the
Number Of Shares Issuable With Respect To The Existing Class A Equity Interest
In The FON Group and the Number Of Shares Issuable With Respect To The DT Class
A Equity Interest In The FON Group.

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<PAGE>

"Shares Issuable With Respect To The Class A Equity Interest In The PCS
Group," as defined in the Recapitalization Amendment, means, at any time, the
Number Of Shares Issuable With Respect To The Existing Class A Equity Interest
In The PCS Group and the Number Of Shares Issuable With Respect To The DT Class
A Equity Interest In The PCS Group.

"Strategic Merger," as defined in the Amended Articles, means a merger or
other business combination involving Sprint (a) in which the holders of Class A
Stock are entitled to retain or receive, as the case may be, voting equity
securities of the surviving parent entity in exchange for or in respect of (by
conversion or otherwise) such Class A Stock, with an aggregate Fair Market
Value (as defined in the Amended Articles) equal to at least 75% of the sum of
(i) the Fair Market Value of all consideration which such holders of Class A
Stock have a right to receive with respect to such merger or other business
combination, and (ii) if Sprint is the surviving parent entity, the Fair Market
Value of the equity securities of the surviving parent entity which the holders
of Class A Stock are entitled to retain, (b) immediately after which the
surviving parent entity is an entity whose voting equity securities are
registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act or
which otherwise has any class or series of its voting equity securities held by
at least 500 holders and (c) immediately after which no person or group (other
than the holders of Class A Stock) owns Voting Securities (as defined in the
Amended Articles) of such surviving parent entity with Votes equal to more than
35 percent of the Voting Power of such surviving parent entity.

"Tax Sharing Agreement" means an agreement to be entered into and undertaken
by Sprint pursuant to which Sprint will allocate between the FON Group and the
PCS Group federal and state income taxes incurred by Sprint which are
determined on a consolidated, combined, or unitary basis.

"Trading Day," as defined in the Amended Articles means, with respect to any
security, any day on which the principal national securities exchange on which
such security is listed or admitted to trading or NASDAQ, if such security is
listed or admitted to trading thereon, is open for the transaction of business
(unless such trading shall have been suspended for the entire day) or, if such
security is not listed or admitted to trading on any national securities
exchange or NASDAQ, any day other than a Saturday, Sunday, or a day on which
banking institutions in the State of New York are authorized or obligated by
law or executive order to close.

"Vote," as defined in the Amended Articles, means, with respect to any
entity, the ability to cast a vote at a stockholders', members' or comparable
meeting of such entity with respect to the election of directors, managers or
other members of such entity's governing body, or the ability to cast a general
partnership or comparable vote, provided that with respect to Sprint, the term
"Vote" means the ability to exercise general voting power (as opposed to the
exercise of special voting or disapproval rights such as those set forth in the
Amended Articles) with respect to matters other than the election of directors
at a meeting of the stockholders of Sprint.

"Voting Power," as defined in the Amended Articles, means, with respect to an
entity, the aggregate number of Votes outstanding as of such date in respect of
such entity.

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<PAGE>

PROSPECTUS

SPRINT CORPORATION

Debt Securities

SPRINT CAPITAL CORPORATION

Debt Securities
Unconditionally Guaranteed by

SPRINT CORPORATION

----------------

Sprint Corporation and its subsidiary, Sprint Capital Corporation, may offer
from time to time, in the aggregate, up to $8,000,000,000 principal amount of
unsecured senior Debt Securities. The Debt Securities may be in other
currencies or currency units in an equivalent amount. In the event Debt
Securities are issued at an original issue discount, the net proceeds from the
offering will not exceed $8,000,000,000. Sprint and/or Sprint Capital will
offer the Debt Securities as separate series, in amounts, at prices and on
terms determined at the time of sale.

Sprint will unconditionally guarantee (the "Guarantees") the payment of
principal of and any premium and interest on all Debt Securities issued by
Sprint Capital.

A supplement to this Prospectus will set forth the specific terms of any
series of Debt Securities that is offered and the terms of offering of such
series of Debt Securities. The Prospectus Supplement will also contain
information, where applicable, about material United States federal income tax
considerations relating to, and any listings on a securities exchange of, the
Debt Securities covered by such Prospectus Supplement. See "Plan of
Distribution" for the different methods that may be used to offer the Debt
Securities and for possible indemnification arrangements for underwriters,
dealers and agents.

The Debt Securities will be represented by one or more Global Securities
registered in the name of the nominee of The Depository Trust Company. Unless
otherwise stated in the Prospectus Supplement, Debt Securities in definitive
form will not be issued. See "Description of Debt Securities--Book-Entry
System."

----------------

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy
of this Prospectus. Any representation to
the contrary is a criminal
offense.

----------------

The date of this Prospectus is October 23, 1998
<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

Sprint files annual, quarterly and special reports, proxy statements and
other information with the SEC. You can inspect and copy the Registration
Statement on Form S-3 of which this Prospectus is a part, as well as reports,
proxy statements and other information filed by Sprint, at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
SEC: 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
obtain copies of such material from the Public Reference Room of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can
call the SEC at 1-800-732-0330 for information regarding the operation of its
Public Reference Room. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov. that contains reports, proxy statements and other
information regarding registrants (like Sprint) that file electronically.

In addition, you can inspect reports, proxy statements and other information
concerning Sprint at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, the Chicago Stock Exchange, 440 South
LaSalle Street, Chicago, Illinois 60605, and the Pacific Exchange, 301 Pine
Street, San Francisco, California 94104, on which exchanges the common stock
of Sprint is listed. If the PCS Restructuring is approved by Sprint's
shareholders, Sprint intends to list its FON Stock and PCS Stock only on the
New York Stock Exchange. Consequently, once Sprint's existing common stock is
recapitalized, copies of Sprint's reports and proxy statements will no longer
be filed with the Chicago Stock Exchange and the Pacific Exchange and
therefore will not be available for inspection at those exchanges. See the
discussion under "Sprint Corporation" regarding the proposed PCS Restructuring
and the recapitalization of Sprint's common stock into FON Stock and PCS
Stock.

This Prospectus provides you with a general description of the Debt
Securities that we may offer and any related Guarantees. Each time we sell
Debt Securities, we will provide a Prospectus Supplement that will contain
specific information about the terms of that offering. The Prospectus
Supplement may also add, update or change information contained in this
Prospectus. You should read both this Prospectus and any Prospectus
Supplement, together with the additional information that is incorporated by
reference, as described below.

This Prospectus is part of a Registration Statement that we have filed with
the SEC. To see more detail, you should read the exhibits filed with our
Registration Statement.

The SEC allows this Prospectus to "incorporate by reference" certain other
information that Sprint files with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this Prospectus,
and information that Sprint files later with the SEC will automatically update
and replace this information. We incorporate by reference the documents listed
below and any future filings made by Sprint with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of
the securities that we have registered.

. Sprint's Annual Report on Form 10-K for the year ended December 31, 1997;

. Sprint's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998;

. Sprint's Current Reports on Form 8-K dated May 26, 1998 and June 29,
1998; and

. Sprint's Proxy Statement/Prospectus that forms a part of Registration
Statement No. 333-65173.

If you make a request for such information in writing or by telephone, we
will provide to you, at no cost, a copy of any or all of the information
incorporated by reference in the Registration Statement of which this
Prospectus is a part. Requests should be addressed to: Sprint Corporation,
2330 Shawnee Mission Parkway, Westwood, Kansas 66205, Attention: Investor
Relations (telephone number: (800) 259-3755).

2
<PAGE>

SPRINT CAPITAL CORPORATION

Sprint Capital is a wholly-owned subsidiary of Sprint and was incorporated
in Delaware on May 20, 1993. The principal offices of Sprint and Sprint
Capital are located at 2330 Shawnee Mission Parkway, Westwood, Kansas 66205,
and their telephone number is (913) 624-3000.

Sprint Capital's purpose is to engage in financing activities that provide
funds for use by Sprint and Sprint's subsidiaries, other than its local
exchange telephone subsidiaries ("LECs"). Sprint Capital raises funds through
the offering and sale of debt securities, and the net proceeds thereof are
loaned to or invested in Sprint and its non-LEC subsidiaries. Sprint Capital
does not and will not engage in any other business operations.

SPRINT CORPORATION

Sprint is a diversified telecommunications service provider whose principal
activities include long distance service, local service, wireless personal
communications services ("PCS"), product distribution and directory publishing
activities and other telecommunications activities, investments and alliances.

Sprint's long distance division ("LDD") is the nation's third largest
provider of long distance telephone services. LDD operates a nationwide, all-
digital long distance telecommunications network that uses state-of-the-art
fiber-optic and electronic technology. LDD provides domestic and international
voice, video and data communications services. Sprint's local
telecommunications division ("LTD") consists primarily of regulated LECs
serving approximately 7.5 million access lines in 19 states. LTD provides
local services, access by telephone customers and other carriers to LTD's
local exchange facilities, sales of telecommunications equipment and long
distance services within specified geographic areas. Sprint's product
distribution and directory publishing businesses ("PDDP") consist of wholesale
distribution of telecommunications equipment and publishing and marketing
white and yellow page telephone directories.

Sprint's other telecommunications activities include (i) emerging
businesses, which consist of the development of new integrated communications
services, integration management and support services for computer networks
and international development activities outside the scope of Global One, (ii)
Sprint's interest in the Global One international strategic alliance, a joint
venture with France Telecom S.A. ("FT") and Deutsche Telekom AG ("DT"), and
(iii) Sprint's other telecommunications investments and alliances, such as its
investment in EarthLink Network, Inc., an internet service provider. FT and DT
are European telephone companies with a combined 20% strategic equity
investment in Sprint.

Sprint currently conducts its PCS operations through its 40% interest in
Sprint Spectrum Holding Company, L.P. and MinorCo, L.P., its approximately 47%
interest in PhillieCo Partners I, L.P. and PhillieCo Partners II, L.P., and
its wholly-owned subsidiaries, SprintCom, Inc. and SprintCom Equipment
Company, L.P. These entities market their wireless telephony products and
services under the Sprint(R) and Sprint PCS(R) brand names and, together,
operate the only 100% digital PCS wireless network in the United States with
licenses to provide service nationwide utilizing a single frequency band and a
single technology. These entities own licenses to provide service to the
entire United States population, including Puerto Rico and the U.S. Virgin
Islands. At September 30, 1998, they operated PCS systems in 163 metropolitan
markets within the United States, including 38 of the 50 largest metropolitan
areas.

Sprint has entered into a restructuring agreement with Tele-Communications,
Inc. ("TCI"), Comcast Corporation ("Comcast") and Cox Communications, Inc.
("Cox") (together, the "Cable Parents") to restructure Sprint's PCS operations
(the "PCS Restructuring"). Sprint will acquire the joint venture interests of
TCI, Comcast and Cox in Sprint Spectrum Holding Company, L.P. and MinorCo,
L.P. and the joint venture interests of TCI and Cox in PhillieCo Partners I,
L.P. and PhillieCo Partners II, L.P. In exchange for these joint venture
interests, Sprint will issue to the Cable Parents a newly created class of
Sprint common stock (the "PCS Stock"). The PCS Stock is intended to reflect
separately the performance of these joint ventures and the domestic

3
<PAGE>

PCS operations of SprintCom, Inc. and SprintCom Equipment Company, L.P. These
operations, which after the PCS Restructuring will be 100% owned by Sprint
(subject to a 40.8% minority interest in the entity holding the PCS license
for and conducting operations in the Los Angeles/San Diego/Las Vegas area),
will be referred to as the PCS Group. The FON Stock, which will be created in
a tax-free recapitalization of Sprint's existing common stock, is intended to
reflect the performance of all of Sprint's other operations, including LDD,
LTD, PDDP, emerging businesses and its interest in Global One. These
operations will be referred to as the FON Group. These transactions are
subject to shareholder approval. The special meeting of Sprint shareholders to
obtain approval has been scheduled for November 13, 1998.

USE OF PROCEEDS

Unless otherwise indicated in a Prospectus Supplement, the net proceeds from
the sale of the Debt Securities are intended to be used to repay short-term
debt of Sprint and Sprint Capital and long-term obligations of Sprint and its
subsidiaries, including debt obligations of the new PCS Group following
consummation of the PCS Restructuring. The net proceeds are also intended to
be used to provide funds to Sprint and its subsidiaries for general purposes,
including working capital requirements and new capital investments.

RATIOS OF EARNINGS TO FIXED CHARGES

Sprint's ratio of earnings to fixed charges was 5.66 for the six months
ended June 30, 1998, 6.41 for the year 1997, 5.94 for the year 1996, 4.32 for
the year 1995, 4.28 for the year 1994 and 2.63 for the year 1993. The ratios
were computed by dividing fixed charges into the sum of earnings (after
certain adjustments) and fixed charges. Earnings include income from
continuing operations before taxes, plus equity in net losses of entities that
are less than 50% owned by Sprint, less capitalized interest. Fixed charges
include (i) interest on all debt of continuing operations (including
amortization of debt issuance costs), (ii) the interest component of operating
rents, and (iii) the pre-tax cost of subsidiary preferred stock dividends.

DESCRIPTION OF DEBT SECURITIES

The Debt Securities issued by Sprint will be issued under an Indenture,
dated as of October 1, 1998, between Sprint and Bank One, N.A., as Trustee
(the "Sprint Indenture"), and the Debt Securities issued by Sprint Capital
will be issued under an Indenture, dated as of October 1, 1998, among Sprint
Capital, Sprint and Bank One, N.A., as Trustee (the "Sprint Capital
Indenture," and together with the Sprint Indenture, the "Indentures"). The
Sprint Capital Indenture has similar provisions to the Sprint Indenture,
including an identical lien covenant relating to Sprint. Copies of each of the
Indentures are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.

A summary of certain provisions of the Indentures follows. The summary is
not complete and is qualified in its entirety by express reference to the
detailed provisions of the Indentures, including the definitions in the
Indentures of certain terms. All section references below are to sections of
the applicable Indenture. You should read the Indentures, including the
definition of terms in the Indentures, for a more complete understanding of
the provisions and the terms described below.

GENERAL

The Indentures do not limit the amount of indebtedness that may be issued
thereunder. The Indentures provide that Debt Securities may be issued from
time to time in one or more series. The Debt Securities will be unsecured
obligations of Sprint or Sprint Capital.

The designation of the applicable Indenture, and the title, amount,
maturity, interest rate, terms for redemption, terms for sinking fund
payments, and other specific terms of the series of Debt Securities, including

4
<PAGE>

(i) the currency of payment of principal of and any premium and interest on
the Debt Securities, which may be United States dollars or any other currency
or currency unit, and (ii) any index used to determine the amount of payments
of principal of and any premium and interest on the Debt Securities, will be
set forth or summarized in the Prospectus Supplement.

Unless otherwise provided in the Prospectus Supplement, the Debt Securities
will be represented by one or more Global Securities. Consequently, the
payment of principal and any premium and interest on the Debt Securities will
be made as described below under "Book-Entry System" and "Same-Day Settlement
and Payment," and transfers of the Debt Securities can be made only as
described below under "Book-Entry System." In the event that Debt Securities
in definitive form are issued, the following provisions will apply:

(a) Principal of and any premium and interest on the Debt Securities will
be payable, and transfers of the Debt Securities will be registrable, at
the Corporate Trust Office of the Trustee, provided that at the option of
Sprint or Sprint Capital (in the case of Debt Securities issued by Sprint
Capital) payment of interest may be made by check mailed to the address of
the Person entitled thereto as it appears in the Security Register.
(Indentures, Sections 202, 305, and 1002) The Corporate Trust Office of
Bank One, N.A., is located at 100 East Broad Street, Columbus, Ohio 43215.

(b) The Debt Securities will be issued only in fully registered form
without coupons in denominations of $1,000 or any integral multiple
thereof. (Indentures, Sections 301 and 302).

No service charge will be made for any registration of transfer or exchange
of Debt Securities, but Sprint or Sprint Capital may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with such transfer or exchange, other than exchanges not involving any
transfer. (Indentures, Section 305)

Securities may be issued as Original Issue Discount Securities to be offered
and sold at a substantial discount below the stated principal amount. Federal
income tax consequences and other special considerations applicable to such
Original Issue Discount Securities will be described in the Prospectus
Supplement relating to such securities.

RESTRICTIVE COVENANT--SPRINT

Under the Indentures, Sprint and its Restricted Subsidiaries may not create,
incur or allow to exist any Lien upon any property or assets now owned or
hereafter acquired unless:

. such Lien is a Permitted Lien; or

. the outstanding Debt Securities (or, in the case of Debt Securities
issued by Sprint Capital, the outstanding Guarantees) are equally and
ratably secured by such Lien; or

. the aggregate principal amount of indebtedness secured by such Lien and
any other Lien (other than Permitted Liens) plus the Attributable Debt in
respect of any Sale and Leaseback Transaction does not exceed 15% of the
Consolidated Net Tangible Assets of Sprint and its subsidiaries. (Sprint
Indenture, Section 1008, Sprint Capital Indenture, Section 1012)

The definitions for capitalized terms used above are as follows:

"Attributable Debt" of a Sale and Leaseback Transaction means, at any date,
the total net amount of rent required to be paid under such lease during the
remaining term of the lease (excluding any subsequent renewal or other
extension options held by the lessee), discounted from the respective due
dates of such amounts to such date of determination at the rate of interest
per annum implicit in the terms of such lease, as determined in good faith by
Sprint, compounded annually. The net amount of rent required to be paid under
any such lease for any such period shall be the amount of rent payable by the
lessee with respect to such period, after excluding amounts

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required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges and contingent rents.

"Capital Lease Obligations" means indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles. The
amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles consistently applied.

"Consolidated Net Tangible Assets" of Sprint and its subsidiaries means the
consolidated total assets of Sprint and its subsidiaries as reflected in
Sprint's most recent balance sheet preceding the date of determination
prepared in accordance with generally accepted accounting principles
consistently applied, less (i) current liabilities (excluding current
maturities of long-term debt and Capital Lease Obligations) and (ii) goodwill,
tradenames, trademarks, patents, minority interests of others, unamortized
debt discount and expense and other similar intangible assets (excluding any
investments in permits or licenses issued, granted or approved by the Federal
Communications Commission).

"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, lien, charge, easement or
zoning restriction, encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever on or
with respect to property including any Capital Lease Obligation, conditional
sale or other title retention agreement having substantially the same economic
effect as any of the foregoing or any Sale and Leaseback Transaction.

"Permitted Liens" means:

(i) Liens existing on October 1, 1998;

(ii) Liens on property existing at the time of acquisition of such
property or to secure the payment of all or any part of the purchase price
of such property or to secure any indebtedness incurred prior to, at the
time of or within 270 days after the acquisition of such property for the
purpose of financing all or any part of the purchase price of such
property;

(iii) Liens securing indebtedness owing by a Restricted Subsidiary to
Sprint or any wholly-owned subsidiary of Sprint;

(iv) Liens on property of any entity, or on the stock, indebtedness or
other obligations of such entity, existing at the time (a) such entity
becomes a Restricted Subsidiary, (b) such entity is merged into or
consolidated with Sprint or a Restricted Subsidiary or (c) Sprint or a
Restricted Subsidiary acquires all or substantially all of the assets of
such entity, as long as no such Lien extends to any other property of
Sprint or any other Restricted Subsidiary;

(v) Liens on property to secure any indebtedness incurred to provide
funds for all or any part of the cost of development of or improvements to
such property;

(vi) Liens on the property of Sprint or any of its Restricted
Subsidiaries securing (a) nondelinquent performance of bids or contracts
(other than for borrowed money, obtaining of advances or credit or the
securing of debt), (b) contingent obligations on surety and appeal bonds
and (c) other nondelinquent obligations of a similar nature, in each case,
incurred in the ordinary course of business;

(vii) Liens securing Capital Lease Obligations, provided that (a) any
such Lien attaches to the property within 270 days after the acquisition
thereof and (b) such Lien attaches solely to the property so acquired;

(viii) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds, as long as such deposit
account is not a dedicated cash collateral account and is not subject to
restrictions against access by Sprint or such Restricted Subsidiary, as
applicable, in excess of those set forth by regulations promulgated by the
Federal Reserve Board and such deposit account is not intended by Sprint or
such Restricted Subsidiary to provide collateral to the depository
institution;

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(ix) pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation;

(x) statutory and tax Liens for sums not yet due or delinquent or which
are being contested or appealed in good faith by appropriate proceedings;

(xi) Liens arising solely by operation of law, such as mechanics',
materialmen's, warehouseman's and carriers' Liens and Liens of landlords or
of mortgages of landlords, on fixtures and movable property located on
premises leased in the ordinary course of business;

(xii) Liens on personal property, other than shares of stock or
indebtedness of any Restricted Subsidiary, to secure loans maturing not
more than one year from the date of the creation thereof and on accounts
receivable associated with a receivables financing program of Sprint or any
of its Restricted Subsidiaries;

(xiii) any Lien created by or resulting from litigation or other
proceeding against, or upon property of, Sprint or a Restricted Subsidiary,
or any lien for workmen's compensation awards or similar awards, so long as
the finality of such judgment or award is being contested and execution
thereon is stayed or such Lien relates to a final unappealable judgment
which is satisfied within 30 days of such judgment or any Lien incurred by
Sprint or any Restricted Subsidiary for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding, as long as
such judgment or award does not constitute an Event of Default under clause
(e) of "Events of Default" below;

(xiv) Liens on the real property of Sprint or a Restricted Subsidiary
which constitute minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning
or other restrictions as to the use of such real property, as long as all
of the liens referred to in this clause (xiv) in the aggregate do not at
any time materially detract from the value of such real property or
materially impair its use in the operation of the business of Sprint and
its subsidiaries;

(xv) Liens on property of Sprint or a Restricted Subsidiary securing
indebtedness or other obligations issued by the United States of America or
any state or any department, agency or instrumentality or political
subdivision of the United States of America or any state, or by any other
country or any political subdivision of any other country, for the purpose
of financing all or any part of the purchase price of (or, in the case of
real property, the cost of construction on or improvement of) any property
or assets subject to such Liens (including Liens incurred in connection
with pollution control, industrial revenue or similar financings); and

(xvi) any renewal, extension or replacement (in whole or in part) of any
Lien permitted pursuant to (i), (ii), (iv), (v), (vii) and (xv) above or of
any indebtedness secured by any such Lien, as long as such extension,
renewal or replacement Lien is limited to all or any part of the same
property that secured the Lien extended, renewed or replaced (plus
improvements on such property) and the principal amount of indebtedness
secured by such Lien and not otherwise authorized by clauses (i), (ii),
(iv), (v), (vii) and (xv) does not exceed the principal amount of
indebtedness plus any premium or fee payable in connection with any such
renewal, extension or replacement so secured at the time of such renewal,
extension or replacement.

"Receivables Subsidiary" means a special purpose wholly-owned subsidiary
created in connection with any transactions that may be entered into by Sprint
or any of its subsidiaries pursuant to which Sprint or any of its subsidiaries
may sell, convey, grant a security interest in or otherwise transfer undivided
percentage interests in its receivables.

"Restricted Subsidiary" means any subsidiary of Sprint (other than a
Receivables Subsidiary or Sprint Capital) if:

(i) such subsidiary has substantially all of its property in the United
States (other than its territories and possessions); and

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(ii) at the end of the most recent fiscal quarter of Sprint preceding the
date of determination, the aggregate amount, determined in accordance with
generally accepted accounting principles consistently applied, of
securities of, loans and advances to, and other investments in, such
subsidiary held by Sprint and its other subsidiaries, less any securities
of, loans and advances to, and other investments in Sprint and Sprint's
other subsidiaries held by such subsidiary or any of its subsidiaries,
exceeded 15% of Sprint's Consolidated Net Tangible Assets.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
pursuant to which property is sold or transferred by Sprint or a Restricted
Subsidiary and is thereafter leased back from the purchaser or transferee by
Sprint or such Restricted Subsidiary.

Unless otherwise indicated in the Prospectus Supplement, the covenants
contained in the Indentures and in the Debt Securities and Guarantees would
not necessarily afford holders protection in the event of a highly leveraged
or other transaction involving Sprint that may adversely affect holders.

RESTRICTIVE COVENANTS--SPRINT CAPITAL

Sprint Capital may not create, issue, assume or guarantee any unsecured
Funded Debt ranking prior to the Debt Securities issued by Sprint Capital.
(Sprint Capital Indenture, Section 1009)

Unless otherwise indicated in the Prospectus Supplement, Sprint Capital may
not create, assume or suffer to exist any Lien (as defined above) upon any of
its property or assets, now owned or hereafter acquired, without making
effective provision whereby the outstanding Debt Securities issued by Sprint
Capital shall be secured by such Lien equally and ratably with any and all
other obligations and indebtedness thereby secured, with certain specified
exceptions. (Sprint Capital Indenture, Section 1008)

EVENTS OF DEFAULT

Each of the following is an Event of Default under the Indentures with
respect to Debt Securities of any series:

(a) failure to pay principal of or any premium on any Debt Security of
that series at maturity;

(b) failure to pay any interest on any Debt Security of that series when
due, continued for 30 days;

(d) failure to perform any other covenant or warranty in the applicable
Indenture (other than a covenant included solely for the benefit of series
of Debt Securities other than that series), continued for 60 days after
written notice as provided in such Indenture;

(e) default resulting in acceleration of more than $50,000,000 in
aggregate principal amount of any indebtedness for money borrowed by Sprint
or Sprint Capital or any other subsidiary of Sprint under the terms of the
instrument under which such indebtedness is issued or secured, if such
indebtedness is not discharged or such acceleration is not rescinded or
annulled within 10 days after written notice as provided in the Indentures;

(f) certain events of bankruptcy, insolvency or reorganization; and

(g) any other Event of Default provided with respect to Debt Securities
of that series. (Indentures, Section 501)

If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee with respect to
such Debt Securities or the holders of at least 25% in principal amount of the
outstanding Debt Securities of that series may declare the principal amount
(or, if any of the Debt

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Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of
all the Debt Securities of that series to be due and payable immediately by
written notice as provided in the applicable Indenture.

At any time after a declaration of acceleration with respect to Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due based on acceleration has been obtained, the holders
of a majority in principal amount of the outstanding Debt Securities of that
series may, in accordance with the applicable Indenture, rescind and annul
such acceleration. (Indentures, Section 502)

Each Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the holders, unless such holders offer
reasonable indemnity to the Trustee. (Indentures, Sections 601 and 603)
Subject to such provisions for indemnification of the Trustee, the holders of
a majority in principal amount of the outstanding Debt Securities of any
series will have the right (in accordance with applicable law) to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee,
with respect to the Debt Securities of that series. (Indentures, Section 512)

Sprint and Sprint Capital will be required to furnish to the Trustee
annually a statement as to the performance by it of certain of its obligations
under the applicable Indenture and as to any default in such performance.
(Indentures, Section 1004)

MODIFICATION AND WAIVER

Modifications and amendments of the Sprint Indenture may be made by Sprint
and the Trustee, in most cases with the consent of the holders of a majority
in principal amount of the outstanding Debt Securities of each series affected
by such modification or amendment. Modifications and amendments of the Sprint
Capital Indenture may be made by Sprint, Sprint Capital and the Trustee, in
most cases with the consent of the holders of a majority in principal amount
of the outstanding Debt Securities of each series affected by such
modification or amendment.

Each Indenture provides that, without the consent of the holder of each
outstanding Debt Security affected thereby, no such modification or amendment
may

(a) change the date specified in the Debt Security for the payment of
the principal of, or any installment of principal of or interest on, such
Debt Security,

(b) reduce the principal amount of, or any premium or interest on, any
Debt Security,

(c) reduce the amount of principal of an Original Issue Discount
Security or any other Debt Security payable upon acceleration of the
maturity of such Debt Security,

(d) change the place or currency of payment of principal of, or any
premium or interest on, any Debt Security,

(e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security or

(f) reduce the percentage in principal amount of outstanding Debt
Securities of any series, the consent of whose holders is required for
any supplemental indenture amending or modifying the Indenture or for
waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults. (Indentures, Section 902)

In addition, the Sprint Capital Indenture provides that, without the consent
of the holder of each outstanding Debt Security affected thereby, no such
modification or amendment may modify or affect in any manner adverse

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to the holders the terms and conditions and obligations of the Guarantor in
respect of the Guarantees of any Debt Securities.

The holders of a majority in principal amount of the outstanding Debt
Securities of any series issued under the Sprint Indenture and the Sprint
Capital Indenture may on behalf of the holders of all Debt Securities of that
series waive, insofar as that series is concerned, compliance by Sprint (or
Sprint and Sprint Capital, in the case of the Sprint Capital Indenture) with
certain restrictive provisions of the Indentures. (Sprint Indenture,
Section 1009, Sprint Capital Indenture, Sections 1010 and 1013) The holders of
a majority in principal amount of the outstanding Debt Securities of any
series may on behalf of the holders of all Debt Securities of that series
waive any past default under the applicable Indenture with respect to that
series, except a default in the payment of the principal of or any premium or
interest on any Debt Security of that series or in respect of a covenant or
provision which under the Indentures cannot be modified or amended without the
consent of the holder of each outstanding Debt Security of that series
affected. (Indentures, Section 513)

CONSOLIDATION, MERGER AND CONVEYANCES

Sprint (and, in the case of the Sprint Capital Indenture, Sprint Capital),
without the consent of any holders of outstanding Debt Securities, may
consolidate with or merge with or into, or transfer or lease its properties
and assets substantially as an entirety to, any corporation, partnership or
trust, or may acquire or lease the assets of any Person, provided that (i) the
corporation, partnership or trust formed by such consolidation or into which
Sprint or Sprint Capital is merged or which acquires or leases the assets of
Sprint or Sprint Capital substantially as an entirety is organized under the
laws of any United States jurisdiction and assumes the obligations of Sprint
or Sprint Capital, as applicable, under the Debt Securities or the Guarantees,
as the case may be, and under the Indentures, (ii) after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, has happened and is
continuing, and (iii) certain other conditions specified in the Indentures are
met. Thereafter, all such obligations of Sprint or Sprint Capital, as the case
may be, terminate. (Indentures, Sections 801 and 802)

DEFEASANCE

Unless otherwise indicated in the Prospectus Supplement, the following
defeasance provisions will apply to the Debt Securities.

The Indentures provide that Sprint (or Sprint and Sprint Capital, in the
case of Debt Securities issued under the Sprint Capital Indenture) may elect
either (A) to defease and be discharged from any and all obligations with
respect to such Debt Securities and the Guarantees of such Debt Securities
(with certain limited exceptions described below) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Securities under
Sections 501(5) and 1008 of the Sprint Indenture and Sections 501(5), 1008,
1009 and 1012 of the Sprint Capital Indenture (being the cross-default
provision described in clause (e) under "Events of Default" and the
restriction described under "Restrictive Covenant--Sprint" and, in the case of
the Sprint Capital Indenture, the restrictions described under "Restrictive
Covenants--Sprint Capital") and certain other obligations, including
obligations under covenants provided for the specific benefit of Debt
Securities of that series ("covenant defeasance").

In order to accomplish defeasance or covenant defeasance, Sprint or Sprint
Capital must deposit with the Trustee (or other qualifying trustee), in trust
for such purpose, money and/or U.S. Government Obligations which through the
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of and any premium and
interest on such Debt Securities on the scheduled due dates therefor. Such a
trust may be established only if, among other things, Sprint or Sprint Capital
has delivered to the Trustee an opinion of counsel to the effect that the
holders of such Debt Securities will not recognize gain or loss for Federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred. Such opinion, in the case of defeasance
under

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clause (A) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable Federal income tax law occurring
after October 1, 1998. The obligations which are not discharged in a
defeasance under clause (A) above are those relating to the rights of holders
of outstanding Debt Securities to receive, solely from the trust fund
described above, payments in respect of the principal of and any premium and
interest on Debt Securities when due as set forth in Section 1304 of the
Indentures, and obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of the Debt Securities,
to hold moneys for payment in trust and to compensate, reimburse and indemnify
the Trustee. (Indentures, Article Thirteen)

The Prospectus Supplement may further describe additional provisions, if
any, permitting defeasance or covenant defeasance with respect to the Debt
Securities of a particular series.

REGARDING THE TRUSTEE

Sprint has a normal business banking relationship with the Trustee,
including the maintenance of an account and the borrowing of funds. The
Trustee may own Debt Securities.

GOVERNING LAW

New York law (without regard to principles of conflicts of law) will govern
the Indentures, the Debt Securities and the Guarantees.

GLOBAL SECURITIES

Unless otherwise provided in the Prospectus Supplement, each series of the
Debt Securities will be issued in the form of one or more Global Securities
that will be deposited with, or on behalf of, The Depository Trust Company, as
Depositary. Interests in the Global Securities will be issued only in
denominations of $1,000 or integral multiples thereof. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive form, a Global
Security may not be transferred except as a whole to a nominee of the
Depositary for such Global Security, or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.

BOOK-ENTRY SYSTEM

Initially, the Debt Securities will be registered in the name of Cede & Co.,
the nominee of the Depositary. Accordingly, beneficial interests in the Debt
Securities will be shown on, and transfers of the Debt Securities will be
effected only through, records maintained by the Depositary and its
participants.

The Depositary has advised Sprint, Sprint Capital and any underwriters,
dealers or agents as follows: the Depositary is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Depositary holds securities that its participants ("Direct
Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Direct Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in such Direct Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers (including any underwriters, dealers or
agents), banks, trust companies, clearing corporations, and certain other
organizations. The Depositary is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc.
and the National Association of Securities Dealers, Inc. Access to the
Depositary's book-entry system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to the Depositary
and its Direct and Indirect Participants are on file with the SEC.

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The Depositary advises that its established procedures provide that (i) upon
issuance of the Debt Securities, the Depositary will credit the accounts of
Direct and Indirect Participants designated by the Underwriters with the
principal amounts of the Debt Securities purchased by the Underwriters and
(ii) ownership of interest in the Global Securities will be shown on, and the
transfer of the ownership will be effected only through, records maintained by
the Depositary, the Direct Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities which they own. Consequently, the ability to
transfer beneficial interest in the Global Securities is limited to such
extent.

So long as a nominee of the Depositary is the registered owner of the Global
Securities, such nominee for all purposes will be considered the sole owner or
holder of such Global Securities under the applicable Indenture. Except as
provided below, owners of beneficial interests in the Global Securities will
not be entitled to have Debt Securities registered in their names, will not
receive or be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the owners or holders of the Debt
Securities under the applicable Indenture.

Neither Sprint, Sprint Capital, the Trustee, any paying agent nor the
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Securities, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.

Principal and interest payments on the Debt Securities registered in the
name of the Depositary's nominee will be made in immediately available funds
to the Depositary's nominee as the registered owner of the Global Securities.
Under the terms of the Debt Securities, Sprint, Sprint Capital and the Trustee
will treat the persons in whose names the Debt Securities are registered as
the owners of such Debt Securities for the purpose of receiving payment of
principal and interest on such Debt Securities and for all other purposes.
Therefore, neither Sprint, Sprint Capital, the Trustee nor any paying agent
has any direct responsibility or liability for the payment of principal or
interest on the Debt Securities to owners of beneficial interests in the
Global Securities. The Depositary has advised Sprint, Sprint Capital and the
Trustee that its current practice is upon receipt of any payment of principal
or interest, to credit Direct Participants' accounts on the payment date in
accordance with their respective holdings of beneficial interests in the
Global Securities as shown on the Depositary's records, unless the Depositary
has reason to believe that it will not receive payment on the payment date.
Payments by Direct and Indirect Participants to owners of beneficial interest
in the Global Securities will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Direct and Indirect Participants and not of the
Depositary, the Trustee, Sprint or Sprint Capital, subject to any statutory
requirements that may be in effect from time to time. Payment of principal and
interest to the Depositary is the responsibility of the issuer of the Debt
Securities or the Trustee. Disbursement of such payments to the owners of
beneficial interests in the Global Securities shall be the responsibility of
the Depositary and Direct and Indirect Participants.

Debt Securities represented by a Global Security will be exchangeable for
Debt Securities in definitive form of like tenor as such Global Security in
denominations of $1,000 and in any greater amount that is an integral multiple
if the Depositary notifies Sprint or Sprint Capital that it is unwilling or
unable to continue as Depositary for such Global Security, or if at any time
the Depositary ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by Sprint or Sprint Capital, as
applicable, within 90 days, or Sprint or Sprint Capital, as applicable, in its
discretion at any time determines not to require all of the Debt Securities to
be represented by a Global Security and notifies the Trustee of such decision.
Any Debt Securities that are exchangeable pursuant to the preceding sentence
are exchangeable for Debt Securities issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, a Global Security is not exchangeable, except for a Global Security
or Global Securities of the same aggregate denominations to be registered in
the name of the Depositary or its nominee.

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SAME-DAY SETTLEMENT AND PAYMENT

Settlement for the Debt Securities will be made by any underwriters, dealers
or agents in immediately available funds. So long as the Depositary continues
to make its Same-Day Funds Settlement System available to Sprint or Sprint
Capital, as applicable, all payments of principal and interest on the Debt
Securities will be made by Sprint or Sprint Capital, as applicable, in
immediately available funds.

Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Debt
Securities will trade in the Depositary's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the Debt Securities
will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Debt
Securities.

DESCRIPTION OF GUARANTEES

Sprint will unconditionally guarantee the due and punctual payment of the
principal, any premium and interest on the Debt Securities issued by Sprint
Capital when and as the same shall become due and payable, whether at maturity
or otherwise. (Sprint Capital Indenture, Section 311) The Guarantees will rank
equally with all other unsecured and unsubordinated obligations of Sprint. The
Guarantees provide that in the event of a default in payment of principal, any
premium or interest on a Debt Security, the Holder of the Debt Security may
institute legal proceedings directly against Sprint to enforce the Guarantee
without first proceeding against Sprint Capital. The Sprint Capital Indenture
provides that Sprint may under certain circumstances assume all rights and
obligations of Sprint Capital under the Sprint Capital Indenture with respect
to a series of Debt Securities issued by Sprint Capital.

VALIDITY OF THE DEBT SECURITIES AND GUARANTEES

The validity of the Debt Securities and the Guarantees will be passed upon
for Sprint Capital and Sprint by Don A. Jensen, Esq., Vice President and
Secretary of Sprint Capital and Sprint, and for any underwriters by Cravath,
Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019.
As of September 30, 1998, Mr. Jensen was the beneficial owner of approximately
31,000 shares of Sprint common stock and had options to purchase in excess of
60,000 shares of Sprint common stock.

EXPERTS

The consolidated financial statements and consolidated financial statement
schedule of Sprint appearing in Sprint's Annual Report (Form 10-K) for the
year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference which, as to the year 1997, is based in
part on the report of Deloitte & Touche LLP, independent auditors. Such
consolidated financial statements and consolidated financial statement
schedule are incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.

The consolidated financial statements of Sprint and the combined financial
statements of the FON Group and the PCS Group appearing in Sprint's Proxy
Statement/Prospectus that forms a part of Registration Statement No. 333-65173
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference
which, as to the year 1997 for the consolidated financial statements of Sprint
and the years 1997, 1996 and 1995 for the combined financial statements of the
PCS Group, are based in part on the reports of Deloitte & Touche LLP,
independent auditors. Such consolidated financial statements of Sprint and
combined financial statements of the FON Group and the PCS Group are

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incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.

The combined financial statements of Sprint Spectrum Holding Company, L.P.
and subsidiaries, MinorCo, L.P. and subsidiaries, PhillieCo Partners I, L.P.
and subsidiaries and PhillieCo Partners II, L.P. and subsidiaries as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, incorporated in this Prospectus by reference from the
Sprint Corporation Registration Statement No. 333-65173 and the related
combined financial statement schedule included in this Registration Statement
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports (which express an unqualified opinion and include an explanatory
paragraph referring to the emergence from the development stage) which is
included or incorporated herein by reference in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements and the related financial statement
schedule, incorporated in this Prospectus by reference from the Sprint
Spectrum L.P. and Sprint Spectrum Finance Corporation Annual Reports on Form
10-K for the year ended December 31, 1997, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports (which express an
unqualified opinion and include an explanatory paragraph referring to the
emergence from the development stage) which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements and the related financial statement
schedule of Sprint Spectrum Holding Company, L.P. and subsidiaries as of
December 31, 1997 and 1996, not separately presented in this Prospectus,
incorporated in this Prospectus by reference from the Sprint Corporation
Annual Report on Form 10-K for the year ended December 31, 1997, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report (which expresses an unqualified opinion and includes an explanatory
paragraph referring to the emergence from the development stage) which is
incorporated herein by reference in reliance upon the report of such firm
given their authority as experts in accounting and auditing.

PLAN OF DISTRIBUTION

With respect to the offering of the Debt Securities, the following summary
of the plan of distribution will be supplemented by a description of such
offering, including the particular terms and conditions of such offering, set
forth in the applicable Prospectus Supplement relating to such Debt
Securities.

Sprint and Sprint Capital may sell Debt Securities in any of three ways: (i)
through underwriters or dealers; (ii) directly to one or a limited number of
institutional purchasers; or (iii) through agents. Each Prospectus Supplement
with respect to a series of Debt Securities will set forth the terms of the
offering of such Debt Securities, including the name or names of any
underwriters or agents, the price of such Debt Securities and the net proceeds
to Sprint or Sprint Capital, as the case may be, from such sale, any
underwriting discounts, commissions or other items constituting underwriters'
or agents' compensation, any discount or concessions allowed or reallowed or
paid to dealers and any securities exchanges on which such Debt Securities may
be listed.

If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Debt Securities may be offered to the public either through underwriting
syndicates of investment banking firms represented by managing underwriters,
or directly by one or more such investment banking firms or others, as
designated. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of the underwriters to purchase the Debt
Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all

14
<PAGE>

of the Debt Securities offered thereby if any are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.

Debt Securities may be sold directly by Sprint or Sprint Capital to one or
more institutional purchasers, or through agents designated by Sprint or
Sprint Capital from time to time. Any agent involved in the offer or sale of
the Debt Securities will be named, and any commissions payable by Sprint or
Sprint Capital, as the case may be, to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.

If so indicated in the applicable Prospectus Supplement, Sprint or Sprint
Capital, as the case may be, will authorize agents, underwriters or dealers to
solicit offers by certain specified institutions to purchase the Debt
Securities from Sprint or Sprint Capital, as the case may be, at the public
offering price set forth in such Prospectus Supplement plus accrued interest,
if any, pursuant to delayed delivery contracts providing for payment and
delivery on one or more specified dates in the future. Institutions with which
such contracts may be made include commercial and saving banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all such cases such institutions must be
approved by Sprint or Sprint Capital, as the case may be. Such contracts will
be subject only to those conditions set forth in such Prospectus Supplement
and such Prospectus Supplement will set forth the commission payable for
solicitation of such contracts.

Agents, underwriters and dealers may be entitled under agreements entered
into with Sprint or Sprint and Sprint Capital to indemnification by Sprint or
Sprint and Sprint Capital against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribution
with respect to payments which the agents, underwriters or dealers may be
required to make in respect of such civil liabilities.

Agents, underwriters and dealers may engage in transactions with or perform
services for Sprint and Sprint Capital in the ordinary course of business.

The Debt Securities will be new issues of Debt Securities with no
established trading market. Underwriters and agents to whom Debt Securities
are sold by Sprint or Sprint Capital for public offering and sale may make a
market in such Debt Securities, but such underwriters and agents will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Debt Securities.

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SPRINT CAPITAL CORPORATION

$ % NOTES DUE
$ % NOTES DUE
$ % NOTES DUE
$ % NOTES DUE

UNCONDITIONALLY GUARANTEED BY
SPRINT CORPORATION

[LOGO] Sprint

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PROSPECTUS SUPPLEMENT
, 1998
(Including Prospectus dated October 23, 1998)

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SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
WARBURG DILLON READ LLC
CHASE SECURITIES INC.
LEHMAN BROTHERS
NATIONSBANC MONTGOMERY SECURITIES LLC

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