USW-C INC
424B3, 1998-04-20
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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                                                FILED PURSUANT TO RULE 424(b)(3)
                                                      REGISTRATION NO. 333-45765
 
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                              PROXY STATEMENT FOR
                      1998 ANNUAL MEETING OF STOCKHOLDERS
                               OF U S WEST, INC.
                                 TO BE HELD ON
                             THURSDAY, JUNE 4, 1998
 
    You are invited to attend our 1998 Annual Meeting of Stockholders, which
will be held on Thursday, June 4, 1998, at 3:00 p.m., Eastern Time, at The
Millennium Broadway Hotel, 145 West 44th Street, New York, New York. At the
Annual Meeting, we will be asking you to approve the separation of U S WEST into
two independent companies. We call this transaction the "Separation." If the
Separation is completed, the U S WEST Communications Group will become a
separately traded public company known as "U S WEST, Inc." and the U S WEST
Media Group will become a separately traded public company known as "MediaOne
Group, Inc." As part of the Separation, the U S WEST Media Group's directories
business known as "U S WEST Dex" will become part of the U S WEST Communications
Group. At the Annual Meeting, we will also be asking you to elect members of the
Board of Directors of U S WEST, ratify U S WEST's independent auditors, approve
certain benefit plans and consider certain stockholder proposals.
    This Proxy Statement provides you with detailed information about the
Separation and the other proposals to be voted on at the Annual Meeting. Whether
or not you plan to attend the Annual Meeting, please take the time to vote by
proxy in the manner described in this Proxy Statement.
 
    SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY YOU IN EVALUATING THE SEPARATION.
 
    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SEPARATION OR THE SECURITIES TO BE
ISSUED PURSUANT TO THIS PROXY STATEMENT. THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT PASSED UPON THE FAIRNESS OR MERITS OF THE SEPARATION OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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APRIL 20, 1998
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    Until 25 days after the date of mailing of this Proxy Statement, all dealers
effecting transactions in New U S WEST Common Stock, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
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                               TABLE OF CONTENTS
 
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CHAPTER 1: INTRODUCTION..................................................................................          1
 
CHAPTER 2: RISK FACTORS..................................................................................         14
  Risk Factors Related to New U S WEST...................................................................         14
  Risk Factors Related to MediaOne.......................................................................         16
 
CHAPTER 3: THE SEPARATION................................................................................         20
  Description of the Separation..........................................................................         20
  Background of the Separation...........................................................................         25
  Reasons for the Separation.............................................................................         32
  Recommendation of the Board of Directors...............................................................         36
  Opinions of Financial Advisors.........................................................................         36
  Accounting Treatment...................................................................................         42
  Regulatory Requirements................................................................................         42
  Interest of Certain Persons in the Separation..........................................................         43
  Stock Exchange Listings................................................................................         45
  Dividend Policy........................................................................................         45
  Treatment of Indebtedness..............................................................................         45
  Treatment of Preferred Stock...........................................................................         47
  Federal Securities Laws Consequences...................................................................         47
  Certain U.S. Federal Income Tax Consequences...........................................................         48
  Employee Benefits and Compensation Matters.............................................................         49
  Appraisal Rights.......................................................................................         54
  Relationship Between New U S WEST and MediaOne After the Separation....................................         54
 
CHAPTER 4: OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING..........................................         56
 
  Election of Directors..................................................................................         56
  Ratification of Auditors...............................................................................         58
  Proposal to Approve the 1998 New U S WEST Stock Plan...................................................         58
  Proposal to Approve the New U S WEST Long-Term Incentive Plan..........................................         63
  Proposal to Approve the New U S WEST Executive Short-Term Incentive Plan...............................         64
  Proposal to Approve an Amendment to the U S WEST 1994 Stock Plan.......................................         65
  Proposal to Approve an Amendment to the U S WEST Executive Short-Term
    Incentive Plan.......................................................................................         65
  Stockholder Proposals..................................................................................         67
  U S WEST Director and Executive Officer Information....................................................         69
 
CHAPTER 5: INFORMATION ABOUT U S WEST....................................................................         84
  Business of U S WEST...................................................................................         84
  U S WEST Selected Historical Financial Information.....................................................         86
  U S WEST Management's Discussion and Analysis of Financial Condition and Results of Operations.........         88
 
CHAPTER 6: INFORMATION ABOUT NEW U S WEST................................................................        116
  Business of New U S WEST...............................................................................        116
  Management of New U S WEST.............................................................................        123
  New U S WEST Selected Historical Financial Information.................................................        132
  New U S WEST Management's Discussion and Analysis of Financial Condition and
    Results of Operations................................................................................        133
  New U S WEST Unaudited Pro Forma Condensed Combined Financial Statements...............................        146
 
CHAPTER 7: INFORMATION ABOUT MEDIAONE....................................................................        150
  Business of MediaOne...................................................................................        150
  Management of MediaOne.................................................................................        157
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  MediaOne Unaudited Pro Forma Condensed Combined Financial Statements...................................        160
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CHAPTER 8: CAPITAL STOCK.................................................................................        169
  New U S WEST Capital Stock.............................................................................        169
  MediaOne Capital Stock.................................................................................        172
  Comparison of Rights of Stockholders...................................................................        177
  Certain Antitakeover Considerations....................................................................        180
 
CHAPTER 9: THE ANNUAL MEETING AND CERTAIN OTHER MATTERS..................................................        182
  The Annual Meeting.....................................................................................        182
  Market Price and Dividend Data of Communications Stock and Media Stock.................................        186
  Security Ownership of Certain Beneficial Owners and Management.........................................        187
  Legal Matters..........................................................................................        189
  Experts................................................................................................        189
  Where You Can Find More Information....................................................................        189
  Stockholder Proposals..................................................................................        190
 
ANNEXES
  Annex A-1--Pre-Separation Charter Amendments...........................................................      A-1-1
  Annex A-2--Post-Separation Charter Amendments..........................................................      A-2-1
  Annex B-1--Opinion of Lazard Freres & Co. LLC..........................................................      B-1-1
  Annex B-2--Opinion of SBC Warburg Dillon Read Inc......................................................      B-2-1
  Annex C--1998 New U S WEST Stock Plan..................................................................        C-1
  Annex D--New U S WEST Long-Term Incentive Plan.........................................................        D-1
  Annex E--New U S WEST Executive Short-Term Incentive Plan..............................................        E-1
  Annex F--U S WEST, Inc. Consolidated Financial Statements..............................................        F-1
  Annex G--New U S WEST Combined Financial Statements....................................................        G-1
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GLOSSARY
 
    Set forth below is a list of certain defined terms used in this Proxy
Statement and the page on which such terms are defined.
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TERM                                                  PAGE
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1992 Cable Act...................................         156
1995 Recapitalization............................           9
1998 New U S WEST Stock Plan.....................          50
A/N..............................................         152
Access Reform Order..............................          91
AFOR.............................................         113
AirTouch.........................................           1
AirTouch Joint Venture...........................         114
AirTouch Merger Agreement........................         155
AirTouch Transaction.............................           1
AirTouch Transaction Adjustments.................         160
AT&T.............................................          90
Bain.............................................          28
Bellcore.........................................           8
Broker non-votes.................................         184
Cable Comparables................................          41
Cable Index......................................          40
Cable Plus.......................................          93
Capital Funding..................................          45
Capital Funding Indebtedness.....................          45
CAPs.............................................          14
CDMA.............................................         118
Charter..........................................         151
Charter Amendments...............................          23
Chofu............................................         153
CLECs............................................          14
Code.............................................          27
Comcast..........................................          40
Commission.......................................          24
Committee........................................          76
Communications Businesses........................         133
Communications Group.............................           1
Communications Group Region......................           1
Communications Indebtedness......................          45
Communications Peer Group........................          82
Communications Redemption........................          20
Communications Right.............................         175
Communications Stock.............................           1
Communications Stock Awards......................          49
Composite Tape...................................         186
Continental......................................           3
Continental Acquisition..........................           8
Continental Indebtedness.........................          45
Cox..............................................          40
CPE..............................................          84
DBS..............................................          17
DECs.............................................         109
Deferred Benefit Plans...........................          55
DEUs.............................................          63
Dex..............................................           2
Dex Alignment....................................           2
Dex Dividend.....................................          20
Dex Dividend Number..............................          21
Dex Equity Value.................................          21
Dex Indebtedness.................................           2
Dex Value........................................          21
DGCL.............................................          23
Discontinued Operations Adjustments..............         160
Distribution.....................................          48
DLS Formula......................................          75
 
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Draft Proxy Statement............................          37
EBITDA...........................................          39
EBITDA Multiple..................................          40
Eighth Circuit...................................         120
Employee Matters Agreement.......................          55
Enhance..........................................         109
EPS..............................................          39
ESOP.............................................          51
Exchange Act.....................................          24
Executives.......................................          43
FCC..............................................          14
FCC Order........................................         120
Financial Forecasts..............................          37
Fintelco.........................................          98
FSA..............................................         109
GAAP.............................................          88
General Cable....................................         108
GSM..............................................         154
HFC..............................................         150
Home Box Office..................................         154
Incentive Stock Options..........................          59
IRS..............................................           4
IRS Ruling.......................................           4
ISPs.............................................          14
IXCs.............................................          14
LATAs............................................          14
Lazard Freres....................................           4
Lazard Freres Opinion............................          36
LEC Index........................................          40
LECs.............................................          14
Lehman...........................................          30
LMDS.............................................          17
Media Group......................................           1
Media Peer Group.................................          83
Media Right......................................         175
Media Stock......................................           1
Media Stock Awards...............................          49
MediaOne.........................................           2
MediaOne Acquiring Person........................         175
MediaOne Board...................................           4
MediaOne Bylaws..................................          18
MediaOne Common Stock............................           3
MediaOne Delaware................................           3
MediaOne Distribution Date.......................         175
MediaOne ESOP....................................          52
MediaOne ESTIP...................................          65
MediaOne Exercise Price..........................         175
MediaOne Human Resources Committee...............          66
MediaOne Indebtedness............................          46
MediaOne Pension Plan............................          53
MediaOne Preferred Stock.........................         173
MediaOne Redemption Price........................         177
MediaOne Restated Certificate....................         173
MediaOne Right...................................         175
MediaOne Rights Agreement........................         175
MediaOne Savings Plan/ESOP.......................          52
MediaOne Separation Adjustments..................         160
MediaOne Series A Preferred Stock................         173
MediaOne Series C Preferred Stock................          47
MediaOne Series D Preferred Stock................          47
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TERM                                                  PAGE
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MediaOne Series E Preferred Stock................          47
MediaOne Stock Plan..............................          65
Merrill..........................................          30
Minnesota Sale Agreement.........................         151
Minnesota System.................................         151
MMDS.............................................          17
MTCPs............................................          91
NewVector........................................         155
New U S WEST.....................................           2
New U S WEST Acquiring Person....................         170
New U S WEST Board...............................           4
New U S WEST Bylaws..............................          15
New U S WEST Committee...........................          59
New U S WEST Common Stock........................           2
New U S WEST Compensation Plans..................          51
New U S WEST Distribution Date...................         170
New U S WEST Employee Benefit Committee..........          58
New U S WEST Exercise Price......................         170
New U S WEST ESOP................................          52
New U S WEST ESTIP...............................          51
New U S WEST Human Resources Committee...........          51
New U S WEST Indebtedness........................          46
New U S WEST LTIP................................          51
New U S WEST Named Executive Officers............         126
New U S WEST Pension Plan........................          53
New U S WEST Preferred Stock.....................         169
New U S WEST Redemption Price....................         172
New U S WEST Registration Statement..............         190
New U S WEST Restated Certificate................          22
New U S WEST Right...............................         170
New U S WEST Rights Agreement....................         170
New U S WEST Savings Plan/ESOP...................          51
New U S WEST Separation Adjustments..............         146
New U S WEST Series A Preferred Stock............         170
New U S WEST SIP.................................          23
Non-employer Stock...............................          52
Nonqualified Stock Options.......................          59
NYSE.............................................          24
Old Common Stock.................................           9
Old PrimeStar....................................          92
One 2 One........................................          85
Opinions.........................................          36
OPUC.............................................         113
Oregon Circuit Court.............................         113
Original AirTouch Transaction....................          27
PCS..............................................          84
PCS Holdings.....................................         155
P/E..............................................          39
PICCs............................................         122
Plan.............................................          78
POPs.............................................         118
Post-Separation Charter Amendments...............          23
Preferred Securities.............................           9
Pre-Separation Charter Amendments................          23
Price Cap Order..................................          91
PrimeCo..........................................          85
PrimeStar........................................          84
Pro Forma Financial Statements...................          37
PSE..............................................          24
PUCs.............................................          14
RBOCs............................................          99
Record Date......................................         183
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TERM                                                  PAGE
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Refinancing......................................          45
Reorganization...................................          22
S&P..............................................          40
SARs.............................................          58
Savings Plan/ESOP................................          51
SBC Warburg Dillon Read..........................           4
SBC Warburg Dillon Read Opinion..................          36
Section 83(b) election...........................          62
Securities Act...................................          24
Separation.......................................           1
Separation Agreement.............................          20
Separation Date..................................          20
Separation Time..................................          20
Separation Transactions..........................          36
Severance Agreements.............................          43
SFAS.............................................           8
SLCs.............................................         122
SMATV............................................          17
SOP..............................................         115
Special Committee................................          26
Stock Awards.....................................          49
Targeted Stock Provisions........................          22
Targeted Stocks..................................           1
Tax Sharing Agreement............................          54
TCG..............................................          98
TCI..............................................          40
TCI Exchange.....................................         151
Telecommunications Act...........................          14
Telewest.........................................           9
Tenth Circuit....................................         122
Time Warner Cable................................         151
Titus............................................         153
Transition Team..................................          30
TWE..............................................          25
TWE-A/N..........................................         152
TWE Japan........................................         155
TWE Non-Competition Restrictions.................         155
TWX..............................................          99
Universal Service Order..........................         121
UPSC.............................................         113
U. S. District Court.............................         120
USW-C, Inc.......................................          20
U S WEST.........................................           1
U S WEST Board...................................           2
U S WEST Bylaws..................................          15
U S WEST Communications..........................           3
U S WEST Financial Advisors......................          36
U S WEST Human Resources Committee...............          66
U S WEST Indebtedness............................          45
U S WEST Named Executive Officers................          71
U S WEST Pension Plan............................          53
U S WEST Preferred Stock.........................          47
U S WEST Restated Certificate....................          15
U S WEST Rights Agreement........................         175
U S WEST Series C Preferred Stock................          47
U S WEST Series D Preferred Stock................          47
U S WEST Series E Preferred Stock................          47
U S WEST SIP.....................................          23
U S WEST Stock Plans.............................          49
Washington Rate Order............................           8
WUTC.............................................          89
xDSL.............................................          26
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CHAPTER 1: INTRODUCTION
 
    THIS INTRODUCTION HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY STATEMENT
AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO
UNDERSTAND THE SEPARATION FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE SEPARATION, YOU SHOULD READ CAREFULLY THIS ENTIRE PROXY STATEMENT
AND THE DOCUMENTS WE HAVE REFERRED TO YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 189. THE GLOSSARY WHICH FOLLOWS THE TABLE OF CONTENTS
INDICATES WHERE CERTAIN CAPITALIZED TERMS USED THROUGHOUT THIS PROXY STATEMENT
ARE DEFINED.
 
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ABOUT OUR BUSINESSES..............  U S WEST, Inc. ("U S WEST") is a diversified global
                                    communications company engaged in the
                                    telecommunications, broadband communications, wireless
                                    communications and directories businesses. U S WEST
                                    conducts its businesses through two groups: the U S WEST
                                    Communications Group (the "Communications Group") and
                                    the U S WEST Media Group (the "Media Group").
 
                                    The Communications Group provides telecommunications
                                    services, including local telephone services and
                                    exchange access services, in a 14-state mountain and
                                    western region of the United States (the "Communications
                                    Group Region"). The Communications Group also provides
                                    other products and services, including high-speed data
                                    and Internet services and wireless communications
                                    services, to customers both inside and outside the
                                    Communications Group Region.
 
                                    The Media Group is comprised of domestic and
                                    international broadband communications, wireless
                                    communications and directories businesses. The Media
                                    Group's domestic broadband communications business
                                    provides cable, telephony and high-speed data services
                                    to customers under the name "MediaOne" and is the third
                                    largest cable television system operator in the United
                                    States. On April 6, 1998, U S WEST sold the Media
                                    Group's domestic wireless business to AirTouch
                                    Communications, Inc. ("AirTouch") in a tax-efficient
                                    transaction (the "AirTouch Transaction").
 
                                    U S WEST has two classes of common stock: the U S WEST
                                    Communications Group Common Stock (the "Communications
                                    Stock"), which is intended to reflect separately the
                                    performance of the Communications Group, and the U S
                                    WEST Media Group Common Stock (the "Media Stock"), which
                                    is intended to reflect separately the performance of the
                                    Media Group. The Communications Stock and the Media
                                    Stock are called "Targeted Stocks."
 
THE SEPARATION....................  We are proposing to separate U S WEST into two
                                    independent companies. This transaction is called the
                                    "Separation." Under this proposal, the Communications
                                    Group would become a separately traded public company
                                    known as "U S WEST, Inc." and the Media Group would
                                    become a separately traded public company known as
                                    "MediaOne Group, Inc."
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                                                                               1
                                                         CHAPTER 1: INTRODUCTION
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                                    As a result of developments in technology, the
                                    marketplace and the regulatory arena, the potential for
                                    synergies between the Communications Group and the Media
                                    Group has been greatly reduced. The Communications Group
                                    and the Media Group are currently implementing
                                    strategies based on distinct technologies, separate sets
                                    of customers and different regulatory environments. We
                                    believe that these strategies will be executed more
                                    efficiently, and that the Communications Group and the
                                    Media Group will be able to compete more effectively, if
                                    they are independent companies that are not restrained
                                    by conflicts that result from a single corporate
                                    structure.
 
                                    As part of the Separation, we are proposing to align the
                                    domestic directories business of the Media Group--known
                                    as "Dex"--with the Communications Group. This aspect of
                                    the Separation is called the "Dex Alignment."
 
                                    We believe that the inclusion of Dex among the
                                    Communications Group's businesses will better position
                                    the Communications Group to offer its customers a
                                    broader product offering and to manage more effectively
                                    its brand and customer relationships.
 
STRUCTURE OF THE SEPARATION.......  In order to complete the Separation, we will contribute
                                    the businesses of the Communications Group and Dex to a
                                    newly formed indirect subsidiary of U S WEST ("New U S
                                    WEST") and then distribute all of the Common Stock of
                                    New U S WEST ("New U S WEST Common Stock") to the
                                    holders of Communications Stock, other than $850 million
                                    in value of New U S WEST Common Stock that will be
                                    distributed to holders of Media Stock pursuant to the
                                    Dex Alignment as described below. In connection with
                                    this distribution, the name of New U S WEST will be
                                    changed to "U S WEST, Inc." and the name of U S WEST
                                    will be changed to "MediaOne Group, Inc." As used
                                    herein, U S WEST after the Separation is referred to as
                                    "MediaOne."
 
                                    The Board of Directors of U S WEST (the "U S WEST
                                    Board"), in consultation with U S WEST's management and
                                    its financial advisors, has valued Dex at $4.75 billion.
                                    In connection with the Dex Alignment, holders of Media
                                    Stock will be issued a total of $850 million in value of
                                    shares of New U S WEST Common Stock. This amount
                                    represents the $4.75 billion value of Dex net of $3.9
                                    billion of U S WEST debt currently allocated to the
                                    Media Group which will be refinanced by New U S WEST in
                                    connection with the Separation (the "Dex Indebtedness").
 
NEW U S WEST AND MEDIAONE AFTER
  THE SEPARATION..................  As a result of the Separation, New U S WEST and MediaOne
                                    will become independent separately-traded public
                                    companies. New U S WEST will own all of the
                                    Communications Group's businesses as well as Dex and
                                    MediaOne will own all of the Media Group's businesses
                                    other than Dex.
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                                                                               2
                                                         CHAPTER 1: INTRODUCTION
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                                    As a result of the Separation, New U S WEST will have
                                    approximately $9.7 billion of debt, which will include
                                    approximately $5.5 billion of debt of U S WEST
                                    Communications, Inc. ("U S WEST Communications"), the
                                    Communications Group's local telephone company, and
                                    approximately $4.0 billion of debt currently guaranteed
                                    by U S WEST (including the Dex Indebtedness) that will
                                    be refinanced by New U S WEST as part of the Separation.
 
                                    After the Separation and after giving effect to the
                                    AirTouch Transaction, MediaOne will have approximately
                                    $5.1 billion of debt and trust preferred securities,
                                    which will include $2.7 billion of debt of MediaOne of
                                    Delaware, Inc., the Media Group's broadband company
                                    formerly known as Continental Cablevision, Inc.
                                    ("MediaOne Delaware" or "Continental"), and
                                    approximately $2.2 billion of debt and trust preferred
                                    securities currently issued or guaranteed by U S WEST
                                    that will be refinanced by MediaOne as part of the
                                    Separation. Following the Separation, MediaOne intends
                                    to monetize the AirTouch securities it received in the
                                    AirTouch Transaction and use a portion of the proceeds
                                    of such monetization to reduce its indebtedness.
 
WHAT STOCKHOLDERS WILL RECEIVE....  In the Separation, holders of Communications Stock and
                                    Media Stock will receive the following securities:
 
                                    / /  Holders of Communications Stock will receive one
                                    share of New U S WEST Common Stock for each share of
                                         Communications Stock held.
 
                                    / /  Holders of Media Stock will retain their shares of
                                    Media Stock (which after the Separation will represent
                                         shares of common stock of MediaOne ("MediaOne
                                         Common Stock")) and will receive a fraction of a
                                         share of New U S WEST Common Stock as a
                                         distribution on each share of Media Stock held.
                                         This fraction of a share of New U S WEST Common
                                         Stock is being issued to holders of Media Stock in
                                         connection with the Dex Alignment. Holders of Media
                                         Stock will receive only whole shares of New U S
                                         WEST Common Stock. To the extent the total number
                                         of shares of New U S WEST Common Stock distributed
                                         to any stockholder results in a fraction, that
                                         fraction will be paid in cash.
 
                                    The value of the total number of shares of New U S WEST
                                    Common Stock which will be issued to holders of Media
                                    Stock will equal $850 million. The fraction of a share
                                    of New U S WEST Common Stock to be distributed per share
                                    of Media Stock will be based upon the average price of
                                    the Communications Stock measured over the 20 trading
                                    day period ending on the fifth trading day prior to the
                                    Separation. If the Separation had been completed on
                                    April 9, 1998, this fraction would have equalled 0.02550
                                    of a share of New U S WEST Common Stock per share of
                                    Media Stock. This equates to $1.40 per share of Media
                                    Stock, based upon
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                                                                               3
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
 
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                                    $54.77--the average market price of the Communications
                                    Stock for the 20 trading days ending 5 trading days
                                    prior to April 9, 1998, and $1.37 per share of Media
                                    Stock, based upon $53.625--the closing price of the
                                    Communications Stock on April 9, 1998.
 
                                    Holders of Series C Preferred Stock, Series D Preferred
                                    Stock and Series E Preferred Stock of U S WEST will
                                    retain their shares as part of the Separation. After the
                                    Separation, these shares will represent shares of
                                    Preferred Stock of MediaOne.
 
DIVIDENDS AFTER THE SEPARATION....  If the Separation is completed, it is anticipated that
                                    New U S WEST will pay dividends on the New U S WEST
                                    Common Stock initially at a quarterly rate of $0.535 per
                                    share, which is the same dividend currently paid on the
                                    Communications Stock. While the Board of Directors of
                                    New U S WEST (the "New U S WEST Board") is not expected
                                    to change this dividend policy, it has the right to do
                                    so at any time.
 
                                    Dividends are not currently paid on the Media Stock. If
                                    the Separation is completed, it is anticipated that the
                                    Board of Directors of MediaOne (the "MediaOne Board")
                                    will continue this policy for the foreseeable future and
                                    not declare dividends on the MediaOne Common Stock.
                                    Instead, it is anticipated that the MediaOne Board will
                                    retain future earnings, if any, for the development of
                                    the businesses of MediaOne.
 
TAX MATTERS.......................  For U.S. federal income tax purposes, the Separation
                                    will be tax-free to you as U S WEST's common
                                    stockholders (other than with respect to the cash
                                    proceeds holders of Media Stock will receive instead of
                                    fractional shares of New U S WEST Common Stock) and to U
                                    S WEST. We have obtained a ruling from the Internal
                                    Revenue Service (the "IRS") confirming that the
                                    distribution of New U S WEST Common Stock to our
                                    stockholders and certain other related transactions will
                                    be tax-free to you and U S WEST (the "IRS Ruling").
 
BOARD RECOMMENDATION..............  The U S WEST Board has carefully reviewed the terms of
                                    the Separation, including the Dex Alignment. We have
                                    received opinions of two independent investment banking
                                    firms, Lazard Freres & Co. LLC ("Lazard Freres") and SBC
                                    Warburg Dillon Read Inc. ("SBC Warburg Dillon Read"), as
                                    to the fairness, from a financial point of view, to the
                                    holders of Communications Stock and Media Stock of the
                                    consideration to be provided to them in the Separation.
                                    The full text of these investment banking opinions,
                                    which in each case sets forth the assumptions made,
                                    matters considered and limitations on the review
                                    undertaken in connection with the opinions, are included
                                    in Annex B-1 and Annex B-2 to this Proxy Statement. YOU
                                    ARE URGED TO READ THESE OPINIONS CAREFULLY.
</TABLE>
 
                                                                               4
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
 
<TABLE>
<S>                                 <C>
                                    BASED ON THE FOREGOING, THE U S WEST BOARD HAS
                                    DETERMINED THAT THE SEPARATION IS IN THE BEST INTERESTS
                                    OF U S WEST AND ITS STOCKHOLDERS AND IS FAIR TO THE
                                    HOLDERS OF BOTH CLASSES OF U S WEST'S COMMON STOCK. THE
                                    U S WEST BOARD HAS UNANIMOUSLY APPROVED THE SEPARATION
                                    AND RECOMMENDS THAT HOLDERS OF COMMUNICATIONS STOCK AND
                                    MEDIA STOCK APPROVE THE SEPARATION.
 
INTEREST OF CERTAIN PERSONS IN THE
  SEPARATION......................  In considering the recommendation of the U S WEST Board
                                    that you vote in favor of the Separation, you should be
                                    aware that certain executive officers of U S WEST have
                                    severance agreements that provide them with interests in
                                    the Separation that are different from, or in addition
                                    to, yours. These executive officers will receive an
                                    additional $45.1 million under these severance
                                    agreements if the Separation is completed. See "Chapter
                                    3: The Separation--Interest of Certain Persons in the
                                    Separation" for more information concerning the
                                    severance agreements of our executive officers.
 
RISK FACTORS......................  There are significant risks and challenges involved with
                                    the businesses of New U S WEST and MediaOne following
                                    the Separation. These and other risks, which include a
                                    discussion of certain disadvantages of the Separation,
                                    are addressed in "Chapter 2: Risk Factors."
 
TIMING AND APPROVALS..............  We are working towards completing the Separation as soon
                                    as possible. The completion of the Separation requires
                                    the approval of the Separation by our stockholders. We
                                    currently expect to complete the Separation shortly
                                    after the Annual Meeting.
 
                                    In order to complete the Separation, we need the
                                    following approvals by our stockholders at the Annual
                                    Meeting:
 
                                    / /  The approval of the holders of a majority of the
                                    voting power of the outstanding shares of Communications
                                         Stock and Media Stock, voting as a single class.
 
                                    / /  The approval of the holders of a majority of the
                                         outstanding shares of Communications Stock, voting
                                         as a separate class.
 
                                    / /  The approval of the holders of a majority of the
                                         outstanding shares of Media Stock, voting as a
                                         separate class.
 
VOTING AT THE ANNUAL MEETING......  The U S WEST 1998 Annual Meeting of Stockholders will be
                                    held on June 4, 1998 at 3:00 p.m., Eastern Time, at The
                                    Millennium Broadway Hotel, 145 West 44th Street, New
                                    York, New York. At the Annual Meeting, we will be asking
                                    you to approve the Separation. We will also be asking
                                    you to elect five directors to the U S WEST Board,
                                    ratify U S WEST's independent auditors, approve certain
                                    benefit plans and
</TABLE>
 
                                                                               5
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
 
<TABLE>
<S>                                 <C>
                                    consider certain stockholder proposals. See "Chapter 4:
                                    Other Matters to Be Considered at the Annual Meeting."
 
                                    Your vote is important to us no matter how many shares
                                    of Communications Stock or Media Stock you own. You can
                                    vote by proxy or by attending the Annual Meeting. Votes
                                    by proxy may be made (i) by mail, by completing and
                                    returning the enclosed proxy card, (ii) by telephone, by
                                    calling 1-888-457-2966 or (iii) via the Internet, by
                                    accessing a special site at
                                    http://www.uswest.proxyvoting.com. Stockholders who hold
                                    their shares of Communications Stock or Media Stock in
                                    "street name" (I.E., through a broker or other
                                    intermediary) will not be permitted to vote by telephone
                                    or via the Internet. We hope you can attend the Annual
                                    Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE
                                    ANNUAL MEETING, WE WOULD APPRECIATE IT IF YOU VOTE BY
                                    PROXY AS SOON AS POSSIBLE. If you attend and vote at the
                                    Annual Meeting, your vote will cancel any previous vote
                                    which you may have made by proxy. Once you vote by
                                    proxy, you can revoke your vote at any time by notifying
                                    us or delivering a proxy card with a later date.
 
WHEN YOU WILL RECEIVE NEW
  SHARES..........................  Following completion of the Separation, stockholders
                                    holding stock certificates representing Communications
                                    Stock or Media Stock will receive their shares of New U
                                    S WEST Common Stock in uncertificated book-entry form
                                    unless a stockholder elects to receive a certificate
                                    representing such shares. All stockholders holding stock
                                    certificates representing Media Stock will receive new
                                    certificates representing their shares of MediaOne
                                    Common Stock. We will send you information about these
                                    procedures following completion of the Separation. YOU
                                    SHOULD NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME.
                                    Stockholders who hold their shares in uncertificated
                                    book-entry form through the U S WEST Shareowner
                                    Investment Plan will receive shares of NEW U S WEST
                                    Common Stock in uncertificated book-entry form and
                                    shares of MediaOne Common Stock in certificated form. No
                                    action will be required by stockholders who hold their
                                    shares through the U S WEST Shareowner Investment Plan
                                    to receive the New U S WEST Common Stock and MediaOne
                                    Common Stock to which they are entitled pursuant to the
                                    Separation.
 
PRESENTATION OF FINANCIAL
  INFORMATION.....................  In order to assist you in reviewing the terms of the
                                    Separation, this Proxy Statement contains both
                                    historical and pro forma financial information.
 
                                    Historical financial information contained or
                                    incorporated by reference in this Proxy Statement
                                    includes historical financial information of U S WEST.
                                    In addition, this Proxy Statement contains restated
                                    historical financial information of New U S WEST. This
                                    financial information presents New U S WEST's combined
                                    financial position, results of operations and cash flows
                                    as if it were a separate entity for all of the periods
                                    presented but does not give effect to certain
</TABLE>
 
                                                                               6
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
 
<TABLE>
<S>                                 <C>
                                    transactions being undertaken in connection with the
                                    Separation, including the refinancing of the $3.9
                                    billion of Dex Indebtedness by New U S WEST and the
                                    issuance of $850 million of New U S WEST Common Stock to
                                    holders of Media Stock in connection with the Dex
                                    Alignment.
 
                                    This Proxy Statement contains pro forma financial
                                    information for both New U S WEST and MediaOne. The pro
                                    forma financial information for New U S WEST gives
                                    effect to the refinancing of the $3.9 billion of Dex
                                    Indebtedness by New U S WEST and the issuance of $850
                                    million of New U S WEST Common Stock to holders of Media
                                    Stock in connection with the Dex Alignment, transfers of
                                    certain assets and liabilities of U S WEST to New U S
                                    WEST and allocations of certain costs and expenses in
                                    connection with the Separation.
 
                                    The pro forma financial information for MediaOne
                                    contained in this Proxy Statement gives effect to the
                                    discontinuance by MediaOne of the businesses of New U S
                                    WEST, the refinancing by New U S WEST of the $3.9
                                    billion of Dex Indebtedness, the distribution of all of
                                    the New U S WEST Common Stock to U S WEST's
                                    stockholders, transfers of certain assets and
                                    liabilities of U S WEST to New U S WEST and allocations
                                    of certain costs and expenses in connection with the
                                    Separation, and the consummation of the AirTouch
                                    Transaction.
 
                                    Pro forma financial information is presented for
                                    illustrative purposes only and does not necessarily
                                    indicate the combined results of operations or financial
                                    position that would have occurred if the transactions
                                    presented had occurred at the beginning of each period
                                    presented or on the dates indicated. You should read the
                                    pro forma financial information together with the
                                    historical financial information included or
                                    incorporated by reference in this Proxy Statement.
 
ADDITIONAL INFORMATION............  For additional information about the Separation, please
                                    contact Beacon Hill Associates, Inc., our information
                                    agent, toll-free at 1-800-787-3120.
</TABLE>
 
                                                                               7
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
U S WEST SELECTED HISTORICAL FINANCIAL INFORMATION
 
    The following table sets forth selected historical financial information for
U S WEST. This information should be read in conjunction with U S WEST's
Consolidated Financial Statements, including the notes thereto, included
elsewhere in this Proxy Statement. See "Annex F--U S WEST, Inc. Consolidated
Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AS OF DECEMBER 31,
                                                                      -----------------------------------------------------
                                                                        1997       1996       1995       1994       1993
                                                                      ---------  ---------  ---------  ---------  ---------
<S>                                                                   <C>        <C>        <C>        <C>        <C>
                                                                         DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues(1).........................................  $  15,235  $  12,911  $  11,746  $  10,953  $  10,294
Income before extraordinary items and cumulative
 effect of change in accounting principles(2).......................        700      1,144      1,329      1,426        476
Net income (loss)(3)................................................        697      1,178      1,317      1,426     (2,806)
BALANCE SHEET INFORMATION:
Total assets........................................................     39,740     40,855     25,071     23,204     20,680
Total debt(4).......................................................     14,678     15,351      8,855      7,938      7,199
Mandatorily redeemable preferred stock and Preferred
 Securities(5)......................................................      1,180      1,131        651         51         --
Shareowners' equity.................................................     11,324     11,549      7,948      7,382      5,861
OTHER INFORMATION:
Percentage of debt to total capital(4)..............................       54.0%      54.8%      50.7%      51.6%      55.1%
Capital expenditures(4).............................................  $   4,174  $   3,474  $   3,140  $   2,820  $   2,441
Employees...........................................................     67,461     69,286     61,047     61,505     60,778
COMMUNICATIONS GROUP INFORMATION:(2, 3, 6, 7)
Basic earnings per common share.....................................  $    2.43  $    2.62  $    2.50
Diluted earnings per common share...................................       2.41       2.58       2.46
Basic average common shares outstanding (thousands).................    482,751    477,549    470,716
Diluted average common shares outstanding (thousands)...............    491,232    488,591    481,933
Dividends per common share..........................................  $    2.14  $    2.14  $    2.14
Number of common shareowners of record .............................    672,517    725,560    775,125
MEDIA GROUP INFORMATION:(2, 3, 6, 7)
Basic and diluted earnings (loss) per common share..................  $   (0.88) $   (0.16) $    0.29
Basic average common shares outstanding (thousands).................    606,749    491,924    470,549
Diluted average common shares outstanding (thousands)...............    606,749    491,924    471,612
Number of common shareowners of record..............................    648,077    705,341    770,346
U S WEST INFORMATION:(2, 3, 6, 7)
Basic earnings per common share before extraordinary items and
 cumulative effect of change in accounting principle................                                   $    3.14  $    1.13
Basic earnings (loss) per common share..............................                                        3.14      (6.69)
Diluted earnings (loss) per common share............................                                        3.12      (6.68)
Basic weighted average common shares outstanding (thousands)........                                     453,316    419,365
Diluted weighted average common shares outstanding (thousands)......                                     463,801    419,776
Dividends per common share..........................................                                   $    2.14  $    2.14
Number of common shareowners of record..............................                                     816,099    836,328
</TABLE>
 
- ------------------------------
 
(1) 1997 and 1996 sales and other revenues include $2,070 and $252,
    respectively, related to the acquisition by U S WEST of Continental (the
    "Continental Acquisition"), which was consummated on November 15, 1996.
 
(2) 1997 income is before an extraordinary item and includes a $152 regulatory
    charge ($0.31 per share of Communications Stock) related primarily to the
    1997 Washington State Supreme Court ruling that upheld a Washington State
    Utilities and Transportation Commission 1996 rate order (the "Washington
    Rate Order"), a gain of $32 ($0.07 per share of Communications Stock) on the
    sale of U S WEST Communications' interest in Bell Communications Research,
    Inc. ("Bellcore") and a gain of $48 ($0.10 per share of Communications
    Stock) on the sales of certain rural telephone exchanges. Also included are
    net gains of $249 ($0.41 per share of Media Stock) on the sales of domestic
    and international investments, and net losses of $356 ($0.59 per share of
    Media Stock) related to the Continental Acquisition. 1996 income is before
    the cumulative effect of a change in accounting principle and includes a
    gain of $36 ($0.08 per share of Communications Stock) on the sales of
    certain rural telephone exchanges and the current effect of $15 ($0.03 per
    share of Communications Stock) from adopting Statement of Financial
    Accounting Standards ("SFAS") No. 121. Also included are net losses of $71
    ($0.15 per share of Media Stock) related to the Continental Acquisition and
    a charge of $19 ($0.04 per share of Media Stock) from the sale of
 
                                                                               8
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
    U S WEST's cable television interests in Norway, Sweden and Hungary. 1995
    income is before an extraordinary item and includes a gain of $95 ($0.20 per
    share of Media Stock) from the merger of Telewest Communications plc
    ("Telewest") with SBC CableComms (UK), a gain of $85 ($0.18 per share of
    Communications Stock) on the sales of certain rural telephone
    exchanges and costs of $17 ($0.01 per share of Communications Stock and
    $0.02 per share of Media Stock) associated with the 1995 Recapitalization
    discussed in footnote 6 below. 1994 income includes a gain of $105 ($0.23
    per share) on the partial sale of U S WEST's joint venture interest in
    Telewest, a gain of $41 ($0.09 per share) on the sale of U S WEST's paging
    operations and a gain of $51 ($0.11 per share) on the sales of certain rural
    telephone exchanges. 1993 income is before extraordinary items and was
    reduced by a restructuring charge of $610 ($1.46 per share) and a charge of
    $54 ($0.13 per share) for the cumulative effect on deferred taxes of the
    1993 federally mandated increase in income tax rates. 1993 income is from
    continuing operations.
 
(3) 1997 net income was reduced by an extraordinary charge of $3 ($0.01 per
    share of Communications Stock and no Media Stock impact) for the early
    extinguishment of debt. 1996 net income includes a gain of $34 ($0.07 per
    share of Communications Stock) for the cumulative effect of the adoption of
    SFAS No. 121. 1995 net income was reduced by an extraordinary item of $12
    ($0.02 per share of Communications Stock and $0.01 per share of Media Stock)
    for the early extinguishment of debt. 1993 net income was reduced by
    extraordinary charges of $3,123 ($7.45 per share) for the discontinuance of
    SFAS No. 71 and $77 ($0.18 per share) for the early extinguishment of debt.
    1993 net income also includes a charge of $120 ($0.28 per share) for U S
    WEST's decision to discontinue the operations of its capital assets segment.
    Discontinued operations provided net income of $38 ($0.09 per share) in
    1993.
 
(4) Debt at December 31, 1997 and 1996 includes debt related to the Continental
    Acquisition. Capital expenditures, debt and the percentage of debt to total
    capital excludes the capital assets segment, which has been discontinued and
    is held for sale. Percentage of debt to total capital includes
    Company-obligated mandatorily redeemable preferred securities of subsidiary
    trust holding solely Company-guaranteed debentures ("Preferred Securities")
    and mandatorily redeemable preferred stock as a component of total capital.
 
(5) Includes Preferred Securities of $1,080 at December 31, 1997 and 1996, and
    $600 at December 31, 1995, and preferred stock subject to mandatory
    redemption of $100 at December 31, 1997, and $51 at December 31, 1996, 1995
    and 1994.
 
(6) The average common shares of Media Stock outstanding for the year ended
    December 31, 1996 include 150,615,000 shares issued in connection with the
    Continental Acquisition. Effective November 1, 1995, each share of common
    stock of U S WEST ("Old Common Stock") was converted into one share each of
    Communications Stock and Media Stock (the "1995 Recapitalization"). Earnings
    per common share and dividends per common share for 1995 have been presented
    on a pro forma basis to reflect the two classes of stock as if they had been
    outstanding since January 1, 1995. For periods prior to the 1995
    Recapitalization, the average shares of Communications Stock and Media Stock
    outstanding are assumed to equal the average shares of Old Common Stock
    outstanding for such periods.
 
(7) In 1997, U S WEST adopted SFAS No. 128 "Earnings Per Share" which specifies
    new computation, presentation and disclosure requirements for earnings per
    share to be applied retroactively. SFAS No. 128 requires, among other
    things, presentation of basic and diluted earnings per share. See "Annex
    F--U S WEST, Inc. Consolidated Financial Statements-- Note 16--Earnings Per
    Share."
 
                                                                               9
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
NEW U S WEST SELECTED HISTORICAL FINANCIAL INFORMATION
 
    The following table sets forth selected historical financial information for
New U S WEST. This information presents New U S WEST's results of operations and
financial condition as if it were a separate entity for all periods presented
but does not give effect to certain transactions being undertaken in connection
with the Separation, including the refinancing by New U S WEST of the Dex
Indebtedness and the issuance of $850 of New U S WEST Common Stock to holders of
Media Stock in connection with the Dex Alignment. For financial information for
New U S WEST which gives effect to all such transactions, see "Chapter 6:
Information About New U S WEST--New U S WEST Unaudited Pro Forma Condensed
Combined Financial Statements." This information should be read in conjunction
with New U S WEST's Combined Financial Statements, including the notes thereto.
See "Annex G--New U S WEST Combined Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AS OF DECEMBER 31,
                                                                      -----------------------------------------------------
                                                                        1997       1996       1995       1994       1993
                                                                      ---------  ---------  ---------  ---------  ---------
                                                                         DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<S>                                                                   <C>        <C>        <C>        <C>        <C>
RESULTS OF OPERATIONS INFORMATION:
Operating revenues..................................................  $  11,479  $  11,168  $  10,508  $  10,132  $   9,779
Net income (loss)(1)................................................      1,524      1,535      1,423      1,403     (2,585)
Dividends per common share..........................................       2.14       2.14       2.14
BALANCE SHEET INFORMATION:
Total assets........................................................     17,667     17,279     16,960     16,317     15,727
Total debt..........................................................      5,715      6,545      6,782      6,147      5,728
Total equity........................................................      4,367      4,085      3,657      3,357      2,837
OTHER INFORMATION:
Return on equity(2,3)...............................................       34.7%      38.6%      41.8%      45.3%      27.5%
Percentage of debt to total capital.................................       56.7%      61.6%      65.0%      64.7%      66.9%
Capital expenditures................................................  $   2,672  $   2,831  $   2,770  $   2,513  $   2,251
Telephone network access lines in service (thousands)...............     16,033     15,424     14,795     14,299     13,803
Billed access minutes of use (millions)--
  interstate........................................................     55,362     52,039     47,801     43,768     40,594
  intrastate........................................................     11,729     10,451      9,504      8,507      7,529
Total employees.....................................................     51,110     51,477     54,552     55,246     56,147
Telephone company employees.........................................     43,749     45,427     47,934     47,493     49,668
Telephone company employees per ten
  thousand access lines.............................................       27.3       29.5       32.4       33.2       36.0
</TABLE>
 
- ------------------------------
(1) 1997 net income includes a $152 regulatory charge related primarily to the
    Washington Rate Order, a gain of $48 on the sales of certain rural telephone
    exchanges, a gain of $32 on the sale of U S WEST Communications' investment
    in Bellcore and an extraordinary charge of $3 for the early extinguishment
    of debt. 1996 net income includes a gain of $36 on the sales of certain
    rural telephone exchanges and the cumulative and current effects of $34 and
    $15, respectively, from adopting SFAS No. 121. 1995 net income includes a
    gain of $85 on the sales of certain rural telephone exchanges and other
    charges of $16, including an extraordinary charge of $8 for the early
    extinguishment of debt and $8 for costs associated with the 1995
    Recapitalization. 1994 net income includes a gain of $51 on the sales of
    certain rural telephone exchanges. 1993 net income was reduced by $566 for a
    restructuring charge and $54 for the cumulative effect on deferred taxes of
    the 1993 federally mandated increase in income tax rates. 1993 net income
    was also reduced by extraordinary charges of $3,123 for the discontinuance
    of SFAS No. 71 and $77 for the early extinguishment of debt.
 
(2) The increase in the return on equity since 1993 is primarily due to the
    effects of discontinuing SFAS No. 71 in 1993.
 
(3) 1997 return on equity is based on income before extraordinary item. 1996
    return on equity is based on income before the cumulative effect of a change
    in accounting principle. 1995 return on equity is based on income before
    extraordinary item. 1993 return on equity is based on income excluding
    extraordinary items, a restructuring charge and the cumulative effect on
    deferred taxes of the 1993 federally mandated increase in income tax rates.
 
                                                                              10
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
NEW U S WEST SELECTED PRO FORMA FINANCIAL INFORMATION
 
    The following unaudited selected pro forma condensed combined financial
information of New U S WEST gives effect to the refinancing of $3.9 billion of
Dex Indebtedness by New U S WEST and the issuance of $850 million of New U S
WEST Common Stock to holders of Media Stock in connection with the Dex
Alignment, transfers of certain assets and liabilities of U S WEST to New U S
WEST and allocations of certain costs and expenses in connection with the
Separation. The selected unaudited pro forma condensed combined financial
information has been derived from, or prepared on a basis consistent with, the
unaudited pro forma condensed combined financial statements of New U S WEST,
including the notes thereto, included elsewhere in this Proxy Statement. This
information is presented for illustrative purposes only and is not necessarily
indicative of the combined results of operations or financial position that
would have occurred if the transactions had occurred at the beginning of each
period presented or on the dates indicated, nor is it necessarily indicative of
the future operating results or financial position of New U S WEST. This
information should also be read in conjunction with the unaudited pro forma
condensed combined financial statements of New U S WEST, including the notes
thereto, included elsewhere in this Proxy Statement. See "Chapter 6: Information
About New U S WEST--New U S WEST Unaudited Pro Forma Condensed Combined
Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                                YEAR ENDED
                                                                                                 OR AS OF
                                                                                             DECEMBER 31, 1997
                                                                                         -------------------------
<S>                                                                                      <C>
                                                                                            DOLLARS IN MILLIONS
                                                                                             (EXCEPT PER SHARE
                                                                                                 AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues...............................................................          $  11,479
Operating income.......................................................................              2,776
Income before extraordinary item.......................................................              1,380
Basic earnings per share before extraordinary item.....................................               2.76
Diluted earnings per share before extraordinary item...................................               2.73
 
BALANCE SHEET INFORMATION:
Total assets...........................................................................             17,742
Total debt.............................................................................              9,738
Total equity...........................................................................                395
Book value per share...................................................................               0.79
</TABLE>
 
                                                                              11
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
MEDIAONE SELECTED PRO FORMA FINANCIAL INFORMATION
 
    The following unaudited selected pro forma condensed combined financial
information of MediaOne gives effect to the discontinuance of the businesses of
New U S WEST, the refinancing of $3.9 billion of Dex Indebtedness by New U S
WEST, the distribution of all of the New U S WEST Common Stock to U S WEST's
stockholders, transfers of certain assets and liabilities of U S WEST to New U S
WEST and allocations of certain costs and expenses in connection with the
Separation, and the AirTouch Transaction. The selected unaudited pro forma
condensed combined financial information has been derived from, or prepared on a
basis consistent with, the unaudited pro forma condensed combined financial
statements of MediaOne, including the notes thereto, included elsewhere in this
Proxy Statement. This information is presented for illustrative purposes only
and is not necessarily indicative of the combined results of operations or
financial position that would have occurred if the transactions had occurred at
the beginning of each period presented or on the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of
MediaOne. This information should also be read in conjunction with the unaudited
pro forma condensed combined financial statements of MediaOne, including the
notes thereto, included elsewhere in this Proxy Statement. See "Chapter 7:
Information About MediaOne--MediaOne Unaudited Pro Forma Condensed Combined
Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                                    YEAR ENDED
                                                                                                     OR AS OF
                                                                                                DECEMBER 31, 1997
                                                                                                ------------------
<S>                                                                                             <C>
                                                                                                    DOLLARS IN
                                                                                                     MILLIONS
                                                                                                (EXCEPT PER SHARE
                                                                                                     AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues......................................................................      $    2,419
Loss from continuing operations(1)............................................................            (610)
Loss from continuing operations available for common stock(1).................................            (662)
Basic and diluted loss per share from continuing operations(1)................................           (1.09)
 
BALANCE SHEET INFORMATION:
Total assets..................................................................................          24,314
Total debt....................................................................................           4,039
Mandatorily redeemable preferred stock and Preferred Securities...............................           1,180
Total equity..................................................................................          12,770
Book value per share..........................................................................           21.01
</TABLE>
 
- ------------------------
 
(1) The loss from continuing operations is before extraordinary item.
 
                                                                              12
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
COMPARATIVE PER SHARE DATA
 
    The following table sets forth (i) historical earnings, cash dividends and
book value per share for U S WEST, (ii) unaudited pro forma combined earnings,
cash dividends and book value per share for New U S WEST, (iii) unaudited pro
forma combined loss, cash dividends and book value per share for MediaOne and
(iv) unaudited pro forma equivalent combined loss, cash dividends and book value
per share for the Media Stock. The pro forma data for New U S WEST and MediaOne
give effect to the transactions described under "--New U S WEST Selected Pro
Forma Financial Information" and "--MediaOne Selected Pro Forma Financial
Information," respectively. This data should be read in conjunction with U S
WEST's Consolidated Financial Statements, including the notes thereto, and the
unaudited pro forma condensed combined financial statements of New U S WEST and
MediaOne, including the notes thereto, included elsewhere in this Proxy
Statement. See "Chapter 6: Information About New U S WEST--New U S WEST
Unaudited Pro Forma Condensed Combined Financial Statements," "Chapter 7:
Information About MediaOne--MediaOne Unaudited Pro Forma Condensed Combined
Financial Statements" and "Annex F--U S WEST, Inc. Consolidated Financial
Statements."
 
<TABLE>
<CAPTION>
                                                                                                    YEAR ENDED
                                                                                                     OR AS OF
                                                                                                 DECEMBER 31, 1997
                                                                                                 -----------------
<S>                                                                                              <C>
HISTORICAL:
  U S WEST
    Basic earnings per share of Communications Stock(1)........................................      $    2.44
    Diluted earnings per share of Communications Stock(1)......................................           2.42
    Basic and diluted loss per share of Media Stock............................................          (0.88)
    Cash dividends per share of Communications Stock...........................................           2.14
    Cash dividends per share of Media Stock(2).................................................         --
    Book value per share of Communications Stock...............................................           8.67
    Book value per share of Media Stock........................................................          11.72
 
PRO FORMA:
  New U S WEST
    Basic earnings per share(1)................................................................      $    2.76
    Diluted earnings per share(1)..............................................................           2.73
    Cash dividends per share...................................................................           2.14
    Book value per share.......................................................................           0.79
  MediaOne
    Basic and diluted loss per share from continuing operations(3).............................          (1.09)
    Cash dividends per share(2)................................................................         --
    Book value per share.......................................................................          21.01
 
PRO FORMA EQUIVALENT(4):
  U S WEST
    Basic and diluted loss per share of Media Stock............................................          (1.02)
    Cash dividends per share of Media Stock(2).................................................           0.06
    Book value per share of Media Stock........................................................          21.03
</TABLE>
 
- ------------------------------
 
(1) Earnings per share is before extraordinary item.
 
(2) Dividends are not currently paid on the Media Stock. It is anticipated that
    the MediaOne Board will continue this policy for the foreseeable future.
 
(3) The loss from continuing operations is before extraordinary item.
 
(4) Represents the sum of (i) pro forma loss, cash dividends or book value per
    share of MediaOne Common Stock, respectively, plus (ii) pro forma basic
    earnings or diluted earnings (as applicable), cash dividends or book value,
    per share of New U S WEST Common Stock, respectively, multiplied by 0.02550
    (the estimated fraction of a share of New U S WEST Common Stock which will
    be distributed per share of Media Stock in connection with the Dex
    Alignment). For a description of the manner in which such fraction will be
    calculated, see "Chapter 3: The Separation--Description of the Separation--
    The Dex Alignment."
 
                                                                              13
                                                         CHAPTER 1: INTRODUCTION
<PAGE>
CHAPTER 2: RISK FACTORS
 
RISK FACTORS RELATED TO NEW U S WEST
 
REGULATION
 
    The businesses of New U S WEST are subject to a high degree of regulation at
the federal, state and local levels, including regulation by state public
utility commissions ("PUCs") with respect to access charge tariffs and
intrastate rates and services and by the Federal Communications Commission (the
"FCC") with respect to interstate access tariffs and other matters. In
particular, the Telecommunications Act of 1996 (the "Telecommunications Act")
has introduced new regulations affecting New U S WEST's businesses in many
areas. The regulations to which New U S WEST's businesses are subject can in
certain circumstances impose significant limitations on its operations. In
addition, these regulations are constantly evolving and may change significantly
over time. There can be no assurance that future regulatory changes will not
have a material adverse effect on New U S WEST. See "Chapter 6: Information
About New U S WEST--Business of New U S WEST--Regulation" and "Annex G--New U S
WEST's Combined Financial Statements--Note 13--Contingencies."
 
COMPETITION
 
    New U S WEST operates in an increasingly competitive environment. Services
similar to those offered by New U S WEST, including local exchange services,
exchange access services, long-distance services within local access and
transport areas ("LATAs") and high-speed data and Internet access services, are
also offered by other telecommunications companies, primarily by interexchange
carriers ("IXCs") and other local exchange carriers ("LECs"), including
competitive local exchange carriers ("CLECs") and competitive access providers
("CAPs"). High-speed data and internet access services are also provided by
internet service providers ("ISPs"). Dex competes with various other providers
of directory services, including with providers of electronic directory
services. The wireless communications services currently being introduced by New
U S WEST face competition from numerous other providers of wireless services in
each market. The interLATA long distance service which New U S WEST plans to
introduce will face competition from IXCs. The telecommunications industry is
continually subject to rapid and significant changes in technology. There can be
no assurance that the introduction of any new technology will not result in the
entry of additional competitors into New U S WEST's markets. See "Chapter 6:
Information About New U S WEST--Business of New U S WEST-- Competition."
 
DIVIDEND POLICY
 
    If the Separation is consummated, it is anticipated that New U S WEST will
pay dividends on the New U S WEST Common Stock initially at a quarterly rate of
$0.535 per share, which is the same dividend currently paid on the
Communications Stock. While the New U S WEST Board is not expected to change
this dividend policy, it has the right to do so at any time. See "Chapter 3: The
Separation--Dividend Policy."
 
NO PRIOR PUBLIC MARKET FOR NEW U S WEST COMMON STOCK; NO ASSURANCE AS TO MARKET
  PRICE
 
    Although the Communications Stock has been traded publicly since its initial
issuance in 1995, there has been no public market for the New U S WEST Common
Stock. Because, among other things, the New U S WEST Common Stock will be a
security of New U S WEST (rather than a security of U S WEST) and, as a result
of the Dex Alignment, New U S WEST will include a significant business not
currently attributed to the Communications Group, there can be no assurance that
the public market for the New U S WEST Common Stock will be similar to the
public market for the Communications Stock. See "Chapter 8: Capital Stock--New U
S WEST Capital Stock" and
"--Comparison of Rights of Stockholders." Based on the one-for-one redemption
ratio at which the
 
                                                                              14
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
Communications Stock will be redeemed for New U S WEST Common Stock,
approximately 500.5 million shares of New U S WEST Common Stock will be issued
and outstanding immediately after the Separation. Based on the current ownership
of Communications Stock, upon consummation of the Separation, shares of New U S
WEST Common Stock will be broadly distributed among numerous individual and
institutional holders. Ultimately, the value of each share of New U S WEST
Common Stock will be principally determined in the trading markets and could be
influenced by many factors, including the terms and conditions of the Separation
and the Dex Alignment, the operations of New U S WEST, the growth and expansion
of New U S WEST's businesses, investors' expectations of New U S WEST's
prospects, trends and uncertainties affecting the telecommunications industry as
a whole, future issuances and repurchases of New U S WEST Common Stock and
general economic and other conditions. There can be no assurance that the
trading value of each share of New U S WEST Common Stock immediately after the
Separation will be consistent with the trading value of each share of
Communications Stock immediately before the Separation. The trading value of the
New U S WEST Common Stock could be higher or lower than the trading value of
Communications Stock, and U S WEST and New U S WEST are unable to estimate
whether such difference (whether favorable or unfavorable) will be material to
holders of New U S WEST Common Stock.
 
CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF NEW U S WEST
 
    The New U S WEST Restated Certificate (as defined herein) and the Bylaws of
New U S WEST (the "New U S WEST Bylaws") will contain certain provisions which
could have the effect of delaying, deferring or preventing a change in control
of New U S WEST or the removal of New U S WEST management, of deterring
potential acquirors from making an offer to stockholders of New U S WEST and of
limiting any opportunity to realize premiums over prevailing market prices for
the New U S WEST Common Stock in connection therewith. Such provisions include a
classified board of directors, a provision prohibiting stockholder action by
written consent, a provision prohibiting stockholders from calling special
meetings, a provision which requires the approval of 80% of the stockholders to
remove a director, and a requirement that certain business combinations be
approved by 80% of the stockholders. The foregoing provisions are substantially
similar to the provisions that are present in the Restated Certificate of
Incorporation of U S WEST (the "U S WEST Restated Certificate") and the Bylaws
of U S WEST (the "U S WEST Bylaws"). In addition, the New U S WEST Rights (as
defined herein) will permit disinterested stockholders to acquire additional
shares of New U S WEST or of an acquiring company at a substantial discount in
the event of certain described changes of control. See "Chapter 8: Capital
Stock--Certain Antitakeover Considerations."
 
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
 
    Some of the information presented in or in connection with this Proxy
Statement constitutes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Although U S WEST and New U S
WEST believe that their expectations are based on reasonable assumptions within
the bounds of their knowledge of their businesses and operations, there can be
no assurance that actual results will not differ materially from their
expectations. Factors that could cause actual results to differ from
expectations include: (i) greater than anticipated competition from new entrants
into the local exchange, intraLATA toll, wireless, data and directories markets;
(ii) changes in demand for New U S WEST's products and services, including
optional custom calling features; (iii) higher than anticipated employee levels,
capital expenditures and operating expenses (such as costs associated with year
2000 remediation); (iv) the loss of significant customers; (v) pending
regulatory actions in state jurisdictions; (vi) regulatory changes affecting the
telecommunications industry, including changes that could have an impact on the
competitive environment in the local exchange market; (vii) a change in economic
conditions in the various markets served by New U S WEST's operations; (viii)
greater than anticipated competitive activity requiring new pricing for
services; (ix) higher than anticipated start-up costs associated with new
business opportunities; (x) delays in New
 
                                                                              15
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
U S WEST's ability to begin offering interLATA long-distance services; or (xi)
delays in the development of anticipated technologies, or the failure of such
technologies to perform according to expectations.
 
RISK FACTORS RELATED TO MEDIAONE
 
LOSS OF AVAILABILITY OF COMMUNICATIONS GROUP AND DEX CASH FLOWS AND CREDIT
  SUPPORT
 
    The businesses comprising the Media Group are currently wholly owned by U S
WEST. While the Media Stock, as a Targeted Stock, is intended to reflect
separately the performance of the Media Group, the Media Stock is a class of
common stock of U S WEST. As a result of being a wholly owned business group of
U S WEST, the Media Group has been able to borrow money using U S WEST's
consolidated investment grade credit rating, which is supported by the cash
flows generated by the businesses of both the Communications Group and the Media
Group. The ability of the Media Group to borrow money using U S WEST's
consolidated credit rating has permitted the Media Group to have lower borrowing
costs than it would as a stand-alone entity and to access the commercial paper
market on a regular basis in order to fund its operations. The terms of U S
WEST's indebtedness include few covenants and therefore have not interfered with
the operations of the Media Group or limited the flexibility of the Media Group
to pursue its business objectives. In addition, under U S WEST's current
structure, the U S WEST Board has the ability to transfer money from the
Communications Group to the Media Group through a short-term loan or the
creation of an "inter-group interest." While the U S WEST Board has never
elected to make any such transfer and would only do so in extraordinary
circumstances, the ability of the U S WEST Board to make any such transfer
provides the Media Group with an additional source of capital which could be
drawn upon in the event of an economic downturn or other adverse circumstances.
 
    Upon consummation of the Separation, MediaOne will not have an ownership
interest in, or any other affiliation with, New U S WEST. As a result, MediaOne
will not have access to the cash flows generated by the businesses of New U S
WEST, including the cash flows generated by U S WEST Communications and Dex, to
support its credit rating or otherwise. The rating agencies have not yet
finalized what the credit rating of MediaOne will be following consummation of
the Separation. Based upon the anticipated capitalization of MediaOne, it is
expected that MediaOne's credit rating will be lower than the current credit
rating of U S WEST. The expected lower credit rating of MediaOne could have
important consequences to the businesses and operations of MediaOne. Among other
things, MediaOne may have borrowing costs that are higher than the current
borrowing costs of the businesses of the Media Group. MediaOne may also have
reduced access to the commercial paper market and therefore may be required to
borrow from commercial banks to fund its short-term capital requirements. Such
bank indebtedness, as well as MediaOne's public indebtedness, may contain
covenants that could reduce MediaOne's operating flexibility and its ability to
plan for, or react to, changes affecting its business and market conditions. U S
WEST believes that the AirTouch Transaction may improve the credit rating to be
assigned to MediaOne in the Separation.
 
OPERATING LOSSES
 
    For the year ended December 31, 1997, on a pro forma basis, after giving
effect to the discontinuance of the operations of the businesses of New U S WEST
and the AirTouch Transaction, MediaOne would have had operating losses from
continuing operations of $320 million. See "Chapter 7: Information About
MediaOne--MediaOne Unaudited Pro Forma Condensed Combined Financial Statements."
These losses result from the significant amount of amortization of intangible
assets recognized in connection with the Continental Acquisition and from
depreciation associated with capital expenditures required to upgrade MediaOne's
networks. There can be no assurance that MediaOne will realize positive
operating income from continuing operations in the foreseeable future. See
"Chapter 5: Information About U S WEST--U S WEST Management's Discussion and
Analysis of Financial Condition
 
                                                                              16
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
and Results of Operations--Effects of the Separation, the Refinancing and the
AirTouch Transaction" and "Chapter 7: Information About MediaOne."
 
REGULATION
 
    The businesses of MediaOne are subject to a high degree of regulation at the
federal, state and local levels, as well as in various foreign countries in
connection with certain overseas business activities. These regulations can in
certain circumstances impose significant limitations on operations. In addition,
these regulations are constantly evolving and may change significantly over
time. There can be no assurance that future regulatory changes will not have a
material adverse effect on MediaOne. See "Chapter 7: Information About
MediaOne--Business of MediaOne--Regulation."
 
COMPETITION
 
    MediaOne's businesses operate in an increasingly competitive environment.
MediaOne's cable television systems compete with other providers of video
programming, including direct broadcast satellite ("DBS") systems, multipoint
multichannel distributions services ("MMDS") systems, local multipoint
distribution services ("LMDS") systems, satellite master antenna television
("SMATV") systems and providers of other new technologies. The cable television
services offered by MediaOne face competition from other communications and
entertainment media, including broadcast television, video tape rentals and live
sporting events. In addition, with the passage of the Telecommunications Act,
additional competitors are entering into MediaOne's markets, including LECs with
greater financial resources than MediaOne, who offer video programming services
similar to those offered by MediaOne. As MediaOne begins to offer additional
services over its networks, including local exchange and data services, MediaOne
will face additional competition from other providers of such services,
including from LECs, IXCs and ISPs. MediaOne's international businesses also
typically face significant competition in their markets. The broadband
communications industry is continually subject to rapid and significant changes
in technology. There can be no assurance that the introduction of any new
technology will not result in the entry of additional competitors into
MediaOne's markets, which could reduce MediaOne's market share. See "Chapter 7:
Information About MediaOne--Business of MediaOne--Competition."
 
RISKS ASSOCIATED WITH INTERNATIONAL INVESTMENT
 
    The Media Group has made, and MediaOne intends to continue to consider
making, investments in companies located outside of the United States. Such
investments are subject to risks and uncertainties relating to international
investments which may include taxation, nationalization, inflation, currency
fluctuations, increased regulation and approval requirements and governmental
regulation limiting returns to foreign investors. In recent months, investments
in Asia have been subject to an unusually high level of risk, owing to
uncertainty arising from economic and political conditions. See "Chapter 5:
Information About U S WEST--U S WEST Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--1997
Compared with 1996--Interest Expense and Other--Equity Losses in Unconsolidated
Ventures."
 
DIVIDEND POLICY
 
    Dividends are not currently paid on the Media Stock. If the Separation is
completed, it is anticipated that the MediaOne Board will continue this policy
for the foreseeable future and will not declare dividends on the MediaOne Common
Stock. Instead, it is anticipated that the MediaOne Board will retain future
earnings, if any, for the development of the businesses of MediaOne. See
"Chapter 3: The Separation--Dividend Policy."
 
                                                                              17
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
NO ASSURANCE AS TO MARKET PRICE OF MEDIAONE COMMON STOCK FOLLOWING SEPARATION
 
    The Media Stock has been traded publicly since its initial issuance in 1995
as a Targeted Stock. Following consummation of the Separation, the MediaOne
Common Stock will be the only class of common stock of MediaOne and will not be
a Targeted Stock. As a result of the Dex Alignment, MediaOne will not include a
significant business that is currently attributed to the Media Group.
Accordingly, there can be no assurance that the public market for the MediaOne
Common Stock will be similar to the public market for the Media Stock. See
"Chapter 7: Capital Stock--MediaOne Capital Stock" and "--Comparison of Rights
of Stockholders." Ultimately, the value of each share of MediaOne Common Stock
will be principally determined in the trading markets and could be influenced by
many factors, including the terms and conditions of the Separation and the Dex
Alignment, the operations of MediaOne, the ability of MediaOne to finance its
future capital requirements, the growth and expansion of MediaOne's business,
investors' expectations of MediaOne's prospects, trends and uncertainties
affecting the media industry as a whole, future issuances and repurchases of
MediaOne Common Stock and general economic and other conditions. There can be no
assurance that the trading value of each share of MediaOne Common Stock
immediately after the Separation will be consistent with the trading value of
each share of Media Stock immediately before the Separation. The trading value
of the MediaOne Common Stock could be higher or lower than the trading value of
Media Stock, and U S WEST is unable to estimate whether such difference (whether
favorable or unfavorable) will be material to holders of MediaOne Common Stock.
 
CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF MEDIAONE
 
    The MediaOne Restated Certificate (as defined herein) and the Bylaws of
MediaOne (the "MediaOne Bylaws") will continue to contain certain provisions
present in the U S WEST Restated Certificate and the U S WEST Bylaws which could
have the effect of delaying, deferring or preventing a change in control of
MediaOne or the removal of MediaOne management, of deterring potential acquirors
from making an offer to stockholders of MediaOne and of limiting any opportunity
to realize premiums over prevailing market prices for the MediaOne Common Stock
in connection therewith. Such provisions include a classified board of
directors, a provision prohibiting stockholder action by written consent, a
provision prohibiting stockholders from calling special meetings, a provision
which requires the approval of 80% of the stockholders to remove a director, and
a requirement that certain business combinations be approved by 80% of the
stockholders. In addition, the MediaOne Rights (as defined herein) will permit
disinterested stockholders to acquire additional shares of MediaOne or of an
acquiring company at a substantial discount in the event of certain described
changes of control. See "Chapter 7: Capital Stock--Certain Antitakeover
Considerations."
 
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
 
    Some of the information presented in or in connection with this Proxy
Statement constitutes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Although U S WEST believes
that its expectations are based on reasonable assumptions within the bounds of
its knowledge of its business and operations, there can be no assurance that
actual results will not differ materially from its expectations. Factors that
could cause actual results to differ from expectations include: (i) greater than
anticipated competition from new entrants into the cable and wireless
communications markets; (ii) changes in demand for MediaOne's products and
services; (iii) regulatory changes affecting the cable and telecommunications
industries; (iv) a change in economic conditions in the various markets served
by MediaOne's operations, including international markets, that could adversely
affect the level of demand for cable, wireless or other services offered by
MediaOne; (v) greater than anticipated competitive activity requiring new
pricing for services; (vi) higher than anticipated start-up costs associated
with new business opportunities; (vii) higher than anticipated employee levels,
capital expenditures and operating expenses (such as costs associated with
 
                                                                              18
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
the year 2000 remediation); (viii) consumer acceptance of broadband services,
including telephony and data services, and wireless services; (ix) increases in
fraudulent activity with respect to broadband and wireless services; or (x)
delays in the development of anticipated technologies, or the failure of such
technologies to perform according to expectations.
 
                                                                              19
                                                         CHAPTER 2: RISK FACTORS
<PAGE>
CHAPTER 3: THE SEPARATION (ITEM 1 ON PROXY CARD)
 
DESCRIPTION OF THE SEPARATION
 
    Pursuant to the Separation, the Communications Group and the Media Group
will become independent public companies. As part of the Separation, Dex--the
domestic directories business of the Media Group--will be aligned with the
Communications Group. The Separation will be implemented pursuant to the terms
of a Separation Agreement (the "Separation Agreement") to be entered into
between U S WEST and New U S WEST. The Separation Agreement sets forth the terms
of the Separation and certain other post-Separation arrangements and agreements
between New U S WEST and MediaOne. Certain material provisions of the Separation
Agreement are summarized herein. A copy of the Separation Agreement is filed as
an exhibit to the New U S WEST Registration Statement (as defined herein). This
summary is qualified in its entirety by reference to the full and complete text
of the Separation Agreement. See "Chapter 9: The Annual Meeting and Certain
Other Matters-- Where You Can Find More Information."
 
THE SEPARATION
 
    In order to effect the Separation, pursuant to the Separation Agreement and
subject to the terms and conditions thereof, (i) U S WEST will redeem each
issued and outstanding share of Communications Stock (other than shares of
Communications Stock held as treasury stock by U S WEST) for one share of New U
S WEST Common Stock (the "Communications Redemption") and (ii) distribute as a
dividend (the "Dex Dividend") on each outstanding share of Media Stock (other
than shares of Media Stock held as treasury stock by U S WEST) a fraction of a
share of New U S WEST Common Stock equal to the Dex Dividend Number (which will
be determined in the manner described below under "--The Dex Alignment"). As
only whole shares of New U S WEST Common Stock will be issued, cash in lieu of
fractional shares of New U S WEST Common Stock will be issued to holders of
Media Stock pursuant to the Dex Dividend.
 
    The Separation will become effective at such time after the satisfaction or
waiver of all of the conditions set forth in the Separation Agreement as
determined by the U S WEST Board (the "Separation Time"). See "--Conditions to
the Separation." The date on which the Separation Time occurs (the "Separation
Date") will also be fixed by the U S WEST Board as (i) the date on which the
Communications Stock will be redeemed pursuant to the Communications Redemption,
(ii) the record date for determining the holders of Media Stock entitled to
receive the Dex Dividend and (iii) the date as of which the Dex Dividend will be
paid to holders of Media Stock. From and after the Separation Time, each
outstanding share of Media Stock will remain outstanding and will thereafter
represent one share of MediaOne Common Stock. Each share of Communications Stock
held as treasury stock by U S WEST will be cancelled. Each share of Media Stock
held as treasury stock by U S WEST will remain outstanding as one share of
MediaOne Common Stock held as treasury stock by MediaOne. The Dex Dividend will
not be issued with respect to shares of Media Stock held as treasury stock by U
S WEST.
 
    As a result of the Separation, New U S WEST (which is currently an indirect
wholly owned subsidiary of U S WEST named "USW-C, Inc.") will become an
independent public company comprising the current businesses of the
Communications Group and Dex and will be renamed "U S WEST, Inc." Following the
Separation, U S WEST will continue as an independent public company comprised of
the current businesses of the Media Group other than Dex and will be renamed
"MediaOne Group, Inc." The following charts present in simplified form the
organizational structure of U S WEST prior to the Separation and the
organizational structures of New U S WEST and MediaOne after the Separation.
 
                                                                              20
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
 [Charts depicting structure of U S WEST before the Separation and New U S WEST
                      and MediaOne after the Separation.]
 
THE DEX ALIGNMENT
 
    As part of the Separation, the directories business of Dex will be aligned
with New U S WEST. The U S WEST Board, in consultation with U S WEST's
management and its financial advisors, has determined that the fair value of Dex
is $4.75 billion (the "Dex Value"). See "--Background of the Separation" and
"--Opinions of Financial Advisors." The business of Dex is currently attributed
to the Media Group and, as a result, the value of this business is intended to
be reflected in the Media Stock. In connection with the Dex Alignment, U S WEST
will issue to holders of Media Stock an aggregate of $850 million in value (the
"Dex Equity Value") of shares of New U S WEST Common Stock pursuant to the Dex
Dividend. The Dex Equity Value equals the Dex Value net of the $3.9 billion of
Dex Indebtedness currently allocated to the Media Group that will be refinanced
by New U S WEST in connection with the Separation. For a description of the
manner in which the Dex Indebtedness will be refinanced by New U S WEST, see
"--Treatment of Indebtedness."
 
    The fraction of a share of New U S WEST Common Stock which will be
distributed per share of Media Stock pursuant to the Dex Dividend (the "Dex
Dividend Number") will equal the quotient of (i) the Dex Equity Value (I.E.,
$850 million) divided by (ii) the product of (x) the number of shares of Media
Stock outstanding immediately prior to the Separation Time (other than shares of
Media Stock held as treasury stock by U S WEST) multiplied by (y) the average
market value of the Communications Stock over the period of 20 trading days
ending on the fifth trading day prior to the Separation Date. Assuming the
Separation was consummated on April 9, 1998, based upon $54.77 (the average
market price of the Communications Stock for the 20 trading days ending 5
trading days prior to such date) and the number of shares of Media Stock
outstanding as of April 9, 1998, the Dex Dividend Number would have equalled
0.02550. This equates to $1.40 per share of Media Stock, based upon
 
                                                                              21
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
$54.77--the average market price of the Communications Stock for the 20 trading
days ending 5 trading days prior to April 9, 1998, and $1.37 per share of Media
Stock, based upon $53.625--the market price of the Communications Stock on April
9, 1998.
 
THE REORGANIZATION
 
    Prior to the Separation, U S WEST will effect certain internal stock and
asset transfers, intercompany debt assumptions and other restructurings,
mergers, contributions and assumptions, the purpose and effect of which will be
to separate Dex from the other businesses of the Media Group and to contribute
to New U S WEST all of the assets and liabilities of U S WEST relating to the
businesses of the Communications Group and Dex, as well as certain other assets
and liabilities of U S WEST (the "Reorganization"). In addition, substantially
all of the outstanding indebtedness guaranteed by U S WEST (as well as
indebtedness as to which U S WEST is the obligor) will be refinanced pursuant to
the Refinancing (as defined herein). See "--Treatment of Indebtedness."
 
    Prior to the Reorganization, U S WEST will cause New U S WEST to amend and
restate its Certificate of Incorporation (as so amended and restated, the "New U
S WEST Restated Certificate") to, among other things, authorize two billion
shares of New U S WEST Common Stock. Following such amendment and restatement
and as part of the Reorganization, New U S WEST will issue to U S WEST a number
of shares of New U S WEST Common Stock equal to the sum of (i) the number of
shares of Communications Stock that will be issued and outstanding immediately
prior to the Separation Time plus (ii) the aggregate number of shares of New U S
WEST Common Stock to be issued to holders of Media Stock pursuant to the Dex
Dividend. Such shares of New U S WEST Common Stock will then be distributed by U
S WEST to holders of Communications Stock and Media Stock pursuant to the
Separation.
 
CHARTER AMENDMENTS
 
    The U S WEST Restated Certificate contains various provisions relating to
the terms of the Communications Stock and Media Stock which are included therein
as a result of U S WEST's Targeted Stock structure (the "Targeted Stock
Provisions"). The Targeted Stock Provisions relate to or provide for (i) the
relative voting rights of the Communications Stock and the Media Stock, (ii) the
relative liquidation rights of the Communications Stock and Media Stock, (iii)
certain limitations on the ability of the U S WEST Board to declare dividends on
the Communications Stock and the Media Stock, (iv) the right of U S WEST to
convert one class of common stock into the other class of common stock in
certain circumstances, (v) the right of U S WEST to redeem the class of common
stock relating to a group in exchange for the stock of a subsidiary or
subsidiaries holding all of the assets attributed to such group and (vi) the
requirement that, following a disposition of all or substantially all of the
assets attributed to a group, U S WEST distribute the net proceeds of such
disposition to the holders of the class of common stock relating to such group
by dividend or redemption or convert the common stock of such group into the
common stock of the other group. For a more complete description of the Targeted
Stock Provisions, see "Chapter 8: Capital Stock--Comparison of Rights of
Stockholders."
 
    While, as discussed above, the U S WEST Restated Certficiate contains a
Targeted Stock Provision which permits U S WEST to redeem the Communications
Stock in exchange for all of the stock of a subsidiary holding all of the assets
of the Communications Group, such provision currently does not permit U S WEST
to effect a transaction such as the Communications Redemption in which the
Communications Stock would be redeemed for less than all of the stock of a
subsidiary holding the assets attributed to the Communications Group due to the
payment of the Dex Dividend to holders of Media Stock. In addition, as discussed
above, the U S WEST Restated Certificate contains a Targeted Stock Provision
which provides for certain limitations on the ability of U S WEST to pay
dividends on the Media Stock. Such provision could limit the ability of U S WEST
to pay a dividend such as the
 
                                                                              22
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Dex Dividend. As a result of the foregoing, in order to consummate the
Separation, the U S WEST Restated Certificate will be amended prior to the
Separation Time to amend such redemption provision and dividend restriction to
specifically permit the Communications Redemption and the Dex Dividend. In
addition, the U S WEST Restated Certificate will be amended prior to the
Separation Time to change the name of U S WEST to "MediaOne Group, Inc." Such
amendments are referred to herein as the "Pre-Separation Charter Amendments."
The Pre-Separation Charter Amendments will be set forth in a certificate of
amendment, in the form attached as Annex A-1 to this Proxy Statement, which will
be filed by U S WEST with the Secretary of State of Delaware and become
effective immediately prior to the Separation Time.
 
    Following the Separation, U S WEST will become MediaOne, the Media Stock
will become the MediaOne Common Stock, the Communications Stock will cease to be
outstanding and MediaOne will not have a Targeted Stock structure. Accordingly,
the Targeted Stock Provisions set forth in the U S WEST Restated Certificate
will no longer be required. As a result of the foregoing, the U S WEST Restated
Certificate will be amended immediately following the Separation Time to remove
all references in the U S WEST Restated Certificate to the Communications Stock,
recharacterize the Media Stock as MediaOne Common Stock and delete the Targeted
Stock Provisions. Such amendments are referred to herein as the "Post-Separation
Charter Amendments" and, collectively with the Pre-Separation Charter
Amendments, as the "Charter Amendments." The Post-Separation Charter Amendments
will be set forth in a Restated Certificate of Incorporation of MediaOne, in the
form attached as Annex A-2 to this Proxy Statement, which will be filed with the
Secretary of State of Delaware and become effective immediately following the
Separation Time.
 
    Pursuant to the Delaware General Corporation Law (the "DGCL") and the U S
WEST Restated Certificate, the Charter Amendments are required to be approved
and adopted by (i) the holders of a majority of the voting power of the
outstanding shares of Communications Stock and Media Stock, voting as a single
class, (ii) the holders of a majority of the outstanding shares of
Communications Stock, voting as a separate class, and (iii) the holders of a
majority of the outstanding shares of Media Stock, voting as a separate class. A
vote in favor of the Separation at the Annual Meeting will also constitute a
vote in favor of the Charter Amendments. See "Chapter 9: The Annual Meeting and
Certain Other Matters--The Annual Meeting--Matters to Be Considered at the
Annual Meeting." Consummation of the Separation is conditioned upon the approval
and adoption of the Charter Amendments by U S WEST's stockholders and the
effectiveness of the Charter Amendments. See
"--Conditions to the Separation." The U S WEST Board has authorized and approved
the Charter Amendments. See "--Background of the Separation."
 
DELIVERY OF SHARES
 
    Shares of Communications Stock and Media Stock are currently held in either
certificated form or in uncertificated book-entry form through accounts
maintained under the U S WEST Shareowner Investment Plan (the "U S WEST SIP").
Prior to the Separation, New U S WEST will establish a shareowner investment
plan (the "New U S WEST SIP") and, as of the Separation Time, holders of
Communications Stock and Media Stock who hold their shares through the U S WEST
SIP will receive the shares of New U S WEST Common Stock to which they are
entitled pursuant to the Separation in uncertificated book-entry form through an
account that will be opened on their behalf under the New U S WEST SIP. Holders
of Media Stock who hold their shares in uncertificated form through the U S WEST
SIP will receive certificates representing their shares of MediaOne Common Stock
and will not be able to hold shares of MediaOne Common Stock in uncertificated
book-entry form. Following the Separation, stockholders holding shares through
the New U S WEST SIP will receive statements from New U S WEST which will
indicate their holdings of New U S WEST Common Stock as of the Separation Time.
NO ACTION WILL BE REQUIRED BY STOCKHOLDERS WHO HOLD THEIR SHARES THROUGH THE U S
WEST SIP TO RECEIVE THE SHARES TO WHICH THEY ARE ENTITLED PURSUANT TO THE
SEPARATION.
 
                                                                              23
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    Stockholders who hold shares of Communications Stock and Media Stock in
certificated form will receive the shares of New U S WEST Common Stock to which
they are entitled in uncertificated book-entry form through a direct
registration system to be established by New U S WEST, unless a stockholder
elects to receive a certificate representing such shares. Stockholders who hold
shares of Media Stock in certificated form will receive new certificates
representing the shares of MediaOne Common Stock to which they are entitled. As
soon as reasonably practicable after the Separation Time, each holder of record
as of the Separation Date of certificates representing shares of Communications
Stock or Media Stock will receive a letter of transmittal, an affidavit of loss
and instructions for use in surrendering such certificates or completing such
affidavit of loss in exchange for shares of New U S WEST Common Stock in
uncertificated book-entry form (or, at the election of a stockholder,
certificates representing shares of New U S WEST Common Stock) and certificates
representing shares of MediaOne Common Stock. Following such surrender,
stockholders who elect to receive shares of New U S WEST Common Stock in
uncertificated book-entry form will receive a notice from New U S WEST
indicating their holdings of New U S WEST Common Stock and providing certain
other information required by the DGCL. STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES AT THIS TIME. STOCKHOLDERS SHOULD SEND CERTIFICATES ONLY AFTER THEY
RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING, A LETTER OF
TRANSMITTAL.
 
    Dividends or other distributions declared after the Separation Time will not
be paid with respect to any shares of New U S WEST Common Stock issuable to a
holder of a certificate representing shares of Communications Stock until such
certificate or an affidavit of loss is surrendered for exchange by such holder.
Stockholders who are entitled to receive shares of New U S WEST Common Stock in
connection with the Separation with a value greater than or equal to $15 million
will not receive such shares until such stockholders make any required filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Shares of New U S WEST Common Stock issuable to stockholders required to make
such filings will be held in escrow by New U S WEST's transfer agent until such
time as New U S WEST receives evidence from such stockholders that such filings
have been made. Stockholders should consult their legal advisors for further
information.
 
CONDITIONS TO THE SEPARATION
 
    Consummation of the Separation is subject to the fulfillment of each of the
following conditions: (i) the consummation of all of the transactions
contemplated by the Separation Agreement to be performed on or prior to the
consummation of the Separation, including the Reorganization and the
Refinancing; (ii) a Registration Statement of New U S WEST on Form S-4 under the
Securities Act of 1933, as amended (the "Securities Act"), registering the
shares of New U S WEST Common Stock to be distributed in the Separation having
been declared effective by the Securities and Exchange Commission (the
"Commission"); (iii) a Registration Statement of New U S WEST on Form 8-A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
registering the New U S WEST Common Stock under the Exchange Act having become
effective; (iv) an amendment to U S WEST's Registration Statement on Form 8-B
under the Exchange Act amending certain terms of the Media Stock having become
effective; (v) the Separation and the Charter Amendments having been approved
and adopted by the stockholders of U S WEST and the Charter Amendments having
been filed with the Secretary of State of the State of Delaware in accordance
with the DGCL; (vi) the New U S WEST Common Stock having been approved for
listing on the New York Stock Exchange (the "NYSE") and the Pacific Stock
Exchange (the "PSE"), subject to official notice of issuance; (vii) there not
being issued any order, injunction or decree by any governmental authority that
remains in effect preventing the consummation of the Separation; (viii) all
consents of, approvals of, notices to and filings with any governmental
authority or any other person necessary to consummate the Reorganization or the
Separation having been obtained and being in full force and effect; (ix) U S
WEST having provided the NYSE and the PSE with prior written notice of the
Separation Date as required by the Exchange Act and the rules and regulations of
the NYSE and the PSE; (x) the IRS Ruling being in full
 
                                                                              24
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
force and effect at the Separation Time; and (xi) the execution by U S WEST and
New U S WEST (or their applicable subsidiaries) of certain agreements
contemplated by the Separation Agreement.
 
    Subject to applicable laws, any of the conditions to the Separation may be
waived at any time prior to the Separation Time for any reason, in the sole
discretion of the U S WEST Board. In addition, even if all of the above
conditions are satisfied, the Separation Agreement may be amended or terminated,
and the Reorganization, the Refinancing and the Separation may be abandoned, at
any time prior to the Separation Time for any reason, in the sole discretion of
the U S WEST Board.
 
    As of the date of this Proxy Statement, all material conditions to the
Separation, other than conditions requiring deliveries or actions by U S WEST
prior to the Separation Time and the condition requiring approval of the
Separation and the Charter Amendments by U S WEST's stockholders, have been
satisfied. It is expected that the Separation will be consummated shortly after
the Separation and the Charter Amendments are approved at the Annual Meeting.
 
BACKGROUND OF THE SEPARATION
 
    In 1993, U S WEST adopted a strategy to become a leading provider of
interactive integrated communications, entertainment and information services to
business and residential customers over wired broadband and wireless networks in
the Communications Group Region and in other selected domestic and international
markets. In furtherance of this strategy, U S WEST Communications announced its
intention to build a broadband communications network capable of providing
voice, data and video services to customers within the Communications Group
Region and began a preliminary test of such network in Omaha, Nebraska. In
addition, U S WEST began to acquire and develop interests in and form joint
ventures involving networks in other domestic and international markets. As part
of this effort, U S WEST acquired a 25.51% interest in Time Warner Entertainment
Company, L.P. ("TWE") in September 1993.
 
    In 1995, U S WEST separated its businesses into the Communications Group and
the Media Group and created the Communications Stock and the Media Stock. The
Targeted Stocks were intended to provide U S WEST with the flexibility it
required in order to continue to execute its strategy by allowing U S WEST to
finance its extensive capital requirements on a consolidated basis while
permitting enhanced value recognition through separate equity valuations of the
Communications Group and the Media Group, which were in different stages of
development and had different financial and growth characteristics. In addition,
the creation of the Media Stock provided U S WEST with a non-dividend paying
currency that could be used by U S WEST to make future acquisitions. At the time
of the creation of the Targeted Stocks, the Media Group included three principal
lines of businesses: cable and telecommunications, wireless communications and
multimedia content and services. The Dex business was included in the Media
Group because of its strategic fit with the Media Group's multimedia content and
services businesses, which also included U S WEST's international directory
businesses.
 
    During 1996, strategic and competitive factors affecting the
telecommunications and cable industries changed significantly as a result of the
passage of the Telecommunications Act, the development of new technologies and
the increase in importance of the Internet. With the promulgation of FCC rules
under the Telecommunications Act, it became apparent that telecommunications
companies and cable companies would continue to be regulated differently for the
foreseeable future and that there would not be a convergence of the regulatory
frameworks of such industries as previously anticipated. Furthermore, it became
apparent that there would be high cost and technological hurdles associated
 
                                                                              25
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
with cable and telecommunications companies building broadband networks using
common architectures and that, as a result, convergence of the respective
technologies used by the cable and telecommunications industries was unlikely.
In addition, growth of the data market, accompanied by the widespread use of the
Internet and the World Wide Web, began to require the telecommunications and
cable industries to modify their strategies for serving this market.
 
    In 1996, the Communications Group completed its broadband network trials in
Omaha, Nebraska. While the Omaha broadband trial was a marketing success that
produced high rates of subscriber penetration, the cost of upgrading the
telephone network to provide video and interactive services was prohibitively
expensive. As a result, the Communications Group initiated a new strategy in the
fall of 1996 that focused on other technologies, including Digital Subscriber
Loop "xDSL" technology.
 
    In November 1996, the Media Group's business was expanded through the
acquisition of Continental. Following this acquisition, the Media Group
increased the focus of its operations and objectives on the development of
broadband communications networks and reduced its emphasis on directories
businesses such as Dex and wireless communications businesses. As part of this
change in emphasis, the Media Group has sold a substantial portion of its
international directory businesses during the past year and consummated the
AirTouch Transaction.
 
    In light of these regulatory, technological and strategic developments, the
U S WEST Board formed a special committee (the "Special Committee") for the
purpose of reviewing strategic alternatives for the Communications Group and the
Media Group. The members of the Special Committee were Allen F. Jacobson, Allan
D. Gilmour, Pierson M. Grieve and Grant A. Dove. The Special Committee was
charged with the task of evaluating strategic alternatives for the Media Group
and the Communications Group as well as U S WEST, as a whole, with the goal of
increasing stockholder value in light of these developments.
 
    The Special Committee met on November 6, 1996, December 6, 1996, January 20,
1997, February 7, 1997, March 13, 1997 and April 25, 1997. A separation of the
Communications Group and the Media Group into independent companies and actions
with respect to Dex were among the alternatives the Special Committee
considered. The Special Committee consulted with financial advisors, industry
consultants and legal counsel. The Special Committee considered various
alternatives for Dex, including (i) the alignment of Dex with the Communications
Group in exchange for cash, stock or other value, (ii) the sale of Dex to a
third party, (iii) the spin-off of Dex to holders of Media Stock as a separate
public company and (iv) the retention of Dex by the Media Group. In reviewing
these alternatives, the Special Committee considered a number of issues,
including the tax and accounting treatment of any transaction and the impact of
any transaction on the cash flows and earnings of the Communications Group and
the Media Group. At these meetings, management made presentations on the
benefits of aligning Dex with the Communications Group, specifically from a
strategic standpoint. In particular, management noted that an alignment of Dex
with the Communications Group would enable the Communications Group to offer a
broader product offering to compete more effectively and maximize its
distribution and marketing assets. In addition, management noted that such a
transaction would enable the Media Group to reduce its debt. Management also
reviewed the effects of the Dex Alignment on each group's earnings and cash
flow. At the April 25 meeting, after receiving presentations from management and
Lazard Freres and SBC Warburg Dillon Read, the Special Committee determined to
recommend to the U S WEST Board that Dex be aligned with the Communications
Group on terms consistent with the terms discussed under "--The Dex Alignment."
The Special Committee concluded that it was not prepared to make any decisions
with respect to a separation of the Communications Group and the Media Group
until it had additional information on the technological, regulatory, financial
and competitive factors affecting both the telecommunications and media
industries as well as other information relating to credit, taxes, accounting
and other issues.
 
                                                                              26
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    Because the Special Committee was not yet prepared to make a decision with
respect to a separation of the Communications Group and the Media Group, the U S
WEST Board initially considered and approved the alignment of Dex with the
Communications Group in a transaction separate from the Separation. The U S WEST
Board held meetings by teleconference on May 2 and May 14, 1997 to consider the
recommendation of the Special Committee to align Dex with the Communications
Group. In addition to the U S WEST directors, the May 2 meeting was attended by
Charles M. Lillis, Executive Vice President of U S WEST and President and Chief
Executive Officer of the Media Group, Solomon D. Trujillo, Executive Vice
President of U S WEST and President and Chief Executive Officer of the
Communications Group, Charles P. Russ III, Executive Vice President--Law, Public
Policy and Human Resources, General Counsel and Secretary of U S WEST, Michael
P. Glinsky, Executive Vice President and Chief Financial Officer of U S WEST,
and other senior executives of U S WEST, the Communications Group and the Media
Group. The May 14 meeting was attended by all of the persons present at the May
2 meeting other than Messrs. Lillis and Trujillo. In addition, portions of the
May 14 meeting were attended by representatives of Lazard Freres and SBC Warburg
Dillon Read, U S WEST's financial advisors, and Weil, Gotshal & Manges LLP, U S
WEST's legal advisor. At these meetings, management reviewed the terms of an
alignment of Dex with the Communications Group, including the amount of leverage
which would be associated with Dex, the tax treatment and the accounting
implications, and the anticipated benefits of such a transaction to both the
Communications Group and the Media Group. It was noted that transfers of assets
such as Dex are permitted under the U S WEST Restated Certificate and management
policies adopted by the U S WEST Board in connection with the issuance of the
Targeted Stocks. At the May 2 meeting, Mr. Jacobson made a presentation to the U
S WEST Board as to the findings of the Special Committee and the terms of the
proposed alignment of Dex with the Communications Group and discussed the
financial effects and strategic benefits to both the Communications Group and
Media Group. Mr. Glinsky made a presentation to the U S WEST Board as to the
anticipated accounting treatment of the transaction.
 
    At the May 14 meeting, the U S WEST Board received presentations by
representatives of Lazard Freres and SBC Warburg Dillon Read on their valuation
of Dex and the opinions of Lazard Freres and SBC Warburg Dillon Read as to the
fairness, from a financial point of view, to the holders of Communications Stock
and Media Stock, of the alignment of Dex with the Communications Group in
consideration for the allocation to the Communications Group of $3.9 billion of
debt allocated to the Media Group and the issuance to holders of Media Stock of
$850 million of Communications Stock. These representatives presented their
valuation analysis of the Dex business. In addition, these representatives
discussed the potential financial benefits to the Communications Group and Media
Group and holders of Communications Stock and Media Stock of an alignment of Dex
with the Communications Group on the proposed terms and the increased financial
flexibility which each group could obtain as a result of the transaction. These
presentations were followed by discussions by the U S WEST Board with respect to
the strategic fit of the Dex business with the Communications Group and the
terms of the transaction. At the conclusion of these discussions, the U S WEST
Board approved the Special Committee's recommendation and authorized the
alignment of Dex with the Communications Group on the terms described above
either as part of a transaction entered into by U S WEST and AirTouch in May
1997 pursuant to which AirTouch would acquire the Media Group's domestic
wireless business on terms different than the terms of the AirTouch Transaction
(the "Original AirTouch Transaction") or in a stand-alone transaction in the
event that the Original AirTouch Transaction was not consummated. In approving
the alignment of Dex with the Communications Group, the U S WEST Board concluded
that such transaction would be fair to and in the best interests of U S WEST and
the holders of Communications Stock and Media Stock.
 
    As a consequence of changes to the Internal Revenue Code of 1986, as amended
(the "Code"), that were enacted into law on August 5, 1997, the Original
AirTouch Transaction was terminated and, as a result, the alignment of Dex with
the Communications Group did not occur as part of that transaction. Following
such termination, U S WEST continued to pursue the alignment of Dex with the
 
                                                                              27
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Communications Group in a stand-alone transaction. In addition, members of U S
WEST's management continued to explore the possibility of a separation of the
Communications Group and the Media Group. In furtherance of this effort, U S
WEST retained Bain & Company, Inc. ("Bain") in May 1997 to assess U S WEST's
overall strategy as part of its annual strategic review to be held in the fall
of 1997. Bain was asked to address three broad issues: (i) the likelihood of
technological convergence of telecommunications companies and cable companies;
(ii) the impact of principal industry trends on the businesses of the
Communications Group and the Media Group; and (iii) whether the Targeted Stock
structure was still a viable structure for U S WEST to execute its strategy in
view of changes in the industry. As a result of Bain's analysis and further
investigations by U S WEST's management, the strategic advantages of a
separation of the Communications Group and the Media Group became apparent and
management of U S WEST determined to actively pursue the Separation.
 
    In a series of meetings held by Messrs. McCormick, Russ and Glinsky with
each member of the U S WEST Board in September 1997, the merits of a separation
of the Communications Group and the Media Group were discussed. These
discussions were followed by meetings of the U S WEST Board on October 1-3, 1997
and October 25, 1997, at which the Separation was proposed and reviewed.
 
    At the October 1-3 meeting, U S WEST's management reported its
recommendation that U S WEST proceed with the Separation and that the Dex
Alignment be included as part of the Separation. In addition to the U S WEST
directors, the October 1-3 meeting was attended by Messrs. Lillis, Trujillo,
Russ, Glinsky, and other senior executives of U S WEST, the Communications Group
and the Media Group. Representatives of Lazard Freres and SBC Warburg Dillon
Read, U S WEST's financial advisors, Weil, Gotshal & Manges LLP, U S WEST's
legal advisor, as well as Bain, were also present for portions of the meeting.
At the meeting, Mr. Trujillo reviewed the Communications Group's operations,
financial performance, projected growth, technological advances and strategic
growth plan as well as the regulatory and competitive factors affecting the
Communications Group's business and growth strategy. Mr. Lillis next presented
the Media Group's financial performance, international and domestic operations,
regulatory environment, competitive and technological challenges and growth
strategy.
 
    Following these presentations, representatives of Bain gave a presentation
as to the evolution of U S WEST's strategy since 1992 and discussed Bain's view
that, while the Targeted Stock structure had achieved its objectives up until
that time, because of changes in the regulatory framework, technological
developments and consolidation within each of the telecommunications industry
and the cable industry, the Separation was necessary in order to permit the
Communications Group and the Media Group to more effectively execute their
strategies, compete in the marketplace and operate their businesses in a manner
that maximizes stockholder value. Bain's representatives noted that, because of
the Targeted Stock structure, the Communications Group and the Media Group were
already operating as distinct businesses with separate management structures, as
a result of which a separation of the Communications Group and the Media Group
could be accomplished with relative ease. Bain's representatives also reviewed
the growing number of business conflicts and limitations arising from the common
ownership of the Communications Group and the Media Group by U S WEST and the
benefits of including the Dex Alignment as part of the Separation.
Representatives of Bain next reviewed the possible alternative strategic options
for the Communications Group and the Media Group, including (i) continuing the
current Targeted Stock structure and possible ways of avoiding conflicts in
connection with such structure and (ii) recombining the Communications Stock and
the Media Stock into a single class of common stock of U S WEST and thereby
eliminating the Targeted Stock structure. Such representatives also discussed
the relative degree to which each of these alternatives would effectively
address the recent changes in technology, the industry and the regulatory
environment, and presented Bain's conclusion that the Separation would be the
alternative that would most effectively address the strategic objectives of the
Communications Group and the Media Group. A representative of Bain then
summarized the conclusions of Bain's analysis of each of the principal issues
analyzed by Bain as described
 
                                                                              28
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
above. Bain concluded that because of technological changes and the passage of
the Telecommunications Act, the telecommunications and cable industries were
diverging and that the telecommunications and cable industries would not
converge as originally anticipated by U S WEST at the time it formulated its
1992 strategy. In addition, it was Bain's view that any attempt at convergence
could be detrimental to the interests of the Communications Group and the Media
Group. Bain also determined that, as a result of changes in the competitive
marketplace, the Communications Group and the Media Group would realize few
synergies in the future and would require different and, in certain
circumstances, competing partners. It was Bain's finding that the current
Targeted Stock structure of U S WEST would not provide the Communications Group
and the Media Group with the flexibility to meet the challenges which would be
faced in the future as a result of changes in technology, regulation and the
industry.
 
    Following Bain's presentation, representatives of Lazard Freres and SBC
Warburg Dillon Read gave a presentation as to the current market perception of
the Communications Group and the Media Group and the recent stock performance of
the Communications Stock and the Media Stock. In addition, these representatives
discussed the markets' reactions to other recent spin-offs involving large
corporations and noted that spin-offs have generally received a favorable
response from the financial markets and have generated greater focus on
individual business units. Representatives of Lazard Freres and SBC Warburg
Dillon Read also discussed the anticipated benefits of the proposed separation
of the Communications Group and the Media Group to holders of the Communications
Stock and Media Stock, including increased operating flexibility, the
elimination of complexities associated with Targeted Stocks and a clarification
of each group's strategy.
 
    At the October 1-3 meeting, the U S WEST Board considered a number of other
issues relating to the Separation in detail, including: (i) the structure by
which the Separation would occur; (ii) the fact that the Separation would be
tax-free to U S WEST and its stockholders; (iii) the credit implications of the
Separation, and in particular the credit ratings which would be assigned to New
U S WEST and MediaOne by rating agencies following the Separation; (iv) the
ability of U S WEST to allocate certain of its indebtedness between the two
companies and the costs associated therewith; (v) the long-range plans of the
Communications Group and the Media Group, and in particular the ability of New U
S WEST and MediaOne to finance their respective operating and capital
requirements following the Separation; (vi) the potential value impact of the
Separation on the trading prices of the New U S WEST Common Stock and the
MediaOne Common Stock, including value impacts associated with (a) the
clarification of corporate strategies and elimination of potential conflicts,
(b) a potential increase in the cash flow multiple at which the MediaOne Common
Stock would trade as compared to the cash flow multiple at which the Media Stock
traded at that time and (c) a potential increase in the earnings multiple at
which the New U S WEST Common Stock would trade as compared to the earnings
multiple at which the Communications Stock traded at that time; (vii) the
financial impact of the Dex Alignment, which would remove from the Media Group
an asset that no longer fit with its strategy; and (viii) the accounting
treatment of the Dex Alignment as a transfer of interests by entities under
common control which, because of the historical earnings performance of Dex, was
expected to increase the earnings per share of New U S WEST as compared to the
historic earnings per share of the Communications Stock.
 
    Following these various presentations and the consideration of the factors
described above, the U S WEST Board directed U S WEST's management to finalize
the structure of the Separation and determined to hold a special meeting on
October 25, 1997 to consider approval of the Separation.
 
    At the October 25 meeting, the U S WEST Board met to consider approval of
the Separation. In addition to the U S WEST directors, the October 25 meeting
was attended by Messrs. Lillis, Trujillo, Russ and Glinsky, Frank H. Eichler,
Vice President of Public Policy and Regulatory Law and President of Corporate
Development of U S WEST, James T. Anderson, Vice President and Treasurer of U S
WEST, and other senior executives of U S WEST, the Communications Group and the
Media
 
                                                                              29
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Group, as well as representatives of Lazard Freres and SBC Warburg Dillon Read,
U S WEST's financial advisors, and Weil, Gotshal & Manges LLP, U S WEST's legal
advisor. Also in attendance were representatives of Lehman Brothers Inc.
("Lehman") and Merrill Lynch & Co. ("Merrill"), U S WEST's financial advisors in
connection with the Refinancing (as defined herein). At the meeting, Mr. Eichler
made a presentation to the U S WEST Board as to the proposed structure of the
Separation, including the terms of the Dex Alignment and the Reorganization. Mr.
Eichler noted that the structure would be tax-free to U S WEST and its
stockholders. Mr. Eichler indicated that the structuring of the Separation as a
split-off of the Communications Group instead of a split-off of the Media Group
would minimize regulatory and other approvals required to consummate the
Separation. Mr. Eichler also reviewed the timing of the Separation and discussed
the principal agreements which would be required to implement the transaction.
Mr. Eichler noted that a transition team comprised of representatives of U S
WEST, the Communications Group and the Media Group would be formed to oversee
the implementation of the Separation and to ensure the fairness of the terms of
the transaction to both the Communications Group and the Media Group (the
"Transition Team"). Following this presentation, Mr. Anderson reviewed U S
WEST's debt portfolio and discussed the implications of a separation of the
Communications Group and the Media Group on U S WEST's public debt securities as
well as the credit-worthiness of the Communications Group and Media Group as
independent companies. In this regard, it was Mr. Anderson's view that the
Communications Group's credit rating would not be adversely affected by a
separation transaction and that the Media Group's credit rating would be in line
with its peers and would permit the Media Group to have access to the capital
markets to finance its capital requirements. In addition, Mr. Anderson reviewed
the anticipated costs and expenses of the Refinancing and the tax and accounting
treatment of such costs and expenses. Representatives of Lehman and Merrill were
available to answer questions from the directors regarding the Refinancing. Mr.
Glinsky described the anticipated accounting treatment of the Separation,
including the Dex Alignment, and noted that the assets to be contributed to New
U S WEST would be accounted for by New U S WEST at the Separation at the
historical values at which they were carried by U S WEST prior to the
Separation. A representative of Weil, Gotshal & Manges LLP reviewed certain
matters relating to directors' responsibilities and the legal process necessary
to consummate the various aspects of the Separation.
 
    Representatives of Lazard Freres and SBC Warburg Dillon Read then presented
certain financial analyses regarding the Separation, including the Dex
Alignment, as described under "--Opinions of Financial Advisors." These
representatives indicated that Lazard Freres and SBC Warburg Dillon Read
expected to be in a position to render their respective opinions as to the
fairness of the Separation to the holders of Communications Stock and Media
Stock upon finalization of the specific terms of the Separation, including the
final allocation of assets, liabilities and expenses between New U S WEST and
MediaOne.
 
    After reviewing and discussing the foregoing matters and acting in reliance
on the presentations made and the advice of Lazard Freres and SBC Warburg Dillon
Read that they expected to be able to render fairness opinions as described
herein, the U S WEST Board adopted resolutions determining that the Separation
was in the best interests of U S WEST and its stockholders and authorizing U S
WEST's management to take all actions necessary to implement the Separation. The
U S WEST Board also unanimously determined to recommend to holders of
Communications Stock and Media Stock that such holders approve the Separation at
the Annual Meeting. In addition to considering the various factors described
above, the U S WEST Board also considered and relied upon various other factors
in making this determination. The U S WEST Board placed principal reliance on
the conclusion that the strategic objectives of the Communications Group and the
Media Group would be achieved through the Separation without significant adverse
consequences for MediaOne and New U S WEST and that, other than as a result of
the Dex Alignment, New U S WEST would have substantially the same assets and
liabilities as those currently attributed to the Communications Group and
MediaOne would have substantially the same assets and liabilities as those
currently attributed to the Media
 
                                                                              30
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Group. In addition, the U S WEST Board relied on the fact that the
Communications Group and the Media Group currently operate as distinct business
units with separate management organizations and processes. With respect to the
Dex Alignment, the U S WEST Board considered that the Dex Dividend, together
with the refinancing of the Dex Indebtedness by New U S WEST, would provide to
holders of Media Stock the fair value of Dex. The U S WEST Board also relied
upon the fact that the Transition Team would supervise the Separation process in
order to ensure its fairness to U S WEST and its stockholders.
 
    The U S WEST Board considered the fact that a transaction such as the
Separation is currently contemplated and permitted by the U S WEST Restated
Certificate. The U S WEST Restated Certificate currently permits U S WEST to
effect a transaction in which the Communications Stock is redeemed for the stock
of a subsidiary holding all of the assets of the Communications Group. In
addition, the U S WEST Board is permitted under the U S WEST Restated
Certificate and management policies adopted by the U S WEST Board in connection
with the issuance of the Targeted Stocks to transfer assets such as Dex between
the Communications Group and the Media Group. The U S WEST Board also considered
the fact that the Separation would be submitted for approval not only by all of
U S WEST's common stockholders voting together as a single class in accordance
with their respective voting rights, but also by separate class votes of the
holders of the Communications Stock and Media Stock.
 
    Following the October 25 meeting, the Transition Team, together with U S
WEST's financial, legal and accounting advisors, commenced the formulation of
the specific terms of the Separation and began the preparation of the Separation
Agreement and related agreements. The Transition Team is comprised of Mr.
Anderson, Vice President and Treasurer of U S WEST, Allan R. Spies, who will be
Executive Vice President and Chief Financial Officer of New U S WEST, Mark D.
Roellig, who will be Executive Vice President, General Counsel and Secretary of
New U S WEST, Mr. Eichler, who will be Executive Vice President, General Counsel
and Secretary of MediaOne, and Richard A. Post, who will be Executive Vice
President and Chief Financial Officer of MediaOne. As part of its efforts, the
Transition Team developed specific proposals to be presented to the U S WEST
Board with respect to allocations between New U S WEST and MediaOne of
employees, assets and liabilities of U S WEST not specifically associated with
either group and costs and expenses associated with the Separation.
 
    The U S WEST Board held a meeting on February 6, 1998 to approve the
specific terms of the Separation proposed by the Transition Team and to approve
forms of the Separation Agreement and related agreements and the Charter
Amendments. In addition to the U S WEST directors, the February 6 meeting was
attended by Messrs. Lillis, Trujillo, Russ and Glinsky and by the members of the
Transition Team. Portions of the February 6 meeting were also attended by Lazard
Freres and SBC Warburg Dillon Read, U S WEST's financial advisors, and Weil,
Gotshal & Manges LLP, U S WEST's legal advisor.
 
    At the meeting, Mr. Eichler summarized the proposed terms of the Separation
developed by the Transition Team, including the proposed allocation of certain
assets, liabilities and employees of U S WEST. Mr. Eichler noted that the
Transition Team was comprised of an equal number of representatives of New U S
WEST and MediaOne, as well as a representative of U S WEST, and that it was the
Transition Team's view that the proposed terms of the Separation, including the
above-mentioned allocations, were fair to the Communications Group and the Media
Group and the holders of Communications Stock and Media Stock. Mr. Post, on
behalf of the Media Group, and Mr. Spies, on behalf of the Communications Group,
reported on the deliberations of the Transition Team regarding the specific
terms of the Separation, including the factors considered in finalizing the
allocation of assets, liabilities and employees and costs and expenses between
New U S WEST and MediaOne. Mr. Post and Mr. Spies noted that they were satisfied
that each group's interests had been properly represented in connection with the
transition process. Mr. Eichler noted that substantially all of the assets and
liabilities of U S WEST and its subsidiaries had been allocated between the
Communications Group and the
 
                                                                              31
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Media Group in connection with the issuance of the Targeted Stocks in 1995 and
that, in the Separation, the assets and liabilities attributed to the
Communications Group, together with the assets and liabilities of Dex, would be
allocated to New U S WEST, and the assets and liabilities attributed to the
Media Group other than Dex would be allocated to MediaOne. In addition, Mr.
Eichler discussed the allocation of other assets and liabilities of U S WEST
which are not exclusively related to either group, including the assets
associated with the operations of U S WEST's headquarters and certain pension
assets. Mr. Eichler indicated that these assets and liabilities were allocated
generally based upon historical use and employee headcounts. Mr. Eichler noted
that an independent actuarial firm had been retained in connection with the
allocation of U S WEST's pension assets. Mr. Eichler also discussed the
estimated costs and expenses of the Separation and the allocation of such costs
and expenses between New U S WEST and MediaOne. In connection with such
discussion, Mr. Eichler noted that the Separation would constitute a "change of
control" under the existing severance agreements of Messrs. McCormick, Russ and
Glinsky and that, as a result, Messrs. McCormick, Russ and Glinsky would receive
an additional $45.1 million in compensation thereunder. See "--Interest of
Certain Persons in the Separation." Mr. Glinsky reviewed the pro forma financial
statements of New U S WEST and MediaOne, which give effect to the terms of the
Separation. A representative of Weil, Gotshal & Manges LLP reviewed certain
corporate governance matters relating to the consideration of the terms of the
Separation, including the procedures adopted by the Transition Team to ensure
the fairness of the transition process to both groups.
 
    Following these discussions, representatives of Lazard Freres and SBC
Warburg Dillon Read delivered the written opinions of Lazard Freres and SBC
Warburg Dillon Read to the U S WEST Board as to the fairness, from a financial
point of view, to the holders of Communications Stock and the holders of Media
Stock of (i) the Separation Consideration to be received by the holders of
Communications Stock and the holders of Media Stock in the Separation
Transactions pursuant to the Separation Agreement and (ii) the allocation of the
Dex Indebtedness to New U S WEST and the distribution of the Dex Dividend in
connection with the Dex Alignment pursuant to the Separation Agreement. Copies
of the fairness opinions of Lazard Freres and SBC Warburg Dillon Read, which set
forth the full text of such opinions as well as the assumptions made, matters
considered and limits of the review undertaken, are attached as Annex B-1 and
B-2, respectively, to this Proxy Statement and are incorporated herein by
reference. For further information about such fairness opinions and the related
presentations made by representatives of Lazard Freres and SBC Warburg Dillon
Read to the U S WEST Board, see "--Opinions of Financial Advisors."
 
    Following these presentations, the U S WEST Board approved the terms of the
Separation presented to them at the meeting and approved the forms of the
Separation Agreement and related agreements and the forms of the Charter
Amendments. In addition, the U S WEST Board determined to recommend to holders
of Communications Stock and Media Stock that such holders approve and adopt the
Charter Amendments at the Annual Meeting.
 
REASONS FOR THE SEPARATION
 
GENERAL
 
    Since November 1, 1995, when U S WEST implemented its Targeted Stock
structure, the Communications Group and the Media Group have actively managed
their respective businesses in light of the rapidly changing environment of the
telecommunications and cable television industries. These rapid changes have
produced a competitive environment that is materially different from the one
that existed in November 1995 or in 1993 when U S WEST adopted its initial
broadband strategy. Owing to developments in technology, the marketplace and the
regulatory arena, the potential for both operating and financial synergies
between the Communications Group and the Media Group has been greatly reduced.
Though U S WEST and many of its competitors had originally expected a gradual
convergence of the telecommunications and cable television industries, each
industry has evolved in a manner
 
                                                                              32
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
that has made convergence unlikely. For a period of time that is likely to
extend well into the future, the strategies of telephone and cable television
companies will be based on distinct technologies, separate sets of customers and
radically different regulatory environments. These strategies therefore will
evolve separately. U S WEST believes that these different strategies will be
most effectively executed by, and that the Communications Group and the Media
Group will be able to more effectively compete as, independent companies that
are not constrained by the conflicts inherent in a single corporate structure.
For reasons that are related to these developments, U S WEST also believes that
Dex will fit better strategically with New U S WEST than with MediaOne.
 
TECHNOLOGICAL DEVELOPMENTS
 
    The telephone and cable television industries have historically been
separate businesses, driven by separate technologies. Telephone companies have
used twisted copper wires to provide communications services, while cable
companies have used coaxial cable to provide video services. When U S WEST
developed its 1993 strategy, U S WEST believed that the technology for cable and
telephone lines would evolve into a common architecture that would be
cost-effective to construct and install and enable customers, through a common
"pipe," to obtain integrated telephone, data and video services. U S WEST's
strategy and its implementation of the Targeted Stock structure were in large
measure based on this belief. See "--Background of the Separation."
 
    Though customers may eventually still obtain integrated services over a
single pipe, it is no longer apparent that the common pipe will be the result of
an evolution by telephone and cable companies toward a common architecture.
Several developments, including the following, have made it more likely that
telephone and cable companies will continue to provide their respective services
over different types of transmission facilities: (i) greater than anticipated
costs and time needed to deploy technology alternatives in their networks for
video services by telephone companies; (ii) greater than anticipated time to
implement new technologies by cable companies in providing telephone services
over cable networks; and (iii) development of xDSL technology which has the
potential for telephone companies to use twisted-pair copper wires to provide
voice, data and video services.
 
    These technological developments have made it unlikely that the
Communications Group and the Media Group will find the network-related synergies
that had been anticipated in 1993. Using separate technologies and separate
transmission facilities, they are developing networks that, instead of
converging, remain quite different from one another. As a result, there is
little prospect of cost synergies in the operation of these networks within a
single corporate structure. Nor is there any foreseeable prospect that the two
networks will produce common product sets, or product sets that are similar
enough to make common branding advantageous.
 
DEVELOPMENTS IN THE MARKETPLACE
 
    While, since 1993, U S WEST and certain of its competitors have pursued a
strategy involving a common broadband architecture, the broader communications,
data and video industries have begun strategies that differ from what U S WEST
and other industry participants had anticipated in 1993. The explosive growth of
the data market over the past two years, accompanied by the widespread use of
the Internet and the WorldWide Web, requires the telephone and cable industries
to modify their strategies for serving this market. Instead of focusing on a
common broadband architecture, both industries are aggressively trying to win
the race for high-speed access to the home, and, within each geographic market,
there is a race between the telephone and cable companies to prevail in the data
market and provide integrated telephone, data and video services. In this
environment, U S WEST believes that a competitive advantage will not be obtained
from expensive and time-consuming efforts to build a common broadband
architecture. Rather, competitive advantage will be driven by a different
paradigm that places a premium on speed, flexibility and time to market. Using
different technologies, and therefore different industry strategies, the
Communications Group and the Media Group are each participating in this
competition for the data market.
 
                                                                              33
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    In the absence of an evolution to a common network architecture, telephone
and cable companies are continuing to serve different sets of customers and to
offer separate and distinct sets of products and services. While cable companies
remain focused primarily on providing hybrid fiber-coax broadband services,
telephone companies serve customers ubiquitously through the use of twisted
copper wires. As a result, U S WEST must divide its focus between two distinct
and competing means of providing integrated telephone, data and video services,
with few marketing or operational synergies to be had within a single corporate
structure. U S WEST believes that the Communications Group and the Media Group
would be better focused on these separate businesses if they could pursue them
as independent companies.
 
    In the new competitive environment of the telephone and cable industries, U
S WEST also believes that both telephone companies and cable companies will find
it necessary to partner with industry peers in order to provide standardized
products and achieve economies of scale. In the cable industry, for example,
there are ten different cable modem standards (the device that connects a
computer to the cable network and the protocols that allow a computer to
communicate with other computers). However, cable standards are under discussion
by cable industry participants. The same is true with xDSL technology for the
telephone industry. The telephone companies and cable companies are in
competition with each other to create common standards for the unique
technologies being deployed, and to win the race to provide integrated
telephone, data and video services to the home. Industry participants are
beginning to cooperate in partnerships--first within their own industry (cable
companies with cable companies, telephone companies with telephone companies)
and then with other industry participants such as computer companies, equipment
companies and content companies--to create the scale and scope necessary to
bring new products to market. The Communications Group will need to work with
others to develop standards and purchasing scale for interconnection systems and
xDSL, for long distance access, and for the development of business customer
applications and solutions development. The Media Group will need to work with
others to develop standards and purchasing scale for networks and operating
systems which support data and telephone products over cable architectures. In
addition, the Media Group will need national partners for branding and content
syndicates in its cable business. Cable companies need to partner with other
cable companies and industry participants and telephone companies need to
partner, and are partnering, with other telephone and industry participants in
order to succeed. For the foreseeable future, these partnerships are not likely
to cross the lines between the telephone and cable industries.
 
    As the Communications Group and the Media Group will need to form alliances
with different sets of partners, these partnerships are likely to conflict with
one another if the two groups exist within a single corporate structure. If the
Communications Group works with other local telephone companies to accelerate
data and video offerings, it will be accelerating the ability of local telephone
companies to compete with the Media Group. If, on the other hand, the Media
Group works with other participants in the cable industry, or with computer or
software companies, in order to accelerate the growth of its data business, it
will be helping the competitors of the Communications Group. So long as the
Communications Group and the Media Group remain in a single corporate structure,
the existence of these conflicts is likely to inhibit both Groups from entering
into useful and productive partnering arrangements.
 
    The failure of the telephone and cable industries to converge has also
placed a handicap on the marketing positions of the Communications Group and the
Media Group. A key element in the competition between telephone companies and
cable companies is the strength and success of each industry's marketing
position. The marketing position of both telephone companies and cable companies
will require each to distinguish their products and services on the basis of
selection of technology, network reliability and customer service. Inherent
differences in these choices will create differing market positions.
 
                                                                              34
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
REGULATORY DEVELOPMENTS
 
    The Telecommunications Act and related FCC rules, as well as state
legislative and regulatory actions and court decisions, have resulted in a
regulatory environment substantially different from what U S WEST and other
industry participants had anticipated in 1993. Expecting the telephone and cable
industries to move toward convergence, U S WEST also expected that the
regulatory framework for both industries would converge. The Telecommunications
Act, however, has made it apparent that telephone companies and cable companies
will continue to be regulated differently for a long period of time. Unlike
cable companies, telephone companies will continue to be subject to strict
regulations in terms of the services they can offer and the terms, conditions
and pricing structure under which these services can be provided.
 
    A consequence of these separate regulatory frameworks is that the public
policy positions of telephone and cable companies are, and will continue to be,
different. Local telephone companies, including the Communications Group, favor
regulatory parity, such as requiring telephone and cable companies to contribute
to the Universal Service Fund. Cable companies are not currently required to
contribute to the Universal Service Fund and local telephone companies are
seeking to have cable companies contribute to such fund, thereby creating a
conflict between the groups. The cable companies are likely to support the
long-distance carriers in their efforts to "open" the local telephone companies'
networks to provide alternative providers with the ability to offer local
services through the resale of services of telephone companies such as the
Communications Group. These efforts could delay the entry of telephone companies
into the long-distance market, thereby creating a conflict between the groups.
 
    The developing regulatory conflicts between the groups create difficulties
for U S WEST when it is called upon to support the public policy positions of
either the Communications Group or the Media Group. In some instances, full
support of the public policy position of one Group would jeopardize the public
policy position of the other. This limitation is of concern in an environment
where increasingly important regulatory matters are subject to continuous
change. As separate, independent companies, the Communications Group and the
Media Group would not be subject to this limitation.
 
DEX ALIGNMENT
 
    Given the changes that have occurred in the telecommunications industry
since 1993, U S WEST believes that Dex will fit better strategically with New U
S WEST than with MediaOne. Since its acquisition of Continental in 1996, the
Media Group's domestic competitive strategy has focused primarily on domestic
broadband opportunities. Operating all of its cable properties under the name of
"MediaOne," the Media Group has sought to provide its highly clustered customers
with access to hybrid fiber-coax networks that offer an increasing range of
services. This strategic focus does not involve Dex. Since the passage of the
Telecommunications Act, the strategic focus of the Communications Group has
centered on the expansion of its service offerings beyond traditional telephone
services. Like other telephone companies, the Communications Group believes that
additional service offerings will be necessary to successfully counter the
competition that is expected to continue to develop from the passage of the
Telecommunications Act. With the inclusion of Dex, New U S WEST will be better
positioned to offer its customers a broader product offering as it faces
increasing competition in its service territory and manage its brand and
customer relationships more effectively. In addition, the value of the more
mature Dex business, which is similar in maturity to the businesses of the
Communications Group, is likely to be better reflected in the New U S WEST
Common Stock than it is in the Media Stock. From the perspective of MediaOne,
the Dex Alignment will permit MediaOne to have $3.9 billion less of debt, thus
allowing MediaOne to pursue its strategy with greater flexibility. In view of
these advantages, U S WEST believes that the alignment of Dex with New U S WEST
will better position strategic assets with competitive strategies. Finally, U S
WEST believes that the Dex Alignment will minimize regulatory constraints on the
consummation of the Separation and enable the
 
                                                                              35
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Communications Group to meet certain of its regulatory obligations following the
Separation in a cost-efficient manner.
 
RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    THE U S WEST BOARD HAS DETERMINED THAT THE SEPARATION IS IN THE BEST
INTERESTS OF U S WEST AND ITS STOCKHOLDERS AND IS FAIR TO THE HOLDERS OF BOTH
THE COMMUNICATIONS STOCK AND THE MEDIA STOCK. THE U S WEST BOARD HAS UNANIMOUSLY
APPROVED THE SEPARATION AND RECOMMENDS THAT HOLDERS OF COMMUNICATIONS STOCK AND
MEDIA STOCK APPROVE THE SEPARATION.
 
OPINIONS OF FINANCIAL ADVISORS
 
    Lazard Freres and SBC Warburg Dillon Read (the "U S WEST Financial
Advisors") have acted as financial advisors to U S WEST in connection with the
Separation. In addition, Lehman and Merrill have advised U S WEST on related
matters, including on the Refinancing. Lehman has advised U S WEST during the
last several years regarding numerous strategic issues and transactions,
including the AirTouch Transaction, and Merrill has provided significant
financial advice and has led numerous debt offerings for U S WEST.
 
    Each of Lazard Freres and SBC Warburg Dillon Read delivered its written
opinion to the U S WEST Board on February 6, 1998 (the "Lazard Freres Opinion"
and the "SBC Warburg Dillon Read Opinion," respectively, and, collectively, the
"Opinions"), to the effect that, as of such date, and based on and subject to
various considerations set forth in the Opinions, (i) the Separation
Consideration to be received by the holders of Communications Stock and the
holders of Media Stock in the Separation Transactions pursuant to the terms of
the Separation Agreement is fair, from a financial point of view, to the holders
of Communications Stock and the holders of Media Stock, respectively and (ii)
the allocation to New U S WEST of $3.9 billion of indebtedness currently
attributed to the Media Group and the distribution of the Dex Dividend in
connection with the Dex Alignment pursuant to the terms of the Separation
Agreement, is fair, from a financial point of view, to the holders of
Communications Stock and the holders of Media Stock, respectively. As used in
this section of the Proxy Statement, (i) the term "Separation Transactions"
means, collectively (x) the Dex Alignment, including the refinancing of the Dex
Indebtedness by New U S WEST and the distribution of the Dex Dividend to holders
of Media Stock, and (y) the Communications Redemption, and (ii) the term
"Separation Consideration to be received by the holders of Communications Stock
and the holders of Media Stock in the Separation Transactions" means (x) with
respect to holders of Communications Stock, the receipt of one share of New U S
WEST Common Stock for one share of Communications Stock pursuant to the
Communications Redemption and (y) with respect to the holders of Media Stock,
the receipt of the Dex Dividend and the retention of shares of MediaOne Common
Stock.
 
    THE FULL TEXT OF THE LAZARD FRERES OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY LAZARD FRERES, IS ATTACHED HERETO AS ANNEX B-1. THE FULL
TEXT OF THE SBC WARBURG DILLON READ OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY SBC WARBURG DILLON READ, IS ATTACHED HERETO AS ANNEX B-2.
THE OPINIONS SHOULD BE READ CAREFULLY AND IN THEIR ENTIRETY BY THE HOLDERS OF
COMMUNICATIONS STOCK AND THE HOLDERS OF MEDIA STOCK. THE OPINIONS ARE LIMITED TO
THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE HOLDERS OF COMMUNICATIONS
STOCK AND MEDIA STOCK OF (I) THE SEPARATION CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF COMMUNICATIONS STOCK AND THE HOLDERS OF MEDIA STOCK IN THE SEPARATION
AND (II) THE ALLOCATION TO NEW U S WEST OF $3.9 BILLION OF INDEBTEDNESS
CURRENTLY ATTRIBUTED TO THE MEDIA GROUP AND THE DISTRIBUTION OF THE DEX DIVIDEND
IN CONNECTION WITH THE DEX ALIGNMENT, AND DO NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISIONS OF
 
                                                                              36
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
U S WEST TO ENGAGE IN THE SEPARATION TRANSACTIONS AND THE DEX ALIGNMENT, OR ANY
OF THE TRANSACTIONS RELATED THERETO OR ANY OTHER ASPECTS OF THE TRANSACTIONS
CONTEMPLATED BY THE SEPARATION AGREEMENT, OR CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF COMMUNICATIONS STOCK OR MEDIA STOCK AS TO HOW SUCH HOLDER SHOULD VOTE
WITH RESPECT TO THE SEPARATION TRANSACTIONS, OR THE TRANSACTIONS RELATED
THERETO. THE OPINIONS ALSO DO NOT CONSTITUTE AN OPINION OR IMPLY ANY CONCLUSION
OF THE U S WEST FINANCIAL ADVISORS AS TO THE LIKELY TRADING RANGE OF THE NEW U S
WEST COMMON STOCK OR THE MEDIAONE COMMON STOCK FOLLOWING CONSUMMATION OF THE
SEPARATION OR THE PRICE FOR WHICH DEX WOULD BE SOLD TO A THIRD PARTY PURCHASER.
THE OPINIONS ARE NECESSARILY BASED ON ECONOMIC, MONETARY, MARKET AND OTHER
CONDITIONS AS THEY WERE IN EFFECT ON, AND THE INFORMATION MADE AVAILABLE AS OF,
THE DATE OF THE OPINIONS. THE SUMMARY OF THE OPINIONS SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINIONS ATTACHED HERETO AS ANNEX B-1 AND ANNEX B-2.
 
    The U S WEST Financial Advisors also provided a written presentation to the
U S WEST Board regarding the financial and comparative analyses performed in
connection with the preparation of the Opinions and discussed such analyses with
the U S WEST Board at its February 6, 1998 meeting.
 
    In connection with rendering the Opinions, the U S WEST Financial Advisors,
among other things: (i) reviewed a draft of the Separation Agreement; (ii)
analyzed certain historical business and financial information relating to Dex,
the Communications Group, the Media Group and U S WEST, including the Annual
Reports to Stockholders and Annual Reports on Form 10-K of U S WEST for the five
years ended December 31, 1996; (iii) reviewed certain financial forecasts and
other data provided to the U S WEST Financial Advisors by U S WEST relating to
the business of Dex, the Communications Group, the Media Group and U S WEST (the
"Financial Forecasts"), including certain financial forecasts for MediaOne and
New U S WEST prepared by management of U S WEST; (iv) reviewed certain pro forma
financial statements for MediaOne and New U S WEST (the "Pro Forma Financial
Statements") prepared by management of U S WEST; (v) reviewed reported prices
and trading activities for the Communications Stock and the Media Stock; (vi)
reviewed the terms of the Communications Stock and the Media Stock as set forth
in the U S WEST Restated Certificate as in effect on the date of the Opinions;
(vii) reviewed a draft of this Proxy Statement in the form provided to them (the
"Draft Proxy Statement"); (viii) held discussions with members of the senior
management of Dex, the Communications Group, the Media Group and U S WEST with
respect to the businesses, prospects and strategic objectives of Dex, the
Communications Group, the Media Group and U S WEST and the expected impact of
the Reorganization, the Separation Transactions and the Refinancing on such
matters; and (ix) conducted such other financial studies, analyses and
investigations as the U S WEST Financial Advisors deemed appropriate.
 
    In connection with the preparation of the Opinions, the U S WEST Financial
Advisors assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to the U S WEST Financial Advisors or publicly available.
In that regard, the U S WEST Financial Advisors assumed, with U S WEST's
consent, that the Financial Forecasts and the Pro Forma Financial Statements had
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of U S WEST, the Communications Group, the Media Group
and Dex, and relied on the Financial Forecasts and the Pro Forma Financial
Statements in rendering their Opinions. The U S WEST Financial Advisors neither
acted as appraisers nor made or obtained any independent evaluations or
appraisals of the assets or liabilities of Dex, the Media Group, the
Communications Group or U S WEST, nor did the U S WEST Financial Advisors
conduct a physical inspection of the properties and facilities of Dex, the
Communications Group, the Media Group or U S WEST. The U S WEST Financial
Advisors assumed that under generally accepted accounting principles following
the Separation the assets and liabilities of New U S WEST and MediaOne would be
reflected at U S WEST's historical book basis and that there would not be any
revaluations or the creation of goodwill or other intangible assets as a
consequence of the consummation of the Separation Transactions or the
transactions related thereto. The U S WEST Financial
 
                                                                              37
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Advisors assumed that for U.S. tax purposes no income or gain would be
recognized by the holders of Communications Stock, the holders of Media Stock, U
S WEST, MediaOne, New U S WEST or any subsidiaries of U S WEST, MediaOne or New
U S WEST in connection with the Separation Transactions, the Reorganization, the
Refinancing or any transactions related thereto. The U S WEST Financial Advisors
assumed that the Separation Transactions, the Reorganization, the Refinancing
and the transactions related thereto would be consummated in the manner set
forth in the Separation Agreement and that, in all respects material to their
analysis, the Refinancing would be completed on the terms reflected in the Pro
Forma Financial Statements and that the aggregate costs and expenses related to
the Separation Transactions, the Reorganization, the Refinancing and the
transactions relating thereto would not exceed, in any respect material to their
analysis, the amounts reflected in the Pro Forma Financial Statements and, in
all respects material to their analysis, would be allocated between MediaOne and
New U S WEST in the manner reflected in the Pro Forma Financial Statements. In
addition, the U S WEST Financial Advisors assumed that the terms of the New U S
WEST Common Stock, the MediaOne Common Stock, the New U S WEST Restated
Certificate, the MediaOne Restated Certificate, the New U S WEST Rights
Agreement and the MediaOne Rights Agreement would not vary, in any respect
material to their analysis, from the descriptions thereof contained in the Draft
Proxy Statement. The U S WEST Financial Advisors also assumed that the
consummation of the Separation Transactions, the Reorganization, the Refinancing
and the transactions relating thereto would not result in any default or similar
event under any instrument of indebtedness (other than indebtedness of U S WEST
to be repaid pursuant to the Refinancing) or other contract of U S WEST or any
of its subsidiaries that would not be waived.
 
    No limitations were imposed by U S WEST or the U S WEST Board with respect
to the investigations made or procedures followed by the U S WEST Financial
Advisors in rendering the Opinions, except that the U S WEST Financial Advisors
were not authorized by U S WEST or the U S WEST Board to solicit, nor did the U
S WEST Financial Advisors solicit, third-party indications of interest with
respect to a business combination or other extraordinary transaction involving
Dex, the Communications Group or the Media Group, or any of their respective
assets.
 
    In connection with rendering the Opinions to the U S WEST Board, the U S
WEST Financial Advisors performed a variety of financial and comparative
analyses, the material portions of which are summarized below. As described
below, certain of the analyses were performed assuming, first, that the AirTouch
Transaction would be consummated substantially in the manner set forth in the
AirTouch Merger Agreement and assuming, second, that the AirTouch Transaction
would not be consummated. See "Chapter 6: Information About MediaOne--Business
of MediaOne--AirTouch Transaction." The summary of such analyses set forth below
does not purport to be a complete description of the analyses underlying the
Opinions or of the U S WEST Financial Advisors' presentation to the U S WEST
Board. In addition, the U S WEST Financial Advisors believe that their analyses
must be considered as a whole and that selecting portions of such analyses and
the factors considered therein, without considering all such analyses and
factors, could create an incomplete view of the analyses and the processes
underlying the Opinions. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. Analyses and estimates of the values of
companies do not purport to be appraisals or necessarily reflect the prices at
which companies or their securities actually may be sold. The range of valuation
for any particular analysis should not be taken to be the view of the U S WEST
Financial Advisors of the actual value of the Communications Stock or the Media
Stock.
 
    OVERVIEW OF ANALYSES OF THE SEPARATION TRANSACTIONS
 
    DEX ALIGNMENT--VALUATION.  The Financial Advisors analyzed the value being
attributed to Dex in connection with the Dex Alignment.
 
                                                                              38
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    DISCOUNTED CASH FLOW ANALYSIS.  Using a discounted cash flow analysis, the U
S WEST Financial Advisors calculated a range of value of Dex based on the
implied total net present value of the estimated future unlevered free cash
flows (defined as earnings before interest, taxes, depreciation and amortization
("EBITDA"), minus unlevered cash taxes minus capital expenditures and changes in
working capital) that Dex could produce on a stand-alone basis. The U S WEST
Financial Advisors determined an implied total net present value reference range
for Dex based on the sum of (a) the discounted value (using various discount
rates ranging from 10.50% to 11.25%) of the estimated free cash flows of Dex for
the five year period of 1998 through 2002 based on the Financial Forecasts, plus
(b) the net present value of the free cash flows of Dex after 2002 (using
various perpetuity growth rates ranging from 2.5% to 3.0%). This analysis
resulted in an implied total net present value reference range for Dex of
approximately $4.7 billion to $5.4 billion.
 
    LEVERAGE BUYOUT ANALYSIS.  The U S WEST Financial Advisors also performed a
pro forma leveraged buyout analysis on Dex utilizing the Financial Forecasts and
arrived at a range of value of $4.5 billion to $4.75 billion, using EBITDA exit
multiples of 7.0x and 8.0x and assuming (i) $1.9 billion in senior debt and $2.0
billion in subordinated debt, at estimated market interest rates of 8.5% and
11.0%, respectively, (ii) 85% leverage and (iii) that no goodwill would be
created in any such transaction (in order to approximate the Dex Alignment).
Based on such analysis, the U S WEST Financial Advisors calculated internal
rates of return on equity ranging approximately from mid to high 20%.
 
    DEX ALIGNMENT--IMPACT ON NEW U S WEST EPS AND CASH FLOW.  The U S WEST
Financial Advisors calculated the pro forma effects of the Dex Alignment on the
New U S WEST earnings per share ("EPS") and cash flow, based on the Financial
Forecasts. The analysis indicated a potential EPS accretion of 10.7%, 12.4%,
13.5%, 14.7% and 14.8% for the years from 1998 through 2002, respectively. The U
S WEST Financial Advisors also calculated that based on the Financial Forecasts
the Dex Alignment could potentially increase New U S WEST's net cash flow
(defined as EBITDA minus taxes, capital expenditures and changes in working
capital) by $166 million, $198 million, $231 million, $261 million and $290
million for the years from 1998 through 2002, respectively. The U S WEST
Financial Advisors reported that, if the potential earnings accretion were to
become realized, New U S WEST's stock price, assuming a constant price to
earnings ("P/E") ratio, could increase accordingly.
 
    DEX ALIGNMENT--IMPACT ON MEDIAONE EBITDA PER SHARE AND EPS.  The U S WEST
Financial Advisors estimated the pro forma effects of the Dex Alignment on
MediaOne's EBITDA per Share and EPS based on Financial Forecasts. For such
analysis, the U S WEST Financial Advisors first assumed that (i) MediaOne would
continue to hold a 25.51% equity interest in TWE and (ii) the AirTouch
Transaction would be consummated. Based on such assumptions, the analysis
indicated a potential dilution in book EBITDA per share of (43.6%), (40.4%),
(37.0%), (32.9%) and (28.1%) for the years from 1998 through 2002, respectively.
The U S WEST Financial Advisors calculated, based on such assumptions, a
potential EPS dilution of (33.5%), (41.2%), (81.6%) and (73.5%) for the years
from 1998 through 2000, respectively, and for 2002. The U S WEST Financial
Advisors also calculated the pro forma effects of the Dex Alignment on
MediaOne's EBITDA per share and EPS, assuming that (i) MediaOne would continue
to hold a 25.51% equity interest in TWE and (ii) the AirTouch Transaction would
not be consummated. Based on such assumptions, the analysis indicated a
potential dilution in book EBITDA per share of (30.9%), (28.6%), (27.1%),
(25.0%) and (22.3%) for the years from 1998 through 2002, respectively. The U S
WEST Financial Advisors also calculated, based on such assumptions, a potential
EPS dilution of (39.7%), (56.3%), (209.8%) and (43.7%) for the years from 1998
though 2000, respectively, and for 2002. However, the U S WEST Financial
Advisors reported that the Dex Alignment would provide the following benefits to
MediaOne and MediaOne's stockholders: (a) based on the Financial Forecasts, the
Dex Alignment could potentially increase MediaOne's future EBITDA growth rates
(i) by 6.4%, 6.7%, 7.7% and 8.7% for the years from 1999 through 2002,
respectively, assuming the consummation of the AirTouch Transaction and (ii) by
3.9%, 2.3%, 3.3% and 4.3% for the years from 1999 through 2002, assuming the
AirTouch Transaction was not consummated,
 
                                                                              39
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
(b) the transfer of $3.9 billion in debt to the Communications Group would
decrease MediaOne's interest charges and enhance MediaOne's credit profile,
thereby enhancing its access, liquidity and pricing in the credit markets and
(c) the holders of Media Stock would receive $850 million of New U S WEST Common
Stock.
 
    SEPARATION--IMPACT ON COMMUNICATIONS STOCK PRICE.  The U S WEST Financial
Advisors reviewed data regarding the P/E ratio of the Communications Stock and
the P/E ratio of an index of selected companies they deemed comparable or
otherwise relevant to their analysis (the "LEC Index") for the thirty trading
days ended October 22, 1997 (prior to the announcement of the proposed
Separation), using estimated earnings for 1997, and the thirty trading days
ended January 26, 1998, using estimated earnings for 1998. The LEC Index
included: Ameritech Corporation, BellSouth Corporation, SBC Communications,
Inc., Bell Atlantic Corporation and GTE Corporation. For the thirty trading days
ended October 22, 1997 and January 26, 1998, the Communication Group's P/E ratio
was 15.0x and 17.0x, respectively, while the LEC Index's P/E Ratio was 16.4x and
17.5x, respectively. The U S WEST Financial Advisors reported that, assuming New
U S WEST's P/E ratio following the Separation increases to more closely approach
that of its primary comparable companies, New U S WEST's trading price could
increase accordingly. Such potential increase would be in addition to the
potential stock price effect of the increase in EPS caused by the Dex Alignment.
See "--Dex Alignment--Impact on New U S WEST Group EPS and Cash Flow."
 
    SEPARATION--IMPACT ON MEDIA STOCK PRICE.  The U S WEST Financial Advisors
reviewed data regarding the cable asset value to estimated cable EBITDA ratio
(the "EBITDA Multiple") of (i) the Media Group, (ii) Cox Communications, Inc.
("Cox"), which the U S WEST Financial Advisors believed to be the Media Group's
closest peer and (iii) an index of comparable cable companies (including Cox)
(the "Cable Index"), in each case, for the thirty trading days ended October 22,
1997, using estimated cable EBITDA for 1997, and the thirty trading days ended
January 26, 1998, using estimated cable EBITDA for 1998. The Cable Index
included: Adelphia Communications Corporation, Cablevision Systems Corporation,
Comcast Corporation ("Comcast"), Cox, TCA Cable TV, Inc. and
Tele-Communications, Inc. ("TCI"). For the thirty trading days ended October 22,
1997 and January 26, 1998, the Media Group's EBITDA Multiple was 7.8x and 9.2x,
respectively, Cox's EBITDA Multiple was 10.1x and 13.3x, respectively, and the
Cable Index's EBITDA Multiple was 9.5x and 10.5x, respectively. The U S WEST
Financial Advisors calculated that, assuming MediaOne's EBITDA Multiple
following the Separation were to more closely approach its primary comparable,
Cox, MediaOne's trading price could increase accordingly.
 
    SEPARATION--IMPACT ON CREDIT STATISTICS.  The U S WEST Financial Advisors
estimated the effects of the Separation (including the Dex Alignment) on the
credit statistics of the Communications Group as a standalone entity based on
the Financial Forecasts. The analysis indicated that the Communication Group's
(i) pretax interest coverage ratio would be 4.3x, 4.2x and 4.6x for the years
1997 through 1999, respectively, (ii) FFO Interest Coverage (defined as net
income from continuing operations plus depreciation, amortization, deferred
income taxes, interest and other non-cash items divided by interest expense)
would be 6.2x, 6.1x and 6.7x, respectively and (iii) net cash flow to total debt
would be 26%, 29% and 35%, respectively. The U S WEST Financial Advisors
compared these statistics to rating guidelines of Standard & Poor's Corporation
("S&P") for telecommunications companies and concluded that, assuming the pro
forma ratios were achieved, based on the S&P rating guidelines New U S WEST
would likely have an S&P credit rating of A- following the Separation.
 
    The U S WEST Financial Advisors estimated the effects of the Separation
(including the Dex Alignment) on the credit statistics of the Media Group based
on Financial Forecasts. Assuming the consummation of the AirTouch Transaction,
the analysis indicated that the Media Group's (i) EBITDA to interest ratio would
be 2.9x, 2.2x and 2.0x for the years 1997 through 1999, respectively, (ii) total
debt to EBITDA ratio would be 6.0x, 9.3x and 8.6x, respectively, (iii) Adjusted
Total Debt (defined as
 
                                                                              40
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
total debt adjusted for certain credits for certain debt and preferred
instruments) to EBITDA ratio would be 5.4x, 5.6x and 5.1x, respectively, (iv)
FFO Interest Coverage would be 4.0x, 2.4x and 3.1x, respectively and (v) net
cash flow to total debt would be 17%, 7% and 12%, respectively. Assuming the
AirTouch Transaction was not consummated, the analysis indicated that the Media
Group's (i) EBITDA to interest ratio would be 2.9x, 2.9x and 2.8x for the years
1997 through 1999, respectively, (ii) total debt to EBITDA would be 6.0x, 6.4x
and 5.9x, respectively, (iii) Adjusted Total Debt to EBITDA ratio would be 5.4x,
5.0x and 4.7x, respectively, (iv) FFO Interest Coverage would be 4.0x, 2.8x and
3.4x, respectively, and (v) net cash flow total debt would be 17%, 9% and 14%,
respectively. The U S WEST Financial Advisors compared these statistics to the
credit statistics of the following cable companies: Cox, Comcast, TCI and TWE
(the "Cable Comparables"), who had S&P ratings of A-, BBB-, BBB-and BBB-,
respectively. The U S WEST Financial Advisors reported that, based on financial
results for the 12 months ended September 30, 1997, (i) Cox's (a) EBITDA to
interest ratio was 3.1x, (b) total debt to EBITDA ratio was 5.4x, (c) FFO
Interest Coverage was 3.7x and (d) net cash flow to total debt was 16%; (ii)
Comcast's (a) EBITDA to interest ratio was 2.5x, (b) total debt to EBITDA ratio
was 4.9x, (c) FFO Interest Coverage was 2.5x and (d) net cash flow to total debt
was 12%; (iii) TCI's (a) EBITDA to interest ratio was 2.4x, (b) total debt to
EBITDA ratio was 5.6x, (c) FFO Interest Coverage was 2.4x and (d) net cash flow
to total debt was 9%; and (iv) TWE's (a) EBITDA to interest ratio was 5.2x, (b)
total debt to EBITDA ratio was 3.0x, (c) FFO Interest Coverage was 4.9x and (d)
net cash flow to total debt was 25%. The U S WEST Financial Advisors also noted
that Cox's and TWE's businesses include significant non-cable assets and that
TWE's rating is impacted by parent company leverage. The U S WEST Financial
Advisors concluded that, assuming the pro forma ratios were achieved, based on
S&P's rating guidelines and on the ratings and ratios of the Cable Comparables,
MediaOne would likely have an S&P credit rating of at least BBB- following the
Separation and should have access to the institutional term credit markets with
liquidity and pricing in line with the Cable Comparables.
 
    No company utilized as a comparison in the above analyses is identical to
either New U S WEST or MediaOne. In evaluating the companies comprising the LEC
Index, the Cable Index and the Cable Comparables, the U S WEST Financial
Advisors made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of U S WEST, New U S WEST and MediaOne,
such as the impact of competition on U S WEST , New U S WEST and MediaOne and
their respective industries, industry growth and the absence of any material
adverse change in the financial condition and prospects of U S WEST, New U S
WEST or MediaOne or the industry, or in the financial markets in general.
 
    The U S WEST Financial Advisors are internationally recognized investment
banking firms that regularly engage in the valuation of companies and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities and corporate, estate and other purposes. U S WEST retained the U S
WEST Financial Advisors as financial advisors because of their reputation,
expertise in the valuation of companies and substantial experience in
transactions such as the Separation.
 
    In addition to the financial advisory services referred to below, each of
the U S WEST Financial Advisors has from time to time provided investment
banking and related services to U S WEST for which such U S WEST Financial
Advisor has received customary fees. In the ordinary course of their business,
the U S WEST Financial Advisors or their respective affiliates may actively
trade the securities of the Communications Group and the Media Group for their
own account and for the accounts of their customers and, accordingly, at any
time may hold a long or short position in such securities.
 
    U S WEST has entered into separate engagement letters with each of Lazard
Freres and SBC Warburg Dillon Read, each dated September 1, 1997, relating to
the services to be provided by Lazard Freres and SBC Warburg Dillon Read in
connection with the Separation and the transactions related
 
                                                                              41
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
thereto. Pursuant to the engagement letters, U S WEST has agreed to pay each of
Lazard Freres and SBC Warburg Dillon Read a fee of up to $7,500,000 in
connection with the Separation and the transactions related thereto, payable as
follows: $500,000 was paid to each of Lazard Freres and SBC Warburg Dillon Read
upon the signing of the engagement letters, $500,000 was paid to each of Lazard
Freres and SBC Warburg Dillon Read upon public announcement of the Separation,
$1,000,000 is payable to each of Lazard Freres and SBC Warburg Dillon Read upon
a vote of the holders of Communications Stock and the Media Stock to approve the
Separation and $5,500,000 is payable to each of Lazard Freres and SBC Warburg
Dillon Read upon consummation of the Separation. U S WEST's Board of Directors
was aware of this fee structure and took it into account in considering the
Opinions and in approving the Separation and the transactions related thereto
and contemplated thereby. U S WEST also agreed to reimburse the U S WEST
Financial Advisors for the reasonable fees and disbursements of their respective
counsel and for their reasonable expenses and to indemnify the U S WEST
Financial Advisors against certain liabilities, including liabilities under the
federal securities laws, arising in any manner out of or in connection with
their engagement.
 
ACCOUNTING TREATMENT
 
    MediaOne will account for the Separation as a discontinuance of the
businesses comprising New U S WEST. The measurement date for discontinued
operations accounting purposes will be the date upon which U S WEST stockholder
approval is received. On such date, MediaOne will recognize a gain on the
distribution of New U S WEST. Because the distribution is non pro-rata, as
compared with the businesses previously attributed to U S WEST's two classes of
stockholders, it will be accounted for at fair value. As of February 20, 1998,
the gain (net of Separation costs) totals approximately $25.2 billion.
Separation costs are estimated at $150 million and include cash payments under
severance agreements of $45.1 million and financial advisory, legal,
registration fee, printing and mailing costs related to the Separation.
 
    This Proxy Statement includes unaudited pro forma condensed combined
financial statements of MediaOne which reflect the discontinuance of the
businesses of New U S WEST, the distribution of the New U S WEST Common Stock to
U S WEST's stockholders, the refinancing of the Dex Indebtedness by New U S
WEST, transfers of certain assets and liabilities of U S WEST to New U S WEST,
allocations of certain costs and expenses in connection with the Separation and
the AirTouch Transaction. See "Chapter 7: Information About MediaOne--MediaOne
Unaudited Pro Forma Condensed Combined Financial Statements."
 
    Following the Separation, New U S WEST will account for the assets of New U
S WEST at the historical values at which they were carried by U S WEST prior to
the Separation. This Proxy Statement includes historical and pro forma financial
information of New U S WEST which present New U S WEST's combined financial
position, results of operations and cash flows as if it were a separate entity
for all periods presented. In addition, the unaudited pro forma condensed
combined financial statements of New U S WEST included in this Proxy Statement
give effect to the refinancing of the Dex Indebtedness by New U S WEST and the
issuance of the Dex Dividend in connection with the Dex Alignment, transfers of
certain assets and liabilities of U S WEST to New U S WEST and allocations of
certain costs and expenses in connection with the Separation. See "Chapter 6:
Information About New U S WEST--New U S WEST Unaudited Pro Forma Condensed
Combined Financial Statements."
 
REGULATORY REQUIREMENTS
 
    U S WEST has obtained the IRS Ruling which confirms, among other things, the
distribution of the New U S WEST Common Stock to holders of Communications Stock
and Media Stock and certain aspects of the Reorganization will qualify as a
tax-free split-off to U S WEST and its stockholders
 
                                                                              42
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
under Section 355 and other Sections of the Code. See "--Certain U.S. Federal
Income Tax Consequences." In addition, U S WEST has been granted authority by
the FCC to transfer various types of FCC licenses and authorizations held by
various subsidiaries and partnerships of U S WEST.
 
    U S WEST is not aware of any material governmental approvals or actions that
may be required for consummation of the Separation other than as described
above. Should any other approval or actions be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause U S WEST to
abandon or modify the terms of the Separation.
 
INTEREST OF CERTAIN PERSONS IN THE SEPARATION
 
STOCK OWNERSHIP
 
    Individuals who are directors or executive officers of U S WEST and the
individuals who will be directors or executive officers of MediaOne or New U S
WEST who currently own shares of Communications Stock and Media Stock will
receive shares of New U S WEST Common Stock and MediaOne Common Stock in
connection with the Separation in respect of the shares of Communications Stock
and Media Stock held by them. See "Chapter 8: The Annual Meeting and Certain
Other Matters-- Security Ownership of Certain Beneficial Owners and Management."
In addition, such individuals hold options to acquire shares of Communications
Stock and restricted shares of Communications Stock and options to acquire
shares of Media Stock and restricted shares of Media Stock. Such options and
restricted shares will become options to acquire shares of New U S WEST Common
Stock and MediaOne Common Stock and restricted shares of New U S WEST Common
Stock and/or MediaOne Common Stock pursuant to the arrangements described under
"--Employee Benefits and Compensation Matters."
 
    For certain information concerning the management and executive compensation
arrangements of MediaOne and New U S WEST after the Separation, see "Chapter 7:
Information About MediaOne" and "Chapter 6: Information About New U S WEST."
 
SEVERANCE AGREEMENTS
 
    U S WEST has maintained change of control severance agreements between it
and a number of its executive officers and has entered into such agreements (as
amended, the "Severance Agreements") with each of Messrs. McCormick, Russ and
Glinsky (the "Executives"), in order to encourage the continued service and
dedication of the Executives in the performance of their duties, notwithstanding
the possibility, threat or occurrence of a change of control of U S WEST.
Pursuant to the Severance Agreements, each Executive will be entitled to certain
benefits described below if a Change of Control (as defined in the Severance
Agreements) occurs and, within the three-year period following such Change of
Control, (i) such Executive's employment with U S WEST is terminated by U S WEST
other than for Cause (as defined in the Severance Agreements) or (ii) such
Executive resigns his employment with U S WEST for Good Reason (as defined in
the Severance Agreements).
 
    The benefits to which each Executive will be entitled under the Severance
Agreements include: (i) payment of any accrued but unpaid salary; (ii) payment
of bonuses and grants under the short-term and long-term incentive plans of U S
WEST in which the Executive participates (calculated as if a change of control
has occurred under each such plan); (iii) payment of the grant value of the most
recent annual grants to the Executive under the long-term incentive plans of U S
WEST in which the Executive participates; and (iv) a payment equal to three
times the sum of (x) the Executive's annual base salary, (y) the Executive's
annual bonus under any short-term incentive plan of U S WEST in which the
Executive participates (calculated as if 100% of performance targets have been
achieved, unless the actual achievement percentage exceeds 100%, in which case
the actual performance level will
 
                                                                              43
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
apply) and (z) the grant value of the most recent annual grants to the Executive
under the long-term incentive plans of U S WEST in which the Executive
participates. In addition, pursuant to the Severance Agreements: (i) if not
already vested, each Executive will be deemed to be fully vested under all of U
S WEST's retirement plans, with the age and years of service of each Executive
increased by three years for purposes of determining benefits thereunder; (ii)
all unvested stock options held by each Executive will vest and become fully
exercisable; and (iii) each Executive will be entitled to continued health care
benefits on terms substantially similar to the retiree health care benefits U S
WEST would provide if the Executive were eligible for retiree health care
benefits immediately prior to the Change of Control, as well as certain limited
perquisites. Any benefits payable under the Severance Agreements are required to
be grossed-up to the extent an Executive would be subject to an excise tax under
Section 4999 of the Code due to the receipt thereof. U S WEST does not believe
that any gross-up payments will be required under the Severance Agreements as a
result of the Separation. While, under the terms of the Severance Agreements,
all unvested stock options and shares of restricted stock held by the Executives
will vest upon a Change of Control, no additional shares of stock will be issued
to the Executives upon a Change of Control.
 
    Consummation of the Separation will constitute a Change of Control within
the meaning of the Severance Agreements and, under the terms of these
agreements, each Executive will be entitled to receive all of the benefits
described above following consummation of the Separation. It is estimated that
the incremental amounts which will be payable to Messrs. McCormick, Russ and
Glinsky under the Severance Agreements in excess of the amounts which would
otherwise be payable to them absent the Separation would be approximately $24.5
million, $11.3 million and $9.3 million, respectively (calculated as of March
13, 1998). It is anticipated that all cash amounts due to the Executives under
the Severance Agreements will be paid to them by New U S WEST and MediaOne
promptly following consummation of the Separation. Following consummation of the
Separation, New U S WEST and MediaOne will be jointly and severally liable for U
S WEST's obligations to the Executives under their respective Severance
Agreements.
 
    In consideration for the foregoing, each of the Executives has agreed that,
for a period of one year from the Separation Time, in the case of Messrs. Russ
and Glinsky, or three years from the Separation Time, in the case of Mr.
McCormick, subject to continued performance by New U S WEST and MediaOne of
their obligations under the Severance Agreements, each Executive will not (a)
engage, directly or indirectly, whether as principal, agent, distributor,
representative, consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than (i) two percent (2%)
of the stock or equity of any corporation the capital stock of which is publicly
traded or (ii) two percent (2%) of the ownership interest of any limited
partnership or other entity) or otherwise, within the United States of America,
in any business which is competitive with the business conducted by U S WEST
(or, following the Separation, New U S WEST and MediaOne), except as a member of
the board of directors of New U S WEST or MediaOne, (b) solicit or entice or
endeavor to solicit or entice away from U S WEST (or such successors) any person
who was an officer, employee or sales representative of U S WEST, either for his
own account or for any individual, firm or corporation, whether or not such
person would commit any breach of his contract of employment by reason of
leaving the service of U S WEST (or such successors), or employ, directly or
indirectly, any person who was an officer, employee or sales representative of U
S WEST or who by reason of such position at any time is or may be likely to be
in possession of any confidential information or trade secrets relating to the
businesses or products of U S WEST, or (c) solicit or entice or endeavor to
solicit or entice away from U S WEST (or such successors) any customer or
prospective customer of U S WEST (or such successors), either for the
Executive's own account or for any individual, firm or corporation. For certain
information regarding the current compensation of the Executives, see "Chapter
4: Other Matters to be Considered at the Annual Meeting--U S WEST Director and
Executive Officer Information."
 
                                                                              44
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    In considering the recommendation of the U S WEST Board to vote in favor of
the Separation, stockholders of U S WEST should be aware that, as a result of
the benefits payable to the Executives under the Severance Agreements in
connection with the Separation, the Executives have interests in the Separation
that are in addition to the interests of the stockholders generally. The U S
WEST Board was aware of these interests and considered them, among other
factors, in approving the Separation. See "--Background of the Separation."
 
STOCK EXCHANGE LISTINGS
 
    The Communications Stock is currently listed and traded on the NYSE and the
PSE under the symbol "USW" and the Media Stock is currently listed and traded on
the NYSE and the PSE under the symbol "UMG". As a result of the Separation, the
New U S WEST Common Stock will be listed and traded on the NYSE and the PSE
under the symbol "USW" and the MediaOne Common Stock will be listed and traded
on the NYSE and the PSE under the symbol "UMG."
 
DIVIDEND POLICY
 
    If the Separation is completed, it is anticipated that New U S WEST will pay
dividends on the New U S WEST Common Stock initially at a quarterly rate of
$0.535 per share, which is the same dividend currently paid on the
Communications Stock. While the New U S WEST Board is not expected to change
this dividend policy, it has the right to do so at any time.
 
    Dividends are not currently paid on the Media Stock. If the Separation is
completed, it is anticipated that the MediaOne Board will continue this policy
for the foreseeable future and not declare dividends on the MediaOne Common
Stock. Instead, the MediaOne Board will retain future earnings, if any, of
MediaOne for the development of the businesses of MediaOne.
 
TREATMENT OF INDEBTEDNESS
 
    As of December 31, 1997, after giving effect to a reduction of $1.35 billion
of indebtedness in connection with the AirTouch Transaction, U S WEST and its
subsidiaries had outstanding approximately $14.4 billion of indebtedness. Such
indebtedness consists of approximately $5.5 billion of indebtedness of U S WEST
Communications (the "Communications Indebtedness"), $2.7 billion of indebtedness
of Continental (the "Continental Indebtedness") and approximately $6.2 billion
of indebtedness issued or guaranteed by U S WEST (the "U S WEST Indebtedness").
The U S WEST Indebtedness includes approximately $4.7 billion of indebtedness
(the "Capital Funding Indebtedness") of U S WEST Capital Funding, Inc.,
("Capital Funding"), $1.1 billion of Preferred Securities issued by U S WEST
Financing I and U S WEST Financing II, Delaware business trusts, and $400
million of other indebtedness issued or guaranteed by U S WEST. Of the U S WEST
Indebtedness, approximately $6.1 billion has historically been allocated to and
is reflected on the balance sheet of the Media Group (including the Dex
Indebtedness) and approximately $100 million has historically been allocated to
and is reflected on the balance sheet of the Communications Group. All of the
$100 million of U S WEST Indebtedness allocated to the Communications Group is
Capital Funding Indebtedness.
 
    Following the Separation, all of the Communications Indebtedness will
continue to be obligations of U S WEST Communications, which will be a
subsidiary of New U S WEST, and all of the Continental Indebtedness will
continue to be obligations of Continental, which will be a subsidiary of
MediaOne, subject to the rights of holders of certain private notes included in
the Continental Indebtedness to require repayment of such notes following
consummation of the Separation.
 
    In connection with the Separation, New U S WEST and MediaOne will seek to
refinance all $6.2 billion of the U S WEST Indebtedness through a combination of
tender offers, prepayments, defeasance, consent solicitations and/or exchange
offers (the "Refinancing"). In the Refinancing, a subsidiary of New U S WEST
will refinance approximately $4.0 billion of U S WEST Indebtedness,
 
                                                                              45
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
consisting of the $100 million of U S WEST Indebtedness currently allocated to
the Communications Group plus the Dex Indebtedness (the "New U S WEST
Indebtedness"), and a subsidiary of MediaOne will refinance approximately $2.2
billion of U S WEST Indebtedness, consisting of the U S WEST Indebtedness
currently allocated to the Media Group other than the Dex Indebtedness (the
"MediaOne Indebtedness"). New U S WEST and MediaOne will also incur additional
indebtedness to fund certain of the costs and expenses of the Separation,
including any differences between the market and face value of the U S WEST
Indebtedness. The Separation is not conditioned upon the refinancing by New U S
WEST and MediaOne of any minimum amount of U S WEST Indebtedness by tender
offer, prepayment, consent solicitation or exchange offer. If New U S WEST and
MediaOne are unable to refinance a portion of the U S WEST Indebtedness by
tender offer, prepayment, consent solicitation or exchange offer, it is
anticipated that such indebtedness would either (i) be defeased using funds
raised as part of the New U S WEST Indebtedness and MediaOne Indebtedness or
(ii) be retained by MediaOne (as the successor to U S WEST) following the
Separation as part of the MediaOne Indebtedness. Any decision as to whether to
defease or retain any U S WEST Indebtedness not refinanced would depend upon the
amount and type of such indebtedness.
 
    The New U S WEST Indebtedness will be comprised of commercial paper, as well
as medium and long-term securities which may be issued by a subsidiary of New U
S WEST in exchange for a portion of the U S WEST Indebtedness. The MediaOne
Indebtedness will be comprised of commercial paper and commercial bank debt, as
well as medium and long-term securities which may be issued by a subsidiary of
MediaOne in exchange for a portion of the U S WEST Indebtedness. In addition,
any U S WEST Indebtedness that is not refinanced by tender offer, prepayment,
consent solicitation or exchange offer and which U S WEST does not elect to
defease (or which cannot be defeased) will be retained by MediaOne as part of
the MediaOne Indebtedness. Following consummation of the Separation, it is
expected that New U S WEST and MediaOne will issue medium and long-term
securities to refinance a portion of the short-term commercial paper and bank
debt incurred by them in connection with the Refinancing. U S WEST, after
consultation with and based upon the advice of its financial advisors, believes
that New U S WEST and MediaOne have sufficient financing capability to
accomplish the refinancings described above. While the terms of the indebtedness
to be incurred by New U S WEST and MediaOne in connection with the Refinancing
have not yet been finalized, it is expected that such indebtedness will have
terms comparable to the terms of the current U S WEST Indebtedness, except that
MediaOne's bank indebtedness may include certain additional terms and covenants
which are generally included in the bank indebtedness of cable companies. In
addition, all senior bank indebtedness issued by MediaOne after the Separation
will be guaranteed by Continental and, as a result, will rank pari passu with
Continental's senior indebtedness. It is anticipated that any medium and
long-term debt securities issued by New U S WEST or MediaOne in connection with
the Refinancing in exchange for a portion of the U S WEST Indebtedness will have
substantially the same terms as the U S WEST Indebtedness exchanged, except that
such debt securities may have higher interest rates than the interest rates of
the corresponding U S WEST Indebtedness.
 
    As a result of the Separation, New U S WEST and its subsidiaries will have
approximately $9.7 billion of indebtedness, consisting of the New U S WEST
Indebtedness, the Communications Indebtedness and indebtedness incurred by New U
S WEST to fund the costs and expenses of the Separation, and MediaOne and its
subsidiaries will have approximately $5.1 billion of indebtedness and trust
preferred securities, consisting of the MediaOne Indebtedness, the Continental
Indebtedness and indebtedness incurred by MediaOne to fund the costs and
expenses of the Separation.
 
    U S WEST is currently in discussions with its financial advisors regarding
the structuring of the Refinancing. While the specific terms of the Refinancing
have not yet been finalized, it is anticipated that any U S WEST Indebtedness
repurchased pursuant to a tender offer will be repurchased at a premium to the
market value of such indebtedness and that any medium and long-term debt
securities issued by New U S WEST or MediaOne pursuant to an exchange offer in
exchange for U S WEST
 
                                                                              46
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
Indebtedness will have the same or a higher interest rate than the U S WEST
Indebtedness exchanged. The anticipated costs of the Refinancing are reflected
in the pro forma financial statements of New U S WEST and MediaOne included in
this Proxy Statement. See "Chapter 6: Information About New U S WEST--New U S
WEST Unaudited Pro Forma Condensed Combined Financial Statements-- Notes B, G
and I" and "Chapter 7: Information About MediaOne--MediaOne Unaudited Pro Forma
Condensed Combined Financial Statements--Notes B, E and K." U S WEST expects
that any tender offers, consent solicitations and exchange offers to be effected
in connection with the Refinancing would be consummated following the approval
of the Separation at the Annual Meeting.
 
    Following the Separation, MediaOne intends to monetize the AirTouch
securities it received in the AirTouch Transaction and use a portion of the
proceeds of such monetization to reduce the MediaOne Indebtedness. See "Chapter
7: Information About MediaOne--Business of MediaOne--AirTouch Transaction."
 
TREATMENT OF PREFERRED STOCK
 
    Currently, U S WEST has three series of preferred stock outstanding: Series
C Cumulative Redeemable Preferred Stock ("U S WEST Series C Preferred Stock"),
Series D Convertible Preferred Stock ("U S WEST Series D Preferred Stock") and
Series E Convertible Preferred Stock ("U S WEST Series E Preferred Stock" and,
together with the Series C Preferred Stock and Series D Preferred Stock, the "U
S WEST Preferred Stock"). In connection with the Separation, each class of U S
WEST Preferred Stock will remain outstanding and, following consummation of the
Separation, will represent shares of preferred stock of MediaOne. After the
Separation Time, the U S WEST Series D Preferred Stock and the U S WEST Series E
Preferred Stock will continue to be convertible into shares of Media Stock
(which will thereafter constitute shares of MediaOne Common Stock) pursuant to
the terms thereof. Holders of U S WEST Preferred Stock will not be entitled to
receive the Dex Dividend. In connection with the Separation, the conversion rate
of the U S WEST Series D Preferred Stock will be appropriately adjusted by
MediaOne pursuant to the terms of the U S WEST Series D Preferred Stock to
reflect the fact that holders of U S WEST Series D Preferred Stock will not
receive the Dex Dividend. No such adjustments will be required to the terms of
the U S WEST Series C Preferred Stock or the U S WEST Series E Preferred Stock.
Currently, there are 50,000 shares of U S WEST Series C Preferred Stock
outstanding, 20 million shares of U S WEST Series D Preferred Stock outstanding
and 994,082 shares of U S WEST Series E Preferred Stock outstanding. The U S
WEST Series C Preferred Stock, U S WEST Series D Preferred Stock and U S WEST
Series E Preferred Stock are referred to herein after the Separation as
"MediaOne Series C Preferred Stock", "MediaOne Series D Preferred Stock" and
"MediaOne Series E Preferred Stock", respectively. For a description of the
terms of the MediaOne Series C Preferred Stock, MediaOne Series D Preferred
Stock and MediaOne Series E Preferred Stock, see "Chapter 8: Capital
Stock--MediaOne Capital Stock." For a discussion of the treatment of the
outstanding Preferred Securities of U S WEST Financing I and U S WEST Financing
II, see "--Treatment of Indebtedness."
 
FEDERAL SECURITIES LAWS CONSEQUENCES
 
    All shares of New U S WEST Common Stock received by holders of
Communications Stock and Media Stock in the Separation will be freely
transferable, except that shares of New U S WEST Common Stock received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of U S WEST prior to the Separation may be resold by them only
in transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of New U S WEST) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of U S WEST are generally defined as
individuals or entities that control, are controlled by, or are under common
control with, U S WEST and include certain executive officers and directors of U
S WEST.
 
                                                                              47
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
 
    U S WEST has obtained the IRS Ruling which confirms, among other things, the
distribution by U S WEST of the New U S WEST Common Stock to the holders of
Communications Stock and Media Stock (the "Distribution") will qualify as a
tax-free split-off to U S WEST and its stockholders under Section 355 of the
Code. The following is a summary of the material federal income tax consequences
to U S WEST and U S WEST stockholders resulting from the Distribution as set
forth in the IRS Ruling:
 
    / / A U S WEST stockholder will not recognize any income, gain or loss as a
        result of the Distribution, except, as described below, in connection
        with the receipt by a holder of Media Stock of cash instead of
        fractional shares of New U S WEST.
 
    / / A holder of Media Stock will apportion the tax basis for such holder's
        Media Stock on which New U S WEST Common Stock is distributed between
        the Media Stock and the New U S WEST Common Stock received in the
        Distribution (including any fractional shares of the New U S WEST Common
        Stock deemed received) in proportion to the relative fair market values
        of such Media Stock and New U S WEST Common Stock on the Separation
        Date.
 
    / / The tax basis of the shares of New U S WEST Common Stock received by a
        holder of Communications Stock in redemption of the Communications Stock
        held by such holder will be the same as the basis of such Communications
        Stock on the Separation Date.
 
    / / The holding period for the New U S WEST Common Stock received by a
        holder of Media Stock in the Distribution will include the period during
        which such holder held the Media Stock on which New U S WEST Common
        Stock is distributed, provided that such Media Stock is held as a
        capital asset by such holder on the Separation Date.
 
    / / The holding period for the New U S WEST Common Stock received by a
        holder of Communications Stock in the Distribution will include the
        period during which such holder held the Communications Stock redeemed,
        provided that such Communications Stock is held as a capital asset by
        such holder on the Separation Date.
 
    / / A holder of Media Stock who receives cash instead of fractional shares
        will be treated as if such holder received a fractional share of New U S
        WEST Common Stock as part of the Distribution and then such fractional
        share was redeemed by New U S WEST. Accordingly, such stockholder will
        recognize gain or loss equal to the difference between the cash so
        received and the portion of the tax basis in New U S WEST Common Stock
        that is allocable to such fractional share, which gain or loss will be
        capital gain or loss, provided that such fractional share was held as a
        capital asset at the time of the Distribution.
 
    / / U S WEST will not recognize any income, gain or loss as a result of the
        Distribution.
 
    Current Treasury regulations require each U S WEST stockholder who receives
New U S WEST Common Stock pursuant to the Distribution to attach to his or her
federal income tax return for the year in which the Distribution occurs a
detailed statement setting forth such data as may be appropriate in order to
show the applicability of Section 355 of the Code to the Distribution. U S WEST
will provide the appropriate information to each stockholder of record as of the
Separation Date.
 
    THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS WHO RECEIVED
THEIR SHARES OF COMMUNICATIONS STOCK OR MEDIA STOCK THROUGH THE EXERCISE OF AN
EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION OR WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES OR WHO
 
                                                                              48
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
ARE OTHERWISE SUBJECT TO SPECIAL TREATMENT UNDER THE CODE. ALL STOCKHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE DISTRIBUTION TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL
AND FOREIGN TAX LAWS.
 
EMPLOYEE BENEFITS AND COMPENSATION MATTERS
 
U S WEST STOCK OPTIONS AND OTHER AWARDS
 
    Stock options, restricted stock and phantom stock awards (collectively,
"Stock Awards") with respect to Communications Stock ("Communications Stock
Awards") and Media Stock ("Media Stock Awards") currently are outstanding under
the U S WEST 1994 Stock Plan, the U S WEST Media Group 1996 Stock Plan, the U S
WEST Media Group 1997 Stock Plan and the U S WEST Communications Group 1997
Stock Plan (the "U S WEST Stock Plans"). These Stock Awards will be adjusted or
substituted as a result of the Separation. The treatment of Stock Awards that
are outstanding prior to the Separation is designed to preserve, as a general
matter, the economic value of each award. Under the U S WEST Stock Plans, in the
event of any consolidation, combination, liquidation, reorganization,
recapitalization, stock dividend, stock split, split-up, spin-off, combination
of shares or exchange of shares, the Human Resources Committee of the U S WEST
Board may make such adjustments in the stock subject to awards under the plan as
such committee deems appropriate. Pursuant to that provision, Stock Awards
granted under the U S WEST Stock Plan will be adjusted or substituted to reflect
the Separation, including the Dex Dividend.
 
ADJUSTMENTS TO MEDIA STOCK AWARDS
 
    Stock options for Media Stock, whether held by those individuals who will
become employees of MediaOne or New U S WEST, will continue to remain
outstanding as stock options for MediaOne Common Stock following the Separation,
except that the number of shares subject to and the exercise price of such stock
options will be adjusted to reflect the fact that holders of such stock options
will not receive the Dex Dividend. Option holders who will continue employment
with New U S WEST will not forfeit the options as a result of their termination
of employment with U S WEST in connection with the Separation as long as they
are employed by New U S WEST.
 
    Restricted Media Stock held by those individuals who will become employees
of MediaOne will remain outstanding as restricted MediaOne Common Stock. In
addition, such individuals will receive the Dex Dividend payable with respect to
such restricted Media Stock in unrestricted shares of New U S WEST Common Stock.
Restricted Media Stock held by those individuals who will become employees of
New U S WEST will be replaced immediately prior to the Separation with
substitute restricted Communications Stock having a value equal to 1.0645 of the
value of the Media Stock replaced. Each such share of restricted Communications
Stock will then be replaced with a share of restricted New U S WEST Common Stock
in the Separation.
 
    Phantom stock units for Media Stock held by those individuals who will
become employees of MediaOne will continue as phantom stock units for MediaOne
Common Stock after the Separation, except that the number of shares of MediaOne
Common Stock reflected in such phantom stock units will be increased by the
value of the Dex Dividend. Phantom stock units for Media Stock held by those
individuals who will become employees of New U S WEST will be replaced
immediately prior to the Separation with substitute phantom stock units for
Communications Stock based on the market value at such time. Each such phantom
unit for Communications Stock will then be replaced with a phantom unit for New
U S WEST Common Stock in the Separation.
 
    Except as described above, all of the terms and conditions of the Media
Awards, including the restrictions on option exercisability and expiration dates
and vesting of restricted stock, will remain in effect following the Separation.
 
                                                                              49
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    As of March 13, 1998, there were outstanding 19,419,165 shares of Media
Stock subject to options and 629,481 shares of restricted Media Stock, of which
6,359,792 options and 73,998 restricted shares were held by individuals who will
become employees of New U S WEST.
 
TREATMENT OF COMMUNICATIONS STOCK AWARDS
 
    Stock options for Communications Stock, whether held by those individuals
who will become employees of New U S WEST or MediaOne, will be replaced with
substitute options in respect of New U S WEST Common Stock under the 1998 New U
S WEST Stock Plan discussed below under "--New U S WEST Compensation Plans" or
the U S WEST Communications Group 1997 Stock Plan, which will be assumed by New
U S WEST. Option holders who will continue employment with MediaOne will not
forfeit the options as a result of the fact that they are not employed by New U
S WEST following the Separation so long as they are employed by MediaOne.
 
    Restricted Communications Stock held by those individuals who will become
employees of New U S WEST will be replaced with substitute restricted New U S
WEST Common Stock. Restricted Communications Stock held by those individuals who
will become employees of MediaOne will be replaced immediately prior to the
Separation with substitute restricted Media Stock having a value equal to 1.0645
of the value of the Communications Stock replaced. Each such share of restricted
Media Stock will remain outstanding following the Separation as a share of
restricted MediaOne Common Stock. In addition, such holders will receive the Dex
Dividend in respect of such shares of restricted Media Stock in unrestricted
shares of New U S WEST Common Stock.
 
    Phantom stock units for Communications Stock held by those individuals who
will become employees of New U S WEST will be replaced with substitute phantom
stock units for New U S WEST Common Stock. Phantom stock units for
Communications Stock held by those individuals who will become employees of
MediaOne will be converted immediately prior to the Separation into phantom
stock units for Media Stock based on the market value at such time. Such phantom
stock units will continue as phantom stock units for MediaOne Common Stock after
the Separation, except that the number of shares of MediaOne Common Stock
reflected in such phantom stock units will be increased by the value of the Dex
Dividend.
 
    Except as described above, each substitute New U S WEST Common Stock option
and restricted share of New U S WEST Common Stock issued will have the same
terms and conditions, exercise price, vesting and restrictions as the
Communications Stock Awards which it replaces.
 
    As of March 13, 1998, there were outstanding 17,347,166 shares of
Communications Stock subject to stock options and 385,246 shares of restricted
Communications Stock, of which 1,364,523 options and 34,610 restricted shares
were held by individuals who will become employees of MediaOne.
 
TREATMENT OF STOCK AWARDS HELD BY OTHER INDIVIDUALS
 
    At March 13, 1998, approximately 1,474,747 Communications Stock options,
1,133,340 Media Stock options, zero shares of restricted Communications Stock
and zero shares of restricted Media Stock were held by certain executive
officers who will not continue their employment either with New U S WEST or
MediaOne. These stock options and restricted stock will be adjusted or
substituted as described above (treating such individuals as employees of New U
S WEST for this purpose) and will become fully vested and exercisable under the
terms of such executives' severance agreements. See "--Interest of Certain
Persons in the Separation."
 
NEW U S WEST COMPENSATION PLANS
 
    Effective prior to the Separation, New U S WEST will adopt the 1998 U S WEST
Stock Plan (the "1998 New U S WEST Stock Plan"), under which New U S WEST may
grant to its employees awards
 
                                                                              50
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
in the form of stock options, stock appreciation rights and restricted stock, as
well as substitute stock options and restricted stock awards. The 1998 New U S
WEST Stock Plan will be administered by the Human Resources Committee of the New
U S WEST Board (the "New U S WEST Human Resources Committee"), and is designed
to enable New U S WEST to retain key employees and to directly link their
incentives to the performance of New U S WEST Common Stock. For a more complete
description of the 1998 New U S WEST Stock Plan, see "Chapter 4: Other Matters
to be Considered at the Annual Meeting--Proposal to Approve the 1998 New U S
WEST Stock Plan." The text of the 1998 New U S WEST Stock Plan is set forth in
full in Annex C. New U S WEST will also assume the U S WEST Communications Group
1997 Stock Plan, and Stock Awards outstanding thereunder will be replaced with
substitute stock awards for New U S WEST Common Stock.
 
    Effective prior to the Separation, New U S WEST will adopt the U S WEST
Long-Term Incentive Plan (the "New U S WEST LTIP"). The New U S WEST LTIP is
intended to provide key executives of New U S WEST with incentive compensation
based upon the sum of regular cash dividends, if any, paid on New U S WEST
Common Stock, and the achievement of pre-established, objective performance
goals. Eligibility under this plan will be limited to executives and key
employees of New U S WEST selected by the New U S WEST Human Resources
Committee. The New U S WEST LTIP will be substantially similar to the current U
S WEST Long-Term Incentive Plan. For a more complete description of the New U S
WEST LTIP, see "Chapter 4: Other Matters to be Considered at the Annual
Meeting--Proposal to Approve the New U S WEST Long-Term Incentive Plan." The
text of the New U S WEST LTIP is set forth in full in Annex D.
 
    Effective prior to the Separation, New U S WEST will adopt the U S WEST
Executive Short-Term Incentive Plan (the "New U S WEST ESTIP" and, together with
the 1998 New U S WEST Stock Plan and the New U S WEST LTIP, the "New U S WEST
Compensation Plans"). Under the New U S WEST ESTIP, New U S WEST may provide
certain officers of New U S WEST with the opportunity to earn annual cash awards
based upon the accomplishment of corporate objectives and individual
contributions to business results. Eligibility under this plan will be limited
to the Chief Executive Officer of New U S WEST and any individuals employed by
New U S WEST at the end of any calendar year who appear in the Summary
Compensation Table of New U S WEST's Annual Proxy Statement to Stockholders for
that year. The New U S WEST ESTIP will be substantially similar to the current U
S WEST Executive Short-Term Incentive Plan. For a more complete description of
the New U S WEST ESTIP, see "Chapter 4: Other Matters to be Considered at the
Annual Meeting--Proposal to Approve the New U S WEST Executive Short-Term
Incentive Plan." The text of the New U S WEST ESTIP is set forth in full in
Annex E.
 
    New U S WEST is adopting the New U S WEST Compensation Plans so that,
following the Separation, it will have in place compensation plans that are
similar to those that applied to its employees before the Separation. Approval
of the New U S WEST Compensation Plans is being sought to establish New U S
WEST's ability to deduct, for federal income tax purposes, compensation paid
pursuant to the exercise of stock options and in respect of other stock awards.
Under Section 162(m) of the Code, stockholder approval of performance-based
compensation plans is necessary to qualify for the performance-based
compensation exception to the limitation on a company's ability to deduct
compensation paid to certain specified individuals in excess of $1 million.
 
TREATMENT OF U S WEST SAVINGS PLAN/ESOP
 
    The U S WEST Savings Plan/ESOP (the "Savings Plan/ESOP"), which covers
eligible employees of U S WEST and its subsidiaries, is a tax-qualified profit
sharing, 401(k) plan with an employee stock ownership plan ("ESOP") component.
 
    Effective as of the Separation Date, sponsorship of the Savings Plan/ESOP
will be transferred to New U S WEST (the "New U S WEST Savings Plan/ESOP"),
which will thereafter cover eligible
 
                                                                              51
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
employees of New U S WEST. Effective as of the Separation Date, MediaOne will
adopt an additional plan (the "MediaOne Savings Plan/ESOP") covering eligible
employees of MediaOne, and existing account balances of such MediaOne employees
will be transferred from the Savings Plan/ESOP to the MediaOne Savings
Plan/ESOP. Shares of Communications Stock and Media Stock owned by the Savings
Plan/ESOP that have been allocated to the accounts of participants in the
MediaOne Savings Plan/ ESOP as of the Separation Date will be transferred from
the Savings Plan/ESOP to the MediaOne Savings Plan/ESOP as shares of New U S
WEST Common Stock and MediaOne Common Stock. The proportion of MediaOne Common
Stock to New U S WEST Common Stock that will be transferred to participants'
accounts in the MediaOne Savings Plan/ESOP may be adjusted prior to such
transfer so that the ESOP portion of the MediaOne Savings Plan/ESOP (the
"MediaOne ESOP") will hold a higher value of MediaOne Common Stock than New U S
WEST Common Stock. Shares of Communications Stock and Media Stock owned by the
Savings Plan/ESOP that have been allocated to accounts of participants in the
New U S WEST Savings Plan/ESOP as of the Separation Date will become shares of
New U S WEST Common Stock and MediaOne Common Stock in the New U S WEST Savings
Plan/ESOP. The proportion of New U S WEST Common Stock to MediaOne Common Stock
that will remain in the ESOP portion of the New U S WEST Savings Plan/ESOP (the
"New U S WEST ESOP") may be adjusted prior to the transfer of participants'
account balances to the MediaOne ESOP so that the New U S WEST ESOP will hold a
higher value of New U S WEST Common Stock than MediaOne Common Stock.
 
    The MediaOne ESOP, acting through an independent fiduciary, will, over the
two-year period beginning on the Separation Date, divest itself of all shares of
New U S WEST Common Stock. The New U S WEST ESOP, acting through an independent
fiduciary, will, over the two-year period beginning on the Separation Date,
divest itself of MediaOne Common Stock. Each of the MediaOne ESOP and the New U
S WEST ESOP shall use commercially reasonable efforts to sell the stock of the
company which does not sponsor the plan ("Non-employer Stock") in a manner that
would be least likely to affect stock price, including offering the other ESOP
the right to purchase such Non-employer Stock. Subject to fiduciary duties and
legal requirements, neither ESOP will sell in any one day more than 20% of the
average daily trading volume of Non-employer Stock, using the average daily
volume in the two months preceding such sale.
 
    It is currently anticipated that, upon consummation of the Separation, the
New U S WEST ESOP will hold approximately 20 million shares of MediaOne Common
Stock, and that the MediaOne ESOP will hold approximately 480,000 shares of New
U S WEST Common Stock.
 
    For a period of at least five years following the Separation Time,
participants in the New U S WEST Savings Plan/ESOP and the MediaOne Savings
Plan/ESOP will not be required to dispose of investments of Non-Employer Stock
not held in the ESOP.
 
    Following the Separation Time, New U S WEST Employees who participate in the
New U S WEST Savings Plan/ESOP will receive their employer match in shares of
New U S WEST Common Stock and will not be permitted to make any further
investment in shares of MediaOne Common Stock, unless they elect to invest their
employee contributions in shares of MediaOne Common Stock through the Personal
Choice Retirement Account. Similarly, MediaOne Employees who participate in the
MediaOne Savings Plan/ESOP will receive their employer match in shares of
MediaOne Common Stock and will not be permitted to make any further investment
in shares of New U S WEST Common Stock, unless they elect to invest their
employee contributions in shares of New U S WEST Common Stock through the
Personal Choice Retirement Account.
 
                                                                              52
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
TREATMENT OF U S WEST PENSION PLAN
 
    U S WEST currently maintains the U S WEST Pension Plan (the "U S WEST
Pension Plan"), a defined benefit pension plan that covers approximately 63,000
active employees and 56,000 former employees of U S WEST, including retirees.
 
    Effective immediately prior to the Separation Time, New U S WEST will assume
sponsorship of the U S WEST Pension Plan (the "New U S WEST Pension Plan").
Effective as of the Separation Date, MediaOne will establish a new defined
benefit pension plan for eligible MediaOne Employees (the "MediaOne Pension
Plan"). In connection with the Separation, a portion of the existing assets of
the U S WEST Pension Plan will be transferred at fair value to the MediaOne
Pension Plan such that, immediately following consummation of the Separation,
the ratio of plan assets to plan liabilities, calculated on a projected benefit
obligations basis as determined by independent actuaries, will be the same for
the New U S WEST Pension Plan and the MediaOne Pension Plan. The U S WEST
Pension Plan currently has approximately $12 billion of assets. It is
anticipated, subject to final adjustments, that the MediaOne Pension Plan will
receive approximately $190 million of such assets, with the remainder of such
assets being retained by the New U S WEST Pension Plan. It is currently
anticipated that the benefit expense and required cash contributions by New U S
WEST to the New U S WEST Pension Plan and by MediaOne to the MediaOne Pension
Plan after the Separation will be materially the same as the benefit expense and
required cash contributions of the Communications Group and the Media Group to
the U S WEST Pension Plan prior to the Separation.
 
    Each of the New U S WEST Pension Plan and the MediaOne Pension Plan will
recognize all service rendered on or prior to the Separation Date with U S WEST
and its subsidiaries for all purposes of determining eligibility, vesting and
benefit accrual to the same extent such service was recognized under the U S
WEST Pension Plan immediately prior to the Separation Time.
 
TREATMENT OF RETIREE MEDICAL AND LIFE INSURANCE BENEFIT PLANS
 
    U S WEST currently maintains an employee welfare benefit program that
includes retiree medical and life insurance benefits for its employees. Under
such program, U S WEST maintains three funded retiree medical and life insurance
benefits trusts. One of these trusts covers hourly employees only and will be
transferred in its entirety to New U S WEST. The remaining two trusts will be
transferred to New U S WEST, and MediaOne will establish new trusts. A portion
of the assets of the U S WEST trusts will be transferred at fair value to the
MediaOne trusts based upon the same methodology used to transfer assets of the U
S WEST Pension Plan to the MediaOne Pension Plan, except that the liabilities
will be calculated by independent actuaries using the accumulated post
retirement benefit obligations basis. It is anticipated that approximately $2
million and $1 million, respectively, will be transferred by the U S WEST trusts
to the MediaOne trusts out of the total assets of $225 million and $600 million,
respectively, of the U S WEST trusts. Retiree medical and life insurance
benefits for retirees other than retirees who are employed by Continental and
MediaOne's other cable subsidiaries will become the responsibility of New U S
WEST after the Separation Time.
 
OTHER
 
    Pursuant to the Employee Matters Agreement, the liability of U S WEST for
the employee benefits matters discussed above and certain other matters will be
allocated among New U S WEST and MediaOne. See "--Relationship Between New U S
WEST and MediaOne After the Separation-- Employee Matters Agreement." As a
result, each of New U S WEST and MediaOne will have certain direct and indirect
liabilities and obligations to certain individuals who were employed by U S WEST
prior to the Separation Date, including U S WEST retirees.
 
                                                                              53
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
APPRAISAL RIGHTS
 
    Stockholders of U S WEST will not be entitled to appraisal rights under
Delaware law in connection with the Separation.
 
RELATIONSHIP BETWEEN NEW U S WEST AND MEDIAONE AFTER THE SEPARATION
 
GENERAL
 
    Following consummation of the Separation, New U S WEST and MediaOne will be
independent companies and neither will have any ownership interest in the other.
In connection with the Separation, New U S WEST and MediaOne and their
respective subsidiaries will enter into a series of agreements governing their
relationship subsequent to the Separation and providing for the allocation of
tax and certain other liabilities and obligations arising from periods prior to
the Separation. Copies of the forms of such agreements are filed as exhibits to
the New U S WEST Registration Statement. In addition, U S WEST intends to file
forms of such agreements as exhibits to a future filing by U S WEST under the
Exchange Act. See "Chapter 9: The Annual Meeting and Certain Other
Matters--Where You Can Find More Information." Set forth below is a description
of certain terms of such agreements.
 
SEPARATION AGREEMENT
 
    U S WEST and New U S WEST will enter into the Separation Agreement providing
for, among other things, certain corporate transactions required to effect the
Reorganization, the Refinancing and the Separation and other arrangements
between New U S WEST and MediaOne subsequent to the Separation.
 
    The Separation Agreement will provide for, among other things, assumptions
of liabilities and cross-indemnities designed to allocate generally, effective
as of the Separation Time, financial responsibility for the liabilities arising
out of or relating to the businesses of the Communications Group and Dex to New
U S WEST, and the businesses of the Media Group other than Dex to MediaOne. In
addition, the Separation Agreement will provide for the allocation generally of
other liabilities and obligations of U S WEST that are not specifically related
to any of U S WEST's businesses and for the costs and expenses associated with
the Separation.
 
    The Separation Agreement will also provide for various agreements and
relationships between New U S WEST and MediaOne subsequent to the Separation,
including agreements with respect to records retention, cash collection,
cooperation with respect to governmental notices and filings and
confidentiality.
 
    Pursuant to the Separation Agreement, all right, title and interest in the
name "U S WEST", whether alone or in combination with one or more words, will be
transferred to New U S WEST. Subject to certain exceptions, from and after the
Separation Time, MediaOne will no longer use the name "U S WEST" in the
operation of its businesses. In addition, MediaOne has agreed in the Separation
Agreement to cause each of its subsidiaries whose corporate name includes "U S
WEST" to change its corporate name to delete any reference therein to the name
"U S WEST."
 
TAX SHARING AGREEMENT
 
    U S WEST and New U S WEST will enter into a tax sharing agreement (the "Tax
Sharing Agreement") that will govern the allocation between U S WEST and New U S
WEST of federal, state, local and foreign tax liabilities that pertain to
taxable periods ending on or prior to the Separation Time. The Tax Sharing
Agreement also governs related tax matters such as the preparation and filing of
tax returns and the conduct of audits and other tax proceedings, for taxable
periods before and after the Separation Time.
 
                                                                              54
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
    In general, the Tax Sharing Agreement will provide that (i) New U S WEST
will be responsible for, and will indemnify U S WEST against, tax liabilities
relating to the Communications Group, for taxable periods ending on or prior to
the Separation Time, and (ii) MediaOne will be responsible for, and will
indemnify New U S WEST against, tax liabilities relating to the Media Group, for
taxable periods ending on or prior to the Separation Time.
 
    In addition, New U S WEST will be liable for, and will indemnify U S WEST
against, all tax liabilities incurred by U S WEST and any of its subsidiaries as
a result of any event, action, or failure to act, wholly or partially within the
control of New U S WEST or any of its subsidiaries, including any event, action
or failure to act that results in a breach of any representation made to the IRS
in connection with the IRS Ruling, or any other event related to the acquisition
of New U S WEST Common Stock, resulting in taxes imposed on U S WEST and any of
its subsidiaries with respect to any action taken pursuant to the Separation and
the Reorganization. U S WEST will be liable for, and will indemnify New U S WEST
against, all tax liabilities incurred by New U S WEST and any of its
subsidiaries as a result of any event, action, or failure to act wholly or
partially within the control of U S WEST or any of its subsidiaries, including
any event, action or failure to act that results in a breach of any
representation made to the IRS in connection with the IRS Ruling, or any other
event related to the acquisition of New U S WEST Common Stock, resulting in
taxes imposed on New U S WEST and any of its subsidiaries with respect to any
action taken pursuant to the Separation and the Reorganization.
 
EMPLOYEE MATTERS AGREEMENT
 
    New U S WEST and MediaOne will enter into an employee benefits agreement
(the "Employee Matters Agreement") providing for the allocation of retirement,
medical, disability and other employee and non-employee benefit and compensation
plans between New U S WEST and MediaOne. The Employee Matters Agreement will
provide for the treatment of certain benefit and compensation plans as described
under "--Employee Benefits and Compensation Matters."
 
    Under the Employee Matters Agreement, current employees of the business to
be transferred to New U S WEST, and employees of U S WEST designated as
employees of the Communications Group, will become employees of New U S WEST and
its subsidiaries. Current employees of the businesses to be retained by
MediaOne, and employees of U S WEST designated as employees of the Media Group,
will be employees of MediaOne and its subsidiaries. Liabilities relating to
former employees who were actively employed by Continental (or its predecessors)
and MediaOne's other cable subsidiaries, and liabilities relating to any other
former employees of the Media Group who do not have a deferred benefit under the
U S WEST Pension Plan, the U S WEST Savings Plan/ESOP, the retiree medical plan
or the long-term disability plan (collectively, the "Deferred Benefit Plans"),
will be retained by MediaOne after the Separation. Liabilities relating to all
other former employees of U S WEST and its affiliates will be assumed by New U S
WEST, although MediaOne will reimburse New U S WEST for one-half of the benefit
or other employment related payments made from the general assets of New U S
WEST, if they are made to a former employee who terminated employment from U S
WEST between November 1, 1995 and the Separation Time and who has no deferred
benefit under the Deferred Benefit Plans after the Separation.
 
                                                                              55
                                                       CHAPTER 3: THE SEPARATION
<PAGE>
CHAPTER 4: OTHER MATTERS TO BE CONSIDERED AT THE
ANNUAL MEETING
 
ELECTION OF DIRECTORS (ITEM 2 ON PROXY CARD)
 
    At the Annual Meeting, stockholders will be asked to elect five directors to
the U S WEST Board. All of the directors to be elected are "Class I" directors
whose terms will expire in 2001. Unless otherwise instructed, proxies will be
voted for the election of the five nominees listed below. If a stockholder
returning a proxy does not wish shares to be voted for particular nominees, the
stockholder must so indicate in the space provided on the proxy card. If one or
more of the nominees becomes unavailable or unable to serve at the time of the
Annual Meeting, the shares to be voted for such nominee or nominees that are
represented by proxies will be voted for any substitute nominee or nominees
designated by the U S WEST Board or, if none, the size of the U S WEST Board
will be reduced. The U S WEST Board knows of no reason why any of the nominees
would be unavailable or unable to serve at the time of the Annual Meeting. THE U
S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THE NOMINEES LISTED
BELOW.
 
    A brief listing of the principal occupations, other major affiliations and
ages of the five nominees for election as directors follows. Similar information
also follows for the remaining directors of U S WEST.
 
NOMINEES FOR ELECTION AS DIRECTORS IN CLASS I
 
    (The term of this class of Directors expires at the 2001 Annual Meeting)
 
    GRANT A. DOVE, Managing Partner of Technology Strategies and Alliances since
1992. Executive Vice President of Texas Instruments from 1982 to 1987. Director
of Cooper Cameron Corporation, Forefront Group, Inc., InterVoice, Inc.,
Mircoelectronics and Computer Technology Corporation, and Netspeed, Inc.
Director and Chairman of Optek Technology, Inc. Director of U S WEST since 1988.
Age 69.
 
    ALLEN F. JACOBSON, retired. Chairman and Chief Executive Officer of
Minnesota Mining & Manufacturing Company from 1986 to 1991. Director of Deluxe
Corporation, Mobil Corporation, Potlatch Corporation, Sara Lee Corporation,
Silicon Graphics, Inc., and Valmont Industries, Inc. Director of U S WEST since
1983. Age 71.
 
    CHARLES M. LILLIS, President and Chief Executive Officer of U S WEST Media
Group since 1995; Executive Vice President of U S WEST since 1987. Director of
Ascent Entertainment Group, Inc., and Supervalu, Inc. Director of U S WEST since
1998. Age 56.
 
    CHARLES P. RUSS, III, Executive Vice President--Law, Public Policy and Human
Resources, General Counsel and Secretary. Executive Vice President, General
Counsel and Secretary since 1992; Executive Vice President for Human Resources
since 1995; and Executive Vice President for Public Policy since 1997. Director
of U S WEST since 1998. Age 53.
 
    LOUIS A. SIMPSON, President and Chief Executive Officer of GEICO Capital
Operations since 1993. Director of Cohr, Inc., Pacific American Income Shares,
Inc., Potomac Electric Power Company, and Western Asset Trust, Inc. Director of
U S WEST since 1998. Age 61.
 
DIRECTORS IN CLASS II
 
    (The term of this class of Directors expires at the 1999 Annual Meeting)
 
    PIERSON M. GRIEVE, retired. Chairman of the Board and Chief Executive
Officer of Ecolab, Inc. from 1983 through 1995. Director of Danka Business
Systems PLC, Norwest Corporation, and St. Paul Companies. Director of U S WEST
since 1990. Age 70.
 
                                                                              56
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    GEORGE J. HARAD, Chairman of the Board of Boise Cascade Corporation since
1995; President and Chief Executive Officer since 1994; President and Chief
Operating Officer from 1991 to 1994. Director of Allendale Insurance Company.
Director of U S WEST since 1997. Age 53.
 
    RICHARD D. MCCORMICK, Chairman of the Board since 1992; President and Chief
Executive Officer since 1991. Director of Norwest Corporation and UAL, Inc.
Director of U S WEST since 1986. Age 57.
 
    MARILYN CARLSON NELSON, Vice Chair and Chief Operating Officer, Carlson
Companies, Inc.; Co-Chair, Carlson Wagonlit Travel. Since joining Carlson
Companies in 1989, Mrs. Nelson has held a number of positions including
Director, Senior Vice President and Vice Chair of Carlson Holdings, Inc.
Director of Exxon Corporation. Member of United States National Tourism
Organization, World Travel and Tourism Council, International Advisory Council,
Center for International Leadership and Committee of 200. Director of U S WEST
since 1993. Age 58.
 
    SOLOMON D. TRUJILLO, President and Chief Executive Officer of U S WEST
Communications Group and Executive Vice President of U S WEST since 1995;
President and Chief Executive Officer of U S WEST Dex, Inc. from 1992 to 1995.
Director of BankAmerica Corporation and Dayton Hudson Corporation. Director of U
S WEST since 1998. Age 46.
 
DIRECTORS IN CLASS III
 
    (The term of this class of Directors expires at the 2000 Annual Meeting)
 
    ROBERT L. CRANDALL, Chairman of the Board, President and Chief Executive
Officer of AMR Corp. since 1985. Director of Halliburton Company and Sabre Group
Holdings, Inc. Director of U S WEST since 1997. Age 62.
 
    ALLAN D. GILMOUR, retired. Vice Chairman of Ford Motor Co. from 1993 to
1995; Executive Vice President of Ford Motor Co. and President, Ford Automotive
Group, from 1990 to 1993. Director of The Dow Chemical Company, DTE Energy
Company, The Prudential Insurance Company of America, and Whirlpool Corporation.
Director of U S WEST since 1992. Age 63.
 
    FRANK POPOFF, Chairman of The Dow Chemical Company since 1992 and Chief
Executive Officer from 1987 to 1995. Director of American Express Company,
Chemical Financial Corporation, and United Technologies Corporation. Director of
U S WEST since 1993. Age 62.
 
    JOHN "JACK" SLEVIN, Chairman of the Board of Comdisco, Inc. since 1996;
President and Chief Executive Officer since 1994; Executive Vice President and
Chief Operating Officer from 1993 to 1994. Director of U S WEST since 1998. Age
61.
 
    JERRY O. WILLIAMS, President and Chief Executive Officer of Grand Eagle
Companies, Inc. since 1992. Director of ECRM Inc. and Monotype Typography, Inc.
Director of U S WEST since 1988. Age 59.
 
    Immediately after the Separation, it is expected that the New U S WEST Board
will consist of 11 directors. Effective as of the Separation Time, Messr. Harad,
Jacobson, McCormick, Popoff, Trujillo and Williams and Ms. Nelson will resign as
directors of U S WEST and will become directors of New U S WEST. In addition, it
is expected that certain other persons will become directors of New U S WEST.
See "Chapter 6: Information about New U S WEST--Management of New U S WEST--
Board of Directors of New U S WEST."
 
    As of the Separation, the U S WEST Board will continue as the MediaOne
Board. It is expected that the MediaOne Board will consist of nine directors.
Messrs. Crandall, Dove, Gilmour, Grieve, Lillis, Russ, Simpson and Slevin will
continue as directors of MediaOne. In addition, it is expected that certain
other persons will become directors of MediaOne. See "Chapter 7: Information
About MediaOne--Management of MediaOne--MediaOne Board of Directors."
 
                                                                              57
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
RATIFICATION OF AUDITORS (ITEM 3 ON PROXY CARD)
 
    The U S WEST Board, upon recommendation of the Audit Committee of the U S
WEST Board, has appointed the firm of Arthur Andersen LLP, Independent Public
Accountants, as independent auditors to audit the financial statements of U S
WEST for calendar year 1998. THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" RATIFICATION OF THIS APPOINTMENT.
 
    Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire, and will be available to respond to questions. Following consummation of
the Separation, Arthur Andersen LLP will continue as independent auditors of
MediaOne. The selection of New U S WEST's auditors will be made after
consummation of the Separation.
 
PROPOSAL TO APPROVE THE 1998 NEW U S WEST STOCK PLAN (ITEM 4 ON PROXY CARD)
 
    Holders of Communications Stock and Media Stock are being asked to consider
and approve a related proposal to adopt the 1998 New U S WEST Stock Plan to
provide for the granting by New U S WEST of stock awards in New U S WEST Common
Stock following the Separation.
 
    Under the 1998 New U S WEST Stock Plan, grants of stock options and other
stock awards made after the Separation may be made with respect to New U S WEST
Common Stock in the same manner as currently permitted with respect to
Communications Stock. If the Separation is approved and implemented, outstanding
Communications Stock Awards previously granted under the U S WEST 1994 Stock
Plan will be replaced with substitute awards in respect of New U S WEST Common
Stock under the 1998 New U S WEST Stock Plan. See "Chapter 3: The
Separation--Employee Benefits and Compensation Matters--Treatment of
Communications Stock Awards."
 
DESCRIPTION OF 1998 NEW U S WEST STOCK PLAN
 
    The 1998 New U S WEST Stock Plan is a stockholder-approved means of
affording eligible employees, executive officers, non-employee directors of New
U S WEST and certain outside advisors to New U S WEST with an opportunity to
acquire a proprietary interest in New U S WEST. Under the 1998 New U S WEST
Stock Plan, "eligible employee" is defined as any employee of New U S WEST or
its subsidiaries who is so employed on the date of the grant of an award. The
1998 New U S WEST Stock Plan provides for the grant of incentive stock options
and non-qualified stock options (with or without reload options), stock
appreciation rights ("SARs"), stock awards in the form of restricted stock or
grants of New U S WEST Common Stock, phantom units (and with respect to phantom
units and restricted stock awards, with or without dividend equivalent units),
or a combination thereof to eligible employees, eligible non-employees,
executive officers or outside directors of New U S WEST. The maximum aggregate
number of shares of New U S WEST Common Stock that may be granted in 1998 is
4,800,000 shares. The maximum aggregate number of shares of New U S WEST Common
Stock that may be granted in any other calendar year pursuant to the 1998 New U
S WEST Stock Plan is one percent (1%) of the shares of New U S WEST Common Stock
outstanding on the first day of such calendar year. The maximum number of shares
of New U S WEST Common Stock for which awards may be granted to any individual
participant in any calendar year may not exceed eight hundred thousand (800,000)
shares. No further awards shall be granted under the 1998 New U S WEST Stock
Plan following the fifth anniversary of the plan's approval by stockholders.
 
    The 1998 New U S WEST Stock Plan will be administered by the New U S WEST
Human Resources Committee with respect to officers, executive officers and
outside directors and by the employee benefits committee (consisting of
employees appointed by the New U S WEST Human Resources Committee) (the "New U S
WEST Employee Benefits Committee") with respect to all other
 
                                                                              58
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
eligible employees and eligible non-employees. For purposes of this description
of the 1998 New U S WEST Stock Plan, the term "New U S WEST Committee" shall
mean the New U S WEST Human Resources Committee or the New U S WEST Employee
Benefits Committee or their delegates, as applicable.
 
    The New U S WEST Board shall have the right to amend, modify, suspend or
terminate the 1998 New U S WEST Stock Plan at any time, provided that, with
respect to Incentive Stock Options (as defined herein), no amendment will be
made that will (i) decrease the minimum option price in the case of any
Incentive Stock Option, or (ii) modify the provisions of the 1998 New U S WEST
Stock Plan with respect to Incentive Stock Options, unless such amendment is
made by or with the approval of the stockholders or unless the New U S WEST
Board receives an opinion of counsel to New U S WEST that stockholder approval
is not necessary with respect to any modifications relating to Incentive Stock
Options, and provided further that no amendment will be made that will (i)
increase the number of shares of New U S WEST Common Stock that may be issued
under the 1998 New U S WEST Stock Plan, (ii) permit the option price for any
option to be less than fair market value on the date such option is granted, or
(iii) extend the period during which awards may be granted under the 1998 New U
S WEST Stock Plan beyond the fifth anniversary of its approval by stockholders,
unless such amendment is made by or with the approval of stockholders. No
amendment, modification, suspension or termination of the 1998 New U S WEST
Stock Plan will alter or impair any awards previously granted under the 1998 New
U S WEST Stock Plan, without the consent of the holder thereof.
 
    STOCK OPTIONS  Options granted under the 1998 New U S WEST Stock Plan may be
either options that are intended to qualify for treatment as "incentive stock
options" under Section 422 of the Code ("Incentive Stock Options") or options
that do not so qualify ("Nonqualified Stock Options"). Incentive Stock Options
or Nonqualified Stock Options may be granted under the 1998 New U S WEST Stock
Plan to any person who is an eligible employee, officer or executive officer of
New U S WEST. In addition, Nonqualified Stock Options may be granted under the
1998 New U S WEST Stock Plan to any person who is an eligible non-employee of
New U S WEST. The exercise price of Incentive Stock Options will be at least the
fair market value of a share of New U S WEST Common Stock on the date of the
grant (and not less than 110% of the fair market value in the case of an
Incentive Stock Option granted to an optionee owning 10% or more of New U S WEST
Common Stock). The exercise price of Nonqualified Stock Options will be at least
the fair market value of a share of New U S WEST Common Stock on the date of the
grant and may be granted with or without dividend equivalent rights; provided,
however, that with respect to Nonqualified Stock Options granted to any
executive officer, no dividend equivalent rights may be granted.
 
    The term of an option may not exceed 10 years (or five years in the case of
an Incentive Stock Option granted to an optionee owning 10% or more of New U S
WEST Common Stock).
 
    STOCK APPRECIATION RIGHTS  The New U S WEST Committee may grant SARs to
eligible employees, officers, executive officers and eligible non-employees
either alone or in connection with an option granted pursuant to the 1998 New U
S WEST Stock Plan. An SAR granted in connection with an option may be exercised
only when the fair market value of the New U S WEST Common Stock exceeds the
option price of the related option. Such SAR entitles the participant to
surrender to New U S WEST unexercised, the related option, or any portion
thereof and to receive cash and/or shares of New U S WEST Common Stock having a
value equal to the excess of (i) the fair market value of one share of New U S
WEST Common Stock on the day of the surrender over (ii) the option price per
share of New U S WEST Common Stock multiplied by (iii) the number of shares of
New U S WEST Common Stock that may be exercised under the option. An SAR granted
singly shall entitle the participant to receive the excess of (i) the fair
market value of a share of New U S WEST Common Stock on the date of exercise
over (ii) the fair market value of a share of New U S WEST Common
 
                                                                              59
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
Stock on the date of the grant of the SAR multiplied by (iii) the number of SARs
exercised. An SAR shall become a vested award upon (x) a participant becoming
Disabled, or (y) the death of a participant.
 
    RESTRICTED STOCK  The New U S WEST Committee may grant restricted stock to
eligible employees, eligible non-employees, officers and executive officers of
New U S WEST. No shares of restricted stock may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of until the restrictions on such
shares have lapsed. The New U S WEST Committee will establish as to each award
of
restricted stock the terms and conditions upon which the restrictions will
lapse, and, in its discretion, may accelerate the time at which such
restrictions lapse, or waive such restrictions.
 
    Upon acceptance by a person of an award of restricted stock, subject to the
restrictions noted above, the person will have all the rights of a stockholder
with respect to such shares, including the right to vote such shares of
restricted stock and the right to receive all dividends paid on such restricted
stock. Certificates representing restricted stock will be held by New U S WEST
until the restrictions lapse.
 
    PHANTOM UNITS  The New U S WEST Committee may, in its sole discretion, grant
the right to earn phantom units to eligible employees, eligible non-employees,
officers and executive officers of New U S WEST. The New U S WEST Committee will
determine the criteria for the earning of phantom units. Upon satisfaction of
such criteria, a phantom unit will be deemed a "vested award," and, unless a
participant has elected to defer, shares of New U S WEST Common Stock
representing the phantom units will be distributed to the participant, unless
the New U S WEST Committee, with the consent of the participant, provides for
the payment of the phantom units in cash or partly in cash and partly in shares
of New U S WEST Common Stock equal to the value of the shares of New U S WEST
Common Stock which would otherwise be distributed to the participant.
 
    ADJUSTMENT OF SHARES  In the event there is any change in the New U S WEST
Common Stock by reason of any changes in the capital structure of New U S WEST,
the number or kind of shares or interests subject to an award and the per share
price or value thereof will be appropriately adjusted by the New U S WEST
Committee at the time of such event, provided that each participant's economic
position with respect to the award will not, as a result of such adjustment, be
worse than it had been immediately prior to such event.
 
    CHANGE OF CONTROL  The 1998 New U S WEST Stock Plan provides that in the
event of a change of control of New U S WEST (as defined in the 1998 New U S
WEST Stock Plan), all options and SARs will be fully exercisable as of the date
of the change of control and remain exercisable through their full term.
Restrictions applicable to outstanding awards of restricted stock will
immediately lapse and conditions applicable to phantom units will automatically
be deemed waived, and participants who receive such grants will become
immediately entitled to receipt of the New U S WEST Common Stock subject to such
grants, and the New U S WEST Committee, in its sole discretion, will have the
right to accelerate payment of any deferrals of vested phantom units.
 
FEDERAL INCOME TAX CONSEQUENCES
 
    The statements in the following paragraphs of the principal federal income
tax consequences of awards granted under the 1998 New U S WEST Stock Plan are
based on statutory authority and judicial and administrative interpretations, as
of the date of this Proxy Statement, which are subject to change at any time
(possibly with retroactive effect). The law is technical and complex and the
discussion below represents only a general summary.
 
    INCENTIVE STOCK OPTIONS.  An employee who receives an Incentive Stock Option
pursuant to the 1998 New U S WEST Stock Plan does not recognize any taxable
income upon the grant of such option.
 
                                                                              60
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
Similarly, the exercise of an Incentive Stock Option generally does not give
rise to federal income tax to the employee, provided that (i) the federal
"alternative minimum tax," which depends on the employee's particular tax
situation, does not apply and (ii) the employee is employed by New U S WEST from
the date of grant of the option until three months prior to the exercise
thereof, except where such employment terminates by reason of disability (where
the three month period is extended to one year) or death (where this requirement
does not apply). If an employee exercises an Incentive Stock Option after these
requisite periods, the Incentive Stock Option will be treated as a Nonqualified
Stock Option and will be subject to the rules described below under
"--Non-Qualified Stock Options, Stock Appreciation Rights and Phantom Units."
 
    If, after exercising an Incentive Stock Option, an employee disposes of the
shares so acquired more than two years from the date of grant and more than one
year from the date of transfer of the shares pursuant to the exercise of such
Incentive Stock Option (the "applicable holding period"), the employee generally
will recognize a capital gain or loss equal to the difference, if any, between
the amount received for the shares and the exercise price. If, however, an
employee does not hold the shares so acquired for the applicable holding
period--thereby making a "disqualifying disposition"--the employee would
recognize ordinary income equal to the excess of the fair market value of the
shares at the time the Incentive Stock Option was exercised over the exercise
price; the balance of any income received at the time of such disqualifying
disposition would be capital gain (provided the employee held such shares as a
capital asset at such time). If the disqualifying disposition is a sale or
exchange that would permit a loss to be recognized under the Code (were a loss
in fact to be realized), and the sales proceeds are less than the fair market
value of the shares on the date of exercise, the employee's ordinary income
therefrom would be limited to the gain (if any) realized on the sale.
 
    An employee who exercises an Incentive Stock Option by delivering shares
previously acquired pursuant to the exercise of another Incentive Stock Option
before the expiration of their applicable holding period is treated as making a
"disqualifying disposition" of such shares. Upon the exercise of an Incentive
Stock Option with previously acquired shares after the applicable holding
period, it appears, despite some uncertainty, that the employee would not
recognize gain or loss with respect to such previously acquired shares.
 
    NONQUALIFIED STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND PHANTOM UNITS.  An
individual who receives a grant of a Nonqualified Stock Option, an SAR, or a
phantom unit will not recognize any taxable income upon such grant. However, the
individual generally will recognize ordinary income upon exercise of a
Nonqualified Stock Option in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price. Similarly,
upon the receipt of cash or shares pursuant to the exercise of an SAR, the
individual generally will recognize ordinary income in an amount equal to the
sum of the cash and the fair market value of the shares received; likewise, upon
the vesting of a phantom unit, the individual generally will recognize ordinary
income in an amount equal to the fair market value of the shares, plus cash, if
any, received.
 
    As a result of Section 16(b) of the Exchange Act, under certain
circumstances, the timing of income recognition may be deferred (i.e., the
"Deferral Period") for any individual who is an officer or director of New U S
WEST or a beneficial owner of more than ten percent (10%) of any class of equity
securities of New U S WEST. Absent a Section 83(b) election (as described
below), recognition of income by the individual will be deferred until the
expiration of the Deferral Period, if any.
 
    An individual who exercises a Nonqualified Stock Option by delivering New U
S WEST Common Stock to New U S WEST, other than New U S WEST Common Stock
previously acquired pursuant to the exercise of an Incentive Stock Option which
is treated as a "disqualifying disposition" as described above, will not
recognize gain or loss with respect to the exchange of such New U S WEST Common
Stock, even if the fair market value of the shares so delivered is different
from the individual's tax
 
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<PAGE>
basis. The individual, however, will be taxed as described above with respect to
the exercise of the Nonqualified Stock Option as if he or she had paid the
exercise price in cash.
 
    RESTRICTED STOCK.  Absent a written election pursuant to Section 83(b) of
the Code filed with the IRS within 30 days after the date of transfer of such
shares (a "Section 83(b) election"), an individual who receives restricted stock
under the 1998 New U S WEST Stock Plan generally will recognize ordinary income
at the earlier of the time at which (i) the shares become transferable or (ii)
the restrictions that impose a substantial risk of forfeiture of such shares
lapse, in an amount equal to the excess of the fair market value (on such date)
of such shares over the consideration paid for such restricted stock, if any. If
a Section 83(b) election is made, the individual will recognize ordinary income,
as of the transfer date, in an amount equal to the excess of the fair market
value of the shares as of that date over the price paid for such award, if any.
 
    CONSEQUENCES TO NEW U S WEST.  New U S WEST will not be allowed a federal
income tax deduction upon the grant or exercise of an Incentive Stock Option or
the disposition, after the applicable holding period, of the shares acquired
upon exercise of an Incentive Stock Option. In the event of a disqualifying
disposition of shares acquired upon exercise of an Incentive Stock Option, New U
S WEST generally will be entitled to a deduction in an amount equal to the
ordinary income included by the employee, provided that such amount constitutes
an ordinary and necessary business expense to New U S WEST and is reasonable and
the limitations of Sections 280G and 162(m) of the Code (discussed below) do not
apply.
 
    A federal income tax deduction generally will be allowed to New U S WEST in
an amount equal to the ordinary income included by the employee with respect to
his or her Nonqualified Stock Option, SAR, phantom unit, or restricted stock,
provided that such amount constitutes an ordinary and necessary business expense
to New U S WEST and is reasonable and the limitations of Sections 280G and
162(m) of the Code do not apply.
 
    CHANGE OF CONTROL.  In general, if the total amount of payments to an
individual that are contingent upon a "change of control" of New U S WEST (as
defined in Section 280G of the Code), including payments under the 1998 New U S
WEST Stock Plan that vest upon a "change of control," equals or exceeds three
times the individual's "base amount" (generally, such individual's average
annual compensation for the five calendar years preceding the change of
control), then, subject to certain exceptions, the payments may be treated as
"parachute payments" under the Code, in which case a portion of such payments
would be non-deductible to New U S WEST and the individual would be subject to a
20% excise tax on such portion of the payments.
 
    CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION.  With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in excess
of $1 million per executive per taxable year. One such exception applies to
certain performance-based compensation provided that such compensation has been
approved by stockholders in a separate vote and certain other requirements are
met. New U S WEST believes that certain awards granted under the 1998 New U S
WEST Stock Plan should qualify for the performance-based compensation exception
to Section 162(m).
 
    Approval of the 1998 New U S WEST Stock Plan is being sought to establish
New U S WEST's ability to deduct, for federal income tax purposes, compensation
paid pursuant to the exercise of stock options and in respect of other stock
awards. Under Section 162(m) of the Code, stockholder approval of
performance-based compensation plans is necessary to qualify for the
performance-based compensation exception to the limitation on a company's
ability to deduct compensation paid to certain specified individuals in excess
of $1 million.
 
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<PAGE>
    The foregoing summary of the 1998 New U S WEST Stock Plan is qualified in
its entirety by reference to the full proposed text of the 1998 New U S WEST
Stock Plan included in Annex C. The 1998 New U S WEST Stock Plan will become
effective at the Separation Time. This proposal is conditioned upon approval by
holders of Communications Stock and Media Stock of the Separation. If the
Separation is not approved by holders of Communications Stock and Media Stock or
implemented by the U S WEST Board, this proposal will not be implemented. The
approval of the Separation and this proposal by holders of Communications Stock
and Media Stock at the Annual Meeting will constitute approval of the 1998 New U
S WEST Stock Plan by stockholders of New U S WEST. THE U S WEST BOARD RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 1998 NEW U S WEST STOCK PLAN.
 
PROPOSAL TO APPROVE THE NEW U S WEST LONG-TERM INCENTIVE PLAN (ITEM 5 ON PROXY
  CARD)
 
    Holders of Communications Stock and Media Stock are being asked to consider
and approve a related proposal to adopt the New U S WEST LTIP.
 
    The New U S WEST LTIP is intended to provide key executives of New U S WEST
with incentive compensation based upon the sum of regular cash dividends, if
any, paid on New U S WEST Common Stock, and the achievement of pre-established,
objective performance goals. Eligibility under the New U S WEST LTIP will be
limited to executives and key employees of New U S WEST selected by the New U S
WEST Human Resources Committee.
 
    The New U S WEST LTIP includes three performance periods of three years that
conclude, respectively, on December 31 of 1998, 1999 and 2000. The New U S WEST
Human Resources Committee will assign Dividend Equivalent Units ("DEUs") to New
U S WEST LTIP participants with respect to each performance period that had been
assigned to such participant under the U S WEST Communications Group Long-Term
Incentive Plan. The New U S WEST Human Resources Committee may assign additional
DEUs on such other occasions as it may determine, the number of which will be
determined, based on New U S WEST's compensation strategy and philosophy at such
time. At the conclusion of each performance period, participants will be
entitled to receive a percentage of the product of their respective DEUs
multiplied by the aggregate value of dividends paid during the performance
period on one share of New U S WEST Common Stock. The percentage, which may not
exceed 150%, will be determined pursuant to a performance formula established by
the New U S WEST Human Resources Committee within 90 days of the commencement of
a performance period. The performance formula will be based on one or more of
New U S WEST's financial results, revenue, productivity and efficiency measures,
customer service, and employee and management satisfaction measures.
 
    Payments, if any, following a performance period will be in the form of New
U S WEST Common Stock, and shall occur as soon as practicable following the
conclusion of the performance period. The number of shares issued for a
performance period will be determined by dividing the amount payable to a
participant for a performance period by the closing price of New U S WEST Common
Stock, averaged over a 20 trading day period commencing ten trading days prior
to the end of the performance period. Shares so paid may be restricted or
unrestricted, at the discretion of the New U S WEST Human Resources Committee. A
pool of 1,300,000 shares of New U S WEST Common Stock will be available for
issuance over the life of the New U S WEST LTIP, and the number of DEUs issued
to any participant for any performance period shall not exceed 500,000.
 
    Approval of the New U S WEST LTIP is being sought to establish New U S
WEST's ability to deduct, for federal income tax purposes, compensation paid
pursuant to the New U S WEST LTIP. Under Section 162(m) of the Code, stockholder
approval of performance-based compensation plans is
 
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<PAGE>
necessary to qualify for the performance-based compensation exception to the
limitation on a company's ability to deduct compensation paid to certain
specified individuals in excess of $1 million.
 
    The foregoing summary of the New U S WEST LTIP is qualified in its entirety
by reference to the full text of the plan included in Annex D. The New U S WEST
LTIP will become effective at the Separation Time. This proposal is conditioned
upon approval by holders of Communications Stock and Media Stock of the
Separation. If the Separation is not approved by holders of Communications Stock
and Media Stock or implemented by the U S WEST Board, this proposal will not be
implemented. The approval of the Separation and this proposal by holders of
Communications Stock and Media Stock at the Annual Meeting will constitute
approval of the New U S WEST LTIP by stockholders of New U S WEST. THE U S WEST
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE NEW U S WEST LTIP.
 
PROPOSAL TO APPROVE THE NEW U S WEST EXECUTIVE SHORT-TERM INCENTIVE PLAN (ITEM 6
  ON PROXY CARD)
 
    Holders of Communications Stock and Media Stock are being asked to consider
and approve a related proposal to adopt the New U S WEST ESTIP.
 
    The New U S WEST ESTIP will provide certain officers of New U S WEST with
the opportunity to earn annual cash awards based upon the accomplishment of
corporate objectives and individual contributions to business results.
Eligibility under this plan will be limited to the Chief Executive Officer and
any individuals employed by New U S WEST at the end of any calendar year who
appear in the summary compensation table in New U S WEST's annual proxy
statement to stockholders for that year.
 
    Under this plan, participants will be eligible to receive equal shares of a
cash bonus pool, provided that the New U S WEST Human Resources Committee will
have the authority to reduce the share of any participant. The cash bonus pool
will be equal to one-quarter of one percent (0.25%) of cash provided by
operating activities of New U S WEST and its consolidated subsidiaries,
determined in accordance with the standards of the Financial Accounting
Standards Board, less any amount the New U S WEST Human Resources Committee
deems appropriate. In the event that the New U S WEST Human Resources Committee
elects to reduce the cash bonus pool to an amount that is less than 0.25% of
cash provided by operating activities, the amount by which the pool is reduced
may, at the New U S WEST Human Resources Committee's sole discretion, be added
to the cash bonus pool that is available for any subsequent year or years. In
determining the amount to be paid to a participant for any calendar year or
other applicable period, the New U S WEST Human Resources Committee will
consider a number of performance factors, including, but not limited to, New U S
WEST's net income and cash flow, quality indicators, and other operating and
strategic results. Any such reduction of a participant's share will not result
in an increase of another participant's share. Should a "change of control," as
that term is defined in the New U S WEST ESTIP, occur, the period for which the
cash bonus pool is established may be reduced, so that the end of such period
coincides with the date of the change of control.
 
    Approval of the New U S WEST ESTIP is being sought to establish New U S
WEST's ability to deduct, for federal income tax purposes, compensation paid
pursuant to the New U S WEST ESTIP. Under Section 162(m) of the Code,
stockholder approval of performance-based compensation plans is necessary to
qualify for the performance-based compensation exception to the limitation on a
company's ability to deduct compensation paid to certain specified individuals
in excess of $1 million.
 
    The foregoing summary of the New U S WEST ESTIP is qualified in its entirety
by reference to the full proposed text of the New U S WEST ESTIP included in
Annex E. The New U S WEST ESTIP will become effective at the Separation Time.
This proposal is conditioned upon approval by
 
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                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
holders of Communications Stock and Media Stock of the Separation. If the
Separation is not approved by holders of Communications Stock and Media Stock or
implemented by the U S WEST Board, this proposal will not be implemented. The
approval of the Separation and this proposal by holders of Communications Stock
and Media Stock at the Annual Meeting will constitute approval of the New U S
WEST ESTIP by stockholders of New U S WEST. THE U S WEST BOARD RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE NEW U S WEST ESTIP.
 
PROPOSAL TO APPROVE AN AMENDMENT TO THE U S WEST 1994 STOCK PLAN (ITEM 7 ON
  PROXY CARD)
 
    Holders of Communications Stock and Media Stock are being asked to consider
and approve a related proposal to amend the U S WEST 1994 Stock Plan, which will
continue as the stock plan for MediaOne after the Separation (the "MediaOne
Stock Plan"). See "Chapter 3: The Separation-- Employee Benefits and
Compensation Matters."
 
    The MediaOne Stock Plan is a stockholder-approved means of affording certain
eligible employees, executive officers, directors and certain outside advisors
with an opportunity to acquire a proprietary interest in U S WEST, which after
the Separation will become MediaOne. Through grants of stock options, restricted
and unrestricted stock and other instruments, the MediaOne Stock Plan aligns the
financial interests of participants with those of stockholders, and provides
participants with a strong incentive to maximize stockholder value. The maximum
number of shares that may be granted with respect to the Media Stock in any
calendar year under the MediaOne Stock Plan is three-quarters of one percent
(0.75%) of the Media Stock outstanding on the first day of that calendar year,
though in the event that fewer than the full number of shares available for
issuance in any calendar year is issued in that year, the shares not issued are
added to the shares available for issuance in any subsequent year or years. The
U S WEST Board recommends that stockholders approve an amendment to increase the
maximum number of shares that may be granted with respect to the Media Stock (or
MediaOne Common Stock after the Separation) in any calendar year under the
MediaOne Stock Plan from the current three-quarters of one percent (0.75%) to
one percent (1.0%) of the Media Stock (or MediaOne Common Stock after the
Separation) outstanding on the first day of that calendar year.
 
    Approval of the amendment to the MediaOne Stock Plan is also being sought to
establish U S WEST's ability to deduct, for federal income tax purposes,
compensation paid pursuant to the exercise of stock options and in respect of
other stock awards. Under Section 162(m) of the Code, stockholder approval of
performance-based compensation plans is necessary to qualify for the
performance-based compensation exception to the limitation on a company's
ability to deduct compensation paid to certain specified individuals in excess
of $1 million.
 
    This proposal is not conditioned upon approval by holders of Communications
Stock and Media Stock of the Separation. If this proposal is approved, the
MediaOne Stock Plan will be amended as described above regardless of whether the
Separation is approved by holders of Communications Stock and Media Stock or
implemented by the U S WEST Board. THE U S WEST BOARD RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE MEDIAONE STOCK PLAN.
 
PROPOSAL TO APPROVE AN AMENDMENT TO THE U S WEST EXECUTIVE SHORT-TERM INCENTIVE
  PLAN (ITEM 8 ON PROXY CARD)
 
    Holders of Communications Stock and Media Stock are being asked to consider
and approve a related proposal to amend the U S WEST Executive Short-Term
Incentive Plan, which will continue as the short-term incentive plan for certain
executive officers of MediaOne after the Separation (the "MediaOne ESTIP").
 
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                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    The MediaOne ESTIP is intended to provide key executives of MediaOne with
incentive compensation based upon the achievement of pre-established performance
goals. The Human Resources Committee of the U S WEST Board (the "U S WEST Human
Resources Committee") established the performance goals for MediaOne for 1998,
at the beginning of the 1998 performance period. Following the Separation, the
MediaOne ESTIP will be administered by the MediaOne Human Resources and
Executive Development Committee (the "MediaOne Human Resources Committee"),
which will establish performance goals at the beginning of each performance
period. The MediaOne ESTIP performance goals consist of financial, strategic and
customer objectives for MediaOne, as well as individual performance goals. For
calendar year 1998, the financial, strategic and customer goals for MediaOne
pertain to growth in EBITDA, revenues, net cash flow, and cable television
subscribers, as well as to qualitative goals involving customer service, quality
controls, public policy, alliance/partnering issues and issues surrounding the
recognition of the year 2000 by MediaOne's software and technology systems.
Individual performance goals are based on the contributions of a participant's
business unit toward the achievement of MediaOne's financial, strategic and
customer goals. Eligibility in the plan will continue to be limited to the Chief
Executive Officer and any individuals employed at the end of a calendar year who
appear in the summary compensation table of MediaOne's proxy statement to
stockholders for that year. Under the terms of the plan, participants are
eligible to receive equal shares of a cash bonus pool, provided that the
MediaOne Human Resources Committee will have authority to reduce the share of
any participant. The cash bonus pool is currently equal to one-quarter of one
percent (0.25%) of cash provided by operating activities of U S WEST and its
consolidated subsidiaries, determined in accordance with the standards of the
Financial Accounting Standards Board, less any amount the U S WEST Human
Resources Committee deems appropriate. For the year ended December 31, 1997,
0.25% of cash provided by operating activities amounted to approximately $12.9
million for U S WEST and its consolidated subsidiaries. In the event that the U
S WEST Human Resources Committee elects to reduce the cash bonus pool to an
amount that is less than 0.25% of cash provided by operating activities, the
amount by which the pool is reduced may, at the U S WEST Human Resources
Committee's sole discretion, be added to the cash bonus pool that is available
for any subsequent year or years. In determining the amount to be paid to a
participant for any calendar year, the MediaOne Human Resources Committee will
consider the extent to which MediaOne has achieved its financial, strategic and
customer goals, as well as the extent to which each participant has achieved his
individual performance goals. Any such reduction of a participant's share does
not result in an increase of another participant's share. Should a "change of
control," as that term is defined in the MediaOne ESTIP, occur, the period for
which the cash bonus pool is established may be reduced, so that the end of such
period coincides with the date of the change of control.
 
    The U S WEST Board recommends that stockholders approve an amendment to
modify the calculation of the cash bonus pool so that it is equal to one-half of
one percent (0.5%) of the EBITDA of MediaOne and its consolidated subsidiaries,
determined on a proportionate basis (I.E., MediaOne's proportionate share of
EBITDA of nonconsolidated investments are included with the EBITDA of
consolidated investments). It is expected that this amendment will maintain the
size of the cash bonus pool, following the Separation, at a level that will
permit MediaOne to award performance with incentive compensation in a manner
that is consistent with past practices. For the year ended December 31, 1997,
0.50% of MediaOne's pro forma EBITDA determined on a proportionate basis
amounted to approximately $10.1 million. The U S WEST Board believes that this
amendment will allow MediaOne, following the Separation, to provide incentive
compensation to its key executives to an extent that is commensurate with its
industry peers. The MediaOne ESTIP, as amended, will become effective at the
Separation Time.
 
    Approval of the amendment to the MediaOne ESTIP is being sought to establish
U S WEST's ability to deduct, for federal income tax purposes, compensation paid
pursuant to the MediaOne ESTIP. Under Section 162(m) of the Code, stockholder
approval of performance-based compensation
 
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                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
plans is necessary to qualify for the performance-based compensation exception
to the limitation on a company's ability to deduct compensation paid to certain
specified individuals in excess of $1 million.
 
    This proposal is conditioned upon approval by holders of Communications
Stock and Media
Stock of the Separation. If the Separation is not approved by holders of
Communications Stock and Media Stock or implemented by the U S WEST Board, this
proposal will not be implemented.
THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE MEDIAONE ESTIP.
 
STOCKHOLDER PROPOSALS
 
    Stockholder proponents have notified U S WEST of their intent to present the
following proposals and supporting statements at the Annual Meeting. The
adoption of the proposals would not, in itself, cause the implementation of the
action or policy called for by the proposal, but simply would constitute a
recommendation to the U S WEST Board.
 
STOCKHOLDER PROPOSAL (ITEM 9 ON THE PROXY CARD)
 
    Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, owning of record 120 shares of Communications
Stock and 120 shares of Media Stock, has given notice that she intends to
present to the Annual Meeting the following resolution:
 
        "RESOLVED: That the shareholders of U S WEST recommend that the Board of
    Directors take the necessary steps to institute the election of directors
    ANNUALLY, instead of the stagger system as is now provided."
 
        "REASONS: The great majority of New York Stock Exchange listed
    corporations elect all their directors each year."
 
        "This ensures that ALL directors will be more accountable to ALL
    shareholders each year and to a certain extent prevents the
    self-perpetuation of the Board."
 
        "Last year the owners of Communications Stock and Media Stock
    representing approximately 36.8% of shares VOTING, voted FOR this proposal."
 
        "If you AGREE, please mark your proxy FOR this resolution."
 
    THIS PROPOSAL HAS BEEN SUBMITTED TO EACH OF THE PAST NINE ANNUAL MEETINGS
AND EACH TIME HAS BEEN DEFEATED. THE U S WEST BOARD AGAIN HAS CONSIDERED THE
PROPOSAL AND AGAIN RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" IT.
 
    The U S WEST Board believes that the election of directors by classes
enhances the likelihood of continuity and stability in the U S WEST Board and
its policies. When directors are elected by classes, a change in the composition
of a majority of the U S WEST Board normally requires at least two stockholder
meetings, instead of one. Classification of the U S WEST Board also encourages
any person seeking to acquire control of U S WEST to initiate such an action
through arm's length negotiations with management and the U S WEST Board, who
are in a position to negotiate a transaction that is fair to all stockholders of
U S WEST. With a classified U S WEST Board, it is more likely that a majority of
the directors of U S WEST will have prior U S WEST Board experience, which will
continue to facilitate planning for the business of U S WEST.
 
STOCKHOLDER PROPOSAL (ITEM 10 ON THE PROXY CARD)
 
    Mr. John J. Gilbert and Mrs. Margaret R. Gilbert, 29 East 64th Street, New
York, New York, 10021-7043, owners, executors of estates holding, and
co-trustees of family trusts owning of record approximately 1060 shares of
Communications Stock and 801 shares of Media Stock; Mr. Allan Frank,
 
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                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
6882 East Center Ave., Denver, Colorado, 80224-1503, owner of record of 308
shares each of Communications Stock and Media Stock; Mr. Gerald Armstrong, P.O.
Box 18546, Capital Hill Station, Denver, Colorado 80218, owner of record of 20
shares each of Communications Stock and Media Stock; and Mr. Edward Rudy and
Mrs. Edith Rudy, Box 7077, Yorkville Station, New York, New York 10126, owners
of record of 366 shares of Communications Stock and 348 shares of Media Stock,
have given notice that they intend to present at the Annual Meeting the
following resolution:
 
        "RESOLVED: That the stockholders of U S WEST, Inc., assembled in annual
    meeting in person and by proxy, hereby request the Board of Directors to
    take the steps necessary to provide for cumulative voting in the election of
    directors, which means each stockholder shall be entitled to as many votes
    as shall equal the number of shares he or she owns multiplied by the number
    of directors to be elected, and he or she may cast all of such votes for a
    single candidate, or any two or more of them as he or she may see fit."
 
        "REASONS: Continued strong support along the lines we suggest were shown
    at the last annual meeting, when owners of Communications Stock and Media
    Stock representing approximately 27.2% of shares voting were cast in favor
    of this proposal."
 
        "California law still requires that unless stockholders have voted not
    to have cumulative voting they will have it. Ohio also has the same
    provision."
 
        "The National Bank Act provides for cumulative voting. In many cases
    companies get around it by forming holding companies without cumulative
    voting. Banking authorities have the right to question the capability of
    directors to be on banking boards. In many cases authorities come in after
    and say the director or directors were not qualified. We were delighted to
    see that the SEC has finally taken action to prevent bad directors from
    being on boards of public companies. The SEC should have hearings to prevent
    such persons from becoming directors before they harm investors."
 
        "Many successful companies have cumulative voting. For example, Pennzoil
    defeated Texaco in that famous case. Texaco's recent problems might have
    also been prevented with cumulative voting, getting directors on the board
    to prevent such things. Ingersoll-Rand, also having cumulative voting, won
    two awards. Further, Union Pacific is a good example having troubles with
    their freight shipments, which are backed up for a month. The merger with
    Southern Pacific is part of the excuse. Just last year, Union Pacific took
    away cumulative voting."
 
        "Lockheed-Martin, as well as VWR Corporation, now has a provision that
    if anyone has 40% or more of the shares then cumulative voting applies; it
    does apply at the latter company."
 
        "In 1995 American Premier adopted cumulative voting. Alleghany Power
    System tried to take away cumulative voting, as well as put in a stagger
    system, and stockholders defeated it, showing stockholders are interested in
    their rights. Hewlett Packard, a very successful company, has cumulative
    voting."
 
        "If you agree, please mark your proxy for this resolution; otherwise it
    is automatically cast against it, unless you have marked to abstain."
 
    THIS PROPOSAL WAS SUBMITTED AT FOUR OF THE LAST FIVE ANNUAL MEETINGS AND WAS
DEFEATED EACH TIME. THE U S WEST BOARD HAS AGAIN CONSIDERED THE PROPOSAL AND
AGAIN RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST IT.
 
    Currently, each director of U S WEST is elected by the holders of a majority
of the U S WEST shares represented and voting at a meeting of stockholders. This
method reflects the widely-held approach that directors should be elected for
their willingness and ability to serve all stockholders. The U S WEST Board
believes that cumulative voting can result in the election of directors by a
relatively
 
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                                                  CHAPTER 4: OTHER MATTERS TO BE
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<PAGE>
small group of stockholders. Such directors tend to represent special interests
of the small group that elected them. This partisanship among directors voting
on behalf of special interests could interfere with the effectiveness of the U S
WEST Board and thus be contrary to the interests of U S WEST and its
stockholders as a whole.
 
U S WEST DIRECTOR AND EXECUTIVE OFFICER INFORMATION
 
BOARD OF DIRECTORS
 
    Pursuant to the U S WEST Restated Certificate, the U S WEST Board consists
of three classes of directors. Each class of directors is subject to election by
stockholders every three years. The U S WEST Board has adopted a policy that
requires directors to retire at the annual meeting following the director's 72nd
birthday.
 
    Regular meetings of the U S WEST Board take place six times during the year
and special meetings are scheduled as necessary. The U S WEST Board held 11
meetings in 1997. No incumbent Director attended fewer than 75 percent of the
aggregate of the total number of meetings of the U S WEST Board and all
Committees of the U S WEST Board on which such director served. Directors meet
their responsibilities not only by attending U S WEST Board and Committee
meetings but also through participation in informational sessions, informal
consultations, and communication with members of management on matters affecting
U S WEST.
 
    For information with respect to the members of the U S WEST Board, see
"--Election of Directors."
 
COMMITTEES OF THE U S WEST BOARD
 
    The U S WEST Board has established the following standing Committees.
 
    AUDIT COMMITTEE.  The Audit Committee held four meetings in 1997. The Audit
Committee members are Mr. Dove (Chair), Mr. Crandall, Mr. Grieve, Mr. Jacobson
and Ms. Nelson. The Audit Committee's purpose is to oversee U S WEST's
accounting and financial reporting policies and practices and to assist the U S
WEST Board in fulfilling its fiduciary and corporate accountability
responsibilities. U S WEST's internal auditors and independent certified public
accountants periodically meet with the Audit Committee and always have
unrestricted direct access to the Audit Committee members.
 
    BOARD AFFAIRS COMMITTEE.  The Board Affairs Committee held five meetings in
1997. The Committee members are Mr. Grieve (Chair), Mr. Jacobson, Ms. Nelson and
Mr. Popoff. The Board Affairs Committee serves as a nominating committee for the
U S WEST Board. The Committee also makes recommendations regarding director
compensation and committee structure and composition, and oversees corporate
governance. This committee will consider candidates for the U S WEST Board
recommended by stockholders if the names and qualifications of such candidates
are submitted in writing to the Secretary of U S WEST, Inc., 7800 East Orchard
Road, Suite 200, Englewood, Colorado 80111.
 
    FINANCE COMMITTEE.  The Finance Committee held three meetings in 1997. The
Finance Committee members are Mr. Gilmour (Chair), Mr. Grieve, Mr. Harad, Ms.
Nelson and Mr. Williams. The Finance Committee is responsible for evaluating U S
WEST's growth strategies and financing for U S WEST's operations.
 
    HUMAN RESOURCES COMMITTEE.  The Human Resources Committee held six meetings
in 1997. The Human Resources Committee members are Mr. Popoff (Chair), Mr.
Gilmour, Mr. Harad and Mr. Williams. The Human Resources Committee is
responsible for assuring the appropriateness of the compensation and benefits of
the Executive Officers of U S WEST and its subsidiaries and for providing for
the orderly succession of management.
 
                                                                              69
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    PUBLIC POLICY COMMITTEE.  The Public Policy Committee held two meetings in
1997. The Public Policy Committee members are Mr. Crandall (Chair), Mr. Dove,
Mr. Jacobson and Mr. Popoff. The Public Policy Committee is responsible for
reviewing public policy issues generally.
 
DIRECTOR COMPENSATION
 
    To attract and retain exceptionally qualified directors, U S WEST offers a
competitive director compensation package, with a strategic mix of elements
weighted toward equity ownership to align the interests of directors with the
long-term interests of stockholders. U S WEST considers equity ownership a
powerful influence to put decision-making in close contact with stockholder
interests and focus attention on directing U S WEST as owners. The remaining
compensation components consist of cash and non-cash benefits, described below.
 
    Non-employee directors receive an annual retainer of $30,000 and a fee of
$1,200 for attendance at each U S WEST Board or Committee meeting. For multi-day
meetings, non-employee directors receive a fee of $1,200 per day. For additional
service as Committee chairs, the chairpersons of the standing Committees receive
an annual retainer of $4,500. Each non-employee director also receives an
allowance of up to $3,000 per year net of taxes for the purchase of
telecommunications and cable services and equipment.
 
    Directors may elect to defer receipt of all or part of their retainers and
Committee fees in stock or in cash. Deferred amounts that otherwise would be
payable in common stock have been credited, in evenly divided proportions of
Communications Stock and Media Stock, in an account as phantom stock units, the
value of which rises and falls with the price of Communications Stock and Media
Stock. Additional stock units are credited to the account when a dividend is
declared on U S WEST common stock. Cash payments so deferred earn interest,
compounded quarterly, at a rate equal to the average interest rate for ten-year
United States Treasury notes for the previous quarter.
 
    From time to time, on appropriate occasions, directors are asked to
participate in informational sessions or informal consultations regarding U S
WEST developments or otherwise to assist U S WEST with special projects or other
business matters in which they have expertise. For such sessions or
consultations of significant duration, directors are compensated with a cash
payment of $1,200. Directors routinely participate in informational sessions and
consultations of shorter duration without receiving any separate compensation.
 
    Under the terms of the amended U S WEST 1994 Stock Plan approved by
stockholders, directors have received 400 shares of Communications Stock and 400
shares of Media Stock in each of their first five years of service. They also
have received annual grants of 3,000 stock options for each class of common
stock. These options have value for directors only if the price of U S WEST's
stock appreciates from the date of the option grant.
 
    Non-employee directors who serve a minimum of five credited years on the U S
WEST Board (or one year, in the event of a change of control of U S WEST) are
entitled to a retirement benefit equal in value to the amount of their
final-year retainer multiplied by the lesser of ten or their number of years of
service on the U S WEST Board. At the director's discretion, this amount is paid
in ten equal annual installments or a single installment equal to its discounted
present value.
 
    Any director who is an employee of U S WEST or one of its subsidiaries
receives no compensation for serving as a director.
 
                                                                              70
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
 
    The following table discloses the compensation received by U S WEST's Chief
Executive Officer and the four other most highly paid executive officers (the "U
S WEST Named Executive Officers") for services rendered for the three fiscal
years ended December 31, 1997, 1996 and 1995.
 
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                          LONG-TERM COMPENSATION
                                                 ANNUAL COMPENSATION          ----------------------------------------------
                                         -----------------------------------               SECURITIES UNDERLYING
                                                                   OTHER      RESTRICTED
                                                                  ANNUAL         STOCK          OPTIONS/SARS         LTIP
                                          SALARY      BONUS    COMPENSATION    AWARD(S)    ----------------------   PAYOUTS
NAME AND PRINCIPAL POSITION     YEAR        ($)        ($)          ($)           ($)         CLASS        (#)        ($)
- ----------------------------  ---------  ---------  ---------  -------------  -----------     -----     ---------  ---------
<S>                           <C>        <C>        <C>        <C>            <C>          <C>          <C>        <C>
RICHARD D. MCCORMICK........       1997  $ 871,904  $1,100,000   $  24,005                          M     185,500  $ 276,130
  President, CEO and                                                                                C     298,855
  Chairman of the Board            1996  $ 760,000  $1,100,000   $  19,113                          M     153,500
                                                                                                    C     211,736
                                   1995  $ 760,000  $ 450,000    $  22,865                          U     140,000  $2,083,292
 
CHARLES M. LILLIS...........       1997  $ 618,115  $ 630,000    $   3,083                          M     168,150  $  90,583
  Executive Vice President,                                                                         C      30,000
  U S WEST & President             1996  $ 548,846  $ 458,500    $   1,059                          M     143,150
  and CEO, U S WEST                                                                                 C      33,000
  Media Group                      1995  $ 490,000  $ 375,000    $     632     $ 100,800(2)          U    100,000  $1,488,098
 
SOLOMON D. TRUJILLO.........       1997  $ 525,220  $ 645,000    $  11,821                          M      56,650  $ 267,319
  Executive Vice President,                                                                         C     113,836
  U S WEST & President             1996  $ 432,477  $ 383,500    $  15,029                          M      56,650
  and CEO, U S WEST                                                                                 C     113,461
  Communications Group             1995  $ 342,500  $ 300,000    $  10,468                          U     130,000  $ 976,441
 
CHARLES P. RUSS, III........       1997  $ 487,577  $ 450,000    $   6,579                          M      74,250  $  75,534
  Executive Vice President-                                                                         C      38,000
  Law, Public Policy and           1996  $ 399,423  $ 285,800    $   4,459                          M      46,250
  Human Resources,                                                                                  C      38,502
  General Counsel and              1995  $ 370,000  $ 180,000    $  15,050                          U      40,000  $ 892,847
  Secretary
 
MICHAEL P. GLINSKY(1).......       1997  $ 421,808  $ 370,000    $   2,943                          M      58,250  $  77,343
  Executive Vice President
    and                                                                                             C      29,000
  Chief Financial Officer          1996  $ 276,923  $ 285,800    $     111                          M      46,250
                                                                                                    C      28,000
 
<CAPTION>
                                 ALL OTHER
                              COMPENSATION(3)
NAME AND PRINCIPAL POSITION         ($)
- ----------------------------  ----------------
<S>                           <C>
RICHARD D. MCCORMICK........     $  139,646
  President, CEO and
  Chairman of the Board          $   54,049
                                 $   68,182
CHARLES M. LILLIS...........     $   97,237
  Executive Vice President,
  U S WEST & President           $   67,635
  and CEO, U S WEST
  Media Group                    $   31,156
SOLOMON D. TRUJILLO.........     $   51,129
  Executive Vice President,
  U S WEST & President           $   45,458
  and CEO, U S WEST
  Communications Group           $   29,491
CHARLES P. RUSS, III........     $   49,663
  Executive Vice President-
  Law, Public Policy and         $   30,644
  Human Resources,
  General Counsel and            $   26,241
  Secretary
MICHAEL P. GLINSKY(1).......     $   67,120
  Executive Vice President
    and
  Chief Financial Officer        $  304,549
</TABLE>
 
- ------------------------------
 
U=U S WEST, Inc. option
C=U S WEST Communications option
M=U S WEST Media option
 
NOTE: On October 31, 1995, the stockholders of U S WEST approved the 1995
Recapitalization. Options granted on or after the effective date, November 1,
1995, are options in either Communications Stock or Media Stock. Options
outstanding prior to November 1, 1995, were classified as one option each of
Communications Stock and Media Stock. The exercise price of these reclassified
options is based on the weighted closing price of Communications Stock and Media
Stock as of November 1, 1995, which on a combined basis equals the full exercise
price of the original option.
 
(1) Mr. Glinsky was elected Executive Vice President and Chief Financial Officer
    effective April 15, 1996.
 
(2) Mr. Lillis received 5,600 shares of Media Stock in November, 1995, subject
    to a two-year restriction on sale or transferability.
 
(3) The amounts in this column are attributable to (1) the U S WEST matching
    contribution under the Deferred Compensation Plan, (2) the U S WEST matching
    contribution under the Savings Plan/ESOP, (3) the current dollar value of
    the remainder of the premium paid under a split-dollar insurance
    arrangement, and (4) the amount paid for the term insurance portion of
 
                                                                              71
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    the foregoing split-dollar arrangement. The separate components of these
    amounts are set forth below. In April 1996, upon his employment with U S
    WEST, Mr. Glinsky received a one-time cash payment of $204,250.
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31, 1997
                                  ----------------------------------------------------------------------
                                      DEFERRED
                                    COMPENSATION       SAVINGS PLAN      SPLIT-DOLLAR     TERM PORTION
NAME                                COMPANY MATCH      COMPANY MATCH     PREMIUM VALUE       PREMIUM
- --------------------------------  -----------------  -----------------  ---------------  ---------------
<S>                               <C>                <C>                <C>              <C>
Richard D. McCormick............      $  90,595          $   8,000         $  38,906        $   2,145
Charles M. Lillis...............      $  45,906          $   8,000         $  42,137        $   1,194
Solomon D. Trujillo.............      $  19,250          $   8,000         $  23,441        $     438
Charles P. Russ, III............      $  30,879          $   8,000         $  10,101        $     683
Michael P. Glinsky..............      $  14,500          $   5,519         $  46,333        $     768
</TABLE>
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31, 1996
                                  ----------------------------------------------------------------------
                                      DEFERRED
                                    COMPENSATION       SAVINGS PLAN      SPLIT-DOLLAR     TERM PORTION
NAME                                COMPANY MATCH      COMPANY MATCH     PREMIUM VALUE       PREMIUM
- --------------------------------  -----------------  -----------------  ---------------  ---------------
<S>                               <C>                <C>                <C>              <C>
Richard D. McCormick............      $  30,499          $   7,500         $  14,505        $   1,545
Charles M. Lillis...............      $  19,942          $   7,500         $  39,159        $   1,034
Solomon D. Trujillo.............      $  18,148          $   7,500         $  19,539        $     271
Charles P. Russ, III............      $  12,471          $   7,500         $  10,079        $     594
Michael P. Glinsky..............      $  --              $  --             $  99,583        $     711
</TABLE>
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31, 1995
                                  ----------------------------------------------------------------------
                                      DEFERRED
                                    COMPENSATION       SAVINGS PLAN      SPLIT-DOLLAR     TERM PORTION
NAME                                COMPANY MATCH      COMPANY MATCH     PREMIUM VALUE       PREMIUM
- --------------------------------  -----------------  -----------------  ---------------  ---------------
<S>                               <C>                <C>                <C>              <C>
Richard D. McCormick............      $  30,441          $   7,500         $  28,826        $   1,415
Charles M. Lillis...............      $  --              $   7,500         $  22,831        $     825
Solomon D. Trujillo.............      $   8,885          $   7,500         $  12,886        $     220
Charles P. Russ, III............      $  11,000          $   7,500         $   7,199        $     542
</TABLE>
 
OPTION/SAR GRANTS IN LAST FISCAL YEAR
 
    The following table provides information on stock options granted to the U S
WEST Named Executive Officers during 1997. U S WEST employed the Black-Scholes
option pricing model to develop the theoretical values set forth under the
"Grant Date Present Value" column. These stock options comprise a portion of the
U S WEST Named Executive Officers' total long-term compensation potential. As
such, the issued amounts are consistent with U S WEST's compensation philosophy
as outlined in the Report of the Human Resources Committee on Executive
Compensation. See "-- Report of the Human Resources Committee on Executive
Compensation."
 
                                                                              72
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    COMMUNICATIONS STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                                   INDIVIDUAL GRANTS
                                  -----------------------------------------------------------------------------------
                                       NUMBER OF          PERCENT OF TOTAL
                                      SECURITIES        OPTIONS/SARS GRANTED    EXERCISE OR               GRANT DATE
                                  UNDERLYING OPTIONS/      TO EMPLOYEES IN      BASE PRICE   EXPIRATION     PRESENT
NAME                                SARS GRANTED(1)          FISCAL YEAR          ($/SH)        DATE       VALUE($)
- --------------------------------  -------------------  -----------------------  -----------  -----------  -----------
<S>                               <C>                  <C>                      <C>          <C>          <C>
Richard D. McCormick............          94,000                   0.99%         $  32.625       1/2/07    $ 496,072(3)
                                          40,849(2)                0.43%         $  34.125      11/8/03    $ 225,487(4)
                                          39,482(2)                0.42%         $  34.125       9/1/05    $ 217,941(4)
                                          65,006(2)                0.69%         $  45.938      12/2/04    $ 465,572(4)
                                          26,049(2)                0.28%         $  45.938      3/15/06    $ 186,562(4)
                                          33,469(2)                0.35%         $  45.938       9/1/05    $ 239,704(4)
Charles M. Lillis...............          30,000                   0.32%         $  32.625       1/2/07    $ 158,321(3)
Solomon D. Trujillo.............          74,000                   0.78%         $  32.625       1/2/07    $ 390,525(3)
                                          21,941(2)                0.23%         $  34.125      7/14/04    $ 121,114(4)
                                          17,895(2)                0.19%         $  45.625      12/2/04    $ 127,292(4)
Charles P. Russ, III............          38,000                   0.40%         $  32.625       1/2/07    $ 200,540(3)
Michael P. Glinsky..............          29,000                   0.31%         $  32.625       1/2/07    $ 153,044(3)
</TABLE>
 
    MEDIA STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                                 INDIVIDUAL GRANTS
                                ------------------------------------------------------------------------------------
                                     NUMBER OF          PERCENT OF TOTAL
                                    SECURITIES        OPTIONS/SARS GRANTED    EXERCISE OR                GRANT DATE
                                UNDERLYING OPTIONS/      TO EMPLOYEES IN      BASE PRICE   EXPIRATION     PRESENT
NAME                              SARS GRANTED(1)          FISCAL YEAR          ($/SH)        DATE        VALUE($)
- ------------------------------  -------------------  -----------------------  -----------  -----------  ------------
<S>                             <C>                  <C>                      <C>          <C>          <C>
Richard D. McCormick..........         157,000                   1.80%         $  18.625       1/2/07   $  1,123,952(5)
                                        28,500                   0.33%         $  19.250      3/13/07   $    210,876(5)
Charles M. Lillis.............         150,000                   1.72%         $  18.625       1/2/07   $  1,073,389(5)
                                        18,150                   0.21%         $  19.000      2/21/07   $    132,551(5)
Solomon D. Trujillo...........          41,000                   0.47%         $  18.625       1/2/07   $    293,516(5)
                                        15,650                   0.18%         $  19.000      2/21/07   $    114,293(5)
Charles P. Russ, III..........          63,000                   0.72%         $  18.625       1/2/07   $    451,013(5)
                                        11,250                   0.13%         $  19.000      2/21/07   $     82,160(5)
Michael P. Glinsky............          47,000                   0.54%         $  18.625       1/2/07   $    336,470(5)
                                        11,250                   0.13%         $  19.000      2/21/07   $     82,160(5)
</TABLE>
 
- ------------------------------
 
(1) Except as otherwise noted, these stock options become exercisable in
    one-third increments on the first, second and third anniversaries of the
    date of the grant, and include a reload feature. The reload feature gives
    the optionee the right to receive a further option, at the then current
    market price, for a number of shares equal to the number of shares of stock
    surrendered by the optionee in payment of the exercise price of the original
    option.
 
(2) These stock options become fully exercisable one year from the date of grant
    and do not include a reload feature.
 
(3) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Communications Stock, using the following
    assumptions: volatility, 25.0%, dividend yield, 5.8%, and a risk-free rate
    of return of 6.24% based on the options being outstanding for an average
    term of 4.0 years.
 
(4) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Communications Stock, using the following
    assumptions: volatility, 25.0%, dividend yield of 5.8%, and a risk-free rate
    of return of 5.77% to 6.24% based on the options being outstanding for an
    average term of 4.0 years.
 
(5) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Media Stock, using the following
    assumptions: volatility, 30.0%, dividend yield, 0.0%, and a risk-free rate
    of return of 6.33% based on the options being outstanding for an average
    term of 5 years.
 
                                                                              73
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
  VALUES
 
    COMMUNICATIONS STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                             NUMBER OF UNEXERCISED        VALUE OF UNEXERCISED
                                  SHARES                          OPTIONS/SARS                IN-THE-MONEY
                                ACQUIRED ON                       AT FY-END(#)                OPTIONS/SARS
                                 EXERCISE       VALUE      --------------------------  ---------------------------
NAME                                (#)      REALIZED ($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
- ------------------------------  -----------  ------------  -----------  -------------  ------------  -------------
<S>                             <C>          <C>           <C>          <C>            <C>           <C>
Richard D. McCormick..........     271,666   $  4,477,859     183,295        412,189   $  2,681,754   $ 3,912,485
Charles M. Lillis.............      63,330   $    411,066      99,336         85,334   $  2,097,362   $ 1,327,703
Solomon D. Trujillo...........      50,122   $    806,527     111,945        243,837   $  1,831,255   $ 3,381,812
Charles P. Russ, III..........      17,164   $    200,087      90,661         70,001   $  1,658,556   $   999,160
Michael P. Glinsky............      --       $    --            9,333         47,667   $    114,329   $   591,171
</TABLE>
 
    MEDIA STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                             NUMBER OF UNEXERCISED        VALUE OF UNEXERCISED
                                  SHARES                          OPTIONS/SARS                IN-THE-MONEY
                                ACQUIRED ON                       AT FY-END(#)                OPTIONS/SARS
                                 EXERCISE       VALUE      --------------------------  ---------------------------
NAME                                (#)      REALIZED ($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
- ------------------------------  -----------  ------------  -----------  -------------  ------------  -------------
<S>                             <C>          <C>           <C>          <C>            <C>           <C>
Richard D. McCormick..........      --       $    --          501,958        315,501   $  6,370,757   $ 3,105,994
Charles M. Lillis.............      --       $    --          253,332        284,818   $  3,007,604   $ 2,789,308
Solomon D. Trujillo...........      --       $    --          146,890        147,318   $  1,755,550   $ 1,545,786
Charles P. Russ, III..........      --       $    --          113,332        110,918   $  1,385,233   $ 1,102,132
Michael P. Glinsky............      --       $    --           11,666         81,584   $    128,326   $   849,518
</TABLE>
 
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
 
    The following table provides information concerning dividend equivalent
units granted to the U S WEST Named Executive Officers during 1997 under the U S
WEST Communications Group Long-Term Incentive Plan. Each dividend equivalent
unit represents the right to receive an amount equal to the cumulative dividends
paid on Communications Stock during a performance period, multiplied by a
percentage representing the extent to which U S WEST Communications Group
achieves certain performance goals based on financial results, revenue,
productivity and efficiency, service and customer care, employee satisfaction,
and stock performance.
 
<TABLE>
<CAPTION>
                                                                                 ESTIMATED FUTURE PAYOUTS UNDER
                                                       PERFORMANCE PERIOD         NON-STOCK PRICE-BASED PLAN(1)
                                                        UNTIL MATURATION   -------------------------------------------
                NAME                  NUMBER OF UNITS      OR PAYOUT          THRESHOLD        TARGET       MAXIMUM
- ------------------------------------  ---------------  ------------------  ---------------  ------------  ------------
<S>                                   <C>              <C>                 <C>              <C>           <C>
Richard D. McCormick................       162,000           1997-1999                0     $  1,040,040  $  1,040,000
Charles M. Lillis...................        52,000           1997-1999                0     $    333,840  $    333,840
Solomon D. Trujillo.................       126,000           1997-1999                0     $    808,920  $    808,920
Charles P. Russ, III................        65,000           1997-1999                0     $    417,300  $    417,300
Michael P. Glinsky..................        49,000           1997-1999                0     $    314,580  $    314,580
</TABLE>
 
- ------------------------------
 
(1) Estimated future payouts assume a quarterly dividend rate of $0.535 per
    share over the performance period. Any change to the quarterly dividend rate
    would vary the payouts.
 
U S WEST PENSION PLANS
 
    The following tables illustrate the maximum estimated annual benefits
payable to the U S WEST Named Executive Officers upon retirement pursuant to the
U S WEST Pension Plans, based upon applicable pension plan formulas for
specified final average annual compensation and specified years of
 
                                                                              74
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
service. The second table is based on the "defined lump sum" pension plan
formula (the "DLS Formula") that applies to Mr. Glinsky. Messrs. McCormick,
Lillis, Trujillo and Russ are eligible to receive the greater of any pension
amount that is calculated under either table.
 
                              PENSION PLAN TABLES
                                  FIRST TABLE
 
<TABLE>
<CAPTION>
                                                                        YEARS OF SERVICE
        FINAL AVERAGE ANNUAL          ------------------------------------------------------------------------------------
            COMPENSATION                  15          20          25          30          35          40           45
- ------------------------------------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>         <C>
$ 500,000...........................  $  112,500  $  160,000  $  187,500  $  225,000  $  262,500  $  293,750  $    325,000
  600,000...........................     135,000     180,000     225,000     270,000     315,000     352,500       390,000
  700,000...........................     157,500     210,000     262,500     315,000     367,500     411,250       455,000
  800,000...........................     180,000     240,000     300,000     360,000     420,000     470,000       520,000
  900,000...........................     202,500     270,000     337,500     405,000     472,500     528,750       585,000
 1,000,000..........................     225,000     300,000     375,000     450,000     525,000     587,500       650,000
 1,100,000..........................     247,500     330,000     412,500     495,000     577,500     646,250       715,000
 1,200,000..........................     270,000     360,000     450,000     540,000     630,000     705,000       780,000
 1,300,000..........................     292,500     390,000     487,500     585,000     682,500     763,750       845,000
 1,400,000..........................     315,000     420,000     525,000     630,000     735,000     822,500       910,000
 1,500,000..........................     337,500     450,000     562,500     675,000     787,500     881,250       975,000
 1,600,000..........................     360,000     480,000     600,000     720,000     840,000     940,000     1,040,000
 1,700,000..........................     382,500     510,000     637,500     765,000     892,500     998,750     1,105,000
</TABLE>
 
                                  SECOND TABLE
 
<TABLE>
<CAPTION>
                                                                         YEARS OF SERVICE
         FINAL AVERAGE ANNUAL           ----------------------------------------------------------------------------------
             COMPENSATION                   15          20          25          30          35          40          45
- --------------------------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
<S>                                     <C>         <C>         <C>         <C>         <C>         <C>         <C>
$ 500,000.............................  $  112,500  $  162,500  $  212,500  $  237,500  $  256,250  $  262,500  $  268,750
  600,000.............................     135,000     195,000     255,000     285,000     307,500     315,000     322,500
  700,000.............................     157,500     227,500     297,500     332,500     358,750     367,500     376,250
  800,000.............................     180,000     260,000     340,000     380,000     410,000     420,000     430,000
  900,000.............................     202,500     292,500     382,500     427,500     461,250     472,500     483,750
 1,000,000............................     225,000     325,000     425,000     475,000     512,500     525,000     537,500
 1,100,000............................     247,500     357,500     467,500     522,500     563,750     577,500     591,250
 1,200,000............................     270,000     390,000     510,000     570,000     615,000     630,000     645,000
 1,300,000............................     292,500     422,500     552,500     617,500     666,250     682,500     698,750
 1,400,000............................     315,000     455,000     595,000     665,000     717,500     735,000     752,500
 1,500,000............................     337,500     487,500     637,500     712,500     768,750     787,500     806,250
 1,600,000............................     360,000     520,000     680,000     760,000     820,000     840,000     860,000
 1,700,000............................     382,500     552,500     722,500     807,500     871,250     892,500     913,750
</TABLE>
 
    The calculation of "final average annual compensation," is the highest
average compensation for 60 consecutive months of the 120 consecutive-month
period preceding retirement and includes compensation that would appear under
the "Salary" and "Bonus" columns of the Summary Compensation Table. As of
December 31, 1997, Messrs. McCormick, Lillis, Trujillo, Russ and Glinsky had 36,
12, 23, 5 and 1 actual years of service, respectively. Mr. Lillis is eligible
for a variable percentage of his final average annual compensation (calculated
as his highest average compensation over any 60 consecutive-month period of his
employment) based upon his age at retirement, less any amounts payable under
 
                                                                              75
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
any U S WEST pension plans. The applicable percentage is 40% at age 56 (his
present age), and increases by varying increments from year to year -- I.E., 5%
per year through age 58, and 1.5% per year thereafter. Mr. Russ is also eligible
for a variable percentage of his final average compensation, calculated as his
highest average compensation over any 60 consecutive-month period less amounts
payable under U S WEST pension plans. The applicable variable percentage for Mr.
Russ is 41% at age 53 (his present age), and increases by approximately 1.5% per
year through age 65. In the event it is greater, Mr. Russ alternatively may
receive an annuity equal to $14,000 for each of his first seven years of service
at U S WEST. Given Mr. Glinsky's limited tenure with U S WEST, U S WEST has
agreed to credit Mr. Glinsky with an additional .75 years of service for each
year of credited service, calculated under the formula that applies to the first
table set forth above.
 
    Benefits set forth in the preceding tables are computed as a straight-life
annuity and are subject to deduction for Social Security.
 
EXECUTIVE AGREEMENTS
 
    U S WEST has entered into Severance Agreements with Messrs. Glinsky,
McCormick and Russ. For a description of these agreements, see "Chapter 3: The
Separation--Interests of Certain Persons in the Separation--Severance
Agreements." In addition, Messrs. Lillis and Trujillo are parties to similar
agreements with U S WEST. The Separation will not constitute a "Change of
Control" under the severance agreements of Messrs. Lillis and Trujillo.
 
    U S WEST has entered into executive severance agreements with certain of its
officers, including the executive officers other than the Chief Executive
Officer. These agreements set forth the severance benefits that would be payable
in certain circumstances other than a change of control, such as a termination
not for cause, termination in connection with a downsizing, or resignation of an
officer who elects not to accept reassignment to a non-comparable position. The
severance benefits payable in such circumstances, following the delivery of a
waiver and release of claims by the executive officer, include: (i) an amount
equal to two times base salary; (ii) the amounts that would be otherwise due
under the Executive Short-Term Incentive Plan and any long-term incentive plan,
in each case pro-rated to the date of termination and calculated on the basis of
full achievement of targeted performance levels; and (iii) financial counseling
services, or the cash value thereof, through the year following the year of
termination. The agreements also provide for the lapse of restrictions on
certain grants of common stock issued to the officer, and the accelerated
vesting of a pro-rated portion of the stock options issued to the officer.
Finally, the agreements include provisions for medical, dental and vision
benefits following termination, and provisions to protect confidentiality of U S
WEST information and to arbitrate employment disputes. In the event of a change
of control, the terms of the executive severance agreements will be superseded
by any applicable change of control agreement.
 
REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
 
        HUMAN RESOURCES COMMITTEE.  The Human Resources Committee of the
    Board (the "Committee") is composed entirely of independent outside
    Directors who meet regularly to oversee compensation levels and benefits
    plans to ensure that such levels and plans are appropriately competitive
    with the marketplace and aligned with shareholder interests. The
    Committee submits reports to the full Board concerning its activities
    and decisions. None of these non-employee Directors has interlocking or
    other relationships with other boards or the Company that would call
    into question his or her independence as a Committee member.
 
                                                                              76
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
        COMPENSATION PHILOSOPHY.  The Committee has approved a compensation
    plan designed to attract, motivate, and retain the high-caliber
    executives necessary to achieve the Company's business strategies. The
    plan rewards those executives for building long-term value for Company
    shareholders. The Company takes an integrated and managed approach in
    developing its executive compensation strategy and programs. This
    approach balances the overall needs of the Company, including the unique
    business strategies and human resources initiatives among U S WEST, the
    Communications Group and the Media Group.
 
        Each compensation element supports the Company's mission, values,
    and culture. The compensation principles that link the individual
    elements into an integrated compensation strategy are as follows: (i) a
    compensation structure that directly aligns the executives with the
    interests and concerns of shareholders; (ii) competitive compensation
    within industry and peer companies; (iii) customized business unit plans
    that reflect the unique characteristics of the Company's diversified
    operations; (iv) individual compensation highly correlated with personal
    performance and shareholder value creation; (v) programs that foster
    executive movement across the organization; and (vi) executive
    development and succession planning programs to provide long-term
    organizational strength and flexibility.
 
        The key elements of the Company's executive compensation program are
    base salary, annual incentives, and long-term incentive compensation
    consisting primarily of stock options and performance-based stock plans.
    In developing an executive's total compensation package, the Committee
    considers each of these key compensation elements, as well as retirement
    benefits, insurance, and limited perquisites.
 
        Overall, the Committee believes that the Company's competitive
    market for executive talent is broader than the industry peer groups
    established to compare shareholder returns, which are set forth on the
    accompanying Performance Graphs. Accordingly, the population of
    companies surveyed for compensation data extends beyond the companies
    included in the peer group indices in the Performance Graphs.
 
        Total compensation is targeted near industry median benchmarks of
    surveyed companies for each component of compensation. Superior
    performance will result in above-market compensation delivered through
    variable-pay components. Likewise, less than satisfactory performance
    will result in below-market compensation.
 
        BASE SALARY.  U S WEST has in place a market and performance based
    salary structure for its executive employees. Determination of
    appropriate compensation is based on level of responsibility, scope and
    impact of decision-making, and internal and external comparability. For
    purposes of comparability and competitive market pricing, the Company
    utilizes annual executive compensation salary surveys prepared by
    nationally recognized independent compensation consulting firms. These
    surveys encompass both the telecommunications and media industries, as
    well as surveys of companies of similar size in other industries. On
    average, the Company seeks to target executive base salary levels at the
    median range of surveyed companies. To facilitate executive movement
    among U S WEST, Inc., Communications Group, and Media Group, the Company
    has established comparable base salary opportunities across company
    lines.
 
        Executive salary reviews generally are conducted within a twelve to
    twenty-four month cycle. Base salary adjustments may occur at the time
    of such reviews and depend upon individual performance results, changes
    in job responsibilities, competitive forces, and/or the overall
    financial condition of the Company. Mr. McCormick's most recent salary
    action occurred in January 1997. At that time his base salary was
    increased to $875,000. Mr. McCormick's current base salary places him
    within the median range of surveyed companies.
 
                                                                              77
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
        SHORT-TERM INCENTIVE COMPENSATION.  The U S WEST Executive
    Short-Term Incentive Plan (ESTIP) approved by shareholders in May, 1994
    provides each named Executive Officer with the potential to earn annual
    cash awards based on the achievement of pre-established performance
    goals. Participants include the Chief Executive Officer and any
    individual employed by the Company at the end of any calendar year who
    appears in the Summary Compensation Table of the Annual Proxy Statement
    to Shareholders. The cash bonus pool from which the Company pays the
    bonuses for the CEO and the other named Executive Officers is limited to
    0.25% of "Cash Provided by Operating Activities" for the annual
    performance period. The Committee has discretion to pay any portion of
    this pool based on factors including the Company's performance relative
    to pre-set financial, strategic, and customer goals, as well as
    individual performance goals. Any amount of the cash bonus pool not so
    paid may be added, at the Committee's sole discretion, to the cash bonus
    pool that is available for any subsequent year or years. The Committee
    has elected not to add unpaid portions of 1997's cash bonus pool to the
    bonus pool for 1998 and subsequent years.
 
        The pre-set performance goals for 1997 were an average roll-up of
    the goals of Communications Group and Media Group business units. The
    business unit goals for 1997 included EBITDA, net cash flow, operating
    income, strategic accomplishments, and qualitative measures.
 
        In determining the amount to be paid to Mr. McCormick for 1997
    performance, the Committee considered the above-mentioned pre-set
    performance goals for U S WEST Inc., Communications Group and Media
    Group and individual performance. Mr. McCormick received ESTIP
    compensation of $ 1,100,000, or 125.7% of his 1997 base salary.
 
        LONG-TERM INCENTIVE COMPENSATION.  For 1997, the Company's long-term
    incentive compensation included performance-based Dividend Equivalent
    Units issued under the U S WEST Communications Group Long-Term Incentive
    Plan (LTIP) and stock options issued under the U S WEST 1994 Stock Plan.
    Shareholders have approved both plans.
 
        During the past year, this combination of stock options and
    performance-based long term incentive opportunities provided a strategic
    mix of equity-based incentives that (i) continues to focus performance
    on the attainment of long-term strategic objectives, (ii) provides
    incentive to the executives for increasing total shareholder return, and
    (iii) provides continuity throughout the officer team by rewarding
    long-term commitment to the Company. The long-term compensation elements
    used for 1997 were:
 
        PERFORMANCE-BASED DIVIDEND EQUIVALENT UNITS ("DEUS").  The U S WEST
    Communications Group Long-Term Incentive Plan (the "Plan") provides key
    executives of the Company and of U S WEST Communications Group with
    incentive compensation based upon the sum of regular cash dividends, if
    any, paid on Communications Stock paid during a performance period under
    the plan. DEUs provide the executive the opportunity to earn incentive
    compensation based on the achievement of pre-established strategic
    and/or financial goals. These goals are structured to focus the
    executive's medium-term performance on the strategic imperatives that
    drive long-term value creation for the Company's shareholders.
 
        The Human Resources Committee assigned DEUs to Plan Participants at
    the beginning of each performance period. The Plan includes a two-year
    performance period that ended on December 31, 1997. At the conclusion of
    each performance period, participants are entitled to receive a
    percentage of the product of their respective DEUs multiplied by the
    aggregate value of dividends paid during the performance period on one
    share of Communications Stock. The percentage, which for the 1996-1997
    performance period can not exceed 100%, is
 
                                                                              78
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    determined pursuant to a performance formula established by the Human
    Resources Committee. The performance formula is based on one or more of
    the Communications Group's financial results, productivity and
    efficiency measures, customer service, stock performance and employee
    and management satisfaction measures. Under this formula Mr. McCormick
    received 5,798 shares of Communications Stock worth $276,130.
 
        STOCK OPTIONS.  The Committee generally has elected to grant stock
    options annually. The Company's stock option grants are designed to
    deliver, together with other long-term incentives, the potential for the
    executive to earn a market-based percentage of salary dependent on
    future stock performance. The Committee may take into consideration
    prior years' grants and circumstances when setting current year grants.
    Stock options granted during 1997 have an exercise price equal to the
    market price of the Company's stock on the date of grant, vest in
    one-third increments commencing one year from the grant date, and carry
    a ten-year term.
 
        Mr. McCormick received a stock option grant of: 94,000
    Communications Stock shares and 185,500 Media Stock shares. The
    Committee believes that the grant to Mr. McCormick in 1997 is consistent
    with the Committee's total compensation philosophy to link a substantial
    portion of the CEO's compensation directly with the long-term value
    created for shareholders. This option grant is consistent with the
    average grants made to peer company CEOs as determined by market survey
    data.
 
        SIGNIFICANT EVENTS AFFECTING FUTURE LONG-TERM COMPENSATION.  In
    conjunction with the restructuring of the Company into two new
    companies, if the restructuring is approved by shareholders, the Board
    approved long-term compensation plans for the executives of the new
    companies. The long-term incentive opportunity for executives of
    MediaOne Group is comprised entirely of MediaOne Group stock options.
    The long-term incentive opportunity for executives of new U S WEST, Inc.
    will consist of a combination of new U S WEST, Inc. stock options and
    DEUs as noted above.
 
        DEDUCTIBILITY OF COMPENSATION.  The Committee has carefully
    considered Section 162(m) of the Internal Revenue Code and believes the
    Company's pay-for-performance practices ensure that executive
    compensation is strongly tied to performance. The Committee believes it
    is in the best interests of the Company and its shareholders to comply
    with the tax law while still preserving the flexibility to reward
    executives consistent with the Company's pay philosophy for each
    compensation element. The Committee is obligated to the Board and
    shareholders of the Company to recognize and reward performance that
    increases the value of the Company. Accordingly, the Committee will
    exercise discretion in those instances where tax law considerations
    would compromise the interests of the shareholder.
 
        STOCK OWNERSHIP GUIDELINES.  To encourage further growth in
    shareholder value, the Board has approved stock ownership targets for
    the Executive Officers of the Company. The Board established these
    targets because it believes that a significant level of stock ownership
    provides a powerful incentive to manage the Company as owners. The
    Committee reviews Executive Officers' stock ownership annually and, at
    its discretion, may consider such ownership in the granting of
    restricted shares and stock options. The target ownership level for the
    Chairman and CEO equals 5 times base salary. At the end of 1997, Mr.
    McCormick held Company stock valued at 29 times his 1997 salary.
 
                                                                              79
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
        CONCLUSION.  It is the opinion of the Committee that U S WEST's
    integrated executive compensation strategy aligns the Company's
    executive compensation practices with corporate performance and the best
    interests of shareholders by ensuring the continuity and ongoing
    development of a strong leadership team fully aligned with our
    shareholders. We trust this letter and the accompanying tables and
    graphs will help you understand further the Company's compensation
    philosophy, programs, and actions.
 
    U S WEST, Inc. Board of Directors Human Resources Committee:
 
    Allan D. Gilmour                      George J. Harad
 
    Frank P. Popoff (Chairman)            Jerry O. Williams
 
                                                                              80
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPHS
 
    CONSOLIDATED U S WEST PERFORMANCE.  The following graph and chart compare
the yearly change in cumulative total stockholder return on the consolidated
common stocks of U S WEST, including the reinvestment of dividends, with the
return on the Standard Poor's 500 Stock Index and the "Regional Holding Company
Group." On November 1, 1995, U S WEST recapitalized its former single class of
stock into Communications Stock and Media Stock. The performance graph sets
forth the return on $100 invested in U S WEST common stock on December 31, 1992
over a 5-year period, and reflects a composite return for the two new classes of
stock distributed on November 1, 1995.
 
               COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(A)
                         AMONG U S WEST CONSOLIDATED(B)
              S&P 500 INDEX, AND REGIONAL HOLDING COMPANY GROUP(C)
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
   VALUE OF $100.00 INVESTED
           12/31/92
 
<S>                              <C>                       <C>        <C>
                                   US WEST - Consolidated    S&P 500    RHCs - Weighted
Dec-92                                               $100       $100               $100
Dec-93                                              $ 125      $ 110              $ 117
Dec-94                                              $ 103      $ 112              $ 107
Dec-95                                              $ 165      $ 153              $ 166
Dec-96                                              $ 160      $ 189              $ 167
Dec-97                                              $ 243      $ 251              $ 239
</TABLE>
 
<TABLE>
<CAPTION>
                                      DECEMBER     DECEMBER     DECEMBER     DECEMBER     DECEMBER     DECEMBER
                                        1992         1993         1994         1995         1996         1997
                                     -----------  -----------  -----------  -----------  -----------  -----------
<S>                                  <C>          <C>          <C>          <C>          <C>          <C>
U S WEST--Consolidated.............   $     100    $     125    $     103    $     165    $     160    $     243
S&P 500............................   $     100    $     110    $     112    $     153    $     189    $     251
RHCs--Weighted.....................   $     100    $     117    $     107    $     166    $     167    $     239
</TABLE>
 
    Assumes $100 invested on December 31, 1992 in the common stock of U S WEST,
the S&P 500 Index, and the Regional Holding Company Group.
 
Notes:
 
(a)  Total return assumes the reinvestment of dividends.
 
(b)  Combined returns from Communications Stock and Media Stock.
 
(c)  Consists of the regional holding companies, excluding U S WEST, that were
    created upon the divestiture of American Telephone and Telegraph Company of
    its local telephone operating companies. Includes the returns of Ameritech,
    Bell Atlantic, BellSouth, NYNEX, Pacific Telesis Group and SBC
    Communications, weighted by market capitalization. Pacific Telesis Group was
    acquired by SBC Communications on April 1, 1997, and NYNEX was acquired by
    Bell Atlantic on August 14, 1997. The total shareholder returns of Pacific
    Telesis Group and NYNEX parallel those of SBC Communications and Bell
    Atlantic, respectively, after such dates.
 
                                                                              81
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    SEPARATE COMMON STOCK GRAPHS.  In addition to the Performance Graphs for U S
WEST's consolidated total return, U S WEST has included two additional
performance graphs that indicate the performance of the Communications Group and
the Media Group against their respective peer groups. Each graph charts the
performance of U S WEST stock relative to the Standard & Poor's 500 Stock Index
and customized peer group indices for the 26-month period since November 1,
1995.
 
    For comparison of cumulative total stockholder return on Communications
Stock, U S WEST has established a customized peer group (the "Communications
Peer Group") that includes companies that offer communications services,
including local telephone services, to business and residential customers in
domestic geographic markets. The graph assumes $100 was invested in each of the
Communications Stock, the Standard & Poor's 500 Stock Index and the
Communications Peer Group in order to provide the returns on the Communications
Stock relative to the indices since the recapitalization. For the companies in
the Communications Peer Group, the returns of each company have been weighted to
reflect the relative stock market capitalization as of the beginning of the
26-month performance period.
 
               COMPARISON OF 26-MONTH CUMULATIVE TOTAL RETURN(A)
                      AMONG U S WEST COMMUNICATIONS GROUP,
                S&P 500 INDEX, AND COMMUNICATIONS PEER GROUP(B)
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
   VALUE OF $100.00 INVESTED ON
             10/31/95
 
<S>                                 <C>                                <C>        <C>
                                       US WEST - Communications Group    S&P 500   Communications Peer Group - Weighted
Oct-95                                                           $100       $100                                   $100
Dec-95                                                          $ 124      $ 107                                  $ 109
Dec-96                                                          $ 120      $ 131                                  $ 111
Dec-97                                                          $ 177      $ 174                                  $ 154
</TABLE>
 
<TABLE>
<CAPTION>
                                                                OCTOBER     DECEMBER     DECEMBER     DECEMBER
                                                                 1995         1995         1996         1997
                                                              -----------  -----------  -----------  -----------
<S>                                                           <C>          <C>          <C>          <C>
U S WEST--Communications Group..............................   $     100    $     124    $     120    $     177
S&P 500.....................................................   $     100    $     107    $     131    $     174
Communications Peer Group--Weighted.........................   $     100    $     109    $     111    $     154
</TABLE>
 
    Assumes $100 invested on October 31, 1995 in Communications Stock, the S&P
500 Index, and the Communications Peer Group--Weighted.
 
Notes:
 
(a)  Total return assumes the reinvestment of dividends.
 
(b)  Includes the returns weighted by market capitalization of Alltel,
    Ameritech, Bell Atlantic, BellSouth, Cincinnati Bell, Frontier Corp., GTE,
    NYNEX, Pacific Telesis Group, SBC Communications, and Southern New England
    Telephone. Pacific Telesis Group was acquired by SBC Communications on April
    1, 1997, and NYNEX was acquired by Bell Atlantic on August 14, 1997. The
    total stockholder returns of Pacific Telesis Group and NYNEX parallel those
    of SBC Communications and Bell Atlantic, respectively, after such dates.
 
                                                                              82
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
    For comparison of cumulative total stockholder return on the Media Stock, U
S WEST has established a customized peer group (the "Media Peer Group") that
includes companies whose mix of businesses is consistent with the Media Group's
current portfolio of domestic and international businesses. The graph assumes
$100 was invested in each of the Media Stock, the Standard & Poor's 500 Stock
Index, and the Media Peer Group in order to provide the returns on the Media
Stock relative to the indices since the recapitalization. For the companies in
the Media Peer Group, the returns of each such company have been weighted to
reflect the relative stock market capitalization as of the beginning of the
26-month performance period.
 
               COMPARISON OF 26-MONTH CUMULATIVE TOTAL RETURN(A)
                          AMONG U S WEST MEDIA GROUP,
                     S&P 500 INDEX, AND MEDIA PEER GROUP(B)
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
   VALUE OF $100.00 INVESTED
           10/31/95
 
<S>                              <C>                      <C>        <C>
                                     US WEST Media Group    S&P 500   Media Peer Group - Weighted
Oct-95                                              $100       $100                          $100
Dec-95                                              $ 99       $107                         $ 106
Dec-96                                              $ 96      $ 131                         $ 103
Dec-97                                             $ 151      $ 174                         $ 151
</TABLE>
 
<TABLE>
<CAPTION>
                                                                OCTOBER     DECEMBER     DECEMBER     DECEMBER
                                                                 1995         1995         1996         1997
                                                              -----------  -----------  -----------  -----------
<S>                                                           <C>          <C>          <C>          <C>
U S WEST--Media Group.......................................   $     100    $      99    $      96    $     151
S&P 500.....................................................   $     100    $     107    $     131    $     174
Media Peer Group--Weighted..................................   $     100    $     106    $     103    $     151
</TABLE>
 
    Assumes $100 invested on October 31, 1995 in Media Stock, the S&P 500 Index
and the Media Peer Group--Weighted.
 
Notes:
 
(a)  Total return assumes the reinvestment of dividends.
 
(b)  Includes the returns weighted by market capitalization of AirTouch,
    Cablevision Systems, Cellular Communications, Comcast Corp., Cox
    Communications, Dow Jones & Co., Gannett Co., International Family
    Entertainment, Jones Intercable, TCA Cable TV, Tele-Comm--TCI Group, Times
    Mirror, Tribune Co., United International Holdings, U.S. Cellular Corp., and
    Vanguard Cellular Systems. Cellular Communications merged with AirTouch on
    August 16, 1996; Cellular Communications' total shareholder return parallels
    that of AirTouch after this date.
 
                                                                              83
                                                  CHAPTER 4: OTHER MATTERS TO BE
                                                CONSIDERED AT THE ANNUAL MEETING
<PAGE>
CHAPTER 5: INFORMATION ABOUT U S WEST
 
BUSINESS OF U S WEST
 
GENERAL
 
    U S WEST is a diversified global communications company engaged in the
telecommunications, broadband communications, wireless communications and
directories businesses. U S WEST conducts its businesses through two groups: the
Communications Group and the Media Group. U S WEST has two classes of common
stock: the Communications Stock, which is intended to reflect separately the
performance of the Communications Group, and the Media Stock, which is intended
to reflect separately the performance of the Media Group.
 
THE COMMUNICATIONS GROUP
 
    The Communications Group provides telecommunications and related services,
including wireless services and high-speed data and Internet services.
 
    TELECOMMUNICATIONS AND RELATED SERVICES.  The Communications Group provides
telecommunications and related services, including local telephone services,
exchange access services and intraLATA long-distance network services, to
customers in the Communications Group Region, which is comprised of the states
of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico,
North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. The
Communications Group also provides other telecommunications and related products
and services, including customer premises equipment ("CPE") and certain other
communications services to business customers and governmental agencies.
 
    WIRELESS, HIGH-SPEED DATA AND INTERNET SERVICES.  The Communications Group
is constructing wireless networks in its principal markets within the
Communications Group Region and began offering wireless personal communications
services ("PCS") in various markets in 1997. The Communications Group also
provides high-speed data communications and network services, including frame
relay service, Transparent LAN service, ATM Cell Relay Service, network
integration solutions and other data-related services, as well as Internet
services in various markets both inside and outside the Communications Group
Region.
 
    All of the businesses of the Communications Group will be contributed to New
U S WEST in connection with the Separation. For additional information about the
businesses of the Communications Group, see "Chapter 6: Information about New U
S WEST--Business of New U S WEST."
 
THE MEDIA GROUP
 
    The Media Group has operations and investments in three principal areas: (i)
cable and broadband communications; (ii) wireless communications; and (iii)
directory and information services.
 
    CABLE AND BROADBAND COMMUNICATIONS.  The Media Group provides cable,
telephony and high-speed data services to customers under the name "MediaOne"
and is the third largest cable television system operator in the United States.
In addition, the Media Group holds a 25.51% interest in TWE, the second largest
cable television system operator in the United States, and an approximate 10%
interest in PrimeStar, Inc. ("PrimeStar"), a provider of DBS services in the
United States. The Media Group also holds interests in various international
providers of broadband services, including a 26.75% interest in Telewest, the
second largest provider of combined cable and broadband communications services
in the United Kingdom, and interests in providers of broadband services in
Singapore, the Netherlands, Belgium, the Czech Republic, Malaysia, Indonesia and
Japan.
 
                                                                              84
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    WIRELESS COMMUNICATIONS.  The Media Group holds interests in various
international providers of wireless communications services, including a 50%
interest in Mercury Personal Communications ("One 2 One"), a provider of PCS
services in the United Kingdom, and interests in providers of wireless
communications services in Hungary, the Czech and Slovak Republics, Russia,
Malaysia, India and Poland. On April 6, 1998, U S WEST sold the Media Group's
domestic wireless businesses pursuant to the AirTouch Transaction. The Media
Group's domestic wireless businesses included cellular networks in 12 mountain
and western states and a 25% interest in PrimeCo Personal Communications, L.P.
("PrimeCo"), a provider of PCS services in various domestic markets.
 
    DIRECTORY AND INFORMATION SERVICES.  The Media Group's directory and
information services businesses develop and package content and information
services, including telephone directories, database marketing, electronic
directory and other interactive services in domestic markets. The Media Group
also holds a 50% interest in Listel, Brazil's largest publisher of telephone
directories. During 1997, the Media Group sold Thomson Directories, a
directories business in the United Kingdom, and U S WEST Polska, a directories
business in Poland.
 
    The Media Group's cable and broadband communications businesses and
international wireless communications businesses will continue as the businesses
of MediaOne in connection with the Separation. The Media Group's domestic
directories businesses (operated by Dex) will be aligned with New U S WEST in
connection with the Separation pursuant to the Dex Alignment. The Media Group
has sold its domestic wireless businesses to AirTouch pursuant to the AirTouch
Transaction. For additional information about the businesses of the Media Group
other than Dex and about the AirTouch Transaction, see "Chapter 7: Information
about MediaOne--Business of MediaOne." For additional information about the Dex
Alignment and Dex, see "Chapter 3: The Separation--Description of the
Separation--The Dex Alignment" and "Chapter 6: Information about New U S
WEST--Business of New U S WEST."
 
                                                                              85
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
U S WEST SELECTED HISTORICAL FINANCIAL INFORMATION
 
    The following table sets forth selected historical financial information for
U S WEST. This information should be read in conjunction with U S WEST's
Consolidated Financial Statements, including the notes thereto. See "Annex F--U
S WEST, Inc. Consolidated Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AS OF DECEMBER 31,
                                                                      -----------------------------------------------------
                                                                        1997       1996       1995       1994       1993
                                                                      ---------  ---------  ---------  ---------  ---------
<S>                                                                   <C>        <C>        <C>        <C>        <C>
                                                                         DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues(1).........................................  $  15,235  $  12,911  $  11,746  $  10,953  $  10,294
Income before extraordinary items and cumulative
 effect of change in accounting principles(2).......................        700      1,144      1,329      1,426        476
Net income (loss)(3)................................................        697      1,178      1,317      1,426     (2,806)
BALANCE SHEET INFORMATION:
Total assets........................................................     39,740     40,855     25,071     23,204     20,680
Total debt(4).......................................................     14,678     15,351      8,855      7,938      7,199
Mandatorily redeemable preferred stock and Preferred
 Securities(5)......................................................      1,180      1,131        651         51         --
Shareowners' equity.................................................     11,324     11,549      7,948      7,382      5,861
OTHER INFORMATION:
Percentage of debt to total capital(4)..............................       54.0%      54.8%      50.7%      51.6%      55.1%
Capital expenditures(4).............................................  $   4,174  $   3,474  $   3,140  $   2,820  $   2,441
Employees...........................................................     67,461     69,286     61,047     61,505     60,778
COMMUNICATIONS GROUP INFORMATION:(2, 3, 6, 7)
Basic earnings per common share.....................................  $    2.43  $    2.62  $    2.50
Diluted earnings per common share...................................       2.41       2.58       2.46
Basic average common shares outstanding (thousands).................    482,751    477,549    470,716
Diluted average common shares outstanding (thousands)...............    491,232    488,591    481,933
Dividends per common share..........................................  $    2.14  $    2.14  $    2.14
Number of common shareowners of record..............................    672,517    725,560    775,125
MEDIA GROUP INFORMATION:(2, 3, 6, 7)
Basic and diluted earnings (loss) per common share..................  $   (0.88) $   (0.16) $    0.29
Basic average common shares outstanding (thousands).................    606,749    491,924    470,549
Diluted average common shares outstanding (thousands)...............    606,749    491,924    471,612
Number of common shareowners of record..............................    648,077    705,341    770,346
U S WEST INFORMATION:(2, 3, 6, 7)
Basic earnings per common share before extraordinary items and
 cumulative effect of change in accounting principle................                                   $    3.14  $    1.13
Basic earnings (loss) per common share..............................                                        3.14      (6.69)
Diluted earnings (loss) per common share............................                                        3.12      (6.68)
Basic weighted average common shares outstanding (thousands)........                                     453,316    419,365
Diluted weighted average common shares outstanding (thousands)......                                     463,801    419,776
Dividends per common share..........................................                                   $    2.14  $    2.14
Number of common shareowners of record..............................                                     816,099    836,328
</TABLE>
 
- ------------------------------
 
(1) 1997 and 1996 sales and other revenues include $2,070 and $252,
    respectively, related to the Continental Acquisition.
 
(2) 1997 income is before an extraordinary item and includes a $152 regulatory
    charge ($0.31 per share of Communications Stock) related primarily to the
    Washington Rate Order, a gain of $32 ($0.07 per share of Communications
    Stock) on the sale of Bellcore and a gain of $48 ($0.10 per share of
    Communications Stock) on the sales of certain rural telephone exchanges.
    Also included are net gains of $249 ($0.41 per share of Media Stock) on the
    sales of domestic and international investments, and net losses of $356
    ($0.59 per share of Media Stock) related to the Continental Acquisition.
    1996 income is before the cumulative effect of a change in accounting
    principle and includes a gain of $36 ($0.08 per share of Communications
    Stock) on the sales of certain rural telephone exchanges and the current
    effect of $15 ($0.03 per share of Communications Stock) from adopting SFAS
    No. 121. Also included are net losses of $71 ($0.15 per share of Media
    Stock) related to the Continental Acquisition and a charge of $19 ($0.04 per
    share of Media Stock) from the sale of U S WEST's cable television interests
    in Norway, Sweden and Hungary. 1995 income is before an extraordinary item
    and includes a gain of $95 ($0.20 per share of Media Stock) from the merger
    of Telewest with SBC CableComms (UK), a gain of $85 ($0.18 per share of
    Communications Stock) on the sales of certain rural telephone exchanges and
    costs of $17 ($0.01 per share of Communications Stock and $0.02 per share of
    Media Stock) associated with the 1995 Recapitalization. 1994 income includes
    a gain of $105 ($0.23 per share) on the partial sale of U S WEST's joint
    venture interest in Telewest, a gain of $41 ($0.09 per share) on the sale of
 
                                                                              86
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    U S WEST's paging operations and a gain of $51 ($0.11 per share) on the
    sales of certain rural telephone exchanges. 1993 income is before
    extraordinary items and was reduced by a restructuring charge of $610 ($1.46
    per share) and a charge of $54 ($0.13 per share) for the cumulative effect
    on deferred taxes of the 1993 federally mandated increase in income tax
    rates. 1993 income is from continuing operations.
 
(3) 1997 net income was reduced by an extraordinary charge of $3 ($0.01 per
    share of Communications Stock and no Media Stock impact) for the early
    extinguishment of debt. 1996 net income includes a gain of $34 ($0.07 per
    share of Communications Stock) for the cumulative effect of the adoption of
    SFAS No. 121. 1995 net income was reduced by an extraordinary item of $12
    ($0.02 per share of Communications Stock and $0.01 per share of Media Stock)
    for the early extinguishment of debt. 1993 net income was reduced by
    extraordinary charges of $3,123 ($7.45 per share) for the discontinuance of
    SFAS No. 71 and $77 ($0.18 per share) for the early extinguishment of debt.
    1993 net income also includes a charge of $120 ($0.28 per share) for U S
    WEST's decision to discontinue the operations of its capital assets segment.
    Discontinued operations provided net income of $38 ($0.09 per share) in
    1993.
 
(4) Debt at December 31, 1997 and 1996 includes debt related to the Continental
    Acquisition. Capital expenditures, debt and the percentage of debt to total
    capital excludes the capital assets segment, which has been discontinued and
    is held for sale. Percentage of debt to total capital includes the Preferred
    Securities and mandatorily redeemable preferred stock as a component of
    total capital.
 
(5) Includes Preferred Securities of $1,080 at December 31, 1997 and 1996, and
    $600 at December 31, 1995, and preferred stock subject to mandatory
    redemption of $100 at December 31, 1997, and $51 at December 31, 1996, 1995
    and 1994.
 
(6) The average common shares of Media Stock outstanding for the year ended
    December 31, 1996 include 150,615,000 shares issued in connection with the
    Continental Acquisition. Effective November 1, 1995, each share of Old
    Common Stock was converted into one share each of Communications Stock and
    Media Stock. Earnings per common share and dividends per common share for
    1995 have been presented on a pro forma basis to reflect the two classes of
    stock as if they had been outstanding since January 1, 1995. For periods
    prior to the 1995 Recapitalization, the average shares of Communications
    Stock and Media Stock outstanding are assumed to equal the average shares of
    Old Common Stock outstanding for such periods.
 
(7) In 1997, U S WEST adopted SFAS No. 128 "Earnings Per Share" which specifies
    new computation, presentation and disclosure requirements for earnings per
    share to be applied retroactively. SFAS No. 128 requires, among other
    things, presentation of basic and diluted earnings per share. See "Annex
    F--U S WEST, Inc. Consolidated Financial Statements-- Note 16--Earnings Per
    Share."
 
                                                                              87
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
U S WEST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    The following discussion is based on the U S WEST Consolidated Financial
Statements prepared in accordance with generally accepted accounting principles
("GAAP"). See "Annex F--U S WEST, Inc. Consolidated Financial Statements." As
used in this discussion, all references to dollars are in millions.
 
RESULTS OF OPERATIONS--1997 COMPARED WITH 1996
 
    NET INCOME (LOSS)
 
<TABLE>
<CAPTION>
                                                        NET INCOME (LOSS)                   BASIC EARNINGS (LOSS) PER SHARE(1)
                                            ------------------------------------------  ------------------------------------------
                                                                        DECREASE                                    DECREASE
                                                                  --------------------                        --------------------
                                              1997       1996         $          %        1997       1996         $          %
                                            ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Communications Group......................  $   1,177  $   1,249  $     (72)      (5.8) $    2.43  $    2.62  $   (0.19)      (7.3)
Media Group...............................       (480)       (71)      (409)    --          (0.88)     (0.16)     (0.72)    --
                                            ---------  ---------  ---------  ---------
Total net income..........................  $     697  $   1,178  $    (481)     (40.8)
                                            ---------  ---------  ---------  ---------
                                            ---------  ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) In 1997, U S WEST adopted SFAS No. 128, "Earnings Per Share," which
    specifies new computation, presentation and disclosure requirements for
    earnings per share. SFAS No. 128 requires, among other things, presentation
    of basic and diluted earnings per share on the face of the income statement.
    The following discussion and analysis of operations is based upon basic
    weighted average common shares outstanding. For the calculation of diluted
    earnings (loss) per share, see "Annex F-- U S WEST, Inc. Consolidated
    Financial Statements--Note 16--Earnings Per Share."
 
    COMMUNICATIONS GROUP NET INCOME
<TABLE>
<CAPTION>
                                                                   NET INCOME                     BASIC EARNINGS PER SHARE
                                                   ------------------------------------------  -------------------------------
                                                                         INCREASE (DECREASE)                         INCREASE
                                                                                                                     (DECREASE)
                                                                         --------------------                        ---------
                                                     1997       1996         $          %       1997(1)     1996       $(1)
                                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                                <C>        <C>        <C>        <C>        <C>        <C>        <C>
Reported net income..............................  $   1,177  $   1,249  $     (72)      (5.8) $    2.43  $    2.62  $   (0.19)
Adjustments to reported net income:
  Gains on sales of rural telephone exchanges....        (48)       (36)       (12)      33.3      (0.10)     (0.08)     (0.02)
  Gain on sale of investment in Bellcore.........        (32)    --            (32)    --          (0.07)    --          (0.07)
  Cumulative effect of change in accounting
    principle(2).................................     --            (34)        34     --         --          (0.07)      0.07
  Current year effect of change in accounting
    principle(2).................................     --            (15)        15     --         --          (0.03)      0.03
  Early extinguishment of debt(3)................          3     --              3     --           0.01     --           0.01
                                                   ---------  ---------        ---  ---------  ---------  ---------  ---------
Normalized income................................  $   1,100  $   1,164  $     (64)      (5.5) $    2.28  $    2.44  $   (0.16)
                                                   ---------  ---------        ---  ---------  ---------  ---------  ---------
                                                   ---------  ---------        ---  ---------  ---------  ---------  ---------
 
<CAPTION>
 
                                                       %
                                                   ---------
<S>                                                <C>
Reported net income..............................       (7.3)
Adjustments to reported net income:
  Gains on sales of rural telephone exchanges....       25.0
  Gain on sale of investment in Bellcore.........     --
  Cumulative effect of change in accounting
    principle(2).................................     --
  Current year effect of change in accounting
    principle(2).................................     --
  Early extinguishment of debt(3)................     --
                                                   ---------
Normalized income................................       (6.6)
                                                   ---------
                                                   ---------
</TABLE>
 
- ------------------------------
 
(1) Column does not add due to rounding of individual components.
 
(2) Effective January 1, 1996, U S WEST adopted SFAS No. 121, "Accounting for
    the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
    Of" which, among other things, requires that companies no longer record
    depreciation expense on assets held for sale.
 
(3) Reflects a third-quarter 1997 charge of $3 (net of income tax benefits of
    $2) related to the early extinguishment of debt.
 
    In 1997, normalized income decreased $64, or 5.5 percent, to $1,100 as
compared with $1,164 in 1996. Normalized earnings per share of Communications
Stock were $2.28, a decrease of $0.16, or 6.6 percent, as compared to 1996. The
decrease is primarily due to a $152 after-tax regulatory charge ($250
 
                                                                              88
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
pretax), or $0.31 per share of Communications Stock, in the fourth quarter of
1997. The charge primarily relates to a liability for revenues that were
collected subject to refund (with interest) in the state of Washington from May
1, 1996 through December 31, 1997. The liability was recognized in light of the
Washington Rate Order. Absent the effects of the charge, Communications Group's
adjusted earnings per share were $2.59, an increase of 6.1 percent as compared
to 1996. The prospective revenue reduction as a result of the Washington Rate
Order approximates $115 annually. In a separate action in January 1998 the
Washington State Utilities and Transportation Commission ("WUTC") authorized a
rate increase of approximately $60 annually. Tariffs implementing both orders
became effective February 1, 1998. See "Contingencies."
 
    Income in 1997 was favorably impacted by strong demand for services.
Partially offsetting the effects of increased demand were higher expenses
related to interconnection, provisions for estimated regulatory liabilities
other than Washington, and start-up costs associated with growth initiatives,
including PCS.
 
    MEDIA GROUP NET LOSS
 
<TABLE>
<CAPTION>
                                                                       NET LOSS                     BASIC LOSS PER SHARE
                                                           ---------------------------------  ---------------------------------
                                                                                  DECREASE                           DECREASE
                                                                                 -----------                        -----------
                                                             1997       1996          $         1997       1996          $
                                                           ---------  ---------  -----------  ---------  ---------  -----------
<S>                                                        <C>        <C>        <C>          <C>        <C>        <C>
Reported net loss........................................  $    (480) $     (71)  $    (409)  $   (0.88) $   (0.16)  $   (0.72)
Adjustments to reported net loss:
  Gains on sales of investments..........................       (249)    --            (249)      (0.41)    --           (0.41)
                                                           ---------        ---       -----   ---------  ---------  -----------
Normalized loss..........................................  $    (729) $     (71)  $    (658)  $   (1.29) $   (0.16)  $   (1.13)
                                                           ---------        ---       -----   ---------  ---------  -----------
                                                           ---------        ---       -----   ---------  ---------  -----------
</TABLE>
 
    During 1997, the Media Group reported a normalized net loss of $729 ($1.29
per share of Media Stock), compared with a net loss of $71, ($0.16 per share of
Media Stock) in 1996. The Continental Acquisition contributed approximately $356
($0.59 per share of Media Stock) of the increase. The Continental Acquisition
resulted in significant increases in interest and depreciation and amortization
charges. The remaining increase in net loss is primarily due to greater losses
from unconsolidated ventures, partially offset by increased earnings from
domestic cellular and directories operations.
 
    During June 1997, Media Group incurred an extraordinary gain of $3 (net of
income tax expenses of $2) related to the early extinguishment of debt of
MediaOne Delaware. During August 1997, Media Group incurred an extraordinary
loss of $3 (net of income tax benefits of $2) related to the early
extinguishment of debt.
 
    SALES AND OTHER REVENUES
 
<TABLE>
<CAPTION>
                                                                                                   INCREASE (DECREASE)
                                                                                                   --------------------
                                                                               1997       1996         $          %
                                                                             ---------  ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>        <C>
Communications Group.......................................................  $  10,319  $  10,079  $     240        2.4
Media Group................................................................      5,043      2,955      2,088       70.7
Intergroup eliminations....................................................       (127)      (123)        (4)       3.2
                                                                             ---------  ---------  ---------        ---
Total sales and other revenues.............................................  $  15,235  $  12,911  $   2,324       18.0
                                                                             ---------  ---------  ---------        ---
                                                                             ---------  ---------  ---------        ---
</TABLE>
 
                                                                              89
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    COMMUNICATIONS GROUP OPERATING REVENUES
 
<TABLE>
<CAPTION>
                                                                                                   INCREASE (DECREASE)
                                                                                                   --------------------
                                                                               1997       1996         $          %
                                                                             ---------  ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>        <C>
Local service..............................................................  $   5,016  $   4,770  $     246        5.2
Interstate access service..................................................      2,666      2,507        159        6.3
Intrastate access service..................................................        761        770         (9)      (1.2)
Long-distance network services.............................................        885      1,100       (215)     (19.5)
Other services.............................................................        991        932         59        6.3
                                                                             ---------  ---------  ---------  ---------
Total......................................................................  $  10,319  $  10,079  $     240        2.4
                                                                             ---------  ---------  ---------  ---------
                                                                             ---------  ---------  ---------  ---------
</TABLE>
 
    Approximately 97 percent of the Communications Group's revenues are
attributable to the operations of U S WEST Communications, of which
approximately 67 percent are derived from the states of Arizona, Colorado,
Minnesota, Oregon and Washington. The primary factors that influence changes in
revenues are customer demand for products and services, price changes (including
those related to regulatory proceedings) and refunds. Approximately 30 percent
of the access lines in service at December 31, 1997 are devoted to providing
services to business customers. The access line growth rate for business
customers, who tend to be heavier users of the network, has consistently
exceeded the growth rate of residential customers. During 1997, business access
lines grew 5.8 percent while residential access lines increased 3.9 percent,
when adjusted for the 1997 sales of rural telephone access lines.
 
    During 1997, the Communications Group's operating revenues increased 2.4
percent, to $10,319. Revenue growth was impacted by the $250 regulatory charge
in the fourth quarter of 1997. The regulatory charge was allocated among local
service revenues, interstate and intrastate access services revenues,
long-distance network service revenues and interest expense. Absent the effects
of the charge, revenues were $10,549, an increase of 4.7 percent as compared
with 1996.
 
    LOCAL SERVICE REVENUES.  Local service revenues include local telephone
exchange, local private line and public telephone services. During 1997, local
service revenues increased 5.2 percent, or $246, as compared with 1996. Local
service revenue growth of 5.2 percent declined from 9.8 percent in 1996 due to
the effects of an $86 accrual recognized during fourth-quarter 1997 as part of
the Washington Rate Order and additional provisions of approximately $95 during
the year for other estimated state regulatory liabilities. See "Contingencies."
Lower wireless interconnection access prices mandated by the Telecommunications
Act and the effects of rural exchange sales also impacted local service revenue
growth in 1997.
 
    The increase in local service revenues is primarily attributable to access
line growth and increased demand for new product and service offerings and
existing central office features. Total reported access lines increased 609,000
during 1997, or 3.9 percent, of which 294,000 is attributed to second lines.
Second line installations increased 28.2 percent compared with 1996. Access
lines grew 683,000, or 4.4 percent, when adjusted for sales of approximately
74,000 rural telephone access lines during 1997. Also contributing to the
revenues increase were rate increases of $37 in various states and interim
compensation revenues from IXCs as a result of the FCC payphone orders which
took effect in April 1997.
 
    INTERSTATE ACCESS SERVICE REVENUES.  Access charges are collected primarily
from IXCs for their use of the local exchange network. For interstate access
services there is also a fee collected directly from telephone customers.
Approximately 28 percent of access revenues and 9 percent of total revenues are
derived from providing access services to AT&T Corp. ("AT&T").
 
                                                                              90
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    During 1997, interstate access service revenues increased $159, or 6.3
percent, to $2,666. The increase in interstate access service revenues resulted
primarily from greater demand for private line services, access line growth and
an increase of 6.4 percent in billed interstate access minutes of use. Also
contributing to the increase were the effects of higher accruals for refunds to
IXCs in 1996. Lower prices under the FCC's current price cap plan and a $25
charge during fourth-quarter 1997 for an FCC-ordered refund to IXCs for access
revenues collected during the last half of 1997 partially offset the effects of
greater demand for interstate access services. The Communications Group reduced
prices for interstate access services, effective July 1, 1997, as a result of
the FCC's current price cap plan. The access rate reductions, which are being
reflected through lower interstate rates over twelve months beginning July 1,
1997, have an on-going annual revenue impact of approximately $160. The rate of
growth in interstate access service revenues could decline in 1998 as a result
of the FCC's May 1997 decisions to establish rules to restructure the access
charge system (the "Access Reform Order") and the current price cap plan (the
"Price Cap Order"). See "Chapter 6: Information About New U S WEST--Business of
New U S WEST--Competition" and "--Business of New U S WEST-- Regulation."
 
    INTRASTATE ACCESS SERVICE REVENUES.  The decrease of $9, or 1.2 percent, in
intrastate access service revenues is primarily due to the effects of a $68
accrual recognized during fourth-quarter 1997 as part of the Washington Rate
Order. A 12.2 percent increase in billed intrastate minutes of use, higher
demand for private line services and $7 of rate increases in local jurisdictions
largely offset the effects of the Washington Rate Order.
 
    LONG-DISTANCE NETWORK SERVICES REVENUES.  Long-distance network services
revenues are derived from calls which both originate and terminate within the
LATA boundaries of the Communications Group Region. In 1997, long-distance
network services revenues decreased $215, or 19.5 percent, as compared with
1996. The decline is partially due to the effects of a $51 accrual recognized
during fourth-quarter 1997 as part of the Washington Rate Order. The decrease in
long-distance network services revenues is also due to the effects of
competition and the implementation of multiple toll carrier plans ("MTCPs") in
various jurisdictions in 1997 and 1996. The MTCPs essentially allow independent
telephone companies to act as toll carriers and are net income neutral with the
reduction in toll revenues largely offset by increased intrastate access service
revenues and lower access expense. Rate decreases of $20 in local jurisdictions
also contributed to the decrease in long-distance network services revenues.
 
    Long-distance network services revenues have declined over the last several
years as customers have migrated to IXCs that have the ability to offer
long-distance services on both an intraLATA and interLATA basis. A portion of
revenues lost to competition, however, is recovered through access charges paid
by the IXCs. The Communications Group believes that erosion of long-distance
network services revenues will continue due to the loss of exclusivity of 1+
dialing in Minnesota and Arizona in February and April of 1996, respectively,
and in New Mexico and Wyoming in September and December of 1997, respectively,
and the effects of continued competitive dial-around activity in other states
within the Communications Group Region. The Communications Group is responding
to competition through competitive pricing of intraLATA long-distance network
services and increased promotional efforts to retain customers.
 
    OTHER SERVICES REVENUES.  Revenues from other services primarily consist of
voice messaging services, inside wire installation and maintenance services,
billing and collection services, and the provision of CPE. Other services
revenues increased $59, or 6.3 percent, as compared with 1996, primarily as a
result of continued market penetration of voice messaging services and greater
sales of inside wire maintenance and certain other unregulated products and
services. Also contributing to the increase were revenues from the launch of PCS
services. Partially offsetting these increases was a
 
                                                                              91
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
reduction in contract revenues due to the completion of a large federal
government telephony project in 1996.
 
    MEDIA GROUP SALES AND OTHER REVENUES
 
<TABLE>
<CAPTION>
                                                                         INCREASE (DECREASE)       PRO      INCREASE (DECREASE)
                                                                                                FORMA(1)
                                                                         --------------------  -----------  --------------------
                                                     1997       1996         $          %         1996          $          %
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
<S>                                                <C>        <C>        <C>        <C>        <C>          <C>        <C>
CABLE AND BROADBAND:
  Domestic.......................................  $   2,323  $     488  $   1,835     --       $   2,125   $     198        9.3
  International..................................         18          6         12     --               6          12     --
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
                                                       2,341        494      1,847     --           2,131         210        9.9
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
WIRELESS COMMUNICATIONS:
  Domestic:
    Cellular service.............................      1,276      1,078        198       18.4       1,078         198       18.4
    Cellular equipment...........................        152        105         47       44.8         105          47       44.8
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
                                                       1,428      1,183        245       20.7       1,183         245       20.7
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
DIRECTORY AND INFORMATION SERVICES:
  Domestic.......................................      1,197      1,120         77        6.9       1,120          77        6.9
  International..................................         48        139        (91)     (65.5)        139         (91)     (65.5)
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
                                                       1,245      1,259        (14)      (1.1)      1,259         (14)      (1.1)
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
Other............................................         29         19         10       52.6          19          10       52.6
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
Total............................................  $   5,043  $   2,955  $   2,088       70.7   $   4,592   $     451        9.8
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
                                                   ---------  ---------  ---------  ---------  -----------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) Gives effect to the Continental Acquisition as though it had occurred on
    January 1, 1996.
 
    The pro forma increase in Media Group sales and other revenues was primarily
due to growth in domestic cable and broadband and cellular service revenues.
 
    CABLE AND BROADBAND.  Cable and broadband revenues consist primarily of
basic cable programming and premium cable television services, the rental of
converters and remote control devices, cable installation fees, advertising and
PrimeStar DBS services.
 
    Prior to April 1, 1998, Media Group held a 10.4 percent interest in
PrimeStar Partners, L.P. ("Old PrimeStar"). In addition, Media Group distributed
PrimeStar DBS services to subscribers in its service areas and, as a result,
reflected consolidated operating results with respect to such subscribers. On
April 1, 1998, Media Group contributed its interests in Old PrimeStar, as well
as its PrimeStar subscribers and certain related assets, to PrimeStar in
exchange for an approximate 10 percent interest in PrimeStar and cash. As a
result, Media Group will no longer reflect consolidated operating results for
PrimeStar DBS services. See "Chapter 7: Information About MediaOne--Business of
MediaOne-- Business--Domestic Broadband Communications--Other Broadband
Interests."
 
    On a pro forma basis, domestic cable and broadband revenues increased 9.3
percent, to $2,323, in 1997. Basic cable programming services revenues increased
$146, or 10.6 percent, to $1,518, primarily a result of rate increases. Rate
increases averaged approximately 6 to 8 percent and were primarily related to an
increase in programming costs and the addition of channels. This contributed to
the 4.7 percent increase in core cable revenue per average cable subscriber to
$37.76 in 1997, from $36.06 in 1996. Basic subscriber growth of 1.6 percent,
adjusted for dispositions and an acquisition, also contributed to the increase
in revenues along with growth in equipment rental and installation revenues.
Partially offsetting the increase in revenues was a decline in premium services
revenues as a result of moving the Disney Channel to the basic service tier in
several markets and discounting of
 
                                                                              92
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
premium service packages. PrimeStar DBS services contributed $40 to the increase
in domestic cable and broadband revenues principally as a result of a 31 percent
increase in DBS customers to 181,000 at December 31, 1997.
 
    International cable and broadband revenues reflect the consolidation of
Cable Plus a.s. ("Cable Plus"), a cable operator in the Czech Republic, in
fourth-quarter 1996. The consolidation of Cable Plus is associated with a
restructuring in 1996 whereby Media Group's ownership interest increased to 94
percent.
 
    WIRELESS COMMUNICATIONS.  Cellular service revenues increased 18.4 percent,
to $1,276 in 1997, due to a 27 percent increase in subscribers during the year,
partially offset by a 12 percent drop in average revenue per subscriber to
$46.42 per month. The increase in subscribers relates to continued growth in
demand for wireless services, as well as the 1997 introduction of digital
wireless services in several major markets.
 
    Cellular equipment revenues increased 44.8 percent, to $152 in 1997, as a
result of a 14 percent
increase in gross customer additions and the introduction of digital handsets.
These volume increases were partially offset by decreased selling prices for
analog handsets.
 
    On April 6, 1998, Media Group sold its domestic wireless business to
AirTouch pursuant to the AirTouch Transaction. See "Chapter 7: Information About
MediaOne--Business of MediaOne-- AirTouch Transaction."
 
    DIRECTORY AND INFORMATION SERVICES.  Revenues related to Yellow Pages
directory advertising, which represents 99 percent of domestic directory and
information services revenues, increased 7.2 percent, to $1,181 in 1997. The
increases are largely a result of a 7.3 percent increase in revenue per local
advertiser, primarily resulting from price increases of 4.6 percent and an
increase in volume and complexity of advertisements sold. These increases were
offset slightly by decreased revenues associated with exited product lines which
were nonstrategic to the directory business. Interactive and other services,
which comprise the remaining domestic directory and information services
revenues, totaled $16 and $18 for the years ended December 31, 1997 and 1996,
respectively.
 
    In conjunction with the proposed Separation, the domestic directory business
will be aligned with New U S WEST.
 
    During 1997, Media Group sold its wholly owned international directory and
information services operations.
 
    OPERATING INCOME
 
<TABLE>
<CAPTION>
                                                                                                    INCREASE (DECREASE)
                                                                                                    --------------------
                                                                                1997       1996         $          %
                                                                              ---------  ---------  ---------  ---------
<S>                                                                           <C>        <C>        <C>        <C>
Communications Group........................................................  $   2,210  $   2,340  $    (130)      (5.6)
Media Group.................................................................        596        515         81       15.7
                                                                              ---------  ---------  ---------        ---
Total operating income......................................................  $   2,806  $   2,855  $     (49)      (1.7)
                                                                              ---------  ---------  ---------        ---
                                                                              ---------  ---------  ---------        ---
</TABLE>
 
                                                                              93
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    COMMUNICATIONS GROUP OPERATING INCOME
 
<TABLE>
<CAPTION>
                                                                                                    INCREASE (DECREASE)
                                                                                                    --------------------
                                                                                1997       1996         $          %
                                                                              ---------  ---------  ---------  ---------
<S>                                                                           <C>        <C>        <C>        <C>
Operating revenues..........................................................  $  10,319  $  10,079  $     240        2.4
Operating expenses:
  Employee-related expenses.................................................      3,697      3,594        103        2.9
  Other operating expenses..................................................      1,870      1,634        236       14.4
  Taxes other than income taxes.............................................        416        389         27        6.9
  Depreciation and amortization.............................................      2,126      2,122          4        0.2
                                                                              ---------  ---------  ---------        ---
    Total operating expenses................................................      8,109      7,739        370        4.8
                                                                              ---------  ---------  ---------        ---
Operating income............................................................  $   2,210  $   2,340  $    (130)      (5.6)
                                                                              ---------  ---------  ---------        ---
                                                                              ---------  ---------  ---------        ---
</TABLE>
 
    Operating income declined $130, or 5.6 percent, to $2,210 in 1997. Revenue
growth of $240, or 2.4 percent, was more than offset by an increase of $370, or
4.8 percent, in operating costs, including approximately $150 of expenses
related to interconnection. See "Chapter 6: Information about New U S
WEST--Business of New U S WEST--Regulation." In addition, revenue growth was
negatively impacted by the fourth-quarter 1997 regulatory charge. See "Sales and
Other Revenues." Absent the effects of the regulatory charge, operating income
was $2,440, an increase of 4.3 percent, as compared with 1996.
 
    Operating expense growth was primarily due to increases in employee-related
and other operating expenses. Employee-related expenses include salaries and
wages (including both basic and performance-based pay), overtime, benefits
(including pension, postretirement and health care), payroll taxes and contract
labor. During 1997, total employee-related expenses increased $103, or 2.9
percent, to $3,697, primarily due to higher contract labor costs. The contract
labor costs were predominately a result of increased systems development work
(which includes expenses related to interconnection and year 2000 costs) and
marketing and sales efforts. Increases in certain employee-related benefit costs
also contributed to the growth in total employee-related expenses. Partially
offsetting these increases were lower salaries and wages related to headcount
reductions, lower conference and travel expenses and decreases in overtime
costs.
 
    Other operating expenses include access charges paid to independent LECs
(incurred for the routing of long-distance traffic through their facilities),
network software expenses and other general and administrative costs, including
allocated costs from U S WEST. During 1997, other operating expenses increased
$236, or 14.4 percent, to $1,870, primarily due to a $92 increase in advertising
costs and approximately $90 of interconnection expenses. Costs associated with
strategic and growth initiatives (primarily PCS) and increased equipment rentals
also contributed to the increase. Partially offsetting these cost increases were
reduced access expenses (primarily related to the implementation of the MTCPs in
1997 and 1996), the completion of a large federal government telephony project
in 1996 and lower material and supplies expense. A 1996 charge of $11 to
discontinue the Omaha broadband video service trial also partially offset the
increase in other operating expenses.
 
    At December 31, 1997, approximately 69 percent of the Communications Group's
employees were represented by unions. The Communications Group's principal
collective bargaining agreements expire in August 1998. Negotiations with
respect to future collective bargaining agreements are underway.
 
    Taxes other than income taxes, which consist primarily of property taxes,
increased $27, or 6.9 percent, to $416, primarily due to the effects of property
tax adjustments in 1996 and increased 1997 use taxes. Partially offsetting the
increases were the effects of favorable tax valuations and mill levies on 1997
property taxes as compared with 1996.
 
                                                                              94
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    MEDIA GROUP OPERATING INCOME
 
<TABLE>
<CAPTION>
                   INCREASE      PRO       INCREASE
                  (DECREASE)   FORMA(1)   (DECREASE)
                  -----------  --------   -----------
    1997   1996     $     %      1996      $      %
    -----  -----  -----  ----  --------   ----  -----
  <C>      <C>    <C>    <C>   <C>        <C>   <C>
CABLE
  AND
  BROADBAND:
  Domestic... $(111) $ (13) $ (98)  --  $ (73) $(38)  52.1
  International...   (15)    (7)    (8)  --     (7)   (8)  --
    -----  -----  -----  ----  --------   ----  -----
     (126)   (20)  (106)  --      (80)     (46)  57.5
    -----  -----  -----  ----  --------   ----  -----
WIRELESS
COMMUNICATIONS:
  Domestic...   353   243   110 45.3    243  110  45.3
  International...   (13)    (3)   (10)  --     (3)  (10)  --
    -----  -----  -----  ----  --------   ----  -----
      340    240    100  41.7     240      100   41.7
    -----  -----  -----  ----  --------   ----  -----
DIRECTORY
  AND
  INFORMATION
  SERVICES:
  Domestic...   548   452    96 21.2    452   96  21.2
  International...   (11)     2   (13)  --      2  (13)  --
    -----  -----  -----  ----  --------   ----  -----
      537    454     83  18.3     454       83   18.3
    -----  -----  -----  ----  --------   ----  -----
Other(2)...  (155)  (159)     4 (2.5)   (159)    4  (2.5)
    -----  -----  -----  ----  --------   ----  -----
Operating
income... $ 596 $ 515 $  81 15.7  $ 455   $141   31.0
    -----  -----  -----  ----  --------   ----  -----
    -----  -----  -----  ----  --------   ----  -----
</TABLE>
 
- ------------------------------
 
(1) Gives effect to the Continental Acquisition as though it had occurred on
    January 1, 1996.
 
(2) Primarily includes headquarters expenses for shared services and divisional
    expenses associated with equity investments.
 
    The Media Group pro forma operating income increases were due primarily to
growth in domestic wireless and domestic directory operations, partially offset
by higher domestic cable operating losses.
 
    CABLE AND BROADBAND.  Domestic cable and broadband operating losses
increased 52.1 percent, or $38, to $111, as compared with pro forma 1996.
Revenue growth of $198, or 9.3 percent, to $2,323, was more than offset by
increases in programming costs, including programming for PrimeStar DBS
services, of $71, or 15.6 percent, to $525, increases in operating, marketing
and advertising, and general and administrative costs of $89, or 11.4 percent,
to $868, and increases in depreciation and amortization expense of $76, or 7.9
percent, to $1,041.
 
    Programming cost increases are primarily a result of rate increases and
subscriber growth. Increases in operating, marketing and advertising, and
general and administrative costs are primarily a function of customer service
initiatives, costs associated with deployment of new services such as high-speed
data, advertising costs to implement the "MediaOne" brand and increased
professional fees. A reduction in the estimated remaining useful lives of
certain assets in accordance with planned re-build activities resulted in a
depreciation adjustment of $61 which accounts for the majority of the increase
in depreciation and amortization expense during 1997.
 
    The domestic cable and broadband business will continue to generate
operating losses for the foreseeable future due to the amortization of
intangible assets associated with the Continental Acquisition and depreciation
associated with network upgrades.
 
    WIRELESS COMMUNICATIONS.  Domestic cellular operating income increased 45.3
percent, to $353, in 1997. The increase in operating income is a result of
revenue increases associated with the expanding subscriber base combined with
efficiency gains. These increases were somewhat offset by a decline in revenue
per subscriber, caused primarily by promotional pricing to retain subscribers
and remain competitive with other wireless service providers. On a per
subscriber basis, the 1997 decline in revenue of 11.6 percent has been more than
offset by a combined decrease of 19.4 percent in the costs incurred
 
                                                                              95
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
to acquire and support customers. Customer acquisition costs include sales
commissions, advertising, other selling costs and equipment costs. Customer
support costs include charges for access and usage of land-line
telecommunications networks, subscriber billing, customer service and general
support costs, as well as costs associated with roaming, toll calls within LATA
boundaries, and fraud. Support costs per subscriber declined 17.6 percent in
1997. The decline is generally a result of the efficiencies gained from an
expanding customer base without corresponding increases in headcount and
infrastructure.
 
    Competitive activity increased in U S WEST's domestic cellular markets in
the second half of the year, particularly with the introduction of new PCS
wireless services in several markets. In many cases, discounted cellular service
price plans were offered in response to competition. This resulted in slowing
operating income growth during the fourth quarter of 1997.
 
    Domestic cellular depreciation and amortization increased 22.4 percent, to
$180, largely as a result of network upgrades.
 
    DIRECTORY AND INFORMATION SERVICES.  During 1997, operating income related
to domestic Yellow Pages directory advertising increased 14 percent to $582.
Revenue increases of 7.2 percent were partially offset by an 11 percent increase
in paper and printing costs, and a 7 percent increase in sales support costs.
These cost increases were associated with an increase in the volume and
complexity of advertisements sold. Additionally, 1996 results include a charge
of $25 incurred to reorganize and reduce management headcount. During 1997, the
Yellow Pages operation completed its reorganization. Centralized operating
management was divided into three regions to establish greater accountability
and to move decision making closer to the customers.
 
    Operating losses associated with ongoing product development activities,
which include development costs for Internet content services, are included in
domestic directory and information services operating income. Such losses
reduced domestic directory and information services operating income by $34 in
1997, compared with a reduction of $59 in 1996. The decrease in losses is
primarily the result of cost containment efforts in 1997 and discontinuing
various product development activities in 1996.
 
    At December 31, 1997, approximately 64 percent of the directory and
information services segment employees were represented by unions. The principal
collective bargaining agreements expire in May and October 1998. Negotiations
with respect to future collective bargaining agreements are underway.
 
    OTHER.  Other operating losses include costs related to general and
administrative services provided by U S WEST to the Media Group, including
executive management, legal, accounting and auditing, tax, treasury, strategic
planning, and public policy. Also included are costs related to managing the
various Media Group operations, predominantly the international operations. The
1997 results include a $30 charge for management changes and moving costs
related to relocating MediaOne Delaware's operations from Boston to Denver. This
charge was partially offset by savings associated with lower international staff
levels in 1997, combined with a 1996 charge of $10 related to the staff
reductions at international headquarters.
 
                                                                              96
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    INTEREST EXPENSE AND OTHER
 
<TABLE>
<CAPTION>
                                                                                                 INCREASE (DECREASE)
                                                                                                 --------------------
                                                                             1997       1996         $          %
                                                                           ---------  ---------  ---------  ---------
<S>                                                                        <C>        <C>        <C>        <C>
Interest expense.........................................................  $  (1,083) $    (612) $     471       77.0
Equity losses in unconsolidated ventures.................................       (909)      (346)       563     --
Gains on sales of investments............................................        474     --            474     --
Gains on sales of rural telephone exchanges..............................         77         59         18       30.5
Guaranteed minority interest expense.....................................        (87)       (55)        32       58.2
Other expense--net.......................................................        (56)       (61)        (5)      (8.2)
</TABLE>
 
    INTEREST EXPENSE.  Interest expense increased $471, or 77.0 percent,
primarily as a result of assuming, at market value, $6.5 billion of debt related
to the Continental Acquisition. Partially offsetting the increase were lower
average debt levels at the Communications Group in 1997. U S WEST's weighted
average borrowing cost was 7.0 percent in 1997, compared with 6.85 percent in
1996. See "Liquidity and Capital Resources."
 
    EQUITY LOSSES IN UNCONSOLIDATED VENTURES.  Equity losses increased $563 in
1997, predominantly a result of greater losses generated from international
ventures and the domestic investment in PrimeCo. PrimeCo launched service in
November 1996, and losses associated with this venture have increased $68 as a
result of start-up and other costs.
 
    International equity losses increased $455 in 1997. Ventures located in
Asia, which includes Indonesia, India, Malaysia, Japan and Singapore,
contributed $397 to the increase. During the twelve month period ending December
31, 1997, the value of the Malaysian currency declined 36 percent and the
Indonesian currency declined 57 percent as compared with the U. S. dollar. As a
result of this significant decline, U S WEST reviewed its investments in
Malaysia and Indonesia for impairment. Management concluded that each of its
investments in Malaysia and Indonesia was impaired and in each case the fair
value of the investment was zero as of December 31, 1997. U S WEST recorded
pretax charges of $145 and $55 related to the ventures in Malaysia and
Indonesia, respectively.
 
    In the case of Malaysia, the charge of $145 was to recognize that the
investment was impaired and to write down the carrying value of the investment
to its fair value of zero. The following factors were considered by management
in determining that the investment was impaired:
 
    - The venture has negative cash flow and no ability to meet its debt
      obligations of $482 due in 1998. Total venture debt and vendor payables
      exceeded $800 at December 31, 1997. The venture debt is subject to cross
      default provisions so that failure to pay any material obligation is
      highly likely to accelerate the total balance due. Management has no
      intention of funding future operating losses or debt obligations. The
      venture debt is primarily denominated in U. S. dollars with the revenues
      and operating expenses of the business denominated in local currency.
 
    - As determined on a U. S. GAAP basis, the venture's liabilities exceeded
      its assets as of December 31, 1997, making the venture insolvent at that
      time.
 
    - The business plan for the venture contemplated a significant contribution
      to cash flows from the wireline business. The actual and potential cash
      flows of the venture have been severely diminished by the inability of the
      venture to effectively establish the wireline business. The venture has
      other lines of business (gateway switch, satellite and wireless
      communications) which do not generate sufficient cash flow to fund the
      operations and to retire the debt. Management believes that such condition
      is other than temporary and its investment is impaired as of December 31,
      1997.
 
                                                                              97
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    The following table shows summarized financial information for the Malaysian
venture, Binariang SDN BHD:
 
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                      -------------------------------
                                                                        1997       1996       1995
                                                                      ---------  ---------  ---------
<S>                                                                   <C>        <C>        <C>
RESULTS OF OPERATIONS
Revenues............................................................  $     268  $      90  $      20
Operating losses....................................................        (72)       (73)      (145)
Net loss............................................................       (361)      (120)      (139)
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                               --------------------
                                                                                 1997       1996
                                                                               ---------  ---------
<S>                                                                            <C>        <C>
FINANCIAL POSITION
Current assets...............................................................  $     151  $      99
Property, plant and equipment--net...........................................        695        671
Other assets.................................................................         23         15
                                                                               ---------  ---------
Total assets.................................................................  $     869  $     785
                                                                               ---------  ---------
                                                                               ---------  ---------
Current liabilities and current debt.........................................  $     891  $     302
Long-term debt...............................................................     --            282
Equity (deficit).............................................................        (22)       201
                                                                               ---------  ---------
Total liabilities and equity (deficit).......................................  $     869  $     785
                                                                               ---------  ---------
                                                                               ---------  ---------
</TABLE>
 
    In the case of Indonesia, the net book value of the venture had been reduced
to its fair value of zero through recognition of $43 of equity losses during
1997. The $55 charge was to recognize probable funding commitments in connection
with a shareholder support agreement. The probable funding commitments consist
of U S WEST's remaining contractual commitment under the shareholder support
agreement of $19 and its partners' remaining commitments of $36. Under the terms
of the shareholder support agreement, each shareholder is responsible for the
full unfunded liability if the other shareholders do not meet their
proportionate obligations. Although the lenders have not formally declared
default, the venture is in default of its debt agreements. Management believes
that it is probable that default will be declared by the lenders and that the
other shareholders will not meet their proportionate obligations. As a result, U
S WEST has accrued for its partners' share of the commitment under the
shareholder support agreement.
 
    The following factors were considered by management in determining that the
Indonesian investment was impaired and that accrual of U S WEST's and its
partners' funding liabilities were necessary:
 
    - As determined on a U. S. GAAP basis, the venture's liabilities,
      predominantly U. S. dollar denominated debt, exceeded its assets as of
      December 31, 1997.
 
    - Management believes the venture is not viable given the political and
      economic uncertainties in Indonesia.
 
    - The venture has ceased funding capital projects.
 
    U S WEST's other ventures in Asia, located in Japan, Singapore and India,
were evaluated for impairment at December 31, 1997. Such evaluation indicated
there was no impairment as the fair value of these ventures exceeded their
recorded values.
 
    GAINS ON SALES OF INVESTMENTS.  During 1997, Media Group sold: (i) its 90
percent interest in Fintelco, S.A. ("Fintelco"), a cable and telecommunications
venture located in Argentina, for a pretax gain of $135 ($80 after tax), (ii)
its shares of Teleport Communications Group, Inc. ("TCG"), acquired
 
                                                                              98
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
in the Continental Acquisition, for a pretax gain of $162 ($96 after tax), (iii)
its shares of Time Warner Inc. ("TWX"), acquired in the Continental Acquisition,
for a pretax gain of $44 ($25 after tax), (iv) its five percent interest in a
French wireless venture, for a pretax gain of $51 ($31 after tax), and (v) U S
WEST Polska, its wholly owned directory operation in Poland, for a pretax gain
of $29 ($17 after tax).
 
    Additionally, U S WEST Communications and the other Regional Bell Operating
Companies ("RBOCs") sold their equity interests in Bellcore. As a result of the
sale, U S WEST Communications recorded a pretax gain of $53 ($32 after tax).
 
    GAINS ON SALES OF RURAL TELEPHONE EXCHANGES.  During 1997, the
Communications Group sold selected rural telephone exchanges in Iowa, South
Dakota, Nebraska, Idaho, and Minnesota for pretax gains of $77. The 1996 gains
were a result of sales in Utah, North Dakota, South Dakota, Idaho and New
Mexico.
 
    GUARANTEED MINORITY INTEREST EXPENSE.  Guaranteed minority interest expense
reflects an increase of $32 related to the October 29, 1996 issuance of
Preferred Securities totaling $480.
 
    OTHER EXPENSE--NET.  Other expense decreased $5 in 1997, due primarily to a
1996 pretax charge of $31 associated with the sale of the Media Group's cable
television interests in Norway, Sweden and Hungary. Largely offsetting this
decrease was additional interest expense associated with the Communications
Group's state regulatory and interstate sharing liabilities, and increased
foreign exchange transaction losses associated with loans to international
ventures.
 
    PROVISION FOR INCOME TAXES
 
<TABLE>
<CAPTION>
                                                                                                            DECREASE
                                                                                                      --------------------
                                                                                  1997       1996         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Provision for income taxes....................................................  $     522  $     696  $    (174)     (25.0)
Effective tax rate............................................................       42.7%      37.8%    --         --
</TABLE>
 
    The increase in the effective tax rate is primarily a result of the effects
of goodwill amortization associated with the Continental Acquisition.
 
    RESTRUCTURING CHARGE
 
    In 1993, U S WEST incurred a $1 billion restructuring charge (pretax). The
related restructuring plan was designed to provide faster, more responsive
customer services, while reducing the costs of providing these services. During
1997, the restructuring reserve decreased $70, to $56. Reserve usage was
primarily a result of 645 employee separations and systems development costs
during 1997. The restructuring plan is substantially complete as of December 31,
1997.
 
                                                                              99
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
RESULTS OF OPERATIONS--1996 COMPARED WITH 1995
 
    NET INCOME (LOSS)
<TABLE>
<CAPTION>
                                                         NET INCOME (LOSS)                BASIC EARNINGS (LOSS) PER SHARE
                                             ------------------------------------------  ---------------------------------
                                                                         INCREASE                                INCREASE
                                                                        (DECREASE)                               (DECREASE)
                                                                   --------------------                          ---------
                                               1996       1995         $          %        1996       1995(1)        $
                                             ---------  ---------  ---------  ---------  ---------  -----------  ---------
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>          <C>
Communications Group.......................  $   1,249  $   1,176  $      73        6.2  $    2.62   $    2.50   $    0.12
Media Group................................        (71)       141       (212)    --          (0.16)       0.29       (0.45)
                                             ---------  ---------  ---------  ---------
Total net income...........................  $   1,178  $   1,317  $    (139)     (10.6)
                                             ---------  ---------  ---------  ---------
                                             ---------  ---------  ---------  ---------
 
<CAPTION>
                                                 %
                                                ---
<S>                                          <C>
Communications Group.......................        4.8
Media Group................................     --
Total net income...........................
</TABLE>
 
- ------------------------------
 
(1) As a result of the 1995 Recapitalization, basic earnings (loss) per share
    have been presented on a pro forma basis as if the Communications Stock and
    Media Stock had been outstanding since January 1, 1995. For periods prior to
    the 1995 Recapitalization, the average common shares outstanding are assumed
    to be equal to the average common shares outstanding for U S WEST.
 
    COMMUNICATIONS GROUP NET INCOME
 
<TABLE>
<CAPTION>
                                                            NET INCOME                         BASIC EARNINGS PER SHARE(1)
                                            ------------------------------------------  ------------------------------------------
                                                                        INCREASE                                    INCREASE
                                                                       (DECREASE)                                  (DECREASE)
                                                                  --------------------                        --------------------
                                              1996       1995         $          %        1996      1995(1)       $          %
                                            ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Reported net income.......................  $   1,249  $   1,176  $      73        6.2  $    2.62  $    2.50  $    0.12        4.8
 
Adjustments to reported net income:
  Gains on sales of rural telephone
    exchanges.............................        (36)       (85)        49      (57.6)     (0.08)     (0.18)      0.10      (55.6)
  Cumulative effect of change in
    accounting principle(2)...............        (34)    --            (34)    --          (0.07)    --          (0.07)    --
  Current year effect of change in
    accounting principle(2)...............        (15)    --            (15)    --          (0.03)    --          (0.03)    --
  Recapitalization costs..................     --              8         (8)    --         --           0.01      (0.01)    --
  Early extinguishment of debt(3).........     --              8         (8)    --         --           0.02      (0.02)    --
                                            ---------  ---------        ---  ---------  ---------  ---------  ---------  ---------
Normalized income.........................  $   1,164  $   1,107  $      57        5.1  $    2.44  $    2.35  $    0.09        3.8
                                            ---------  ---------        ---  ---------  ---------  ---------  ---------  ---------
                                            ---------  ---------        ---  ---------  ---------  ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) As a result of the 1995 Recapitalization, basic earnings per share have been
    presented on a pro forma basis as if the Communications Stock had been
    outstanding since January 1, 1995. For periods prior to the 1995
    Recapitalization, the average common shares outstanding are assumed to be
    equal to the average common shares outstanding for U S WEST.
 
(2) Effective January 1, 1996, U S WEST adopted SFAS No. 121 which, among other
    things, requires that companies no longer record depreciation expense on
    assets held for sale.
 
(3) Represents an extraordinary charge of $8 (net of income tax benefits of $5)
    related to the refinancing of $145 of long-term debt.
 
    The Communications Group's 1996 normalized income was $1,164, an increase of
$57, or 5.1 percent, compared with $1,107 in 1995. Normalized earnings per share
of Communications Stock were $2.44, an increase of $0.09, or 3.8 percent, as
compared to 1995. The increase in normalized income is primarily attributable to
increased demand for services. Partially offsetting the increased revenues were
higher costs incurred to address business growth, service-improvement
initiatives and costs related to new business opportunities.
 
                                                                             100
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    MEDIA GROUP NET INCOME (LOSS)
 
<TABLE>
<CAPTION>
                                                                                                BASIC EARNINGS (LOSS) PER
                                                                 NET INCOME (LOSS)                      SHARE(1)
                                                         ---------------------------------  ---------------------------------
                                                                                INCREASE                           INCREASE
                                                                               (DECREASE)                         (DECREASE)
                                                                               -----------                        -----------
                                                           1996       1995          $         1996      1995(1)        $
                                                         ---------  ---------  -----------  ---------  ---------  -----------
<S>                                                      <C>        <C>        <C>          <C>        <C>        <C>
Reported net income (loss).............................  $     (71) $     141   $    (212)  $   (0.16) $    0.29   $   (0.45)
 
Adjustments to reported net income (loss):
  Merger of joint venture(2)...........................     --            (95)         95      --          (0.20)       0.20
  Recapitalization costs...............................     --              9          (9)     --           0.02       (0.02)
  Early extinguishment of debt(3)......................     --              4          (4)     --           0.01       (0.01)
                                                               ---  ---------       -----   ---------  ---------  -----------
Normalized income (loss)...............................  $     (71) $      59   $    (130)  $   (0.16) $    0.12   $   (0.28)
                                                               ---  ---------       -----   ---------  ---------  -----------
                                                               ---  ---------       -----   ---------  ---------  -----------
</TABLE>
 
- ------------------------------
 
(1) As a result of the 1995 Recapitalization, basic earnings (loss) per share
    have been presented on a pro forma basis as if the Media Stock had been
    outstanding since January 1, 1995. For periods prior to the 1995
    Recapitalization, the average common shares outstanding are assumed to be
    equal to the average common shares outstanding for U S WEST.
 
(2) Relates to the merger of Telewest with SBC CableComms (UK).
 
(3) Media Group incurred an extraordinary loss of $4 (net of income tax benefits
    of $2) related to the early retirement of debt by TWE.
 
    During 1996, the Media Group recorded a net loss of $71 compared to
normalized income of $59 in 1995. Excluding the effects of the Continental
Acquisition, the Media Group would have been break-even in 1996. The decline in
1996 normalized income (loss), excluding Continental, is primarily due to higher
equity losses related to international and domestic growth initiatives,
partially offset by improvement in domestic cellular operations.
 
    SALES AND OTHER REVENUES
 
<TABLE>
<CAPTION>
                                                                                                        INCREASE
                                                                                                       (DECREASE)
                                                                                                  --------------------
                                                                              1996       1995         $          %
                                                                            ---------  ---------  ---------  ---------
<S>                                                                         <C>        <C>        <C>        <C>
Communications Group......................................................  $  10,079  $   9,484  $     595        6.3
Media Group...............................................................      2,955      2,374        581       24.5
Intergroup eliminations...................................................       (123)      (112)       (11)       9.8
                                                                            ---------  ---------  ---------  ---------
Total sales and other revenues............................................  $  12,911  $  11,746  $   1,165        9.9
                                                                            ---------  ---------  ---------  ---------
                                                                            ---------  ---------  ---------  ---------
</TABLE>
 
    COMMUNICATIONS GROUP OPERATING REVENUES
 
<TABLE>
<CAPTION>
                                                                                                            INCREASE
                                                                                                           (DECREASE)
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Local service.................................................................  $   4,770  $   4,344  $     426        9.8
Interstate access service.....................................................      2,507      2,378        129        5.4
Intrastate access service.....................................................        770        747         23        3.1
Long-distance network services................................................      1,100      1,189        (89)      (7.5)
Other services................................................................        932        826        106       12.8
                                                                                ---------  ---------  ---------        ---
Total.........................................................................  $  10,079  $   9,484  $     595        6.3
                                                                                ---------  ---------  ---------        ---
                                                                                ---------  ---------  ---------        ---
</TABLE>
 
                                                                             101
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    LOCAL SERVICE REVENUES.  Local service revenues increased principally as a
result of access line growth and increased demand for new product and service
offerings, and existing central office features. Total reported access lines
increased 629,000 during 1996, or 4.3 percent, of which 244,000 was attributed
to second lines. Second line installations increased 30.5 percent compared with
1995. Access line growth was 5.0 percent when adjusted for sales of rural
telephone access lines during 1996.
 
    INTERSTATE AND INTRASTATE ACCESS SERVICE REVENUES.  Higher revenues from
interstate access services were driven by access line growth and an increase of
8.9 percent in interstate billed access minutes of use. The increased business
volume was partially offset by the effects of price reductions and sharing
related accrued refunds to IXCs. Intrastate access service revenues increased
primarily due to higher demand partially offset by the effects of price
reductions.
 
    LONG-DISTANCE NETWORK SERVICES REVENUES.  Long-distance network services
revenues decreased primarily due to the effects of competition and the
implementation of MTCPs in 1996. The 1996 impact of the MTCPs was a $27
reduction in long-distance network services revenues, partially offset by an
increase in intrastate access service revenues of $5 and a decrease in other
operating expenses (primarily access expense) of $21.
 
    OTHER SERVICES REVENUES.  During 1996, revenues from other services
increased primarily as a result of continued market penetration in voice
messaging services and increased inside wire maintenance services. Also
contributing to other services revenue growth were increased contract revenues
related to a large federal government telephony project and CPE sales.
 
    MEDIA GROUP SALES AND OTHER REVENUES
 
<TABLE>
<CAPTION>
                                                                                                      INCREASE (DECREASE)
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
CABLE AND BROADBAND:
  Domestic....................................................................  $     488  $     215  $     273     --
  International...............................................................          6     --              6     --
                                                                                ---------  ---------  ---------  ---------
                                                                                      494        215        279     --
                                                                                ---------  ---------  ---------  ---------
 
WIRELESS COMMUNICATIONS:
  Domestic:
    Cellular service..........................................................      1,078        845        233       27.6
    Cellular equipment........................................................        105         96          9        9.4
                                                                                ---------  ---------  ---------  ---------
                                                                                    1,183        941        242       25.7
                                                                                ---------  ---------  ---------  ---------
 
DIRECTORY AND INFORMATION SERVICES:
  Domestic....................................................................      1,120      1,058         62        5.9
  International...............................................................        139        122         17       13.9
                                                                                ---------  ---------  ---------  ---------
                                                                                    1,259      1,180         79        6.7
                                                                                ---------  ---------  ---------  ---------
Other.........................................................................         19         38        (19)     (50.0)
                                                                                ---------  ---------  ---------  ---------
Total.........................................................................  $   2,955  $   2,374  $     581       24.5
                                                                                ---------  ---------  ---------  ---------
                                                                                ---------  ---------  ---------  ---------
</TABLE>
 
    Media Group sales and other revenues increased 24.5 percent, to $2,955 in
1996 due primarily to the Continental Acquisition and to strong growth in
cellular service revenue. Excluding the effects of the Continental Acquisition,
sales and other revenues increased 13.9 percent.
 
                                                                             102
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    CABLE AND BROADBAND.  Domestic cable and broadband revenues increased $273,
to $488 in 1996, due primarily to the Continental Acquisition. Excluding the
effects of the Continental Acquisition, domestic cable and broadband revenues
increased $21, or 9.8 percent, to $236. The normalized increase was due to
higher revenues from the Media Group's cable systems in Atlanta, as a result of
a 3.9 percent increase in revenue per subscriber to $39.36 per month and a basic
subscriber increase of 4.5 percent. The increase in revenue per subscriber was
primarily a result of price increases of 6 to 7 percent.
 
    International cable and broadband revenues reflect the consolidation in the
fourth quarter of 1996 of Cable Plus.
 
    WIRELESS COMMUNICATIONS.  Cellular service revenues increased 27.6 percent,
to $1,078 in 1996, due to a 40 percent increase in subscribers during the year.
The increase in subscribers was partially offset by a 12 percent drop in average
revenue per subscriber to $53.00 per month. The increase in subscribers relates
to continued growth in demand for wireless services, especially among consumers.
 
    Cellular equipment revenues increased 9.4 percent, to $105 in 1996, as a
result of a 61 percent increase in units sold which was somewhat offset by lower
equipment prices. A 30 percent increase in customers added during the year and
the implementation of a phone exchange program for existing customers led to the
increase in units sold.
 
    DIRECTORY AND INFORMATION SERVICES.  Revenues related to Yellow Pages
directory advertising, which represents 98 percent of the domestic directory and
information services revenue, increased 7.4 percent, to $1,102 in 1996. The
increases are largely a result of a 5.7 percent increase in revenue per local
advertiser (primarily a result of price increases of approximately 4.0 percent)
combined with an increase of 3,000 in local advertisers during the year.
 
    OPERATING INCOME
 
<TABLE>
<CAPTION>
                                                                                                            INCREASE
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Communications Group..........................................................  $   2,340  $   2,178  $     162        7.4
Media Group...................................................................        515        467         48       10.3
                                                                                ---------  ---------  ---------  ---------
Total operating income........................................................  $   2,855  $   2,645  $     210        7.9
                                                                                ---------  ---------  ---------  ---------
                                                                                ---------  ---------  ---------  ---------
</TABLE>
 
    COMMUNICATIONS GROUP OPERATING INCOME
 
<TABLE>
<CAPTION>
                                                                                                           INCREASE
                                                                                                     --------------------
                                                                                 1996       1995         $          %
                                                                               ---------  ---------  ---------  ---------
<S>                                                                            <C>        <C>        <C>        <C>
Operating revenues...........................................................  $  10,079  $   9,484  $     595        6.3
Operating expenses:
  Employee-related expenses..................................................      3,594      3,341        253        7.6
  Other operating expenses...................................................      1,634      1,543         91        5.9
  Taxes other than income taxes..............................................        389        380          9        2.4
  Depreciation and amortization..............................................      2,122      2,042         80        3.9
                                                                               ---------  ---------  ---------  ---------
    Total operating expenses.................................................      7,739      7,306        433        5.9
                                                                               ---------  ---------  ---------  ---------
Operating income.............................................................  $   2,340  $   2,178  $     162        7.4
                                                                               ---------  ---------  ---------  ---------
                                                                               ---------  ---------  ---------  ---------
</TABLE>
 
    Communications Group operating income increased $162, or 7.4 percent, to
$2,340 in 1996. Revenues increased $595, or 6.3 percent, and were partially
offset by an increase of $433, or 5.9 percent, in
 
                                                                             103
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
operating costs. Total operating expense growth was primarily due to increases
in employee-related costs, other operating expenses and depreciation expense.
 
    Total employee-related expenses increased $253 primarily due to continued
efforts to address increased business growth, service-improvement initiatives
and new business opportunities. Salaries and wages increased primarily due to
inflation-driven and contractual wage increases. Contract labor costs increased
to support business growth and additional marketing organization costs related
to the launch of new products and services. Employee-related expenses also
included approximately $15 for contract labor and overtime as a result of
flooding in Washington and Oregon in first-quarter 1996. Partially offsetting
these increases were a reduction in postretirement benefit costs due to changes
in actuarial assumptions and favorable cost trends, lower conference and travel
expenses and decreased overtime as a result of accelerated cost reduction
efforts in the latter half of 1996.
 
    Other operating expenses increased $91, or 5.9 percent, primarily due to
higher advertising and bad debt expenses and costs associated with greater sales
of CPE. Also contributing to the increase was a reserve adjustment associated
with billing and collection activities performed for IXCs, and an $11 charge
related to the discontinuance of the Omaha broadband video service trial.
Reduced access expense (a portion of which relates to the 1996 implementation of
MTCPs) and a reduction in allocated costs from U S WEST partially offset these
increases. Allocated costs from U S WEST were $88 and $116 in 1996 and 1995,
respectively.
 
    Taxes other than income taxes were relatively flat as compared with 1995. In
fourth-quarter 1996, taxes other than income taxes increased by $24, or 32.4
percent, due to favorable property tax valuations and mill levies recognized
during fourth-quarter 1995.
 
    Depreciation and amortization expense increased $80, or 3.9 percent, due to
the effects of a higher depreciable asset base, partially offset by the effects
of 1995 sales of certain rural telephone exchanges and the adoption of SFAS No.
121.
 
    MEDIA GROUP OPERATING INCOME
 
<TABLE>
<CAPTION>
                                                                                                         INCREASE (DECREASE)
                                                                                                         --------------------
                                                                                     1996       1995         $          %
                                                                                   ---------  ---------  ---------  ---------
<S>                                                                                <C>        <C>        <C>        <C>
CABLE AND BROADBAND:
  Domestic.......................................................................  $     (13) $      23  $     (36)    --
  International..................................................................         (7)    --             (7)    --
                                                                                   ---------  ---------  ---------        ---
                                                                                         (20)        23        (43)    --
                                                                                   ---------  ---------  ---------        ---
WIRELESS COMMUNICATIONS:
  Domestic.......................................................................        243        147         96       65.3
  International..................................................................         (3)    --             (3)    --
                                                                                   ---------  ---------  ---------        ---
                                                                                         240        147         93       63.3
                                                                                   ---------  ---------  ---------        ---
DIRECTORY AND INFORMATION SERVICES:
  Domestic.......................................................................        452        399         53       13.3
  International..................................................................          2         (1)         3     --
                                                                                   ---------  ---------  ---------        ---
                                                                                         454        398         56       14.1
                                                                                   ---------  ---------  ---------        ---
Other(1).........................................................................       (159)      (101)       (58)      57.4
                                                                                   ---------  ---------  ---------        ---
Operating income.................................................................  $     515  $     467  $      48       10.3
                                                                                   ---------  ---------  ---------        ---
                                                                                   ---------  ---------  ---------        ---
</TABLE>
 
- ------------------------------
 
(1) Primarily includes headquarters expenses for shared services and divisional
    expenses associated with equity investments.
 
                                                                             104
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    During 1996, Media Group operating income increased 10.3 percent, to $515,
due primarily to strong subscriber growth in wireless operations. Excluding the
effects of the Continental Acquisition, Media Group operating income increased
$73, or 15.6 percent.
 
    CABLE AND BROADBAND.  Domestic cable and broadband operating income
decreased $36, to a loss of $13, in 1996 due primarily to the Continental
Acquisition. Continental contributed losses of $25 since the date of the
Continental Acquisition. The Atlanta cable systems contributed operating income
of $12 in 1996, compared with $23 in 1995. An increase in depreciation expense
related to system upgrade activity at the Atlanta cable systems contributed to
the decrease in operating income.
 
    International cable and broadband operating losses reflect the
fourth-quarter 1996 consolidation of Cable Plus.
 
    WIRELESS COMMUNICATIONS.  Cellular operating income increased 65.3 percent,
to $243 in 1996. The increase in operating income is a result of revenue
increases associated with the rapidly expanding subscriber base combined with
efficiency gains. The 1996 decline in revenue per subscriber of 12 percent has
been more than offset by a combined decrease of 18 percent in the costs incurred
to acquire and support customers.
 
    DIRECTORY AND INFORMATION SERVICES.  During 1996, operating income related
to domestic Yellow Pages directory advertising increased 1.6 percent to $511.
Revenue increases of 7.4 percent were offset by an approximate 10 percent
increase in paper, printing, delivery and distribution costs and a charge of $25
to reorganize and reduce headcount in 1996. Operating losses associated with
on-going product development activities reduced domestic directory and
information services operating income by $59 in 1996, compared with a reduction
of $104 in 1995. The decrease in operating losses is primarily the result of
exiting various product development activities in 1995.
 
    OTHER.  Other operating losses increased in 1996 primarily as a result of a
change in cost allocation policy. Beginning in 1996, other operating losses
include costs that are not specifically identifiable with an operating company.
Previously such costs were allocated to the operating companies. Other operating
losses also include a charge of $10 related to staff reductions at international
headquarters in 1996.
 
    INTEREST EXPENSE AND OTHER
 
<TABLE>
<CAPTION>
                                                                                                      INCREASE (DECREASE)
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Interest expense..............................................................  $    (612) $    (527) $      85       16.1
Equity losses in unconsolidated ventures......................................       (346)      (207)       139       67.1
Gains on sales of rural telephone exchanges...................................         59        136        (77)     (56.6)
Gain on merger of joint venture interest......................................     --            157       (157)    --
Guaranteed minority interest expense..........................................        (55)       (14)        41     --
Other expense--net............................................................        (61)       (36)        25       69.4
</TABLE>
 
    INTEREST EXPENSE.  Interest expense increased primarily as a result of
assuming, at market value, $6.5 billion of debt related to the Continental
Acquisition. Also contributing to the increase was a higher average debt level
at the Communications Group and a decrease in the amount of interest capitalized
resulting from a lower average balance of telecommunications plant under
construction at the Communications Group.
 
    EQUITY LOSSES.  Equity losses increased primarily due to: (1) network
expansion and additional financing costs at Telewest and One 2 One, (2) rapid
customer growth at One 2 One, (3) start-up and other costs associated with new
international investments located in Poland and Malaysia, and (4) losses related
to Continental's cable and telecommunications investments. Domestically,
improved
 
                                                                             105
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
results from the TWE partnership, related to improvements in cable and
programming operations, were more than offset by increased losses at PrimeCo
which launched service in the fourth quarter of 1996.
 
    GAINS ON SALES OF RURAL TELEPHONE EXCHANGES.  During 1996, the
Communications Group sold selected rural telephone exchanges in Utah, North
Dakota, South Dakota, Idaho and New Mexico for pretax gains of $59. The 1995
gains were a result of sales in Colorado, Washington, Oregon and Arizona.
 
    GAIN ON MERGER OF JOINT VENTURE INTEREST.  During 1995, Telewest merged with
SBC CableComms (UK) resulting in a pretax gain of $157.
 
    GUARANTEED MINORITY INTEREST EXPENSE.  Guaranteed minority interest expense
reflects an increase of $34 related to the September 11, 1995 issuance of
Preferred Securities totaling $600, and an increase of $7 related to an
additional $480 issuance of Preferred Securities on October 29, 1996.
 
    OTHER EXPENSE--NET.  Other expense increased primarily as a result of a
pretax charge of $31, associated with the sale of U S WEST's cable television
interests in Norway, Sweden and Hungary, and a $13 adjustment related to U S
WEST Communications' equity investment in Bellcore. Partially offsetting the
increase in other expense were foreign currency translation gains associated
with loans to international ventures and costs incurred in 1995 associated with
the 1995 Recapitalization.
 
    PROVISION FOR INCOME TAXES
 
<TABLE>
<CAPTION>
                                                                                                               DECREASE
                                                                                                         --------------------
                                                                                     1996       1995         $          %
                                                                                   ---------  ---------  ---------  ---------
<S>                                                                                <C>        <C>        <C>        <C>
Provision for income taxes.......................................................  $     696  $     825  $    (129)     (15.6)
Effective tax rate...............................................................       37.8%      38.3%    --         --
</TABLE>
 
    The decrease in the effective tax rate is primarily a result of a one-time
benefit associated with the leveraged lease portfolio.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    OPERATING ACTIVITIES
 
<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
                                                                                         1997       1996       1995
                                                                                       ---------  ---------  ---------
<S>                                                                                    <C>        <C>        <C>
Communications Group(1)..............................................................  $   3,848  $   3,306  $   2,719
Media Group(1).......................................................................      1,318        724        640
Other................................................................................     --         --             61
                                                                                       ---------  ---------  ---------
Total cash provided by operating activities..........................................  $   5,166  $   4,030  $   3,420
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) Individual group cash flow statements are provided in "Annex F--U S WEST,
    Inc. Consolidated Financial Statements-- Note 23--Supplemental
    Communications Group and Media Group Combined Statements."
 
    During 1997, the increase in the Communications Group's operating cash flow
reflects business growth, efforts to manage working capital, lower restructuring
expenditures, and a decrease in the cash funding of postretirement benefits
during 1997. Operating cash flow at Media Group increased primarily due to the
effects of the Continental Acquisition and growth in the domestic cellular and
Yellow Pages businesses. Partially offsetting the increase were higher financing
costs resulting from greater debt levels associated with the Continental
Acquisition.
 
    During 1996, cash provided by operating activities increased $610 due
primarily to growth in Communications Group operations. The increase in
operating cash flows at the Communications Group
 
                                                                             106
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
also reflects a $157 decrease in the cash funding of postretirement benefits and
lower restructuring expenditures. Media Group operating cash flow increased due
to growth in the cellular and Yellow Pages businesses.
 
    Future cash needs of the Communications Group could increase with the
pursuit of new business opportunities, including PCS. Future cash needs could
also increase as the Communications Group implements the interconnection
requirements and other provisions of the Telecommunications Act. However, the
impact will depend on the nature and timing of the requirements and the type of
recovery mechanisms provided for by the FCC and state commissions. See "Chapter
6: Information About New U S WEST--Business of New U S WEST--Regulation." The
Communications Group expects that such cash needs will be funded through
operations and, when necessary, the issuance of debt securities.
 
    Media Group expects that its future cash needs, primarily associated with
domestic cable capital expenditures, will exceed cash generated from operations
during the next several years. Additional financing is expected to come
primarily from a combination of new debt and the monetization of the securities
received by Media Group from AirTouch in connection with the AirTouch
Transaction. See "--Effects of the Separation, the Refinancing and the AirTouch
Transaction."
 
    INVESTING ACTIVITIES
 
<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       -------------------------------
                                                                                         1997       1996       1995
                                                                                       ---------  ---------  ---------
<S>                                                                                    <C>        <C>        <C>
Communications Group(1)..............................................................  $   2,058  $   2,230  $   2,268
Media Group(1).......................................................................      1,242        818      1,238
                                                                                       ---------  ---------  ---------
Total cash used for investing activities.............................................  $   3,300  $   3,048  $   3,506
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) Individual group cash flow statements are provided in "Annex F--U S WEST,
    Inc. Consolidated Financial Statements-- Note 23--Supplemental
    Communications Group and Media Group Combined Statements."
 
    Total capital expenditures, on a cash basis, were $3,690, $3,071, and $2,825
in 1997, 1996 and 1995, respectively. Communications Group capital expenditures
were $2,139, $2,419 and $2,462, and Media Group capital expenditures were
$1,551, $652 and $363 in 1997, 1996 and 1995, respectively. The majority of the
Communication Group's 1997 capital expenditures related to access line growth,
continued modernization of the telecommunications network and Telecommunications
Act requirements including interconnection and local number portability costs.
Expenditures associated with entering wireless communications markets with the
launch of PCS also impacted capital expenditures. Media Group capital
expenditures increased in 1997 associated with its domestic cable network
upgrade.
 
    In 1998, capital expenditures are expected to approximate $4.3 billion, of
which $2.6 billion pertains to the Communications Group and $1.7 billion
pertains to the Media Group. Included in the 1998 capital expenditure estimates
are Communications Group entry costs for the launch of PCS in new markets and
additional interconnection costs. Also included are Media Group domestic cable
capital expenditures of $1.6 billion, primarily to expand and upgrade the
domestic cable network, as well as to prepare for the provision of new and
enhanced services. In 1998, the domestic cellular business incurred
approximately $60 in capital expenditures prior to consummation of the AirTouch
Transaction on April 6, 1998.
 
    Media Group has invested $213, $132 and $268 in PrimeCo in 1997, 1996 and
1995, respectively. Such funding was for network build activities in 1997 and
1996, and the purchase of PCS licenses in 11 markets in 1995. In 1998, Media
Group invested an additional $65 in PrimeCo prior to consummation of the
AirTouch Transaction on April 6, 1998.
 
                                                                             107
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    Investing activities of Media Group include equity investments in
international ventures. Media Group invested $325, $243 and $681 in
international ventures in 1997, 1996 and 1995, respectively. Investments in 1997
included an additional 40 percent interest in Fintelco and capital contributions
to a wireless venture in India. Investments in 1996 included loans provided to
One 2 One, the purchase of a 23 percent interest in Polska Telefonia Cyfrowa, a
venture to provide wireless service in Poland, and the purchase of a 28 percent
interest in Telenet Flanders, a venture in Belgium to provide telephony services
on the cable network. In 1995, U S WEST invested $681 in international ventures
in Malaysia, the Netherlands, the Czech Republic and the United Kingdom. U S
WEST anticipates that investments in international ventures will approximate
$290 in 1998 to fund continued expansion in India, Japan, Belgium, and at One 2
One.
 
    On March 29, 1998, Telewest announced that merger discussions were underway
for Telewest to acquire General Cable plc ("General Cable") for Telewest shares
and cash. A 40 percent shareholder of General Cable has agreed to accept
Telewest's offer if made on or before April 15, 1998 and involved 1.243 new
Telewest shares and 65 pence in cash for each General Cable share (or an
aggregate of approximately L426 million in Telewest shares and L240 million in
cash). Telewest intends to raise the cash portion of the purchase price through
a rights offering to Telewest's existing shareholders, including Media Group. It
is currently contemplated that Media Group and certain of Telewest's other
principal shareholders may purchase any Telewest shares not purchased by
Telewest's other shareholders in the rights offering. There can be no assurance
that any transaction involving the acquisition of General Cable will be
consummated.
 
    During 1997, Media Group paid the cash portion of the Continental
Acquisition consideration of $1,150 to the Continental shareowners. In addition,
the Communications Group paid $73 to purchase PCS licenses in connection with
its launch of PCS service in various markets.
 
    Throughout 1997, Media Group pursued a plan to monetize nonstrategic assets,
including various domestic and international investments. Such asset sales
generated total proceeds of $2,058. Proceeds from sales of international
investments totaled $887, domestic investments totaled $931, assets held for
sale totaled $231, and disposals of property, plant and equipment totaled $9.
International sales consisted of: (a) a five percent interest in a French
wireless venture for proceeds of $81, (b) a 90 percent interest in Fintelco for
proceeds of $641, (c) Thomson Directories, the directory operation in the United
Kingdom, and U S WEST Polska, the directory operation in Poland, for net
proceeds of $121 and $27, respectively, and (d) other miscellaneous
international investment sales for proceeds of $17. Domestic sales were
comprised of the sale of shares of TCG, for net proceeds of $678, shares of TWX,
for net proceeds of $220, and miscellaneous asset sales, for proceeds of $33. In
addition, U S WEST Communications sold its equity interest in Bellcore for
proceeds of $65.
 
    The Communications Group received cash proceeds of $67, $174 and $214 during
1997, 1996 and 1995, respectively, for the sales of certain rural telephone
exchanges. Since implementing its rural telephone exchange sales program, the
Communications Group has sold approximately 342,000 access lines.
 
                                                                             108
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    FINANCING ACTIVITIES
 
<TABLE>
<CAPTION>
                                                                                          YEAR ENDED DECEMBER 31,
                                                                                      -------------------------------
                                                                                        1997       1996       1995
                                                                                      ---------  ---------  ---------
<S>                                                                                   <C>        <C>        <C>
Communications Group(1).............................................................  $  (1,843) $  (1,168) $    (395)
Media Group(1)......................................................................        (13)       195        525
Other...............................................................................     --         --            (61)
                                                                                      ---------  ---------  ---------
Total cash (used for) provided by financing activities..............................  $  (1,856) $    (973) $      69
                                                                                      ---------  ---------  ---------
                                                                                      ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) Individual group cash flow statements are provided in "Annex F--U S WEST,
    Inc. Consolidated Financial Statements-- Note 23--Supplemental
    Communications Group and Media Group Combined Statements."
 
    DIVIDENDS
 
    U S WEST paid dividends on the Communications Stock totaling $992, $939 and
$926 during 1997, 1996 and 1995, respectively.
 
    DEBT ACTIVITY
 
    Total debt at December 31, 1997 was $14,678, a decrease of $673 compared to
December 31, 1996. This decrease was due primarily to debt redemptions. During
1996, debt increased $6,496 primarily a result of assuming, at market value,
Continental debt totaling $6,525 in conjunction with the Continental
Acquisition. Concurrently, U S WEST refinanced $3,657 of Continental's debt with
U S WEST commercial paper. In January 1997, U S WEST issued medium- and
long-term debt totaling $4.1 billion, at a weighted average interest rate of
7.47 percent. The proceeds were used to refinance the commercial paper.
Accordingly, such commercial paper is classified as long-term debt at December
31, 1996.
 
    During 1997 U S WEST redeemed its zero coupon subordinated notes, which had
a recorded value of $571. In addition, MediaOne Delaware redeemed a 10 5/8
percent senior subordinated note with a recorded value of $110, including a
premium of $10. U S WEST financed both redemptions with floating-rate commercial
paper.
 
    In June 1997, U S WEST acquired cable systems serving approximately 40,000
subscribers in Michigan for cash of $25 and the issuance of approximately $50 in
liquidation value of U S WEST Series E Preferred Stock. The Series E Preferred
Stock is redeemable at U S WEST's option beginning five years from the date of
issuance. The stockholders have the right to elect cash upon redemption, or to
convert their shares into Media Stock based on a predetermined formula.
 
    In 1996, U S WEST issued $254 of exchangeable notes, or Debt Exchangeable
for Common Stock ("DECS"), due May 15, 1999. Upon maturity, each such DECS will
be exchanged by U S WEST for shares of common stock of Financial Security
Assurance Holdings Ltd. ("FSA") held by U S WEST or, at U S WEST's option,
redeemed at the cash equivalent. The capital assets segment currently holds
approximately 42.1 percent of the outstanding FSA common stock. On October 29,
1996, U S WEST refinanced commercial paper through the issuance of 8.25 percent
Preferred Securities totaling $480. The payment of interest and redemption
amounts to holders of the Preferred Securities are fully and unconditionally
guaranteed by U S WEST. In 1995, U S WEST issued $130 of DECS due December 31,
1998. Upon maturity, each such DECS will be exchanged by U S WEST for shares of
Enhance Financial Services Group, Inc. ("Enhance") or, at U S WEST's option,
redeemed at the cash equivalent. The capital assets segment currently holds
approximately 29.2 percent of the outstanding Enhance common stock.
 
                                                                             109
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    During 1995, increases in debt were partially offset by reductions in debt
related to the Media Group's investment in TWE and a refinancing of commercial
paper by issuing $600 of 7.96 percent Preferred Securities. U S WEST refinanced
$2.6 billion of commercial paper to take advantage of favorable long-term
interest rates. In addition to the commercial paper, U S WEST Communications
refinanced $145 of long-term debt.
 
    Excluding debt associated with the capital assets segment, U S WEST's
percentage of debt to total capital at December 31, 1997, was 54.0 percent
compared with 54.8 percent at December 31, 1996. Including debt associated with
the capital assets segment, Preferred Securities and mandatorily redeemable
preferred stock, U S WEST's percentage of debt to total capital was 58.9 percent
at December 31, 1997 compared with 59.5 percent at December 31, 1996. The
decrease in the percentage of debt to total capital in 1997 is primarily a
result of decreased debt levels.
 
    U S WEST COMMUNICATIONS CREDIT RATINGS
 
    During the first quarter of 1997, Standard & Poor's lowered U S WEST
Communications' senior unsecured debt rating from A+ to A as a result of a
modified rating criteria implemented by Standard & Poor's to reflect the
increased competitive telecommunications environment.
 
    In connection with U S WEST's announcement of the Separation, Standard &
Poor's placed U S WEST Communications' senior unsecured debt on credit watch
with positive implications and reaffirmed U S WEST Communications' commercial
paper ratings, and Duff & Phelps reaffirmed U S WEST Communications' senior
unsecured debt and commercial paper ratings.
 
    During the first quarter of 1998, Moody's downgraded U S WEST
Communications' senior unsecured debt from Aa3 to A2 due to recent regulatory
rulings and financial challenges associated with the Separation. See
"Contingencies." U S WEST Communications' debt remains under review by Moody's
for possible downgrade pending clarification of New U S WEST's corporate
structure and future strategic initiatives.
 
    U S WEST Communications' current senior unsecured debt and commercial paper
ratings by Moody's, Standard & Poor's and Duff & Phelps are A2, A and AA-, and
P1, A1 and D1+, respectively.
 
    CAPITAL FUNDING AND PREFERRED SECURITIES CREDIT RATINGS
 
    As a result of the Separation announcement, the credit ratings for Capital
Funding and for the Preferred Securities of U S WEST Financing I and U S WEST
Financing II are under review by Standard & Poor's (with negative implications),
Moody's and Duff & Phelps. Senior debt at MediaOne Delaware was downgraded by
Moody's from Baa2 to Baa3 and subordinated debt from Baa3 to Ba1, and is under
review by Standard & Poor's, with negative implications. The MediaOne Delaware
debt remains under review for further downgrading by Moody's. For all
outstanding debt securities issued or guaranteed by U S WEST, U S WEST intends
to take appropriate steps to preserve bondholder value in connection with the
Separation. See "Chapter 3: The Separation--Treatment of Indebtedness."
 
    Capital Funding's senior unsecured debt and commercial paper ratings by
Moody's, Standard & Poor's and Duff & Phelps were Baa1, BBB+ and BBB+, and P2,
A2, and D-2, respectively, at December 31, 1997. The Preferred Securities'
ratings by Moody's, Standard & Poor's, and Duff & Phelps were baa2, BBB+ and
BBB, respectively, at December 31, 1997.
 
    OTHER ITEMS
 
    U S WEST commitments and debt guarantees associated with Media Group
international and domestic investments totaled approximately $650 and $100,
respectively, at December 31, 1997. In addition, a Media Group subsidiary
guarantees debt, nonrecourse to U S WEST, associated with its international
investment in the principal amount of approximately $600.
 
                                                                             110
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    U S WEST maintains a commercial paper program to finance short-term cash
flow requirements, as well as to maintain a presence in the short-term debt
market. In addition, U S WEST maintains lines of credit aggregating
approximately $4.5 billion, all of which were available at December 31, 1997.
Under registration statements filed with the Commission, as of December 31,
1997, U S WEST is permitted to issue up to approximately $900 of new debt
securities.
 
    U S WEST from time to time engages in preliminary discussions regarding
restructurings, dispositions and other similar transactions. Any such
transaction may include, among other things, the transfer of certain assets,
businesses or interests, or the incurrence or assumption of indebtedness, and
could be material to the financial condition and results of operations of U S
WEST. There is no assurance that any such discussions will result in the
consummation of any such transaction.
 
    RISK MANAGEMENT
 
    U S WEST is exposed to market risks arising from changes in interest rates,
foreign exchange rates and equity prices. Derivative financial instruments are
used to selectively manage these risks. U S WEST does not use derivative
financial instruments for trading purposes.
 
    INTEREST RATE RISK MANAGEMENT.  The objective of the interest rate risk
management program is to minimize the total cost of debt over time and the
interest rate variability. This is achieved through the use of interest rate
swaps, which adjust the ratio of fixed- to variable-rate debt.
 
    Approximately $270 of U S WEST's floating rate debt is exposed to changes in
interest rates. Such exposure is primarily linked to the 30-day commercial paper
rate. A hypothetical 10 percent change in the 30-day commercial paper rate would
not have a material effect on the annual earnings of U S WEST.
 
    FOREIGN EXCHANGE RISK MANAGEMENT.  U S WEST selectively enters into forward
and option contracts to manage the market risks associated with fluctuations in
foreign exchange rates after considering offsetting foreign exposures among
international operations. The use of forward and option contracts allows U S
WEST to fix or cap the cost of firm foreign investment commitments, the amount
of foreign currency proceeds from sales of foreign investments, the repayment of
foreign currency denominated receivables and the repatriation of dividends. The
market values of the foreign exchange positions, including the hedging
instruments, are continuously monitored and compared with predetermined levels
of acceptable risk. All foreign exchange contracts have maturities of one year
or less. The use of such contracts was limited in 1997 and as of December 31,
1997, the market value of foreign exchange contracts outstanding was not
material.
 
    U S WEST is exposed to foreign exchange risk associated with its cash
deposits and notes receivable and payable denominated in foreign currencies. As
of December 31, 1997, Media Group has British pound-denominated notes receivable
and cash deposits in the translated amount of $245, a Czech Koruna-denominated
note receivable and cash deposits in the translated amount of $50 and a Czech
Koruna-denominated note payable in the translated amount of $17.
 
    A hypothetical adverse change of 10 percent in the British Pound and Czech
Koruna exchange rates as compared with the U. S. dollar would reduce the market
value of the cash deposits and notes receivable and payable by $28 as of
December 31, 1997.
 
    EQUITY-PRICE RISK MANAGEMENT.  U S WEST is exposed to market risks
associated with fluctuations in equity security prices related to its
investments in marketable equity securities. On a selective basis, U S WEST
enters into option contracts to manage the market risks associated with
fluctuations in equity security prices. At December 31, 1997, U S WEST had sold
call options to complete exit strategies with regard to certain individual
marketable equity securities.
 
                                                                             111
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    A hypothetical 10 percent decline in equity security prices related to U S
WEST's combined position in marketable equity securities and option contracts
would reduce the market value of the combined position at December 31, 1997, by
$12.
 
    The changes in interest rates, foreign exchange rates and equity security
prices are based on hypothetical movements in future market rates and are not
necessarily indicative of actual results which may occur. Future gains and
losses will be affected by actual changes in interest rates, foreign exchange
rates and equity security prices and market exposures, and changes in derivative
financial instruments employed during the year.
 
    EFFECTS OF THE SEPARATION, THE REFINANCING AND THE AIRTOUCH TRANSACTION
 
    The following discussion should be read in conjunction with the MediaOne
unaudited pro forma condensed combined financial statements. See "Chapter 7:
Information About MediaOne--MediaOne Unaudited Pro Forma Condensed Combined
Financial Statements."
 
    In connection with the Separation, New U S WEST and MediaOne will seek to
refinance all of the U S WEST Indebtedness through the Refinancing. See "Chapter
3: The Separation--Treatment of Indebtedness." At December 31, 1997, after
giving effect to a reduction of $1.35 billion of indebtedness in connection with
the AirTouch Transaction, the U S WEST Indebtedness totaled approximately $6.2
billion and included Preferred Securities of $1,080. As of February 20, 1998,
the estimated cost of the Refinancing is $346 (net of income tax benefits of
$231). In addition to refinancing costs, such costs include the difference
between the market and face value of the U S WEST Indebtedness and a charge for
unamortized debt issuance costs.
 
    The businesses comprising New U S WEST and the Media Group's domestic
wireless business generated operating cash flow during 1997 of approximately
$4.6 billion. Upon consummation of the Separation, MediaOne will no longer have
access to the operating cash flows of New U S WEST. As a result of the AirTouch
Transaction, MediaOne no longer has access to the operating cash flows of the
Media Group's domestic wireless business. Operating cash flows of MediaOne will
consist primarily of the cash generated by its domestic cable business. MediaOne
expects that its future cash needs, primarily associated with domestic cable
capital expenditures ($1.6 billion in 1998) and debt service, will exceed cash
generated from operations during the next several years. Additional financing
will come primarily from a combination of new debt and monetization of the
securities received by Media Group from AirTouch in connection with the AirTouch
Transaction.
 
    Following the Separation, Refinancing and AirTouch Transaction, total
indebtedness of MediaOne will approximate $4,039. This represents a reduction of
$10,639 as compared with total U S WEST indebtedness of $14,678 as of December
31, 1997. Such debt reduction is comprised of $5,715 related to the
discontinuance of the businesses of New U S WEST, $3,831 related to the
Refinancing, including the refinancing by New U S WEST of the Dex Indebtedness,
and $1,354 related to the AirTouch Transaction. Also included are increases in
debt of $243 for financing the costs of the Refinancing and Separation and $18
for financing the costs of the AirTouch Transaction. As a result, the ratio of
total debt to EBITDA for MediaOne will be approximately 5.4x. Including the
Preferred Securities, such ratio would be 6.8x.
 
    Following the Separation, Refinancing and AirTouch Transaction, annual
interest expense of MediaOne will approximate $299. This represents a reduction
of $784 as compared with total U S WEST annual interest expense of $1,083 during
1997. Such interest expense reduction is comprised of $405 related to the
discontinuance of the businesses of New U S WEST, $304 related to the
Refinancing, including the refinancing by New U S WEST of the Dex Indebtedness,
and $90 related to the AirTouch Transaction. Also included is an increase in
interest expense of $15 for financing the costs of the Refinancing and
Separation.
 
                                                                             112
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
    Under the terms of the AirTouch Transaction, U S WEST and AirTouch entered
into an investment agreement, pursuant to which AirTouch has agreed to provide
to U S WEST registration rights with respect to the shares of AirTouch preferred
stock and AirTouch common stock which it received in the AirTouch Transaction
and to assist U S WEST in the monetization of such shares. The market value of
such shares was approximately $4.4 billion upon consummation of the AirTouch
Transaction. U S WEST believes that the consummation of the AirTouch Transaction
will likely improve the credit rating to be assigned to MediaOne in the
Separation.
 
    MediaOne's access to the capital markets and the cost of financing available
to it will depend on its post-Separation credit rating. MediaOne's management
anticipates that such credit rating, although lower than the current credit
rating of U S WEST, will allow MediaOne sufficient ability to access the capital
markets. In conjunction with the Refinancing, management expects that the
increase in the cost of debt associated with the anticipated lower credit rating
will be offset by a reduction in the market rate of interest on the refinanced
debt as compared with the historical rates on U S WEST debt.
 
CONTINGENCIES
 
    COMMUNICATIONS GROUP
 
    At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.
 
    WASHINGTON.  In 1996, the WUTC acted on U S WEST Communications' 1995 rate
request. U S WEST Communications had sought to increase revenues by raising
rates primarily for basic residential services over a four-year period. Instead
of granting U S WEST Communications' request, the WUTC ordered $91.5 in annual
net revenue reductions, effective May 1, 1996.
 
    On December 24, 1997, the Washington State Supreme Court upheld the WUTC
ruling. The Washington State Supreme Court's ruling resulted in an estimated
liability for the revenues that were collected subject to refund from May 1,
1996 through December 31, 1997, including interest, in the amount of $225. The
prospective revenue reduction as a result of this ruling approximates $115
annually, which includes the effects of business growth. In a separate action,
the WUTC authorized a rate increase of approximately $60 annually that partially
mitigates the effect of the Washington State Supreme Court's ruling. Tariffs
implementing both orders became effective February 1, 1998.
 
    OREGON.  On May 1, 1996, the Oregon Public Utilities Commission ("OPUC")
approved a stipulation terminating prematurely U S WEST Communications'
alternative form of regulation ("AFOR") plan, and it then undertook a review of
U S WEST Communications' earnings. In May 1997, the OPUC ordered U S WEST
Communications to reduce its annual revenues by $97, effective May 1, 1997, and
to issue a one-time refund, including interest, of approximately $102 to reflect
the revenue reduction for the period May 1, 1996 through April 30, 1997. The
one-time refund is for interim rates which became subject to refund when U S
WEST Communications' AFOR plan was terminated on May 1, 1996.
 
    U S WEST Communications filed an appeal of the order and asked for an
immediate stay of the refund with the Oregon Circuit Court for the County of
Marion (the "Oregon Circuit Court") which granted U S WEST Communications'
request for a stay, pending a full review of the OPUC's order. On February 19,
1998, the Oregon Circuit Court entered a judgment in U S WEST Communications'
favor on most of the appealed issues. The OPUC has announced its intent to
appeal. The potential exposure, including interest, at December 31, 1997, is not
expected to exceed $180.
 
    UTAH.  In another proceeding, the Utah Supreme Court has remanded a Utah
Public Service Commission ("UPSC") order to the UPSC for hearing, thereby
establishing two exceptions to the rule against retroactive ratemaking: 1)
unforeseen and extraordinary events, and 2) misconduct. The UPSC's initial order
denied a refund request from IXCs and other parties related to the Tax Reform
 
                                                                             113
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
Act of 1986. The potential exposure, including interest, at December 31, 1997,
is not expected to exceed $160.
 
    STATE REGULATORY ACCRUALS.  U S WEST Communications has accrued $348 at
December 31, 1997, which represents its estimated liability for all state
regulatory proceedings, predominately the items discussed above. Approximately
$225 of the total estimated liability was recognized during fourth-quarter 1997.
It is possible that the ultimate liability could exceed the recorded liability
by an amount up to approximately $230. U S WEST Communications will continue to
monitor and evaluate the risks associated with its local regulatory
jurisdictions, and will adjust estimates as new information becomes available.
 
    MEDIA GROUP
 
    Prior to April 6, 1998, Media Group and AirTouch were parties to a
multi-phased joint venture (the "AirTouch Joint Venture") pursuant to which they
had agreed to combine their domestic cellular businesses. In February 1997, the
King County Superior Court in Washington state ruled that a subsidiary of Media
Group violated the terms of its partnership agreement with its minority partners
in the Seattle cellular partnership by entering into the AirTouch Joint Venture.
Similar litigation was filed in other jurisdictions regarding other cellular
partnerships by the same minority partner that brought the Seattle litigation.
On December 1, 1997, this minority partner announced it was selling its minority
interests in the eight cellular properties where it was a partner with a Media
Group subsidiary to AirTouch. As a result of the minority partner's actions,
litigation in the states of Washington, Arizona, Colorado, Minnesota, Idaho and
Delaware has now been stayed or dismissed pending consummation of the transfer
of the minority partner's interest to AirTouch. The AirTouch Transaction, which
was entered into in lieu of the AirTouch Joint Venture, was consummated on April
6, 1998.
 
COMPETITIVE AND REGULATORY ENVIRONMENT
 
    For a discussion of the competitive and regulatory environments of U S WEST,
see "Chapter 6: Information About New U S WEST--Business of New U S
WEST--Competition" and "--Business of New U S WEST--Regulation" and "Chapter 7:
Information About MediaOne--Business of MediaOne--Competition" and "Regulation."
 
YEAR 2000 COSTS
 
    COMMUNICATIONS GROUP
 
    During 1997 the Communications Group conducted a comprehensive review of its
computer systems and related software to ensure systems properly recognize the
year 2000 and continue to process data. The systems evaluated include all
internal systems and those that manage the public switched network. This
evaluation includes the Communications Group's significant vendors in
determining the impact on the Communications Group if those third parties fail
to remediate their own year 2000 issues. Based on its internal assessment, the
Communications Group has determined that it will have to modify or replace
certain portions of its internal use software, whether developed by U S WEST or
provided by a third party. For public network software, there are central office
and remote switches from a variety of vendors in addition to interoffice and
loop transport equipment that also require conversion. To date, inventory is
complete for all major network elements, compliance standards have been
published and key vendors have agreed to compliance dates. Detailed plans for
the year 2000 project for all systems have been completed and conversion
activity is underway.
 
    The estimated remaining costs of the related projects approximate $150
through 1999. Management's estimate of the costs and completion dates of the
year 2000 project are dependent on various factors including availability of
skilled resources, the ability to locate and modify all relevant software code
and vendor compliance. The Communications Group cannot provide assurance that
actual results will not differ from management's estimates. Failure to complete
the project in a timely or complete
 
                                                                             114
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
manner, or within its estimate of project costs, could have a material impact on
future results of operations.
 
    MEDIA GROUP
 
    Media Group uses software and related technologies throughout its businesses
that will be affected by the date change in the year 2000. Media Group has
established accountabilities and priorities for addressing the issue. Media
Group is now in the process of finalizing its assessment of the impact of the
year 2000 date change on its operations. An internal study is underway to
determine the full scope of the issue and related costs. Media Group's
assessment should be complete in mid-1998. Media Group anticipates that costs
related to year 2000 remediation will begin to be incurred in 1998.
 
NEW ACCOUNTING STANDARDS
 
    In 1997, U S WEST adopted SFAS No. 128, "Earnings Per Share." This
accounting standard specifies new computation, presentation and disclosure
requirements for earnings per share to be applied retroactively. SFAS No. 128
requires, among other things, presentation of basic and diluted earnings per
common share on the face of the income statement.
 
    In 1998, U S WEST will adopt SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 requires that the components and total amount of
comprehensive income be displayed in the financial statements for interim and
annual periods beginning in 1998. Comprehensive income includes net income and
all changes in equity during a period that arise from nonowner sources, such as
foreign currency items and unrealized gains and losses on certain investments in
equity securities. SFAS No. 131 requires, among other things, the reporting of
detailed operating segment information of an enterprise for annual periods
beginning in 1998 and for interim periods beginning in 1999.
 
    Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," was issued in March 1998. SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of SOP 98-1 is required as of
January 1, 1999, but earlier adoption is allowed. U S WEST is currently
evaluating the impact of SOP 98-1 and believes that it could initially have a
significant impact upon results of operations.
 
                                                                             115
                                           CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>
CHAPTER 6: INFORMATION ABOUT NEW U S WEST
 
BUSINESS OF NEW U S WEST
 
GENERAL
 
    New U S WEST is a diversified communications company providing services
principally to customers in the Communications Group Region, which is comprised
of the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska,
New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.
New U S WEST has operations in four principal areas: (i) telecommunications and
related services; (ii) wireless services; (iii) high-speed data and Internet
services; and (iv) directory services. The major component of New U S WEST is U
S WEST Communications, which provides communications services to more than 25
million residential and business customers in the Communications Group Region.
 
STRATEGY
 
    New U S WEST's competitive strategy will address both the advantages and
challenges inherent in one of the fastest growing but least populated regions of
the country. In recent years, the Communications Group Region, with seven of the
ten fastest growing states in the United States, has experienced rapid growth.
At the same time, the Communications Group Region is one of the least densely
populated regions of the country. Though it comprises over forty percent of the
land mass of the contiguous 48 states, it has just over ten percent of the
population. This low population density, along with the fact that most of the
growth continues to occur outside of the top five Metropolitan Statistical
Areas, makes the Communications Group Region less attractive to facilities-based
competitors, such as CLECs and CAPs, than the regions of the other RBOCs.
Additionally, competitors are inclined to target high value customers and
therefore focus their efforts on other regions, notwithstanding the
Communications Group Region's rapid growth. However, lack of population density
also creates challenges. The vast geography of the Communications Group Region
adds considerably to investment and maintenance costs, making the provision of
ubiquitous service comparatively expensive. To capitalize on these advantages
and manage the challenges, New U S WEST has adopted the following specific and
mutually reinforcing strategies.
 
    PROVIDE SUPERIOR SERVICE TO CUSTOMERS.  Management believes that New U S
WEST is entering the competitive arena from a position of strength. U S WEST
Communications has one hundred years of experience in managing increasingly
complex networks and delivering complex bundled services to millions of
customers. It has the ability to provide telecommunications services to mass
markets and the advantage of long-term relationships with its customers. To
continue to capitalize on these strengths in a competitive environment, New U S
WEST must continue to provide competitive, quality service. To that end, U S
WEST Communications has accelerated its investment in service quality even in
the face of rapid and sustained growth. The results of this investment have
become evident. Orders for primary basic service held more than 30 days totaled
601 at year-end 1997, 864 at year-end 1996, and 1,887 at year-end 1995. This
improvement has occurred in spite of a substantial increase in service order
activity over the last two years. Following the Separation, New U S WEST intends
to continue its service improvement efforts, and to retain its customers by
providing superior service.
 
    ENHANCE NETWORK CAPACITY AND CAPABILITY.  New U S WEST intends to deliver
the products and services its customers want. U S WEST Communications currently
is utilizing a flexible network architecture as it upgrades and expands its
infrastructure. A key example of this effort is the deployment of "U S WEST
Network 21" in major metropolitan areas. Targeted deployment of this
leading-edge bi-directional SONET ring architecture offers unprecedented
survivability, reliability and flexibility for high-capacity services.
Deployment is complete in Denver, Phoenix, Seattle, Minneapolis/St. Paul,
Portland, Salt Lake City and Omaha, and is underway in other key cities. A
benefit of Network 21 is the size of the rings. New U S WEST's competitors
usually measure coverage in blocks, targeting core downtown locations. The
geographic coverage of Network 21 is measured in hundreds of square miles
 
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                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
and connects users across vast metropolitan areas. Taking advantage of
capabilities like Network 21 and other network improvements, New U S WEST seeks
to keep in place an infrastructure that will enable it to satisfy the needs of
customers into the future.
 
    BUILD CUSTOMER LOYALTY, EXPAND PORTFOLIO OF PRODUCTS AND SERVICES.  New U S
WEST is focused on positioning itself as the premier service provider for
customers who want a comprehensive, affordable solution to their communications
needs. New U S WEST is taking steps to better understand and segment customers,
comprehend their wants and needs, develop specialized packages of communications
products and services for specific customer segments, deliver exceptional value
and provide full-service support. The Dex Alignment will provide New U S WEST
with an important new component in its integrated service offerings and an
enhanced opportunity to market its brand.
 
    New U S WEST is also building a long-distance division that will primarily
focus on providing long-distance services between LATAs, with an emphasis on
calls that originate within the Communications Group Region. This division, U S
WEST Long Distance, Inc., will package its offerings with New U S WEST's
existing products and services. Based on FCC calling traffic analysis, about 13
percent of the nation's long-distance traffic originates within the
Communications Group Region, and approximately 40 percent of this traffic both
originates and terminates within the Communications Group Region. Recent market
data indicates that the interLATA long-distance market within the Communications
Group Region currently amounts to approximately $10 billion, or approximately $6
billion net of access charges. New U S WEST intends to begin offering interLATA
long-distance services in the Communications Group Region pending successful
resolution of litigation pertaining to the constitutionality of certain
provisions of the Telecommunications Act and other regulatory proceedings. New U
S WEST currently offers limited out-of-region long-distance services. The
objective of the long-distance division is to become the second largest
long-distance provider within the Communications Group Region in its first four
years of operations.
 
    ENSURE A FAIR COMPETITIVE ENVIRONMENT.  New U S WEST must represent the
interests of its investors, creditors and customers as the FCC and PUCs
implement the policies embodied in the Telecommunications Act. Three important
rule-makings by the FCC impact every aspect of the local exchange business:
interconnection, universal service and access charge reform. Though the full
business impacts of these rules are not yet known, U S WEST has moved swiftly
and aggressively to challenge selected portions of the FCC's rules, including
provisions related to interconnection and interLATA long-distance services in an
effort to ensure a fair competitive environment.
 
BUSINESS
 
    TELECOMMUNICATIONS AND RELATED SERVICES
 
    New U S WEST provides telecommunications services to more than 25 million
residential, business and carrier customers in the Communications Group Region.
New U S WEST serves approximately 80% of the population of the Communications
Group Region and approximately 40% of its geographic area. The principal types
of telecommunications services offered by New U S WEST are: (i) local exchange
services, (ii) exchange access services, and (iii) intraLATA long-distance
network services.
 
    Local exchange services provide lines from telephone exchange offices to
customers' premises for the origination and termination of telecommunications
services within local exchange service territories as defined by PUCs. These
services include basic local exchange services provided through the regular
switched network, dedicated private line facilities for voice and special
services, such as transport of data, radio, and video services, switching
services for customers' internal communications through facilities owned by New
U S WEST, services for data transport that include managing and configuring
special service networks, and dedicated low and high-capacity public or private
digital networks. Other local exchange revenue is derived from intercept and
directory assistance, public telephones and various custom features such as
Caller ID, Call Waiting, Call Return and 3-Way Calling.
 
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    New U S WEST provides exchange access services by connecting the equipment
and facilities of its customers with the communications networks of IXCs,
wireless providers and other LECs, including CLECs. These connections are
provided by linking these carriers and customers through the public switched
network of New U S WEST or through dedicated private lines furnished by New U S
WEST.
 
    New U S WEST provides intraLATA long-distance services within the
Communications Group Region. These services include intraLATA service beyond the
local calling area, Wide Area Telecommunications Service or "800" services for
customers with highly concentrated demand, and special services, such as
transport of data, radio and video. New U S WEST intends to begin offering
interLATA long-distance services in the Communications Group Region pending
resolution of litigation pertaining to the constitutionality of certain
provisions of the Telecommunications Act. New U S WEST currently offers limited
out-of-region long-distance services. See "--Regulation."
 
    New U S WEST also provides other telecommunications products and services,
including CPE and certain other communications services to business customers
and governmental agencies.
 
    WIRELESS SERVICES
 
    New U S WEST holds 10 MHz licenses to provide PCS service in 53 markets in
the Communications Group Region. These licenses, which cover approximately 20
million POPs (E.G., potential customers), were purchased in an FCC auction held
in January 1997. In December 1997, New U S WEST purchased additional licenses
for a majority of the Seattle market, which cover an additional 4 million POPs.
New U S WEST is constructing networks using these licenses utilizing digital
code division multiple access ("CDMA") technology. New U S WEST launched
wireless PCS services in Denver, Fort Collins, Greeley, Colorado Springs,
Portland, Salem and Vancouver in 1997 and expects to launch services in three
other major markets in 1998. These wireless services, which are being marketed
under the "Access 2 Advanced PCS Service" brand, enable customers to use the
same number for their mobile phone as for their home or business phone.
 
    HIGH-SPEED DATA AND INTERNET SERVICES
 
    New U S WEST offers high-speed data and Internet services to customers
inside and outside the Communications Group Region. Through !NTERPRISE
Networking Services, New U S WEST provides high-speed data communications and
network services, including frame relay service, Transparent LAN service, ATM
Cell Relay Service, network integration solutions and other data-related
services to business customers both inside and outside of the Communications
Group Region. In 1997, New U S WEST introduced U S WEST Megabit Services, a
high-speed internet access service, and U S WEST.net, a standard internet access
service, in selected markets and expects to launch these services in additional
markets in 1998.
 
    DIRECTORY SERVICES
 
    New U S WEST, through Dex, publishes approximately 320 White and Yellow
Pages directories in the Communications Group Region. Dex's business scope
includes all facets of directory-related publishing services such as market
identification, analysis and planning, advertising and sales, customer service,
directory design, printing and distribution, billing and collection, and product
service promotion. Dex's customers include businesses that purchase advertising
in its directories and other related products, and consumers who use directories
and other advertising and information services. Dex also provides directory
publishing services to other telephone companies on a contract basis, and
electronic directory services.
 
    New U S WEST incurred capital expenditures of approximately $2.6 billion in
1997 and expects to incur approximately $2.6 billion in 1998. The 1997 capital
expenditures were substantially devoted to
 
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the continued modernization of telephone plant, to improve customer service, to
accommodate additional line capability in several states and to enter the
wireless business.
 
COMPETITION
 
    New U S WEST faces competition in the local exchange business, exchange
access and intraLATA long-distance markets, primarily from IXCs, CLECs, and
CAPs. CLECs and CAPs compete with New U S WEST by providing customers with
network services that connect to carrier facilities or other business locations
within a serving LATA. IXCs compete with New U S WEST by providing intraLATA
long-distance services. Such competition is eroding U S WEST Communications'
market share of intraLATA long-distance services, including Wide Area Telephone
Service and "800" services. IXCs are competing in this area by offering lower
prices and packaging these services on an intraLATA and interLATA basis.
 
    The Telecommunications Act has altered the competitive landscape of the
telecommunications industry by permitting competition among local telephone
companies, long-distance companies and cable companies. As a result, it is
expected that additional competitors will be introduced into New U S WEST's
markets who will offer services similar to those offered by New U S WEST,
including local exchange services. New U S WEST believes that these competitors
have initially targeted high-volume business customers in densely populated
urban areas and will selectively pursue business in smaller communities. The
resulting loss of local service customers could affect multiple revenue streams
and could have a material adverse effect on New U S WEST's operations. Court and
state regulatory commission deliberations on interconnection rates and newly
issued FCC rules on interstate access pricing could also result in significant
changes in revenues received from carriers. The wireless services being
introduced by New U S WEST will face competition from the two cellular providers
in each of the markets in which it operates as well as from the other providers
of PCS services in such markets. The high-speed data and Internet access
services offered by New U S WEST face competition from LECs, IXCs, ISPs and
other providers of data services in New U S WEST's markets. Dex competes with
various other providers of directory services, including providers of electronic
directory services.
 
    Technological advancements will also increase competition in the future. New
competitive carriers that are affiliates of cable television companies and power
companies are expected to play a greater role in offering local exchange
services. In addition to local exchange services, competitors are expected to
offer services that will compete with those U S WEST Communications offers and
plans to offer, including video programming and high-speed data and Internet
services.
 
    New U S WEST expects to counter the competition by expanding services to
include new retail as well as wholesale markets. Recently introduced service
offerings include PCS, high-speed data and Internet services, and
interconnection services provided for competing providers of local services.
Planned future service offerings include interLATA long-distance services as the
regulatory environment permits (See "--Regulation"), while interconnection
services will be expanded. Management believes that New U S WEST's ability to
bundle local, long-distance, PCS and other services will provide a significant
opportunity to compete by offering one-stop shopping with a package of services
similar to those that can be offered by IXCs and CLECs.
 
REGULATION
 
    THE TELECOMMUNICATIONS ACT OF 1996
 
    The Telecommunications Act, among other things, modifies the Modification of
Final Judgment, the antitrust consent decree entered into in 1984 by AT&T. This
decree resulted in the divestiture by AT&T of its local telephone business and
the formation of U S WEST and the other RBOCs. The Telecommunications Act
permits local telephone companies, long-distance carriers and cable television
companies to enter each others' lines of business. Under the Telecommunications
Act, the RBOCs are
 
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permitted to provide interLATA long-distance services by opening their local
networks to facilities-based competition and satisfying a detailed list of
requirements, including providing interconnection and number portability. The
Telecommunications Act also lifts the ban on cross-ownership between cable
television and telephone companies. The RBOCs are thereby permitted to enter
into the cable business within their respective service regions so long as such
entry is not achieved through the purchase of existing cable companies. There is
an exception to this rule in rural communities. The Telecommunications Act also
reaffirms the concept of universal service and directs the FCC and state
regulators to determine universal service funding policy. The FCC and state
regulators have been given the responsibility to interpret and oversee
implementation of large portions of the Telecommunications Act.
 
    On December 31, 1997, the U. S. District Court for the Northern District of
Texas (the "U. S. District Court") declared that the restrictions placed on
RBOCs relating to the provision of in-region interLATA long-distance services
were unconstitutional and discriminatory. The FCC, the Department of Justice,
AT&T and other IXCs requested the U. S. District Court to stay its order pending
a full review and appealed the U. S. District Court's order to the Fifth Circuit
Court of Appeals. On February 11, 1998, the U. S. District Court issued a stay
of the order while denying a separate request from IXCs to prevent the RBOCs
from preparing to sell interLATA long-distance service. As a result of the U. S.
District Court's ruling, absent reversal, New U S WEST intends to offer
interLATA long-distance services in the Communications Group Region in 1998.
 
    The FCC issued an order (the "FCC Order") in August of 1996 establishing a
framework of rules that enable the states and the FCC to implement the local
competition provisions of the Telecommunications Act. Key provisions that relate
to U S WEST Communications and other LECs include the requirements that they:
 
    - provide interconnection to any requesting telecommunications carrier under
      certain terms and conditions;
 
    - provide unrestricted access to network services on an unbundled basis;
 
    - provide physical collocation of equipment necessary for interconnection at
      incumbent LEC facilities, unless physical collocation is not practical for
      technical reasons or because of space limitations;
 
    - offer for resale at a discount any telecommunications services that the
      LEC provides at retail to subscribers; and
 
    - provide reciprocal compensation arrangements for wireline and wireless
      local service providers.
 
    INTERCONNECTION
 
    The FCC Order established interconnection costing and pricing rules which,
from U S WEST's perspective, significantly impeded negotiations with new
entrants to the local exchange market, state public policy interconnection
rulemakings, and interconnection arbitration proceedings.
 
    U S WEST appealed the FCC Order and sought a stay of certain of its
provisions, including certain pricing provisions, pending appellate review. On
July 18, 1997, the Eighth Circuit Court of Appeals (the "Eighth Circuit")
vacated significant portions of the FCC Order. Most significantly, the Eighth
Circuit ruled that jurisdiction over local interconnection prices rests with the
states, not the FCC. The Eighth Circuit also determined that the
Telecommunications Act does not require LECs to provide "superior" service to
their competitors or to "rebundle" network elements for their competitors. The
effect of the Eighth Circuit's decision is to have interconnection and unbundled
network element pricing be resolved through negotiations or state commission
arbitration proceedings. Some of the FCC's unbundling rules, as well as its
"pick and choose" provisions, were also vacated by the
 
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Eighth Circuit. The Eighth Circuit is also reviewing the FCC's August 1997 order
that required shared transport be made available in combination with local
switching as an unbundled element. This review is pending.
 
    On October 14, 1997, the Eighth Circuit clarified that incumbent
telecommunications providers are not required to make rebundled service
offerings available to competitors at unbundled element pricing. This decision
substantially reduces new entrants' ability to arbitrage between resale of
finished services and the pricing of unbundled network elements. On January 26,
1998, the U. S. Supreme Court agreed to review the Eighth Circuit decision.
 
    Interconnection proceedings throughout local regulatory jurisdictions are
continuing. U S WEST Communications has secured approximately 220
interconnection agreements with 85 carriers as of December 31, 1997. At December
31, 1997, U S WEST Communications had completed or settled over 85 state
arbitrations. U S WEST Communications advocates that LECs have the right for
timely recovery of the full costs of providing interconnection services and that
they must not be placed at a competitive disadvantage if local and long-distance
markets are opened to competition at different times. U S WEST Communications is
aggressively defending its views in arbitration proceedings and, when necessary,
in the courts. U S WEST Communications cannot provide assurance that it will be
able to fully recover its costs related to providing interconnection services.
 
    NUMBER PORTABILITY
 
    The FCC has established a schedule for deployment of number portability
during 1998 that includes 10 markets in the Communications Group Region. The FCC
is in the final stages of issuing its cost recovery rules as required by the
Telecommunications Act. U S WEST Communications will seek cost recovery of
expenses of providing number portability through state rate-making proceedings
and interconnection cost recovery dockets, if necessary. U S WEST Communications
expects its estimated costs for deployment of number portability to be
significant over the next few years. Due to legal and regulatory uncertainties,
U S WEST Communications cannot provide assurance that one-time costs of
deploying number portability and other interconnection related costs will be
recovered.
 
    UNIVERSAL SERVICE, FEDERAL ACCESS REFORM AND PRICE CAP ORDERS
 
    On May 7, 1997, the FCC announced three decisions that established rules to
implement the Universal Service provision of the Telecommunications Act (the
"Universal Service Order"), as well as the Access Reform Order and the Price Cap
Order.
 
    UNIVERSAL SERVICE.  Under the Universal Service Order, all providers of
interstate telecommunications services will contribute to universal service
funding, which will be based on retail telecommunications revenues. The
Universal Service Order deferred establishing until January 1, 1999, a new
explicit mechanism to support high-cost service in areas served by non-rural
telephone companies such as U S WEST Communications. Until the explicit
mechanism is put in place, the existing universal service support mechanisms
were left intact, except to the extent modified by the FCC's Access Reform and
Price Cap Orders discussed below.
 
    The FCC's Universal Service Order also includes the establishment of two
separate funds to help connect: 1) eligible schools and libraries, and 2) rural
health care providers to the global telecommunications network. These funds were
initially capped at $2.25 billion and $400 million, respectively. The FCC has
now directed that these funds be phased in during 1998. Additionally, the FCC
reduced the funding amount for the first six months of 1998 by approximately 50
percent.
 
    On July 17, 1997, U S WEST filed a petition with the FCC for reconsideration
and clarification of certain issues in the Universal Service Order. Among other
things, U S WEST requested the FCC to reconsider: (i) establishing a national
fund to ensure high-cost support is sufficient and (ii) assessing
 
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contributions as explicit end-user surcharges. Appeals of other issues addressed
by the Universal Service Order have been filed by various other companies.
 
    ACCESS REFORM.  In its Access Reform Order, the FCC ordered a substantial
restructuring of interstate access pricing. A significant portion of the
services that have been charged using minutes-of-use pricing will now be charged
using a combination of minutes-of-use rates, flat-rate presubscribed
interexchange carrier charges ("PICCs") and subscriber line charges ("SLCs").
Although an increase in the SLC to multi-line business users occurred on July 1,
1997, the bulk of the mandated pricing changes occurred on January 1, 1998.
Additional mandated pricing changes will also occur on January 1 of 1999 through
2001. The net effect of these changes will be to decrease minutes-of-use charges
up to 60 percent and increase flat-rate charges (i.e., PICCs and SLCs). The
Access Reform Order, coupled with the Price Cap Order, will over time,
significantly reduce the revenues New U S WEST derives from interstate access
charges.
 
    The Access Reform Order also continued in place the current rules by which
incumbent LECs may not assess interstate access charges on information service
providers and purchasers of unbundled network elements. The FCC will separately
address issues surrounding information service providers' usage of the public
switched network in a related notice of inquiry.
 
    U S WEST and other incumbent LECs have appealed the Access Reform Order. U S
WEST's primary challenge is that the FCC acted unlawfully by exempting
purchasers of unbundled network elements from payment of interstate access
charges, while not providing for the immediate replacement of subsidies
contained within those same access charges. U S WEST's position is that the new
access charge structure is contrary to the universal service provisions of the
Telecommunications Act and fails to make subsidies explicit. This case is
pending in the Eighth Circuit and was argued on January 15, 1998.
 
    PRICE CAP ORDER.  New U S WEST's interstate services have been subject to
price cap regulation since January 1991. Price caps are an alternative form of
regulation designed to limit prices rather than profits. The FCC's previous
price cap plan included sharing of earnings in excess of authorized levels. The
price cap index for most services was subject to annual adjustments for
inflation, productivity level and exogenous costs. The previous price cap plan
provided for three productivity options, including a no-sharing option, and for
increased flexibility for adjusting prices downward in response to competition.
 
    The FCC's May 1997 Price Cap Order requires LECs that were subject to price
cap regulation to increase their price cap index productivity factor to 6.5
percent. The order eliminated the lower productivity factor options (i.e., 4.0
percent and 4.7 percent) that required sharing of earnings above a specified
level. The order further required LECs that were subject to price cap regulation
to set their 1997 price cap index assuming that the 6.5 percent factor had been
in effect at the time of the 1996 tariff filing.
 
    Under the FCC's previous price cap plan, U S WEST Communications had elected
the lowest productivity factor resulting in U S WEST Communications remaining
subject to sharing requirements for the first half of 1997. On June 26, 1997,
the FCC granted U S WEST Communications' request for a waiver of the price cap
sharing rules for the first half of 1997, resulting in a one-time exogenous cost
adjustment of $22 million, reflected in the financial statements of New U S WEST
as a reduction of 1997 interstate access revenues. The access rate reductions in
U S WEST Communications' 1997 interstate access tariff filing as determined
under the Price Cap Order, which have an ongoing annual revenue impact of $160
million, are being reflected through lower interstate rates over twelve months
beginning July 1, 1997.
 
    On June 23, 1997, U S WEST petitioned the Tenth Circuit Court of Appeals
(the "Tenth Circuit") for a review of the Price Cap Order. The Tenth Circuit has
transferred review of the Price Cap Order
 
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to the District of Columbia Court of Appeals. Among other things, U S WEST and
other appellants are requesting the District of Columbia Court of Appeals to
review the use of a 6.5 percent productivity factor and the retroactive
application of the 6.5 percent productivity factor to July 1, 1996 when
determining the price cap index for the 1997 price cap filing. This case will be
heard in 1998.
 
    Due to legal and regulatory uncertainties, the impact of the
Telecommunications Act on New U S WEST's future results remains unclear.
 
EMPLOYEES
 
    At December 31, 1997, the businesses of New U S WEST had 51,110 employees,
of which 43,749 are employees of U S WEST Communications and 3,542 are employees
of Dex. Approximately 70% of the employees of the businesses of New U S WEST are
represented by unions. Historically, New U S WEST has enjoyed good relations
with the unions in which its employees are members and with its employees who
are not members of unions. New U S WEST's principal collective bargaining
agreements expire in May, August and October 1998. Negotiations with respect to
future collective bargaining agreements are underway.
 
REAL PROPERTY
 
    The properties of New U S WEST do not lend themselves to description by
character and location of principal units. At December 31, 1997, the majority of
such property was utilized in providing telecommunications services by U S WEST
Communications. Substantially all of U S WEST Communications' central office
equipment is located in owned buildings situated on land owned in fee, while
many garages and administrative and business offices are in leased quarters.
 
LEGAL PROCEEDINGS
 
    At U S WEST Communications, there are pending certain regulatory actions in
local regulatory jurisdictions that call for price decreases, refunds or both.
For a discussion of these actions see "New U S WEST Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Contingencies." In
addition, the businesses of New U S WEST are currently subject to claims and
proceedings that have arisen in the ordinary course of business.
 
MANAGEMENT OF NEW U S WEST
 
BOARD OF DIRECTORS OF NEW U S WEST
 
    Immediately after the Separation, it is expected that the New U S WEST Board
will consist of 11 directors. Pursuant to the New U S WEST Restated Certificate,
the New U S WEST Board will consist of three classes of directors. Each class of
directors will be subject to election by stockholders every three years. In
addition, it is anticipated that the New U S WEST Board will adopt a policy that
requires directors to retire at the annual meeting following the director's 72nd
birthday.
 
    Prior to the Separation Time, a wholly owned subsidiary of U S WEST, as the
sole stockholder of New U S WEST, intends to elect the following directors of U
S WEST to the New U S WEST Board: Messrs. Harad, Jacobson, McCormick, Popoff,
Trujillo and Williams and Ms. Nelson. In addition, it is expected that Linda G.
Alvarado, Craig R. Barrett, Jerry J. Colangelo and Peter S. Hellman will be
elected by U S WEST to the New U S WEST Board effective as of the Separation
Time. The following is a brief listing of the principal occupations, other major
affiliations and ages of each such individual who is not currently a member of
the U S WEST Board. For information about such individuals who are currently
members of the U S WEST Board, see "Chapter 4: Other Matters to Be Considered at
the Annual Meeting--U S WEST Director and Executive Officer Information."
 
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    LINDA G. ALVARADO,  President and Chief Executive Officer of Alvarado
Construction, Inc. since 1978. Chairman, Denver Hispanic Chamber of Commerce.
Member of the Advisory Board of Woman, Inc. Director of Cyprus Amax Minerals
Company, Engelhard Corporation and Pitney Bowes, Inc. Age 46.
 
    CRAIG R. BARRETT,  President and Chief Operating Officer of Intel
Corporation since 1997. Executive Vice President and Chief Operating Officer
from 1993 to 1997. Executive Vice President from 1990 to 1993. Senior Vice
President and General Manager of the Microcomputer Components Group from 1989 to
1990. Vice President/Senior Vice President and General Manager of the Components
Technology and Manufacturing Group from 1985 to 1989. Vice President from 1984
to 1985. Various technology, engineering and manufacturing management positions
from 1974 to 1984. Professor of Engineering at Stanford University from 1965 to
1974. Director of Intel Corporation (since 1992), Komag, Incorporated and
SEMATECH. Age 59.
 
    JERRY J. COLANGELO,  Owner, Chairman and Chief Executive Officer of the
Arizona Diamondbacks since 1995. President and Chief Executive Officer of the
Phoenix Suns, NBA since 1987. General Manager of the Phoenix Suns, NBA from 1968
to 1987. Head Scout and Director of Merchandising for the Chicago Bulls, NBA
from 1966 to 1968. Associate of D. O. Klein & Associates from 1964 to 1965 and
Partner at House of Charles, Inc. from 1962 to 1964. Director of the Phoenix Art
Museum, Phoenix Community Alliance and Phoenix Suns Charities. Age 59.
 
    PETER S. HELLMAN,  President and Chief Operating Officer of TRW Inc. since
1995. Assistant President of TRW Inc. from 1994 to 1995; Chief Financial Officer
from 1992 to 1994; Vice President and Chief Financial Officer from 1991 to 1992;
Vice President and Treasurer from 1989 to 1991. Employed by BP America from 1979
to 1989 and The Irving Trust Company from 1972 to 1979. Director of TRW Inc. and
Arkwright Mutual Insurance Company. Age 48.
 
DIRECTOR COMPENSATION
 
    New U S WEST has not yet determined the compensation which it will pay to
directors following the Separation. It is anticipated that such compensation
will be set shortly after consummation of the Separation.
 
COMMITTEES OF THE NEW U S WEST BOARD
 
    Following the Separation, the New U S WEST Board will establish the standing
Committees listed below. No final determination has been made as to the
memberships of any such standing Committees.
 
    AUDIT COMMITTEE.  The Audit Committee's purpose will be to oversee New U S
WEST's accounting and financial reporting policies and practices and to assist
the New U S WEST Board in fulfilling its fiduciary and corporate accountability
responsibilities. New U S WEST's internal auditors and independent certified
public accountants will periodically meet with the Audit Committee and will
always have unrestricted direct access to the Audit Committee members.
 
    FINANCE COMMITTEE.  The Finance Committee will be responsible for evaluating
New U S WEST's growth strategies and financing for New U S WEST's operations,
and for overseeing New U S WEST's trusts, including the pension trust.
 
    HUMAN RESOURCES COMMITTEE.  The Human Resources Committee will be
responsible to assure the appropriateness of the compensation and benefits of
the Executive Officers of New U S WEST and its subsidiaries, and to provide for
the orderly succession of management.
 
    PUBLIC POLICY COMMITTEE.  The Public Policy Committee will be responsible
for reviewing public policy issues generally. The Public Policy Committee will
also serve as a nominating committee for the
 
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New U S WEST Board, and will be responsible for periodic evaluations of the
performance of New U S WEST Board members and for assuring the appropriateness
of their compensation.
 
NEW U S WEST EXECUTIVE OFFICERS
 
    Set forth below is information with respect to the current positions of the
individuals who have been selected to serve as executive officers of New U S
WEST upon consummation of the Separation. It is anticipated that these
individuals will be elected by the New U S WEST Board as of the Separation Time.
Unless otherwise indicated, the positions to be held by each such individual
will be similar to their current positions.
 
    DANA P. DUNNE,  Vice President--Strategy of the Communications Group since
January, 1998. Before joining the Communications Group, Mr. Dunne was a Senior
Engagement Partner at McKinsey and Company, where since 1990 he served as one of
the leaders in that company's worldwide telecommunications and European
multimedia practices. Age 34.
 
    ROBERT E. KNOWLING, JR.,  Executive Vice President--Operations and
Technology of the Communications Group since 1997. Mr. Knowling joined U S WEST
in 1996 and previously served as a Vice President for Network Operations of the
Communications Group. Mr. Knowling had previously been a Vice President at
Ameritech Corporation, where he was responsible for network operations and
business processes development. Age 42.
 
    OSCAR MUNOZ,  Vice President and Controller of the Communications Group
since 1997. Mr. Munoz previously served as a Vice President at Coca-Cola
Enterprises, Inc., where for ten years he held a number of financial positions
and was instrumental in reorganizing the firm's financial network. Age 39.
 
    MARK D. ROELLIG,  Vice President--Public Policy and Regulatory Law of the
Communications Group since 1997. Following the Separation, Mr. Roellig will
become Executive Vice President, General Counsel and Secretary of New U S WEST.
Mr. Roellig has served as a Vice President of U S WEST since 1994, and has held
a variety of positions in the Law Department of U S WEST since 1983. Age 42.
 
    JAMES A. SMITH,  President of Dex since 1997. Mr. Smith has been a Vice
President of U S WEST since 1987, and has held a variety of operational,
marketing and management positions with U S WEST and its predecessors for 19
years. Age 45.
 
    ALLAN R. SPIES,  Vice President and Chief Financial Officer of the
Communications Group since 1997. Mr. Spies has been a Vice President of U S WEST
since 1995, and has held a variety of finance and management positions with U S
WEST and its predecessors for over 25 years. Age 49.
 
    SOLOMON D. TRUJILLO,  President and Chief Executive Officer of the
Communications Group since 1995. Mr. Trujillo previously served as President and
Chief Executive Officer of Dex. Mr. Trujillo joined the Mountain States
Telephone and Telegraph Company (U S WEST Communications' predecessor) in 1974
and has been affiliated with U S WEST and its predecessors since that time,
serving in various marketing, sales, finance and public policy positions. Age
46.
 
    GREGORY M. WINN,  Executive Vice President--Retail Markets Division of the
Communications Group since 1997. Mr. Winn has been a Vice President of U S WEST
since 1994, and has held a variety of marketing and sales positions with U S
WEST and its predecessors for over 25 years. Age 48.
 
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COMPENSATION OF NEW U S WEST EXECUTIVE OFFICERS
 
    The following table discloses the compensation received by New U S WEST's
Chief Executive Officer and the four other most highly paid executive officers
(the "New U S WEST Named Executive Officers") for services rendered for the
fiscal year ended December 31, 1997.
 
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                            LONG-TERM COMPENSATION
                                                   ANNUAL COMPENSATION          ----------------------------------------------
                                           -----------------------------------               SECURITIES UNDERLYING
                                                                     OTHER      RESTRICTED
                                                                    ANNUAL         STOCK          OPTIONS/SARS         LTIP
                                            SALARY               COMPENSATION    AWARD(S)    ----------------------   PAYOUTS
NAME AND PRINCIPAL POSITION       YEAR        ($)     BONUS ($)       ($)           ($)         CLASS        (#)        ($)
- ------------------------------  ---------  ---------  ---------  -------------  -----------     -----     ---------  ---------
<S>                             <C>        <C>        <C>        <C>            <C>          <C>          <C>        <C>
SOLOMON D. TRUJILLO...........       1997  $ 525,220  $ 645,000    $  11,821                          M      56,650  $ 267,319
President and CEO                                                                                     C     113,836
GREGORY M. WINN...............       1997  $ 264,127  $ 275,000    $   9,033     $  67,987(1)          M     --      $  32,956
Executive Vice                                                                                        C      25,933
President--Retail Markets
Division
ROBERT E. KNOWLING, JR........       1997  $ 282,658  $ 240,256    $   6,886                          M      --      $  38,433
Executive Vice President--                                                                            C      19,700
Operations and Technology
MARK D. ROELLIG...............       1997  $ 273,519  $ 185,000    $  40,317                          M      17,650  $  19,002
Vice President--Public Policy                                                                         C       7,500
and Regulatory Law
ALLAN R. SPIES................       1997  $ 230,317  $ 202,406    $     330                          M      --      $  23,431
Vice President and Chief                                                                              C      33,100
Financial Officer
 
<CAPTION>
                                   ALL OTHER
                                COMPENSATION(2)
NAME AND PRINCIPAL POSITION           ($)
- ------------------------------  ----------------
<S>                             <C>
SOLOMON D. TRUJILLO...........     $   51,129
President and CEO
GREGORY M. WINN...............     $  301,296
Executive Vice
President--Retail Markets
Division
ROBERT E. KNOWLING, JR........     $   35,575
Executive Vice President--
Operations and Technology
MARK D. ROELLIG...............     $   30,643
Vice President--Public Policy
and Regulatory Law
ALLAN R. SPIES................     $   28,489
Vice President and Chief
Financial Officer
</TABLE>
 
U=U S WEST, Inc. option
 
C=U S WEST Communications option
 
M=U S WEST Media option
 
- ------------------------------
 
NOTE: On October 31, 1995, the stockholders of U S WEST approved the 1995
Recapitalization. Options granted on or after the effective date, November 1,
1995, are options in either Communications Stock or Media Stock. Options
outstanding prior to November 1, 1995, were classified as one option each of
Communications Stock and Media Stock. The exercise price of these reclassified
options is based on the weighted closing price of Communications Stock and Media
Stock as of November 1, 1995, which on a combined basis equals the full exercise
price of the original option.
 
(1) Mr. Winn received 1,550 shares of Communications Stock in February, 1997,
    subject to a six-month restriction as to sale or transferability. Mr. Winn
    received an additional 2,100 shares of Communications Stock in February,
    1997, subject to a four-year restriction as to sale or transferability. At
    December 31, 1997, Mr. Winn held 10,600 restricted shares of Communications
    Stock and 1,000 restricted shares of Media Stock, all of which were entitled
    to dividends, if any, paid during the restriction period, and which had an
    aggregate value of $478,325 and $28,875, respectively.
 
(2) The amounts in this column are attributable to (1) the U S WEST matching
    contribution under the Deferred Compensation Plan, (2) the U S WEST matching
    contribution under the Savings Plan/ESOP, (3) the current dollar value of
    the remainder of the premium paid under a split-dollar insurance
    arrangement, and (4) the amount paid for the term insurance portion of the
    foregoing split-dollar arrangement. The separate components of these amounts
    are set forth below. In 1997, U S WEST also paid Mr. Winn $274,977 to cover
    certain housing expenses he incurred in connection with a relocation.
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31, 1997
                                  ----------------------------------------------------------------------
                                      DEFERRED
                                    COMPENSATION       SAVINGS PLAN      SPLIT-DOLLAR     TERM PORTION
NAME                                COMPANY MATCH      COMPANY MATCH     PREMIUM VALUE       PREMIUM
- --------------------------------  -----------------  -----------------  ---------------  ---------------
<S>                               <C>                <C>                <C>              <C>
Solomon D. Trujillo.............      $  19,250          $   8,000         $  23,441        $     438
Robert E. Knowling, Jr..........      $   2,152          $   7,917         $  25,296        $     210
Gregory M. Winn.................      $   6,666          $   7,157         $  12,319        $     177
Mark D. Roellig.................      $   7,676          $   7,471         $  15,352        $     144
Allan R. Spies..................      $  10,388          $   7,269         $  10,674        $     158
</TABLE>
 
                                                                             126
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
 
    The following table provides information on stock options granted to the New
U S WEST Named Executive Officers during 1997. U S WEST employed the
Black-Scholes option pricing model to develop the theoretical values set forth
under the "Grant Date Present Value" column. These stock options comprise a
portion of the named executive officers' total long-term compensation potential.
 
    COMMUNICATIONS STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                                   INDIVIDUAL GRANTS
                                  -----------------------------------------------------------------------------------
                                       NUMBER OF          PERCENT OF TOTAL
                                      SECURITIES        OPTIONS/SARS GRANTED    EXERCISE OR               GRANT DATE
                                  UNDERLYING OPTIONS/      TO EMPLOYEES IN      BASE PRICE   EXPIRATION     PRESENT
NAME                                SARS GRANTED(1)          FISCAL YEAR          ($/SH)        DATE       VALUE($)
- --------------------------------  -------------------  -----------------------  -----------  -----------  -----------
<S>                               <C>                  <C>                      <C>          <C>          <C>
Solomon D. Trujillo.............          74,000                   0.78%         $  32.625       1/2/07    $ 390,525(3)
                                          21,941(2)                0.23%         $  34.125      7/14/04    $ 121,114(4)
                                          17,895(2)                0.19%         $  45.625      12/2/04    $ 127,292(4)
Robert E. Knowling, Jr..........          12,700                   0.13%         $  32.625       1/2/07    $  67,023(3)
                                           7,000                   0.07%         $  39.250      10/1/07    $  42,835(3)
Gregory M. Winn.................          13,100                   0.14%         $  32.625       1/2/07    $  69,133(3)
                                           6,250(2)                0.07%         $  32.375      3/15/06    $  32,731(4)
                                           6,000                   0.06%         $  39.250      10/1/07    $  36,716(3)
                                             300(2)                0.00%         $  41.125       1/5/01    $   1,797(4)
                                             293(2)                0.00%         $  41.125      11/7/01    $   1,897(4)
Mark D. Roellig.................           7,500                   0.08%         $  32.625       1/2/07    $  39,580(3)
Allan R. Spies..................          10,900                   0.12%         $  32.625       1/2/07    $  57,523(3)
                                           2,200                   0.02%         $  33.625       4/7/07    $  12,471(3)
                                          20,000                   0.21%         $  33.625       4/7/07    $ 109,999(3)
</TABLE>
 
    MEDIA STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                                   INDIVIDUAL GRANTS
                                  -----------------------------------------------------------------------------------
                                       NUMBER OF          PERCENT OF TOTAL
                                      SECURITIES        OPTIONS/SARS GRANTED    EXERCISE OR               GRANT DATE
                                  UNDERLYING OPTIONS/      TO EMPLOYEES IN      BASE PRICE   EXPIRATION     PRESENT
NAME                                SARS GRANTED(1)          FISCAL YEAR          ($/SH)        DATE       VALUE($)
- --------------------------------  -------------------  -----------------------  -----------  -----------  -----------
<S>                               <C>                  <C>                      <C>          <C>          <C>
Solomon D. Trujillo.............          41,000                   0.47%         $  18.625       1/2/07    $ 293,516(5)
                                          15,650                   0.18%         $  19.000      2/21/07    $ 114,293(5)
Robert E. Knowling, Jr..........          --                                     $  --                     $  --
Gregory M. Winn.................          --                                     $  --                     $  --
Mark D. Roellig.................          12,500                   0.14%         $  18.625       1/2/07    $  89,489(5)
                                           5,150                   0.06%         $  19.000      2/21/07    $  37,611(5)
Allan R. Spies..................          --                     --              $  --                     $  --
</TABLE>
 
- ------------------------------
 
(1) Except as otherwise noted, these options become exercisable in one-third
    increments on the first, second and third anniversaries of the date of
    grant, and include a reload feature. The reload feature gives the optionee
    the right to receive a further option, at the then current market price, for
    a number of shares equal to the number of shares of stock surrendered by the
    optionee in payment of the exercise price of the original option.
 
(2) These stock options become fully exercisable one year from the date of grant
    and do not include a reload feature.
 
(3) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Communications Stock, using the following
    assumptions: volatility, 25.0%, dividend yield, 5.8%, and a risk-free rate
    of return of 5.77% to 6.24% based on the options being outstanding for an
    average term of 4.0 years.
 
(4) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Communications Stock, using the following
    assumptions: volatility, 25.0%, dividend yield of 5.80%, and a risk-free
    rate of return of 5.74% to 6.78% based on the options being outstanding for
    a term ranging from 38 months to 48 months.
 
                                                                             127
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
(5) This value reflects the standard application of the Black-Scholes option
    pricing model to options issued on Media Stock, using the following
    assumptions: volatility, 30.0%, dividend yield, 0.0%, and a risk-free rate
    of return of 6.33% based on the options being outstanding for an average
    term of 5 years.
 
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
  VALUES
 
    COMMUNICATIONS STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                             NUMBER OF UNEXERCISED        VALUE OF UNEXERCISED
                                  SHARES                          OPTIONS/SARS                IN-THE-MONEY
                                ACQUIRED ON                       AT FY-END(#)                OPTIONS/SARS
                                 EXERCISE       VALUE      --------------------------  ---------------------------
NAME                                (#)      REALIZED ($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
- ------------------------------  -----------  ------------  -----------  -------------  ------------  -------------
<S>                             <C>          <C>           <C>          <C>            <C>           <C>
Solomon D. Trujillo...........      50,122   $    806,527     111,945        243,837   $  1,831,255   $ 3,381,812
Robert E. Knowling, Jr........      --       $    --           13,033         45,767   $    178,403   $   556,696
Gregory M. Winn...............         800   $     15,620      10,765         61,128   $    159,249   $   758,274
Mark D. Roellig...............       6,258   $     77,199      15,133         15,434   $    297,273   $   223,832
Allan R. Spies................      --            --            6,999         47,101   $    117,745   $   630,597
</TABLE>
 
    MEDIA STOCK OPTIONS
 
<TABLE>
<CAPTION>
                                                             NUMBER OF UNEXERCISED        VALUE OF UNEXERCISED
                                  SHARES                          OPTIONS/SARS                IN-THE-MONEY
                                ACQUIRED ON                       AT FY-END(#)                OPTIONS/SARS
                                 EXERCISE       VALUE      --------------------------  ---------------------------
NAME                                (#)      REALIZED ($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
- ------------------------------  -----------  ------------  -----------  -------------  ------------  -------------
<S>                             <C>          <C>           <C>          <C>            <C>           <C>
Solomon D. Trujillo...........      --       $    --          146,890        147,318   $  1,755,550   $ 1,545,786
Robert E. Knowling, Jr........      --       $    --           --            --        $    --        $   --
Gregory M. Winn...............      --       $    --            4,266            584   $     53,979   $     6,564
Mark D. Roellig...............      --       $    --           21,957         26,718   $    259,170   $   264,476
Allan R. Spies................      --            --            8,366          8,934   $    102,800   $   106,928
</TABLE>
 
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
 
    The following table provides information concerning dividend equivalent
units granted to the New U S WEST Named Executive Officers of New U S WEST
during 1997 under the U S WEST Communications Group Long-Term Incentive Plan.
Each dividend equivalent unit represents the right to receive an amount equal to
the cumulative dividends paid on Communications Stock during a performance
period, multiplied by a percentage representing the extent to which the
Communications Group achieves certain performance goals based on financial
results, revenue, productivity and efficiency, service and customer care,
employee satisfaction, and stock performance.
 
<TABLE>
<CAPTION>
                                                                                   ESTIMATED FUTURE PAYOUTS UNDER
                                                           PERFORMANCE PERIOD       NON-STOCK PRICE-BASED PLAN(1)
                                                            UNTIL MATURATION   ---------------------------------------
NAME                                      NUMBER OF UNITS      OR PAYOUT          THRESHOLD       TARGET     MAXIMUM
- ----------------------------------------  ---------------  ------------------  ---------------  ----------  ----------
<S>                                       <C>              <C>                 <C>              <C>         <C>
Solomon D. Trujillo.....................       126,000           1997-1999                0     $  808,920  $  808,920
Robert E. Knowling, Jr..................        21,800           1997-1999                0     $  139,956  $  139,956
                                                11,000           1997-1999                0     $   52,965  $   52,965
Gregory M. Winn.........................        22,600           1997-1999                0     $  145,092  $  145,092
                                                10,000           1997-1999                0     $   48,150  $   48,150
Mark D. Roellig.........................        12,900           1997-1999                0     $   82,818  $   82,818
Allan R. Spies..........................        22,600           1997-1999                0     $  145,092  $  145,092
</TABLE>
 
- ------------------------------
 
(1) Estimated future payouts assume a quarterly rate of $0.535 per share over
    the performance period. Any change to the quarterly dividend rate would vary
    the payouts.
 
                                                                             128
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
U S WEST PENSION PLANS
 
    The following tables illustrate the maximum estimated annual benefits
payable to the New U S WEST Named Executive Officers upon retirement pursuant to
the U S WEST Pension Plans, based upon applicable pension plan formulas for
specified final average annual compensation and specified years of service. The
second table is based on the DLS Formula that applies to Mr. Knowling. Messrs.
Trujillo, Winn, Roellig and Spies are eligible to receive the greater of any
pension amount that is calculated under either table.
 
                              PENSION PLAN TABLES
                                  FIRST TABLE
 
<TABLE>
<CAPTION>
                                                                        YEARS OF SERVICE
        FINAL AVERAGE ANNUAL          ------------------------------------------------------------------------------------
            COMPENSATION                  15          20          25          30          35          40           45
- ------------------------------------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>         <C>
$ 500,000...........................  $  112,500  $  160,000  $  187,500  $  225,000  $  262,500  $  293,750  $    325,000
  600,000...........................     135,000     180,000     225,000     270,000     315,000     352,500       390,000
  700,000...........................     157,500     210,000     262,500     315,000     367,500     411,250       455,000
  800,000...........................     180,000     240,000     300,000     360,000     420,000     470,000       520,000
  900,000...........................     202,500     270,000     337,500     405,000     472,500     528,750       585,000
 1,000,000..........................     225,000     300,000     375,000     450,000     525,000     587,500       650,000
 1,100,000..........................     247,500     330,000     412,500     495,000     577,500     646,250       715,000
 1,200,000..........................     270,000     360,000     450,000     540,000     630,000     705,000       780,000
 1,300,000..........................     292,500     390,000     487,500     585,000     682,500     763,750       845,000
 1,400,000..........................     315,000     420,000     525,000     630,000     735,000     822,500       910,000
 1,500,000..........................     337,500     450,000     562,500     675,000     787,500     881,250       975,000
 1,600,000..........................     360,000     480,000     600,000     720,000     840,000     940,000     1,040,000
 1,700,000..........................     382,500     510,000     637,500     765,000     892,500     998,750     1,105,000
</TABLE>
 
                                  SECOND TABLE
 
<TABLE>
<CAPTION>
                                                                         YEARS OF SERVICE
         FINAL AVERAGE ANNUAL           ----------------------------------------------------------------------------------
             COMPENSATION                   15          20          25          30          35          40          45
- --------------------------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
<S>                                     <C>         <C>         <C>         <C>         <C>         <C>         <C>
$ 500,000.............................  $  112,500  $  162,500  $  212,500  $  237,500  $  256,250  $  262,500  $  268,750
  600,000.............................     135,000     195,000     255,000     285,000     307,500     315,000     322,500
  700,000.............................     157,500     227,500     297,500     332,500     358,750     367,500     376,250
  800,000.............................     180,000     260,000     340,000     380,000     410,000     420,000     430,000
  900,000.............................     202,500     292,500     382,500     427,500     461,250     472,500     483,750
 1,000,000............................     225,000     325,000     425,000     475,000     512,500     525,000     537,500
 1,100,000............................     247,500     357,500     467,500     522,500     563,750     577,500     591,250
 1,200,000............................     270,000     390,000     510,000     570,000     615,000     630,000     645,000
 1,300,000............................     292,500     422,500     552,500     617,500     666,250     682,500     698,750
 1,400,000............................     315,000     455,000     595,000     665,000     717,500     735,000     752,500
 1,500,000............................     337,500     487,500     637,500     712,500     768,750     787,500     806,250
 1,600,000............................     360,000     520,000     680,000     760,000     820,000     840,000     860,000
 1,700,000............................     382,500     552,500     722,500     807,500     871,250     892,500     913,750
</TABLE>
 
    The calculation of "final average annual compensation" is the highest
average compensation for 60 consecutive months of the 120 consecutive-month
period preceding retirement and includes compensation that would appear under
the "Salary" and "Bonus" columns of the Summary Compensation Table.
 
                                                                             129
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
At December 31, 1997, Messrs. Trujillo, Knowling, Winn, Roellig and Spies had
23, 1, 27, 14 and 27 actual years of service, respectively.
 
    Benefits set forth in the preceding tables are computed as a straight-life
annuity and are subject to deduction for Social Security.
 
EXECUTIVE AGREEMENTS
 
    U S WEST has maintained change of control severance agreements between it
and a number of its officers. Mr. Trujillo is a party to a change of control
severance agreement that is similar to those of the other executive officers of
U S WEST, though the Separation will not constitute a "Change of Control" under
his agreement. See "Chapter 3: The Separation--Interests of Certain Persons in
the Separation--Severance Agreements." Messrs. Knowling and Winn are parties to
separate change of control severance agreements, the purpose of which is to
encourage them to continue to carry out their duties in the event of a possible
change of control. A "Change of Control" is defined in these agreements as (i) a
change of control that would have to be reported under Item 6(e) of Schedule 14A
of the Exchange Act regardless of whether U S WEST is subject to that reporting
requirement, (ii) the acquisition by a party or certain related parties,
directly or indirectly, of twenty percent or more of U S WEST's voting
securities, unless pursuant to a transaction approved by the Board of Directors,
(iii) any period of two consecutive calendar years during which there shall
cease to be a majority of the U S WEST Board comprised as follows: individuals
who at the beginning of such period constitute the U S WEST Board and any new
director(s) whose election by the U S WEST Board or nomination for election by U
S WEST's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
(iv) U S WEST becomes a party to a transaction in which it will not be the
surviving corporation or in which it will be the surviving corporation but
shares of its outstanding common stock will be converted into shares of another
company or other securities, cash or property (other than a reincorporation or
the establishment of a holding company involving no change of ownership of U S
WEST), (v) stockholders of U S WEST approve a merger, plan of reorganization,
consolidation or share exchange, and immediately afterwards the holders of U S
WEST's voting securities prior thereto hold securities representing fifty
percent or less of the voting securities of U S WEST or other surviving entity
and, also immediately afterwards, members of the U S WEST Board prior to such
transaction constitute less than half of U S WEST's or other surviving entity's
Board of Directors, or (vi) any other event that a majority of the U S WEST
Board, in its sole discretion, deems to be a change of control. The agreements
are effective and are automatically renewed for three-year periods, and are
subject to cancellation by the U S WEST Board upon not less than 90 days' notice
prior to a three-year renewal. These agreements provide that the officers will
receive certain benefits upon termination of their employment or if their job
duties or compensation and benefits are substantially reduced following a Change
of Control.
 
    Termination benefits will be payable immediately upon termination following
a Change of Control and will consist of a sum equal to (i) three times the
officer's annual base salary prior to termination, (ii) three times the
officer's annual bonus amount under the Short-Term Incentive Plan (such bonus
amount to be calculated on the basis of the extent to which the performance
factors targeted by the Human Resources Committee have been achieved, which
shall be deemed to be 100% unless the percentage actually achieved is greater
than 100%, in which case the higher percentage shall apply), and (iii) gross-ups
of income sufficient to compensate the officer for any excise taxes incurred in
connection with the benefits paid upon termination. The agreements also provide
for continued health care benefits, and modify the officer's pension benefits so
that he will be immediately vested if he is not already vested, and add three
years to both the officer's age and his years of service.
 
    U S WEST has entered into executive severance agreements with certain of its
officers, including the New U S WEST Named Executive Officers. These agreements
set forth the severance benefits that
 
                                                                             130
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
would be payable in certain circumstances other than a change of control, such
as a termination not for cause, termination in connection with a downsizing, or
resignation of an officer who elects not to accept reassignment to a comparable
position. See "Chapter 4--Other Matters to be Considered at the Annual
Meeting--U S WEST Director and Executive Officer Information-- Executive
Agreements."
 
    U S WEST has entered into a retention agreement with Mr. Roellig in order to
encourage his continued employment with U S WEST and New U S WEST. Under the
terms of this agreement, Mr. Roellig has received 15,800 restricted shares of
Communications Stock and 25,400 restricted shares of Media Stock. Immediately
prior to the Separation, the restricted shares of Media Stock will be replaced
by restricted shares of Communications Stock having a value equal to 1.0645 of
the value of the Media Stock replaced. See "Chapter 3: The Separation--Employee
Benefits and Compensation Matters--Adjustments to Media Stock Awards." Subject
to his continuous employment with U S WEST or New U S WEST, these shares will
vest on March 15, 2001. This agreement also entitles Mr. Roellig to annual cash
payments, which are conditioned on his continuous employment with U S WEST or
New U S WEST until such payments are due. These cash payments are payable prior
to 2001, in installments that are incrementally larger over time, and amount to
$280,000 in the aggregate.
 
    The foregoing severance and retention agreements will be assumed by New U S
WEST in connection with the Separation.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    In September of 1997 and February of 1998, U S WEST and U S WEST
Communications entered into certain advertising, promotional and programming
agreements with certain professional sports organizations in which Jerry J.
Colangelo, a person expected to be named as a director of New U S WEST, is an
owner and executive officer. Under such agreements, U S WEST will make annual
payments for certain advertising and promotional rights of $2 million to the
Arizona Diamondbacks until December 2007 and $1.6 million to the Phoenix Suns,
Arizona Rattlers and Phoenix Mercury until the conclusion of the 2022-23 season.
In a separate agreement with the Phoenix Suns ending in 2023, U S WEST
Communications will pay $2 million and a fee of approximately $125,000 per
selected event which is distributed by U S WEST Communications. Each of the
above-described payments are subject to an annual escalation of three to four
percent per year.
 
                                                                             131
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
NEW U S WEST SELECTED HISTORICAL FINANCIAL INFORMATION
 
    The following table sets forth selected historical financial information for
New U S WEST. This information presents New U S WEST's results of operations and
financial condition as if it were a separate entity for all periods presented
but does not give effect to certain transactions being undertaken in connection
with the Separation, including the refinancing by New U S WEST of the Dex
Indebtedness and the issuance of $850 of New U S WEST Common Stock to holders of
Media Stock in connection with the Dex Alignment. For financial information for
New U S WEST which gives effect to all such transactions, see "--New U S WEST
Unaudited Pro Forma Condensed Combined Financial Statements." This information
should be read in conjunction with New U S WEST's Combined Financial Statements,
including the notes thereto. See "Annex G--New U S WEST Combined Financial
Statements."
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AS OF DECEMBER 31,
                                                                      -----------------------------------------------------
                                                                        1997       1996       1995       1994       1993
                                                                      ---------  ---------  ---------  ---------  ---------
                                                                         DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<S>                                                                   <C>        <C>        <C>        <C>        <C>
RESULTS OF OPERATIONS INFORMATION:
Operating revenues..................................................  $  11,479  $  11,168  $  10,508  $  10,132  $   9,779
Net income (loss)(1)................................................      1,524      1,535      1,423      1,403     (2,585)
Dividends per common share..........................................       2.14       2.14       2.14
BALANCE SHEET INFORMATION:
Total assets........................................................     17,667     17,279     16,960     16,317     15,727
Total debt..........................................................      5,715      6,545      6,782      6,147      5,728
Total equity........................................................      4,367      4,085      3,657      3,357      2,837
OTHER INFORMATION:
Return on equity(2,3)...............................................       34.7%      38.6%      41.8%      45.3%      27.5%
Percentage of debt to total capital.................................       56.7%      61.6%      65.0%      64.7%      66.9%
Capital expenditures................................................  $   2,672  $   2,831  $   2,770  $   2,513  $   2,251
Telephone network access lines in service (thousands)...............     16,033     15,424     14,795     14,299     13,803
Billed access minutes of use (millions)--
  interstate........................................................     55,362     52,039     47,801     43,768     40,594
  intrastate........................................................     11,729     10,451      9,504      8,507      7,529
Total employees.....................................................     51,110     51,477     54,552     55,246     56,147
Telephone company employees.........................................     43,749     45,427     47,934     47,493     49,668
Telephone company employees per ten
  thousand access lines.............................................       27.3       29.5       32.4       33.2       36.0
</TABLE>
 
- ------------------------------
(1) 1997 net income includes a $152 regulatory charge related primarily to the
    Washington Rate Order, a gain of $48 on the sales of certain rural telephone
    exchanges, a gain of $32 on the sale of U S WEST Communications' investment
    in Bellcore and an extraordinary charge of $3 for the early extinguishment
    of debt. 1996 net income includes a gain of $36 on the sales of certain
    rural telephone exchanges and the cumulative and current effects of $34 and
    $15, respectively, from adopting SFAS No. 121. 1995 net income includes a
    gain of $85 on the sales of certain rural telephone exchanges and other
    charges of $16, including an extraordinary charge of $8 for the early
    extinguishment of debt and $8 for costs associated with the 1995
    Recapitalization. 1994 net income includes a gain of $51 on the sales of
    certain rural telephone exchanges. 1993 net income was reduced by $566 for a
    restructuring charge and $54 for the cumulative effect on deferred taxes of
    the 1993 federally mandated increase in income tax rates. 1993 net income
    was also reduced by extraordinary charges of $3,123 for the discontinuance
    of SFAS No. 71 and $77 for the early extinguishment of debt.
 
(2) The increase in the return on equity since 1993 is primarily due to the
    effects of discontinuing SFAS No. 71 in 1993.
 
(3) 1997 return on equity is based on income before extraordinary item. 1996
    return on equity is based on income before the cumulative effect of a change
    in accounting principle. 1995 return on equity is based on income before
    extraordinary item. 1993 return on equity is based on income excluding
    extraordinary items, a restructuring charge and the cumulative effect on
    deferred taxes of the 1993 federally mandated increase in income tax rates.
 
                                                                             132
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
NEW U S WEST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS
 
    The New U S WEST Combined Financial Statements included in this Proxy
Statement include the combined historical balance sheets, results of operations
and cash flows of the businesses that comprise the Communications Group (the
"Communications Businesses") and Dex. The following discussion is based on the
New U S WEST Combined Financial Statements prepared in accordance with GAAP. The
discussion should be read in conjunction with the New U S WEST Unaudited Pro
Forma Condensed Combined Financial Statements and the U S WEST Consolidated
Financial Statements included in this Proxy Statement. See "Annex G--New U S
WEST Combined Financial Statements," "Annex F-- U S WEST Consolidated Financial
Statements" and "Chapter 9: The Annual Meeting and Certain Other Matters--Where
You Can Find More Information." As used in this discussion, all references to
dollars are in millions.
 
    Certain terms of the Separation Agreement, including the refinancing of $3.9
billion of Dex Indebtedness by New U S WEST, the issuance of $850 of New U S
WEST Common Stock in connection with the Dex Alignment, the transfer of certain
assets and liabilities of U S WEST to New U S WEST and the allocation of certain
costs and expenses in connection with the Separation, are not reflected in the
discussion below. As a result, historical earnings per share of New U S WEST are
not presented as such earnings per share are not meaningful until the financial
effects of the Separation, which are significant, are reflected in the
historical statements of New U S WEST. These financial effects will be included
in historical results upon execution of the Separation Agreement. See "--New U S
WEST Unaudited Pro Forma Condensed Combined Financial Statements" and "Chapter
3: The Separation--Accounting Treatment."
 
RESULTS OF OPERATIONS--1997 COMPARED WITH 1996
 
    NET INCOME
 
    Following are details of New U S WEST's net income, normalized to exclude
the effects of certain nonoperating items.
 
<TABLE>
<CAPTION>
                                                                               INCREASE
                                                                              (DECREASE)
                                                                             -------------
                                                      1997        1996         $       %
                                                    --------  ------------   ------  -----
<S>                                                 <C>       <C>            <C>     <C>
Reported net income...............................  $  1,524  $      1,535   $  (11)  (0.7)
Adjustments to reported net income:
  Gains on sales of rural telephone exchanges.....       (48)         )(36      (12)  33.3
  Gain on sale of investment in Bellcore..........       (32)      --           (32)  --
  Cumulative effect of change in accounting
    principle(1)..................................     --             )(34       34   --
  Current year effect of change in accounting
    principle(1)..................................     --             )(15       15   --
  Early extinguishment of debt(2).................         3       --             3   --
                                                    --------        ------   ------  -----
Normalized income.................................  $  1,447  $      1,450   $   (3)  (0.2)
                                                    --------        ------   ------  -----
                                                    --------        ------   ------  -----
</TABLE>
 
- ------------------------------
 
(1) Effective January 1, 1996, New U S WEST adopted SFAS No. 121 which, among
    other things, requires that companies no longer record depreciation expense
    on assets held for sale.
 
(2) Reflects a third-quarter 1997 charge of $3 (net of income tax benefits of
    $2) related to the early extinguishment of debt.
 
    In 1997, normalized income decreased to $1,447 from $1,450 in 1996. The
decrease is primarily due to a $152 after-tax regulatory charge ($250 pretax) in
the fourth quarter of 1997. The charge primarily relates to a liability for
revenues that were collected subject to refund (with interest) in the state of
Washington from May 1, 1996 through December 31, 1997. The liability was
recognized in light of the Washington Rate Order. Absent the effects of the
charge, adjusted income was $1,599, an increase of 10.3 percent as compared to
1996. The prospective revenue reduction as a result of the
 
                                                                             133
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
Washington Rate Order approximates $115 annually. In a separate action in
January 1998 the WUTC authorized a rate increase of approximately $60 annually.
Tariffs implementing both orders became effective February 1, 1998. See
"Contingencies."
 
    Income in 1997 was favorably impacted by strong demand for services in U S
WEST Communications' core business. Growth in the Yellow Pages directory
operations and a 1996 after-tax charge of $15 to reorganize and reduce headcount
in the directory business also contributed to the increase. Partially offsetting
the effects of increased demand were higher expenses related to interconnection,
provisions for estimated regulatory liabilities other than Washington, and
start-up costs associated with growth initiatives, including PCS.
 
    OPERATING REVENUES
 
<TABLE>
<CAPTION>
                                                                                INCREASE
                                                                               (DECREASE)
                                                                             --------------
                                                      1997        1996         $       %
                                                    --------  ------------   ------  ------
<S>                                                 <C>       <C>            <C>     <C>
Communications and related services:
  Local service...................................  $  5,016  $      4,770   $  246     5.2
  Interstate access service.......................     2,666         2,507      159     6.3
  Intrastate access service.......................       761           770       (9)   (1.2)
  Long-distance network services..................       885         1,100     (215)  (19.5)
  Other services..................................       991           932       59     6.3
                                                    --------  ------------   ------  ------
                                                      10,319        10,079      240     2.4
Directory services................................     1,197         1,120       77     6.9
Intersegment eliminations.........................       (37)         )(31       (6)  (19.4)
                                                    --------  ------------   ------  ------
Total operating revenues..........................  $ 11,479  $     11,168   $  311     2.8
                                                    --------  ------------   ------  ------
                                                    --------  ------------   ------  ------
</TABLE>
 
    Approximately 87 percent of New U S WEST's operating revenues and 97 percent
of the communications and related services revenues are attributable to the
operations of U S WEST Communications. Approximately 67 percent of U S WEST
Communications' revenues are derived from the states of Arizona, Colorado,
Minnesota, Oregon and Washington.
 
    COMMUNICATIONS AND RELATED SERVICES
 
    The primary factors that influence changes in revenues are customer demand
for products and services, price changes (including those related to regulatory
proceedings) and refunds. Approximately 30 percent of the access lines in
service at December 31, 1997 are devoted to providing services to business
customers. The access line growth rate for business customers, who tend to be
heavier users of the network, has consistently exceeded the growth rate of
residential customers. During 1997, business access lines grew 5.8 percent while
residential access lines increased 3.9 percent, when adjusted for the 1997 sales
of rural telephone access lines.
 
    During 1997, communications and related services operating revenues
increased 2.4 percent, to $10,319. Revenue growth was impacted by the $250
regulatory charge in the fourth quarter of 1997. The regulatory charge was
allocated among local service revenues, interstate and intrastate access
services revenues, long-distance network service revenues, and interest expense.
Absent the effects of the charge, revenues were $10,549, an increase of 4.7
percent as compared with 1996.
 
    LOCAL SERVICE REVENUES.  Local service revenues include local telephone
exchange, local private line and public telephone services. During 1997, local
service revenues increased 5.2 percent, or $246, as compared with 1996. Local
service revenue growth of 5.2 percent declined from 9.8 percent in 1996 due to
the effects of an $86 accrual recognized during fourth-quarter 1997 as part of
the Washington Rate
 
                                                                             134
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
Order and additional provisions of approximately $95 during the year for other
estimated state regulatory liabilities. See "Contingencies." Lower wireless
interconnection access prices mandated by the Telecommunications Act and the
effects of rural exchange sales also impacted local service revenue growth in
1997.
 
    The increase in local service revenues is primarily attributable to access
line growth and increased demand for new product and service offerings and
existing central office features. Total reported access lines increased 609,000
during 1997, or 3.9 percent, of which 294,000 is attributed to second lines.
Second line installations increased 28.2 percent compared with 1996. Access
lines grew 683,000, or 4.4 percent, when adjusted for sales of approximately
74,000 rural telephone access lines during 1997. Also contributing to the
revenues increase were rate increases of $37 in various states and interim
compensation revenues from IXCs as a result of the FCC payphone orders which
took effect in April 1997.
 
    INTERSTATE ACCESS SERVICE REVENUES.  Access charges are collected primarily
from IXCs for their use of the local exchange network. For interstate access
services there is also a fee collected directly from telephone customers.
Approximately 28 percent of access revenues and 9 percent of total revenues are
derived from providing access services to AT&T.
 
    During 1997, interstate access service revenues increased $159, or 6.3
percent, to $2,666. The increase in interstate access service revenues resulted
primarily from greater demand for private line services, access line growth and
an increase of 6.4 percent in billed interstate access minutes of use. Also
contributing to the increase were the effects of higher accruals for refunds to
IXCs in 1996. Lower prices under the FCC's current price cap plan and a $25
charge during fourth-quarter 1997 for an FCC-ordered refund to IXCs for access
revenues collected during the last half of 1997 partially offset the effects of
greater demand for interstate access services. New U S WEST reduced prices for
interstate access services, effective July 1, 1997, as a result of the FCC's
current price cap plan. The access rate reductions, which are being reflected
through lower interstate rates over twelve months beginning July 1, 1997, have
an on-going annual revenue impact of approximately $160. The rate of growth in
interstate access service revenues could decline in 1998 as a result of the
FCC's Access Reform and Price Cap Orders. See "--Business of New U S
WEST--Competition" and "--Business of New U S WEST--Regulation."
 
    INTRASTATE ACCESS SERVICE REVENUES.  The decrease of $9, or 1.2 percent, in
intrastate access service revenues is primarily due to the effects of a $68
accrual recognized during fourth-quarter 1997 as part of the Washington Rate
Order. A 12.2 percent increase in billed intrastate minutes of use, higher
demand for private line services and $7 of rate increases in local jurisdictions
largely offset the effects of the Washington Rate Order.
 
    LONG-DISTANCE NETWORK SERVICES REVENUES.  Long-distance network services
revenues are derived from calls which both originate and terminate within the
LATA boundaries of the Communications Group Region. In 1997, long-distance
network services revenues decreased $215, or 19.5 percent, as compared with
1996. The decline is partially due to the effects of a $51 accrual recognized
during fourth-quarter 1997 as part of the Washington Rate Order. The decrease in
long-distance network services revenues is also due to the effects of
competition and the implementation of MTCPs in various jurisdictions in 1997 and
1996. The MTCPs essentially allow independent telephone companies to act as toll
carriers and are net income neutral with the reduction in toll revenues largely
offset by increased intrastate access service revenues and lower access expense.
Rate decreases of $20 in local jurisdictions also contributed to the decrease in
long-distance network services revenues.
 
    Long-distance network services revenues have declined over the last several
years as customers have migrated to IXCs that have the ability to offer
long-distance services on both an intraLATA and interLATA basis. A portion of
revenues lost to competition, however, is recovered through access
 
                                                                             135
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
charges paid by the IXCs. New U S WEST believes that erosion of long-distance
network services revenues will continue due to the loss of exclusivity of 1+
dialing in Minnesota and Arizona in February and April of 1996, respectively,
and in New Mexico and Wyoming in September and December of 1997, respectively,
and the effects of continued competitive dial-around activity in other states
within the Communications Group Region. New U S WEST is responding to
competition through competitive pricing of intraLATA long-distance services and
increased promotional efforts to retain customers.
 
    OTHER SERVICES REVENUES.  Revenues from other services primarily consist of
voice messaging services, inside wire installation and maintenance services,
billing and collection services and the provision of CPE. Other services
revenues increased $59, or 6.3 percent, as compared with 1996, primarily as a
result of continued market penetration of voice messaging services and greater
sales of inside wire maintenance and certain other unregulated products and
services. Also contributing to the increase were revenues from the launch of PCS
services. Partially offsetting these increases was a reduction in contract
revenues due to the completion of a large federal government telephony project
in 1996.
 
    DIRECTORY SERVICES
 
    Revenues related to Yellow Pages directory advertising, which represents 99
percent of directory services revenues, increased 7.2 percent, to $1,181 in
1997. The increase is largely a result of a 7.3 percent increase in revenue per
local advertiser, primarily resulting from price increases of 4.6 percent and an
increase in volume and complexity of advertisements sold. These increases were
offset slightly by decreased revenue associated with exited product lines which
were nonstrategic to the directory business.
 
    INTERSEGMENT ELIMINATIONS
 
    Intersegment eliminations consist primarily of sales of customer lists,
billing and collection services and other services by U S WEST Communications to
Dex at market price. Also included are commercial property management services
provided by U S WEST Business Resources, Inc. to Dex.
 
    COSTS AND EXPENSES
 
<TABLE>
<CAPTION>
                                                                               INCREASE
                                                                              (DECREASE)
                                                                             -------------
                                                      1997        1996         $       %
                                                    --------  ------------   ------  -----
<S>                                                 <C>       <C>            <C>     <C>
Employee-related expenses.........................  $  3,953  $      3,893   $   60    1.5
Other operating expenses..........................     2,159         1,901      258   13.6
Taxes other than income taxes.....................       428           404       24    5.9
Depreciation and amortization.....................     2,163         2,158        5    0.2
Interest expense..................................       405           448      (43)  (9.6)
Gains on sales of rural telephone exchanges.......        77            59       18   30.5
Gain on sale of investment in Bellcore............        53       --            53   --
Other expense--net................................        72            46       26   56.5
</TABLE>
 
    EMPLOYEE-RELATED EXPENSES.  Employee-related expenses include salaries and
wages (including both basic and performance-based pay), overtime, benefits
(including pension, postretirement and health care), payroll taxes and contract
labor. During 1997, total employee-related expenses increased $60, or 1.5
percent, most of which was attributable to interconnection costs. Higher
contract labor costs, predominately a result of increased systems development
work (which includes expenses related to interconnection and year 2000 costs)
and marketing and sales efforts, and increases in certain employee-related
benefit costs, also contributed to the growth in total employee-related
expenses.
 
                                                                             136
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
Partially offsetting these increases were lower salaries and wages related to
headcount reductions, lower conference and travel expenses and decreases in
overtime costs. A 1996 charge of $25 to reorganize and reduce headcount in the
directory business, also partially offset the increases. During 1997, the Yellow
Pages operation completed its reorganization. Centralized operating management
was divided into three regions to establish greater accountability and to move
decision making closer to the customers.
 
    At December 31, 1997, approximately 69 percent of the communications and
related services segment employees and 65 percent of the directory services
segment employees were represented by unions. New U S WEST's principal
collective bargaining agreements expire in May, August and October 1998.
Negotiations with respect to future collective bargaining agreements are
underway.
 
    OTHER OPERATING EXPENSES.  Other operating expenses include access charges
paid to independent LECs (incurred for the routing of long-distance traffic
through their facilities), network software expenses, paper, printing, delivery
and distribution costs associated with publishing activities, and other general
and administrative costs. During 1997, other operating expenses increased $258,
or 13.6 percent, primarily due to a $97 increase in advertising costs and
approximately $90 of interconnection expenses. Costs associated with strategic
and growth initiatives (primarily PCS), increased equipment rentals, and
increased printing, paper and sales support costs in the directory business also
contributed to the increase. These directory cost increases were associated with
an increase in the volume and complexity of advertisements sold.
 
    Partially offsetting these cost increases were reduced access expenses
(primarily related to the implementation of the MTCPs in 1997 and 1996), the
completion of a large federal government telephony project in 1996 and lower
material and supplies expense. The effects of the directory business
discontinuing various product development activities in 1996 and an $11 charge
in 1996 to discontinue the Omaha broadband video service trial also partially
offset the increases.
 
    TAXES OTHER THAN INCOME TAXES.  Taxes other than income taxes, which consist
primarily of property taxes, increased $24, or 5.9 percent, primarily due to the
effects of property tax adjustments in 1996 and increased 1997 use taxes.
Partially offsetting the increases were the effects of favorable tax valuations
and mill levies on 1997 property taxes as compared with 1996.
 
    INTEREST EXPENSE.  Interest expense decreased $43, or 9.6 percent, due to
lower average debt levels as compared to 1996. Partially offsetting the decrease
was a reduction in the amount of interest capitalized resulting from a lower
average balance of telecommunications plant under construction. Interest expense
will increase approximately $239 annually, assuming a weighted-average interest
rate of 6.3 percent, upon the execution of the Separation Agreement and the
refinancing of $3.9 billion of Dex Indebtedness by New U S WEST in connection
with the Dex Alignment. See "--New U S WEST Unaudited Pro Forma Condensed
Combined Financial Statements." The average borrowing cost was 7.0 percent in
1997 and 1996. See "Liquidity and Capital Resources."
 
    GAINS ON SALES OF RURAL TELEPHONE EXCHANGES.  During 1997, New U S WEST sold
selected rural telephone exchanges in Iowa, South Dakota, Nebraska, Idaho, and
Minnesota for pretax gains of $77. The 1996 gains were a result of sales in
Utah, North Dakota, South Dakota, Idaho and New Mexico.
 
    GAIN ON SALE OF INVESTMENT IN BELLCORE.  In 1997, U S WEST Communications
and the other RBOCs sold their equity interests in Bellcore. As a result of the
sale, U S WEST Communications recorded a pretax gain of $53.
 
    OTHER EXPENSE--NET.  Other expense increased primarily due to additional
interest expense associated with New U S WEST's state regulatory and interstate
sharing liabilities.
 
                                                                             137
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
    PROVISION FOR INCOME TAXES
 
<TABLE>
<CAPTION>
                                                                               INCREASE
                                                                             -------------
                                                      1997        1996         $       %
                                                    --------     ------      ------  -----
<S>                                                 <C>       <C>            <C>     <C>
Provision for income taxes........................  $    902  $        876   $   26    3.0
Effective tax rate................................      37.1%         36.9%    --     --
</TABLE>
 
    The increase in the effective tax rate resulted primarily from the effects
of lower investment tax credit amortization.
 
    RESTRUCTURING CHARGE
 
    In 1993, New U S WEST incurred a $930 restructuring charge (pretax). The
related restructuring plan was designed to provide faster, more responsive
customer services, while reducing the costs of providing these services. During
1997, the restructuring reserve decreased $70, to $56. Reserve usage was
primarily a result of 645 employee separations and systems development costs
during 1997. The restructuring plan is substantially complete as of December 31,
1997.
 
RESULTS OF OPERATIONS--1996 COMPARED WITH 1995
 
    NET INCOME
 
    Following are details of New U S WEST's net income for 1996 and 1995,
normalized to exclude the effects of certain nonoperating items.
 
<TABLE>
<CAPTION>
                                                                                                            INCREASE
                                                                                                           (DECREASE)
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Reported net income...........................................................  $   1,535  $   1,423  $     112        7.9
Adjustments to reported net income:
  Gains on sales of rural telephone exchanges.................................        (36)       (85)        49      (57.6)
  Cumulative effect of change in accounting principle(1)......................        (34)    --            (34)    --
  Current year effect of change in accounting
    principle(1)..............................................................        (15)    --            (15)    --
  Recapitalization costs......................................................     --              8         (8)    --
  Early extinguishment of debt(2).............................................     --              8         (8)    --
                                                                                ---------  ---------  ---------  ---------
Normalized income.............................................................  $   1,450  $   1,354  $      96        7.1
                                                                                ---------  ---------  ---------  ---------
                                                                                ---------  ---------  ---------  ---------
</TABLE>
 
- ------------------------------
 
(1) Effective January 1, 1996, New U S WEST adopted SFAS No. 121 which, among
    other things, requires that companies no longer record depreciation expense
    on assets held for sale.
 
(2) Represents an extraordinary charge of $8 (net of income tax benefits of $5)
    related to the refinancing of $145 of long-term debt.
 
    New U S WEST's 1996 normalized income was $1,450, an increase of $96, or 7.1
percent, compared with $1,354 in 1995. The increase is primarily attributable to
demand for communications services and the effects of Dex discontinuing various
product development activities in 1995. Growth in the Yellow Pages directory
operations also contributed to the increase. Partially offsetting the increased
demand were higher costs incurred to address business growth,
service-improvement initiatives and costs related to new business opportunities.
An after-tax charge of $15 related to the Yellow Pages directory operations to
reorganize and reduce headcount in 1996 also partially offset the increase.
 
                                                                             138
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
    OPERATING REVENUES
 
<TABLE>
<CAPTION>
                                                                                                           INCREASE
                                                                                                          (DECREASE)
                                                                                                     --------------------
                                                                                 1996       1995         $          %
                                                                               ---------  ---------  ---------  ---------
<S>                                                                            <C>        <C>        <C>        <C>
Communications and related services:
  Local service..............................................................  $   4,770  $   4,344  $     426        9.8
  Interstate access service..................................................      2,507      2,378        129        5.4
  Intrastate access service..................................................        770        747         23        3.1
  Long-distance network services.............................................      1,100      1,189        (89)      (7.5)
  Other services.............................................................        932        826        106       12.8
                                                                               ---------  ---------  ---------        ---
                                                                                  10,079      9,484        595        6.3
Directory services...........................................................      1,120      1,058         62        5.9
Intersegment eliminations....................................................        (31)       (34)         3       (8.8)
                                                                               ---------  ---------  ---------        ---
Total operating revenues.....................................................  $  11,168  $  10,508  $     660        6.3
                                                                               ---------  ---------  ---------        ---
                                                                               ---------  ---------  ---------        ---
</TABLE>
 
    COMMUNICATIONS AND RELATED SERVICES
 
    LOCAL SERVICE REVENUES.  Local service revenues increased principally as a
result of access line growth and increased demand for new product and service
offerings, and existing central office features. Total reported access lines
increased 629,000 during 1996, or 4.3 percent, of which 244,000 was attributed
to second lines. Second line installations increased 30.5 percent compared with
1995. Access line growth was 5.0 percent when adjusted for sales of rural
telephone access lines during 1996.
 
    INTERSTATE AND INTRASTATE ACCESS SERVICE REVENUES.  Higher revenues from
interstate access services were driven by access line growth and an increase of
8.9 percent in interstate billed access minutes of use. The increased business
volume was partially offset by the effects of price reductions and sharing
related accrued refunds to IXCs. Intrastate access service revenues increased
primarily due to higher demand partially offset by the effects of price
reductions.
 
    LONG-DISTANCE NETWORK SERVICES REVENUES.  Long-distance network services
revenues decreased primarily due to the effects of competition and the
implementation of MTCPs in 1996. The 1996 impact of the MTCPs was a $27
reduction in long-distance network services revenues, partially offset by an
increase in intrastate access service revenues of $5 and a decrease in other
operating expenses (primarily access expense) of $21.
 
    OTHER SERVICES REVENUES.  During 1996, revenues from other services
increased primarily as a result of continued market penetration in voice
messaging services and increased inside wire maintenance services. Also
contributing to other services revenue growth were increased contract revenues
related to a large federal government telephony project and CPE sales.
 
    DIRECTORY SERVICES
 
    Revenues related to Yellow Pages directory advertising represented 98 and 97
percent of directory services revenues in 1996 and 1995, respectively. Yellow
Pages directory advertising revenues increased 7.4 percent in 1996 to $1,102.
The increase is largely a result of a 5.7 percent increase in revenue per local
advertiser (primarily a result of price increases of approximately 4.0 percent)
combined with an increase of 3,000 local advertisers during the year.
 
                                                                             139
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
    COSTS AND EXPENSES
 
<TABLE>
<CAPTION>
                                                                                                            INCREASE
                                                                                                           (DECREASE)
                                                                                                      --------------------
                                                                                  1996       1995         $          %
                                                                                ---------  ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>        <C>
Employee-related expenses.....................................................  $   3,893  $   3,623  $     270        7.5
Other operating expenses......................................................      1,901      1,848         53        2.9
Taxes other than income taxes.................................................        404        393         11        2.8
Depreciation and amortization.................................................      2,158      2,067         91        4.4
Interest expense..............................................................        448        429         19        4.4
Gains on sales of rural telephone exchanges...................................         59        136        (77)     (56.6)
Other expense--net............................................................         46         36         10       27.8
</TABLE>
 
    EMPLOYEE-RELATED EXPENSES.  During 1996, total employee-related expenses
increased primarily due to continued efforts at U S WEST Communications to
address increased business growth, service-improvement initiatives and new
business opportunities. Salaries and wages increased in the Communications
Businesses primarily due to inflation-driven and contractual wage increases.
Contract labor costs increased to support business growth and the additional
marketing organization costs related to the launch of new products and services.
Employee-related expenses also include approximately $15 for contract labor and
overtime as a result of flooding in Washington and Oregon in first-quarter 1996.
Also contributing to the employee-related expense increase was a charge of $25
in the directory business to reorganize and reduce headcount in 1996. Partially
offsetting these increases were a reduction in postretirement benefit costs due
to changes in actuarial assumptions and favorable cost trends, lower conference
and travel expenses and decreased overtime as a result of accelerated cost
reduction efforts in the latter half of 1996.
 
    OTHER OPERATING EXPENSES.  During 1996, other operating expenses increased
primarily due to higher advertising and bad debt expenses, and costs associated
with greater sales of CPE. Also contributing to the increase was a reserve
adjustment associated with billing and collection activities performed for IXCs
and an $11 charge related to the discontinuance of the Omaha broadband video
service trial. An approximate 10 percent increase in paper, printing, delivery
and distribution costs at the directory business also contributed to the
increase. Reduced access expense (a portion of which relates to the 1996
implementation of the MTCPs), the effects of the directory business exiting
various product development activities in 1995 and a reduction in general and
administrative costs from U S WEST partially offset these increases.
 
    TAXES OTHER THAN INCOME TAXES.  Taxes other than income taxes were
relatively flat as compared with 1995. In fourth-quarter 1996, taxes other than
income taxes increased by $24, or 30.8 percent, due to favorable property tax
valuations and mill levies recognized during fourth-quarter 1995.
 
    DEPRECIATION AND AMORTIZATION.  The increase in depreciation and
amortization expense is attributed to the effects of a higher depreciable asset
base, partially offset by the effects of 1995 sales of certain rural telephone
exchanges and the adoption of SFAS No. 121.
 
    INTEREST EXPENSE.  Interest expense increased primarily due to higher
average debt levels and a decrease in the amount of interest capitalized
resulting from a lower average balance of telecommunications plant under
construction. The average borrowing cost was 7.0 percent in 1996, compared with
6.9 percent in 1995.
 
    GAINS ON SALES OF RURAL TELEPHONE EXCHANGES.  During 1996, New U S WEST sold
selected rural telephone exchanges in Utah, North Dakota, South Dakota, Idaho
and New Mexico for pretax gains of $59. The 1995 gains were a result of sales in
Colorado, Washington, Oregon and Arizona.
 
                                                                             140
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
    OTHER EXPENSE--NET.  The increase in other expense in 1996 is primarily a
result of gains on nonstrategic asset sales recognized by Dex in 1995 and a $13
adjustment related to U S WEST Communications' equity investment in Bellcore.
Partially offsetting the increase were costs associated with the 1995
Recapitalization.
 
    PROVISION FOR INCOME TAXES
 
<TABLE>
<CAPTION>
                                                                                                                 INCREASE
                                                                                                           --------------------
                                                                                       1996       1995         $          %
                                                                                     ---------  ---------     ---        ---
<S>                                                                                  <C>        <C>        <C>        <C>
Provision for income taxes.........................................................  $     876  $     817  $      59        7.2
Effective tax rate.................................................................       36.9%      36.3%    --         --
</TABLE>
 
    The increase in the effective tax rate resulted primarily from the effects
of lower investment tax credit amortization.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    OPERATING ACTIVITIES
 
    Cash provided by operating activities was $4,191, $3,614, and $2,970 in
1997, 1996 and 1995, respectively. Cash from operations increased $577 during
1997 primarily due to business growth and efforts to manage working capital in
the core telecommunications business. Lower restructuring expenditures, a
decrease in the cash funding of postretirement benefits and growth in the
directory business also contributed to the increase.
 
    During 1996, cash provided by operating activities increased $644 primarily
due to growth in operations in both the communications and the directory
businesses. The increase in operating cash flows also reflects a $161 decrease
in the cash funding of postretirement benefits, and lower restructuring
expenditures. These increases were partially offset by higher 1996 income tax
payments.
 
    Future cash needs could increase with the pursuit of new business
opportunities, including PCS. Future cash needs could also increase as New U S
WEST implements the interconnection requirements and other provisions of the
Telecommunications Act. However, the impact will depend on the nature and timing
of the requirements and the type of recovery mechanisms provided for by the FCC
and state commissions. See "--Business of New U S WEST--Regulation." New U S
WEST expects that such cash needs will be funded through operations and, when
necessary, the issuance of debt securities.
 
    INVESTING ACTIVITIES
 
    Total capital expenditures, on a cash basis, were $2,168, $2,444, and $2,494
in 1997, 1996 and 1995, respectively. The majority of the 1997 expenditures
related to access line growth, continued modernization of the telecommunications
network, and Telecommunications Act requirements including interconnection and
local number portability costs. Expenditures associated with entering wireless
communications markets with the launch of PCS also impacted capital
expenditures. In 1998, capital expenditures are expected to approximate $2.6
billion and include entry costs for the launch of PCS in new markets and
additional interconnection costs.
 
    In 1997, New U S WEST paid $73 to purchase PCS licenses in connection with
its launch of PCS service in various markets.
 
    New U S WEST received cash proceeds of $67, $174, and $214 during 1997, 1996
and 1995, respectively, for the sales of certain rural telephone exchanges.
Since implementing its rural telephone exchange sales program, New U S WEST has
sold approximately 342,000 access lines.
 
    During 1997, U S WEST Communications sold its equity interest in Bellcore
for proceeds of $65.
 
                                                                             141
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
    FINANCING ACTIVITIES
 
    DEBT ACTIVITY
 
    During 1997, debt decreased $830 and the percentage of debt to total capital
declined to 56.7 percent at December 31, 1997 from 61.6 percent at December 31,
1996. The decrease in the percentage of debt to total capital is primarily a
result of lower debt levels. The lower debt levels have been partially driven by
increased operating cash flows and lower capital expenditures. Increased net
income and equity issuances for the exercise of stock options and the dividend
reinvestment plan also contributed to the decline. During 1996, debt decreased
$237 due primarily to growth in operating cash flow.
 
    During 1997, U S WEST redeemed its zero coupon subordinated notes which had
a recorded value of $303 attributed to New U S WEST. Floating-rate U S WEST
debt, due on demand, was used to finance the redemption.
 
    During 1995, U S WEST Communications refinanced $1.5 billion of commercial
paper to take advantage of favorable long-term interest rates. In addition to
the commercial paper, U S WEST Communications refinanced $145 of long-term debt.
 
    Historically, U S WEST has funded the nonregulated activities of New U S
WEST, including Dex, with short-term advances. The net proceeds from and
repayments of such short-term advances were $153, $(42) and $(53) during 1997,
1996 and 1995, respectively. Upon execution of the Separation Agreement,
management anticipates New U S WEST will fund the nonregulated businesses,
including Dex, with short-term advances.
 
    Prior to the Separation, Dex paid dividends to U S WEST equal to its net
income adjusted for the amortization of intangibles. These dividends totaled
$336, $303 and $241 during 1996, 1995 and 1994, respectively.
 
    U S WEST COMMUNICATIONS CREDIT RATINGS
 
    During the first quarter of 1997, Standard & Poor's lowered U S WEST
Communications' senior unsecured debt rating from A+ to A as a result of a
modified rating criteria implemented by Standard & Poor's to reflect the
increased competitive telecommunications environment.
 
    In connection with U S WEST's announcement of the Separation, Standard &
Poor's placed U S WEST Communications' senior unsecured debt on credit watch
with positive implications and reaffirmed U S WEST Communications' commercial
paper ratings, and Duff & Phelps reaffirmed U S WEST Communications' senior
unsecured debt and commercial paper ratings.
 
    During the first quarter of 1998, Moody's downgraded U S WEST
Communications' senior unsecured debt from Aa3 to A2 due to recent regulatory
rulings and financial challenges associated with the Separation. See
"Contingencies" and "Effects of the Separation." U S WEST Communications' debt
remains under review by Moody's for possible downgrade pending clarification of
New U S WEST's corporate structure and future strategic initiatives.
 
    U S WEST Communications' current senior unsecured debt and commercial paper
ratings by Moody's, Standard & Poor's and Duff & Phelps are A2, A and AA-, and
P1, A1 and D1+, respectively.
 
    OTHER ITEMS
 
    U S WEST and U S WEST Communications maintain commercial paper programs to
finance short-term cash flow requirements, as well as to maintain a presence in
the short-term debt market. In addition, U S WEST Communications is permitted to
borrow up to $500 under short-term lines of
 
                                                                             142
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
credit, all of which was available at December 31, 1997. Additional lines of
credit are available to the nonregulated subsidiaries of U S WEST in accordance
with their borrowing needs. Under registration statements filed with the SEC, as
of December 31, 1997, U S WEST Communications is permitted to issue up to $320
of new debt securities. Additional securities are permitted to be issued under
registration statements filed with the SEC to support the requirements of the
nonregulated subsidiaries of U S WEST.
 
    New U S WEST is currently engaged in discussions with major lending
institutions to secure stand-alone lines of credit to meet the combined business
needs of its nonregulated subsidiaries.
 
    New U S WEST from time to time engages in preliminary discussions regarding
restructurings, dispositions and other similar transactions. Any such
transaction may include, among other things, the transfer of certain assets,
businesses or interests, or the incurrence or assumption of indebtedness, and
could be material to the financial condition and results of operations of New U
S WEST. There is no assurance that any such discussion will result in the
consummation of any transaction.
 
    RISK MANAGEMENT
 
    New U S WEST is exposed to market risk arising from changes in interest
rates. Derivative financial instruments are used to selectively manage this
risk. New U S WEST does not use derivative financial instruments for trading
purposes.
 
    The objective of the interest rate risk management program is to minimize
the total cost of debt over time and the interest rate variability. This is
achieved through the use of interest rate swaps, which adjust the ratio of
fixed- to variable-rate debt.
 
    Approximately $60 of New U S WEST's floating rate debt is exposed to changes
in interest rates. Such exposure is primarily linked to the 30-day commercial
paper rate. A hypothetical 10 percent change in the 30-day commercial paper rate
would not have a material effect on the annual earnings of New U S WEST.
 
    EFFECTS OF THE SEPARATION
 
    New U S WEST's total debt and percentage of debt to total capital will
increase significantly due to the Dex Alignment, which will result in the
refinancing of $3.9 billion of Dex Indebtedness by New U S WEST and a
corresponding reduction in equity. New U S WEST is expected to incur additional
debt in 1998 to fund certain one-time expenses associated with the Separation
and costs associated with the Refinancing. The annual interest expense
associated with all of such debt is estimated at approximately $239. See "--New
U S WEST Unaudited Pro Forma Condensed Combined Financial Statements" and
"Chapter 3: The Separation--Accounting Treatment."
 
    Under the terms of the Dex Alignment, U S WEST will distribute, as a
dividend to holders of Media Stock, a fractional share of New U S WEST Common
Stock based on each share of Media Stock held, in the aggregate amount of $850
of value. Management anticipates that the New U S WEST Board will declare
dividends on New U S WEST Common Stock initially at a quarterly rate of $0.535
per share, which is the same dividend currently paid on the Communications
Stock. While the New U S WEST Board is not expected to change this dividend
policy, it has the right to do so at any time. Upon the execution of the
Separation Agreement, total annual cash dividends will increase by approximately
$38 as a result of the issuance of $850 of New U S WEST Common Stock.
 
    During 1997, Dex generated net operating cash flow of approximately $315,
after capital investments of $29. During 1997, such operating cash flows
exceeded the additional interest expense and dividend requirement associated
with the Refinancing and the Dex Alignment. As a result, New U S WEST does not
expect the Separation to adversely affect its ability to access the capital
markets or the financing terms available to it.
 
                                                                             143
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
CONTINGENCIES
 
    At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.
 
    WASHINGTON.  In 1996, the WUTC acted on U S WEST Communications' 1995 rate
request. U S WEST Communications had sought to increase revenues by raising
rates primarily for basic residential services over a four-year period. Instead
of granting U S WEST Communications' request, the WUTC ordered $91.5 in annual
net revenue reductions, effective May 1, 1996.
 
    On December 24, 1997, the Washington State Supreme Court upheld the WUTC
ruling. The Washington State Supreme Court's ruling resulted in an estimated
liability for the revenues that were collected subject to refund from May 1,
1996 through December 31, 1997, including interest, in the amount of $225. The
prospective revenue reduction as a result of this ruling approximates $115
annually, which includes the effects of business growth. In a separate action,
the WUTC authorized a rate increase of approximately $60 annually that partially
mitigates the effect of the Washington State Supreme Court's ruling. Tariffs
implementing both orders became effective February 1, 1998.
 
    OREGON.  On May 1, 1996, the OPUC approved a stipulation terminating
prematurely U S WEST Communications' AFOR plan, and it then undertook a review
of U S WEST Communications' earnings. In May 1997, the OPUC ordered U S WEST
Communications to reduce its annual revenues by $97, effective May 1, 1997, and
to issue a one-time refund, including interest, of approximately $102 to reflect
the revenue reduction for the period May 1, 1996 through April 30, 1997. The
one-time refund is for interim rates which became subject to refund when U S
WEST Communications' AFOR plan was terminated on May 1, 1996.
 
    U S WEST Communications filed an appeal of the order and asked for an
immediate stay of the refund with the Oregon Circuit Court which granted U S
WEST Communications' request for a stay, pending a full review of the OPUC's
order. On February 19, 1998, the Oregon Circuit Court entered a judgment in U S
WEST Communications' favor on most of the appealed issues. The OPUC has
announced its intent to appeal. The potential exposure, including interest, at
December 31, 1997, is not expected to exceed $180.
 
    UTAH.  In another proceeding, the Utah Supreme Court has remanded a UPSC
order to the UPSC for hearing, thereby establishing two exceptions to the rule
against retroactive ratemaking: 1) unforeseen and extraordinary events, and 2)
misconduct. The UPSC's initial order denied a refund request from IXCs and other
parties related to the Tax Reform Act of 1986. The potential exposure, including
interest, at December 31, 1997, is not expected to exceed $160.
 
    STATE REGULATORY ACCRUALS.  U S WEST Communications has accrued $348 at
December 31, 1997, which represents its estimated liability for all state
regulatory proceedings, predominately the items discussed above. Approximately
$225 of the total estimated liability was recognized during fourth-quarter 1997.
It is possible that the ultimate liability could exceed the recorded liability
by an amount up to approximately $230. U S WEST Communications will continue to
monitor and evaluate the risks associated with its local regulatory
jurisdictions, and will adjust estimates as new information becomes available.
 
COMPETITIVE AND REGULATORY ENVIRONMENT
 
    For a discussion of the competitive and regulatory environment of New U S
WEST, see "--Business of New U S WEST--Competition" and "--Business of New U S
WEST--Regulation."
 
                                                                             144
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
YEAR 2000 COSTS
 
    During 1997 New U S WEST conducted a comprehensive review of its computer
systems and related software to ensure systems properly recognize the year 2000
and continue to process data. The systems evaluated include all internal systems
and those that manage the public switched network. This evaluation includes New
U S WEST's significant vendors in determining the impact on New U S WEST if
those third parties fail to remediate their own year 2000 issues. Based on its
internal assessment, New U S WEST has determined that it will have to modify or
replace certain portions of its internal use software, whether developed by New
U S WEST or provided by a third party. For public network software, there are
central office and remote switches from a variety of vendors in addition to
interoffice and loop transport equipment that also require conversion. To date,
inventory is complete for all major network elements, compliance standards have
been published and key vendors have agreed to compliance dates. Detailed plans
for the year 2000 project for all systems have been completed and conversion
activity is underway.
 
    The estimated remaining costs of the related projects approximate $150
through 1999. Management's estimate of the costs and completion dates of the
year 2000 project are dependent on various factors including availability of
skilled resources, the ability to locate and modify all relevant software code
and vendor compliance. New U S WEST cannot provide assurance that actual results
will not differ from management's estimates. Failure to complete the project in
a timely or complete manner, or within its estimate of project costs, could have
a material impact on future results of operations.
 
NEW ACCOUNTING STANDARDS
 
    Upon Separation, New U S WEST will adopt SFAS No. 128, "Earnings Per Share."
This accounting standard specifies new computation, presentation and disclosure
requirements for earnings per share to be applied retroactively. SFAS No. 128
requires, among other things, presentation of basic and diluted earnings per
common share on the face of the income statement.
 
    In 1998, New U S WEST will adopt SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 requires that the components and total amount
of comprehensive income be displayed in the financial statements for interim and
annual periods beginning in 1998. Comprehensive income includes net income and
all changes in equity during a period that arise from nonowner sources, such as
foreign currency items and unrealized gains and losses on certain investments in
equity securities. SFAS No. 131 requires, among other things, the reporting of
detailed operating segment information of an enterprise for annual periods
beginning in 1998 and for interim periods beginning in 1999.
 
    SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," was issued in March 1998. SOP 98-1, among other
things, requires that certain costs of internal use software, whether purchased
or developed internally, be capitalized and amortized over the estimated useful
life of the software. Adoption of SOP 98-1 is required as of January 1, 1999,
but earlier adoption is allowed. New U S WEST is currently evaluating the impact
of SOP 98-1 and believes that it could initially have a significant impact upon
results of operations.
 
                                                                             145
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
NEW U S WEST UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
    The following unaudited pro forma condensed combined statements of
operations of New U S WEST for the year ended December 31, 1997 give effect to
the Refinancing (including the refinancing of the Dex Indebtedness by New U S
WEST), the issuance of the Dex Dividend to holders of Media Stock in connection
with the Dex Alignment and transfers of certain assets and liabilities of U S
WEST to New U S WEST, and allocations of certain costs and expenses in
connection with the Separation (the "New U S WEST Separation Adjustments"), as
if such transactions had been consummated as of January 1, 1997. The unaudited
pro forma condensed combined balance sheet gives effect to the New U S WEST
Separation Adjustments as if such transactions had been consummated as of
December 31, 1997.
 
    The combined historical financial statements of New U S WEST included in
this Proxy Statement combine the historical results of operations and financial
position of the Communications Group and Dex as if such businesses operated as a
separate entity for all periods presented and do not give effect to any of the
New U S WEST Separation Adjustments. The following unaudited pro forma condensed
combined financial statements present the historical results of operations and
financial position of the Communications Group and Dex in separate columns to
the left of New U S WEST's combined historical results of operations and
financial position. This presentation is intended to assist the reader in
gaining a better understanding of the impact of the Dex Alignment on the
combined historical results of operations and financial position of New U S
WEST.
 
    The assets of New U S WEST will be accounted for at the historical book
values at which they were carried by U S WEST prior to the Separation. MediaOne
will account for the distribution of New U S WEST to U S WEST's stockholders at
fair value, and will recognize a gain on the distribution. The historical
results of New U S WEST will be reflected as discontinued operations by
MediaOne. See "Chapter 3: The Separation--Accounting Treatment."
 
    The pro forma adjustments included herein are based on available information
and certain assumptions that management believes are reasonable and are
described in the accompanying notes. The unaudited pro forma financial
statements do not necessarily represent what New U S WEST's financial position
or results of operations would have been had the transaction occurred at such
dates or to project New U S WEST's financial position or results of operations
at or for any future date or period. In the opinion of management, all
adjustments necessary to present fairly the unaudited pro forma financial
information have been made. The unaudited pro forma financial statements should
be read in conjunction with the historical financial statements of New U S WEST,
including the notes thereto, included in Annex G to this Proxy Statement. For a
discussion of the impact of the Separation, including the Refinancing, on New U
S WEST, see "--New U S WEST Management's Discussion and Analysis of Financial
Condition and Results of Operations."
 
                                                                             146
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
                                  NEW U S WEST
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                          YEAR ENDED DECEMBER 31, 1997
 
                 DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                          COMMUNICATIONS                                   NEW U S WEST
                                               GROUP            DEX        NEW U S WEST     SEPARATION      NEW U S WEST
                                            HISTORICAL     HISTORICAL(A)    HISTORICAL      ADJUSTMENTS      PRO FORMA
                                          ---------------  -------------  --------------  ---------------  --------------
<S>                                       <C>              <C>            <C>             <C>              <C>
Operating revenues......................     $  10,319       $   1,160      $   11,479                       $   11,479
Operating expenses......................         8,109             594           8,703                            8,703
                                               -------          ------         -------         -------          -------
Income from operations..................         2,210             566           2,776                            2,776
 
Interest expense........................           403               2             405       $     239(B)           644
Gains on sales of rural telephone                   77                              77                               77
  exchanges.............................
Gain on sale of investment in                       53                              53                               53
  Bellcore..............................
Other expense (income)--net.............            73              (1)             72                               72
                                               -------          ------         -------         -------          -------
Income (loss) before income taxes and            1,864             565           2,429            (239)           2,190
  extraordinary item....................
Provision (benefit) for income taxes....           684             218             902             (92)(C)          810
                                               -------          ------         -------         -------          -------
Income (loss) before extraordinary           $   1,180       $     347      $    1,527       $    (147)      $    1,380
  item..................................
                                               -------          ------         -------         -------          -------
                                               -------          ------         -------         -------          -------
 
Basic earnings per common share before       $    2.44                                                       $     2.76
  extraordinary item....................
 
Average basic common shares outstanding          482.8                                            17.6(D)         500.4(E)
  (millions)............................
Diluted earnings per common share before     $    2.42                                                       $     2.73
  extraordinary item....................
Average diluted common shares                    491.2                                            17.6            508.8
  outstanding (millions)................
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             147
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
                                  NEW U S WEST
 
              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
 
                            AS OF DECEMBER 31, 1997
 
                              DOLLARS IN MILLIONS
 
<TABLE>
<CAPTION>
                                          COMMUNICATIONS                                   NEW U S WEST
                                               GROUP            DEX        NEW U S WEST     SEPARATION      NEW U S WEST
                                            HISTORICAL     HISTORICAL(A)    HISTORICAL      ADJUSTMENTS      PRO FORMA
                                          ---------------  -------------  --------------  ---------------  --------------
<S>                                       <C>              <C>            <C>             <C>              <C>
ASSETS
 
Current assets..........................     $   2,182       $     322      $    2,504       $       8(F)    $    2,512
Property, plant and equipment--net......        14,232              76          14,308              25(F)        14,333
Other assets............................           832              23             855              28(F)           897
                                                                                                    14(G)
                                               -------          ------         -------         -------          -------
Total assets............................     $  17,246       $     421      $   17,667       $      75       $   17,742
                                               -------          ------         -------         -------          -------
                                               -------          ------         -------         -------          -------
 
LIABILITIES AND EQUITY
 
Short term debt.........................     $     626       $      69      $      695       $     816(B)    $    1,703
                                                                                                    14(G)
                                                                                                    60(H)
                                                                                                    23(F)
                                                                                                   121(I)
                                                                                                   (18)(J)
                                                                                                    (8)(K)
Other current liabilities...............         3,374             130           3,504             (14) (H)        3,509
                                                                                                    19(F)
Long-term debt..........................         5,020                           5,020           3,015(B)         8,035
Other noncurrent liabilities............         4,027              54           4,081              19(F)         4,100
Equity..................................         4,199             168           4,367          (3,831)(B)          395
                                                                                                   (46)(H)
                                                                                                  (121)(I)
                                                                                                    18(J)
                                                                                                     8(K)
                                                                                                   850(D)
                                                                                                  (850)(D)
                                               -------          ------         -------         -------          -------
Total liabilities and equity............     $  17,246       $     421      $   17,667       $      75       $   17,742
                                               -------          ------         -------         -------          -------
                                               -------          ------         -------         -------          -------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             148
                                       CHAPTER 6: INFORMATION ABOUT NEW U S WEST
<PAGE>
                                  NEW U S WEST
 
      NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
(A) Reflects the historical results of operations and financial position of Dex.
    Such amounts include the effects of all transactions and receivable and
    payable balances between New U S WEST and MediaOne that will continue after
    the Separation.
 
(B) Reflects an increase in New U S WEST debt totaling $3.9 billion (net of $69
    million of Dex debt) in conjunction with the refinancing by New U S WEST of
    the Dex Indebtedness. Also included is debt incurred related to costs and
    expenses associated with the Separation. Interest expense is based on a rate
    of 5.50 percent for short term debt and 6.20 percent for long term debt (the
    current average of the 5 and 10-year borrowing rates available to U S WEST
    Communications). A 1/8 percentage point change in the assumed financing rate
     would change annual interest expense by approximately $5 million.
 
(C) Reflects the estimated income tax effects of the pro forma adjustments.
 
(D) Issuance of $850 million of New U S WEST Common Stock at $48.27 per share
    (the average price of Communications stock for the 20 trading days ending 5
    days prior to the Separation, as if the Separation had occurred on February
    20, 1998) pursuant to the Dex Alignment. The share issuance is accounted for
    as a dividend.
 
(E) Reflects the redemption of each share of Communications Stock for one share
    of New U S WEST Common Stock and the issuance of $850 million of New U S
    WEST Common Stock at $48.27 per share pursuant to the Dex Alignment.
 
(F) Reflects the transfer of assets and liabilities of U S WEST previously
    shared by New U S WEST and MediaOne, for which debt financing is assumed.
 
(G) Reflects debt issuance costs related to the Refinancing.
 
(H) Reflects New U S WEST's allocated share of Separation costs, for which debt
    financing is assumed. Total separation costs of approximately $150 million
    include cash payments under severance agreements of $45 million and
    financial advisory, legal, registration fee, printing and mailing costs
    related to the separation. The income statement effects of New U S WEST's
    allocated share of Separation Costs are not presented since such costs are
    nonrecurring in nature. However, New U S WEST's cost of the Separation will
    not affect the cost of providing service to telecommunications customers and
    New U S WEST will not seek recovery of such costs from taxpayers.
 
(I) Reflects a dividend to MediaOne of $121 million for New U S WEST's allocated
    share of refinancing costs associated with the Separation, for which debt
    financing is assumed.
 
(J) Reflects an $18 million return of capital to New U S WEST for insurance
    premiums paid by New U S WEST to MediaOne in excess of liabilities incurred.
 
(K) Reflects $8 million payment (after tax) by MediaOne for the present value of
    shared operating expenses to be assumed by New U S WEST subsequent to the
    Separation.
 
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CHAPTER 7: INFORMATION ABOUT MEDIAONE
 
BUSINESS OF MEDIAONE
 
GENERAL
 
    MediaOne is a diversified global media and broadband communications company
and the third largest cable television system operator in the United States.
MediaOne has operations and investments in three principal areas: (i) domestic
broadband communications; (ii) international broadband and wireless
communications; and (iii) cable television programming. Among its investments,
MediaOne holds a 25.51% interest in TWE, a provider of cable programming, filmed
entertainment and broadband communications services which is the second largest
cable television system operator in the United States.
 
STRATEGY
 
    Cable and broadband services are at the core of MediaOne's strategy. While
other companies develop software, hardware and global applications for the
networked world, MediaOne will focus on the supply of easy-to-use local
connections to it. It will do so by providing highly clustered customer access
to hybrid fiber-coax ("HFC") broadband networks. MediaOne believes that this
type of access provides the best and most economical platforms for delivery of
video, data, telephony and other broadband services. Management believes that,
relative to other network alternatives, HFC provides a more desirable
combination of speed, interactivity, signal quality and integration of services.
It is also a better platform for providing a combination of services on a
largely variable cost basis. MediaOne is currently upgrading its cable systems.
Once completed, this upgrade will enhance network quality and reliability as
well as provide capacity for added channels, pay-per-view offerings and targeted
advertising. The upgrade will also permit the offering of new services to
subscribers such as high-speed Internet access, telephone and digital video
offerings. These new services could be offered to subscribers on a highly
variable cost basis. By the end of 1998, MediaOne expects that it will have 60%
to 70% of its owned or managed cable properties upgraded to offer multiple
services to customers.
 
BUSINESS
 
    DOMESTIC BROADBAND COMMUNICATIONS
 
    MEDIAONE NETWORKS.  MediaOne is the third largest cable television system
operator in the United States. As of December 31, 1997, MediaOne's cable
television systems passed approximately 8.4 million homes and provided service
to approximately 4.9 million basic cable subscribers. MediaOne's systems are
organized into six operating regions, including large clusters in Atlanta,
Georgia, Eastern Massachusetts, Southern California, Southern Florida, Detroit,
Michigan and Minneapolis/St. Paul, Minnesota. As of December 31, 1997,
approximately 90% of MediaOne's total basic subscribers were located in clusters
with a population greater than 100,000 (after giving effect to announced swaps).
MediaOne believes that its operating scale in key markets generates significant
benefits, including operating efficiencies, and enhances its ability to develop
and deploy new broadband technologies and services.
 
    MediaOne's cable services are marketed under the "MediaOne" brand.
MediaOne's cable systems offer customers various levels (or "tiers") of cable
programming services consisting of broadcast television signals available
off-the-air in any locality, television signals from so-called "super stations"
originating in distant cities (such as WGN), various satellite-delivered
non-broadcast channels (such as CNN, MTV, USA Network, ESPN, the Discovery
Channel and Nickelodeon), displays of information featuring news, weather, stock
and financial market reports and programming originated locally by the systems
(such as public, governmental and educational access channels). MediaOne's
systems also provide premium programming services to their customers for an
extra monthly charge. These premium programming services include HBO, Cinemax,
Showtime, The Movie Channel, Encore and regional
 
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sports networks. Customers generally pay initial connection charges and fixed
monthly fees for a tier of programming services and additional fixed monthly
fees for premium programming services. MediaOne also offers pay-per-view
programming of movies and special events for an additional per-program charge.
 
    MediaOne's systems have channel capacity and addressability that are among
the highest in the cable industry. MediaOne's systems are located primarily in
suburban communities adjacent to major metropolitan markets and in mid-sized
cities that generally are densely populated and geographically diverse. MediaOne
believes that its technologically advanced broadband networks and the
demographic profile of its subscriber base, coupled with its effective
marketing, have been essential to its ability to sustain total monthly revenue
per basic subscriber that is among the highest in the cable industry. MediaOne
believes that the geographic diversity of its system clusters reduces its
exposure to economic, competitive or regulatory factors in any particular
region.
 
    MediaOne is upgrading its cable systems to create broadband HFC networks.
These HFC networks will provide increased channel capacity for the delivery of
additional cable programming and facilitate the delivery of additional services,
such as telephony services, enhanced video services, Internet access services
and high-speed data services. MediaOne is selectively upgrading its systems and
expects that it will have 60% to 70% of its systems upgraded by the end of 1998.
MediaOne has already begun to offer additional services over upgraded HFC
networks in certain markets. For example, MediaOne currently offers MediaOne
Express, an Internet access service, over its HFC networks in Los Angeles,
Boston, Detroit, Atlanta, Jacksonville, Richmond and Southern Florida. In late
1997, MediaOne and TWX announced plans to merge the operations of MediaOne
Express and Road Runner, the Internet access service offered by Time Warner
Cable, to create the largest cable-based high-speed Internet access business in
the United States. In addition, MediaOne began offering telephony services over
its HFC networks in the Atlanta, Georgia metropolitan area in January 1998 and
expects to begin offering telephony services in two additional markets in 1998.
 
    To further enhance the clustering of its cable systems, MediaOne has entered
into a letter of intent with TCI to exchange (the "TCI Exchange") certain cable
television systems serving approximately 500,000 subscribers. Consummation of
the TCI Exchange is expected to occur in late 1998, subject to the receipt of
certain franchise and other approvals.
 
    In May 1997, MediaOne entered into an agreement (the "Minnesota Sale
Agreement") to sell its cable system (the "Minnesota System") serving the
Minneapolis/St. Paul, Minnesota metropolitan area to Charter Communications,
Inc. ("Charter") for $600 million. As of December 31, 1997, the Minnesota System
served approximately 300,000 subscribers. The Minnesota System was acquired by
MediaOne as part of its acquisition of Continental. Under current FCC
cross-ownership rules, MediaOne is prohibited from owning a cable network and a
telephone network in the same geographic area. Because the Minnesota System is
located in an area where U S WEST Communications owns the telephone network,
MediaOne was mandated by the FCC to sell the Minnesota System in connection with
the Continental Acquisition in order to comply with the cross-ownership rules.
As a result of the Separation, U S WEST Communications and MediaOne will be
independent companies and MediaOne will no longer be prohibited by federal law
from owning the Minnesota System. In February 1998, in response to U S WEST's
petition, the FCC granted to U S WEST a waiver which would permit MediaOne to
retain the Minnesota System so long as the Separation is consummated by July 31,
1998. MediaOne had the right to terminate the Minnesota Sale Agreement at any
time upon the payment to Charter of a $30 million termination fee. MediaOne has
terminated the Minnesota Sale Agreement pursuant to such right and otherwise
settled all claims with Charter.
 
    TIME WARNER CABLE.  MediaOne owns a 25.51% priority capital and residual
equity interest in TWE. The remaining interests in TWE are owned by TWX. See
"--Time Warner Entertainment." TWE, through Time Warner Cable, its cable
division ("Time Warner Cable"), is the second largest
 
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cable television system operator in the United States. Time Warner Cable owns or
manages cable systems in 34 states. These systems include 34 clusters of more
than 100,000 subscribers, including Time Warner Cable of New York City, the
largest cluster in the United States. More than 55% of Time Warner Cable's
subscribers are located in Florida, New York, North Carolina, Ohio and Texas. As
of December 31, 1997, Time Warner Cable owned cable television systems that
passed approximately 15.4 million homes and provided service to approximately
9.7 million basic cable subscribers. Of these systems, systems passing
approximately 7.1 million homes and providing service to approximately 4.6
million subscribers are owned by Time Warner Entertainment-Advance/Newhouse
Partnership ("TWE-A/N"), a partnership in which, as of December 31, 1997, TWE
owned a 66.7% interest, and the Advance/Newhouse Partnership ("A/N") owned a
33.3% interest. In addition, Time Warner Cable manages cable television systems
owned by TWX which, as of December 31, 1997, passed approximately 3.8 million
homes and provided service to approximately 2.3 million cable television
subscribers. Time Warner Cable's cable services are marketed under the "Time
Warner Cable" brand. Time Warner Cable offers cable programming services over
its networks similar to those offered by MediaOne. Like MediaOne, Time Warner
Cable is upgrading its cable systems to provide increased channel capacity and
to facilitate the delivery of additional services.
 
    In February 1998, TWX contributed cable systems serving approximately
675,000 subscribers to TWE-A/N, subject to approximately $1 billion in debt, in
exchange for approximately $300 million of common and preferred interests. In
connection with the transaction, A/N will make equity contributions to TWE-A/N
to maintain its 33.3% interest therein. As a result, TWE-A/N is currently owned
approximately 65.3% by TWE, 33.3% by A/N and 1.4% by TWX.
 
    Through the TWE management committee, MediaOne and TWX jointly direct the
businesses and affairs of TWE and TWE-A/N cable systems, subject in certain
cases to regulatory approval. The TWE management committee has full discretion
and final authority with respect to the businesses and affairs of such cable
systems. The TWE management committee consists of six voting members, of which
three members are designated by U S WEST and three members are designated by
TWX. Each voting member of the TWE management committee has one vote. Any action
required or permitted to be taken by the TWE management committee must be
approved by a majority of its members. Determinations of the TWE management
committee are binding upon TWE and the TWE board of representatives.
 
    TWE is also a leading provider of filmed entertainment and cable
programming. For additional information with respect to MediaOne's interest in
TWE, see "--Cable Programming" and "--Time Warner Entertainment."
 
    OTHER BROADBAND INTERESTS.  MediaOne owns or holds interests in CLECs which
provide business telephony services. Such interests include an 80% interest in
Continental Fiber Technologies, Inc., which provides business telephony services
in Jacksonville, Florida; a 63% interest in Alternet of Virginia, Inc., which
provides business telephony services in Richmond, Virginia; and a 100% interest
in MediaOne Business Services, Inc., which provides business telephony services
in Atlanta, Georgia. MediaOne leases fiber to these companies for use in their
fiber-optic networks. In addition, MediaOne, through TWE, owns an interest in
Time Warner Communications, a provider of business telephony services in many of
the principal cities where Time Warner Cable's systems are located. Time Warner
Communications is owned by TWE, TWE-A/N and TWX, each of whom leases fiber to
Time Warner Communications for use in its fiber-optic networks.
 
    MediaOne owns an approximate 10% interest in PrimeStar, a nationwide
provider of DBS services. TWE also holds an approximate 24% interest in
PrimeStar. On April 1, 1998, MediaOne, TWE and the other stockholders of
PrimeStar contributed their interests in Old PrimeStar, as well as their
PrimeStar subscribers and certain related assets, to PrimeStar, which is a newly
formed company. MediaOne received shares of PrimeStar and cash and TWE received
shares of PrimeStar and realized a
 
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<PAGE>
reduction in indebtedness in connection with such contribution. In a related,
independent transaction, PrimeStar has agreed to purchase the satellite assets
owned by American Sky Broadcasting LLC, which is owned by News Corporation and
MCI Communications Corporation, in exchange for a nonvoting interest in
PrimeStar. This transaction, which is subject to various regulatory and other
approvals, is expected to close in 1998.
 
    INTERNATIONAL BROADBAND AND WIRELESS COMMUNICATIONS
 
    BROADBAND COMMUNICATIONS.  MediaOne owns interests in various providers of
broadband communications services in international markets in continental
Europe, the United Kingdom and Asia. As of December 31, 1997, these interests
represented approximately 2 million proportionate homes passed and 900,000
proportionate subscribers.
 
    Among its international broadband interests, MediaOne holds a 26.8% interest
in Telewest, the second-largest provider of combined cable and
telecommunications services in the United Kingdom. Telewest is constructing
broadband networks capable of providing a broad range of video, telephony and
data services. As of December 31, 1997, Telewest had approximately 687,000 cable
subscribers and 1,040,000 telephony lines. TCI also owns a 26.8% interest in
Telewest. MediaOne also holds interests in other providers of cable and
broadband communications services in international markets, including a 94%
interest in Cable Plus, a provider of cable and telephony services in the Czech
Republic; a 50% interest in A2000 (KTA), a provider of cable television services
in the Netherlands; a 25% interest in Telenet Flanders, a provider of cable and
telephony services over an HFC network in portions of Belgium; a 35% interest in
Aria WEST, a provider of telecommunications services in portions of Indonesia; a
25% interest in Singapore Cablevision Pte Ltd, a joint venture that is
constructing a broadband network in Singapore; and a 25% interest in Titus
Communications Corp. ("Titus") and a 19% interest in Chofu Cable Television
("Chofu"), each of which is constructing cable television systems in Japan. TWX
also holds a 25% interest in Titus and a 19% interest in Chofu.
 
    On March 29, 1998, Telewest announced that merger discussions were underway
for Telewest to acquire General Cable for Telewest shares and cash. A 40%
shareholder of General Cable has agreed to accept Telewest's offer if such offer
is made on or before April 15, 1998 and consists of 1.243 new Telewest shares
and 65 pence in cash for each General Cable share (or an aggregate of
approximately L426 million in Telewest shares and L240 million in cash).
Telewest intends to raise the cash portion of the purchase price through a
rights offering to Telewest's existing shareholders, including MediaOne. It is
currently contemplated that MediaOne and certain of Telewest's other principal
shareholders may purchase any Telewest shares not purchased by Telewest's other
shareholders in the rights offering. There can be no assurance that any
transaction involving the acquisition of General Cable will be consummated.
 
    WIRELESS COMMUNICATIONS.  MediaOne owns interests in various providers of
wireless communications services in international markets in continental Europe,
the United Kingdom and Asia. As of December 31, 1997, these interests
represented 76.9 million proportionate POPs and approximately 1,018,000
proportionate subscribers.
 
    Among its international wireless interests, MediaOne owns a 50% interest in
One 2 One, which provides PCS services in the United Kingdom under the brand
"One 2 One." The remaining 50% of One 2 One is owned by Cable & Wireless plc.
One 2 One was the first PCS service in the world to commence operations in 1993.
As of December 31, 1997, One 2 One's networks served approximately 1,014,000
subscribers and provided coverage to approximately 95% of Great Britain's
population. MediaOne also holds interests in various other providers of wireless
communications services in international markets, including a 46.6% interest in
Westel 900 and a 49% interest in Westel Radiotelefon, providers of cellular
services in Hungary; 24.5% interests in Eurotel Praha and Eurotel Bratislava,
providers of wireless services in portions of the Czech and Slovak Republics; a
22.5% interest in Polska
 
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Telefonia Cyfrowa, a provider of Global Systems for Mobile Communications
("GSM") cellular services in Poland; a 49% interest in U S WEST BPL Cellular
Telecommunications, a provider of GSM cellular services in certain regions of
India; a 19% interest in Binariang, a provider of wireless, wireline, satellite
and international gateway services in Malaysia; and a 66.5% interest in the
Russian Telecommunications Development Corp., a provider of cellular services in
certain cities in Russia.
 
    CABLE PROGRAMMING
 
    MediaOne has made investments in cable programming networks as a means of
generating additional interest among cable television consumers. Among its
investments in providers of cable programming, MediaOne holds a 10.4% interest
in E! Entertainment Television, Inc., a 50% interest in New England Cable News,
a 10.0% interest in PPVN Holding Co., which operates under the brand name
"Viewer's Choice," a 7.5% interest in the Sunshine Network, a provider of sports
programming in Florida, a 9.0% interest in Music Choice, a distributor of audio
programming over cable networks, a 24.1% interest in the Outdoor Life Network
and a 20.7% interest in Speedvision. Internationally, MediaOne holds a 6.7%
interest in Flextech plc, a provider of cable programming in the United Kingdom.
 
    TWE holds extensive interests in cable programming networks. TWE, through
its Home Box Office division ("Home Box Office"), owns and operates HBO and
Cinemax. HBO's programming includes commercial-free, uncut feature motion
pictures, sporting events, special entertainment events and motion pictures
produced by or for HBO. Cinemax offers a broad range of motion pictures,
including classic, family, action-adventure, foreign and recently-released
films. Home Box Office has also entered into a number of international joint
ventures, including HBO Ole in Latin America and a movie-based HBO service in
Asia. Home Box Office also produces television programming and operates TVKO, an
entity that produces boxing matches and other pay-per-view programming. TWE also
holds interests in various other cable programming networks, including a 50%
interest in Comedy Central and a 33.33% interest in Court TV. MediaOne does not
have any rights with respect to the management and operation of TWE's cable
programming businesses. See "--Time Warner Entertainment."
 
TIME WARNER ENTERTAINMENT
 
    MediaOne owns a 25.51% pro rata priority capital and residual equity
interest in TWE. Subsidiaries of TWX own a 74.49% pro rata priority capital and
residual equity interest in TWE as well as certain senior capital interests in
TWE. TWE is engaged in the cable programming, filmed entertainment and broadband
communications businesses. Subject to the powers of the TWE Management Committee
with respect to Time Warner Cable, and except for approvals required for certain
significant actions, the businesses and affairs of TWE are controlled by TWX.
For a description of the broadband communications and cable programming
operations of TWE, see "--Business--Domestic Broadband Communications--Time
Warner Cable" and "--Cable Programming."
 
    TWE's filmed entertainment business consists of the production, financing
and distribution of feature motion pictures (including through Warner Bros.),
television series, made-for-television movies, miniseries for television,
first-run syndication programming and animated programming for theatrical and
television exhibition, and the distribution of prerecorded videocassettes and
videodiscs. TWE owns and operates The WB, a national broadcast television
network launched in 1995. TWE's filmed entertainment business is also engaged in
product licensing and the ownership and operation of retail stores, movie
theaters and theme parks, including Warner Bros. Studio Stores. On April 1,
1998, TWE sold its 49% ownership interest in Six Flags theme parks to Premier
Parks Inc.
 
    MediaOne has an option to increase its equity interest in TWE from 25.51% to
31.84% depending upon cable operating performance. The option is exercisable, in
whole or in part, between January 1,
 
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1999 and May 31, 2005 for an aggregate cash exercise price ranging from $1.25
billion to $1.8 billion, depending upon the year of exercise. Either MediaOne or
TWE may elect that the exercise price for the option be paid with partnership
interests rather than cash.
 
    TWE's limited partnership agreement contains certain non-competition
restrictions (the "TWE Non-Competition Restrictions"), which prohibit each of
the TWE partners, including MediaOne, from competing with TWE in the three
principal lines of business of TWE--cable, filmed entertainment and
programming--as such businesses may evolve, subject to certain agreed upon
exceptions and limited passive investments. The TWE Non-Competition Restrictions
do not prohibit MediaOne from engaging in the cable business in an area where
TWE is not then engaging in the cable business, subject to TWE's right of first
refusal with respect to such cable business, or from engaging in the cable
business outside of the United States. In addition, the TWE Non-Competition
Restrictions do not prevent MediaOne from acquiring a foreign cable business
that is also engaged in a programming business if such programming business does
not account for more than 20% of the cable business' revenues. Under the TWE
Non-Competition Restrictions, the acquisition by U S WEST of Continental and its
cable systems in the Atlanta, Georgia metropolitan area required the consent of
TWX. The ability of MediaOne to make acquisitions of additional cable systems
may be limited by the TWE Non-Competition Restrictions.
 
    MediaOne also owns a 12.75% interest in Time Warner Entertainment Japan Inc.
("TWE Japan"). The remaining interests in TWE Japan are owned by TWX, Itochu
Corporation and Toshiba Corporation. TWE Japan was organized to conduct TWE's
businesses in Japan, including video distribution, theatrical film and
television distribution and merchandising businesses, and to expand and develop
new business opportunities.
 
AIRTOUCH TRANSACTION
 
    On April 6, 1998, MediaOne sold its domestic wireless business to AirTouch
pursuant to the AirTouch Transaction. The AirTouch Transaction was consummated
in accordance with the terms of an Agreement and Plan of Merger, dated as of
January 29, 1998 (the "AirTouch Merger Agreement"), among U S WEST, U S WEST
Media Group, Inc., U S WEST NewVector Group, Inc. ("NewVector"), U S WEST PCS
Holdings, Inc. ("PCS Holdings") and AirTouch. The Media Group's domestic
wireless business was conducted by NewVector, which conducted the Media Group's
domestic cellular business, and by PCS Holdings, which held the Media Group's
interest in PrimeCo, a provider of PCS services. Pursuant to the AirTouch Merger
Agreement, NewVector and PCS Holdings merged with and into AirTouch and, as a
result, AirTouch acquired the businesses of NewVector and PCS Holdings.
 
    Pursuant to the AirTouch Transaction, MediaOne received from AirTouch (i)
$1.65 billion in liquidation preference of dividend bearing AirTouch Preferred
Stock, and (ii) 59.5 million shares of AirTouch Common Stock. In addition,
AirTouch assumed $1.35 billion of indebtedness of NewVector and PCS Holdings.
 
    Applying the terms of the AirTouch Merger Agreement, this transaction will
result in a gain of approximately $2.3 billion, net of deferred taxes of $1.7
billion. See "--MediaOne Unaudited Pro Forma Condensed Combined Financial
Statements."
 
    Prior to the consummation of the AirTouch Transaction, MediaOne and AirTouch
were parties to a multi-phased joint venture pursuant to which the parties had
agreed to combine their domestic cellular businesses. The AirTouch Transaction
was consummated in lieu of such joint venture.
 
    MediaOne intends to take appropriate actions to monetize the shares of
AirTouch Preferred Stock and AirTouch Common Stock which it received in the
AirTouch Transaction. In connection with the AirTouch Transaction, MediaOne and
AirTouch entered into an Investment Agreement, pursuant to which AirTouch has
agreed to provide to MediaOne registration rights with respect to the shares of
 
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AirTouch Preferred Stock and AirTouch Common Stock which it received in the
AirTouch Transaction and to assist MediaOne in the monetization of such shares.
 
COMPETITION
 
    MediaOne's cable television systems generally compete for viewer attention
with other providers of video programming, including DBS systems, MMDS systems,
LMDS systems, SMATV systems and other cable companies providing services in
areas where MediaOne operates. In addition, certain LECs, including RBOCs, are
beginning to offer video programming in competition with MediaOne's cable
services. In the past, federal cross-ownership restrictions have limited entry
by LECs into the cable television business. The Telecommunications Act has
eliminated many of these barriers, thereby enhancing the ability of LECs to
provide video programming in competition with MediaOne. The extent of such
competition in any franchise area is dependent, in part, upon the quality,
variety and price of the programming provided by these services. Many of these
competitive services are generally not subject to the same local government
regulation that affects cable television. The cable television services offered
by MediaOne also face competition for viewers and advertising from other
communications and entertainment media, including off-air television
broadcasting services, movie theaters, video tape rentals and live sporting
events. The competition faced by MediaOne's cable systems may increase in the
future with the development and growth of new technologies.
 
    As MediaOne begins to offer additional services over its HFC networks,
MediaOne will face additional competition. The telephony services which MediaOne
intends to offer will face competition from other providers of local exchange
services, including RBOCs, LECs, IXCs and other providers of local exchange
services. The degree of competition will be dependent upon the state and federal
regulations concerning entry, interconnection requirements and the degree of
unbundling of the LECs' networks. Competition will be based upon price, service
quality and breadth of services offered. The Internet access and high-speed data
services offered by MediaOne compete with other providers of such services,
including LECs, IXCs, ISPs and other on-line service providers.
 
    MediaOne's international broadband and wireless communications businesses
also face competition in their respective markets. Telewest's cable television
services compete with broadcast television stations, DBS services, SMATV systems
and certain narrowband operators in the United Kingdom. Telewest's
telecommunications services compete with domestic telephone companies in the
United Kingdom, such as British Telecommunications plc. One 2 One competes with
two cellular operators and one PCS operator in the United Kingdom. Competition
is based upon price, geographic coverage and the quality of the services
offered.
 
REGULATION
 
    The products and services of MediaOne are subject to varying degrees of
regulation. Under the Telecommunications Act, the regulation of all but basic
tier cable rates will be discontinued effective March 31, 1999, or earlier if
competition exists. The Telecommunications Act also (i) eliminates certain
cross-ownership restrictions among cable operations, broadcasters and MMDS
operations, (ii) removes barriers to competition with LECs, and (iii) eliminates
restrictions that previously applied to MediaOne relating to long-distance
services.
 
    The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") authorizes the FCC to set standards for governmental
authorities to regulate the rates for certain cable television services, except
for services offered on a per-channel or per-program basis, and equipment.
Pursuant to authority granted under the 1992 Cable Act, the FCC adopted a series
of rate regulations. The FCC also publicly announced that it would consider
"social contracts" as an alternative form of rate regulation for cable
operations. Continental's social contract with the FCC was adopted by the FCC on
August 3, 1995 and amended on August 21, 1996 and July 3, 1997 to include
certain systems
 
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acquired by Continental. The social contract is a six-year agreement covering
most of Continental's franchises, including those that were unregulated, and
settled Continental's cost of service rate cases and benchmark cable programming
service tier rate cases for the covered systems. Benchmark basic service tier
rate cases in the covered systems are subject to review by local franchise
authorities. As part of the resolution, Continental agreed to, among other
things, invest at least $1.7 billion in domestic system rebuilds and upgrades
through the year 2000 to expand channel capacity and improve system reliability
and picture quality. At December 31, 1997, the investment commitment had been
substantially met. Under the social contract, Continental also reduced its basic
service tier rates for most of the subscribers covered by the social contract.
These reductions were offset by a revenue neutral increase in cable programming
service tier rates. The social contract allows for the funding of system
rebuilds and upgrades by increasing cable programming service tier rates
annually by one dollar per subscriber from 1997 through 1999 in most franchises,
and from 1996 through 1999 for the systems incorporated under the 1996 amendment
to the social contract. Rate adjustments are also allowed for inflation and
external costs such as programming. The social contract also provides that, if
the laws and regulations applicable to services offered in any Continental
franchise change in a manner that would have a material favorable financial
impact on Continental, MediaOne may petition the FCC to terminate the social
contract.
 
    Cable television systems are also subject to local regulation, typically
imposed through the franchising process. Local officials may be involved in the
initial franchise selection, system design and construction, safety, rate
regulation, customer service standards, billing practices, community-related
programming and services, franchise renewal and imposition of franchise fees.
 
    MediaOne is also subject to various regulations in the foreign countries in
which it has operations. In the United Kingdom, the licensing, construction,
operation, sale and acquisition of cable and wireline and wireless
communications systems are regulated by various government entities, including
the Department of Trade and Industry and the Department of National Heritage.
 
EMPLOYEES
 
    At December 31, 1997, the businesses of MediaOne had approximately 16,350
employees, none of whom were represented by unions. MediaOne believes that its
relations with its employees are good.
 
REAL PROPERTY
 
    The properties of MediaOne do not lend themselves to description by
character and location of principal units. At December 31, 1997, the majority of
MediaOne's property was utilized in providing cable television services.
 
LEGAL PROCEEDINGS
 
    MediaOne is currently subject to claims and proceedings that have arisen in
the ordinary course of business. While complete assurance cannot be given as to
the outcome of any contingent liabilities, in the opinion of MediaOne, any
financial impact to which MediaOne will be subject is not expected to be
material in amount to its financial position or results of operations. In
addition, the businesses in which MediaOne holds an investment, including TWE,
are also subject to claims and proceedings that may be material to such
businesses.
 
MANAGEMENT OF MEDIAONE
 
MEDIAONE BOARD OF DIRECTORS
 
    Immediately after the Separation, it is expected that the MediaOne Board
will consist of     directors. Pursuant to the MediaOne Restated Certificate,
the MediaOne Board will consist of three
 
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classes of directors. Each class of directors will be subject to election by
stockholders every three years. In addition, it is anticipated that the MediaOne
Board will adopt a policy that requires directors to retire at the annual
meeting following the director's 72nd birthday.
 
    Prior to the Separation Time, it is anticipated that Messrs. Harad,
Jacobson, McCormick, Popoff, Trujillo and Williams and Ms. Nelson, who will
serve on the New U S WEST Board, will resign, effective as of the Separation
Time, from the U S WEST Board and that Messrs. Crandall, Dove, Gilmour, Grieve,
Lillis, Russ, Simpson and Slevin will continue as members of MediaOne Board
following the Separation Time. In addition, it is anticipated that, prior to the
Separation Time, the U S WEST Board will elect Kathleen A. Cote to the MediaOne
Board, effective as of the Separation Time, to fill one of the vacancies created
by such resignations. The following is a brief listing of the principal
occupation, other major affiliations and age of Ms. Cote. For information about
such individuals who are currently members of the U S WEST Board, see "Chapter
4: Other Matters to be Considered at the Annual Meeting--U S WEST Director and
Officer Information."
 
    KATHLEEN A. COTE, President and Chief Executive Officer of Computervision
Corporation, 1996 to 1998, President and Chief Operating Officer of
Computervision Corporation from 1995 to 1996. Vice President of Marketing and
Services from 1994 to 1995. President and General Manager of PrimeService from
1989 to 1994. Vice President of Operations from 1986 to 1989. Employed at Wang
Laboratories in various management roles including Director of Manufacturing
from 1980 to 1986. Employed by MFE Corporation from 1978-1980 as head of
Operations. Employed at CTI-Cryogenics from 1971 to 1978, holding various
positions in Operations and Business Management. Currently Director of
Baynetworks, Inc, and Walden University. Age 48.
 
DIRECTOR COMPENSATION
 
    Following the Separation, it is expected that MediaOne will continue the
compensation currently in effect with respect to the directors of U S WEST. For
a description of such arrangements, see "Chapter 4: Other Matters to be
Considered at the Annual Meeting--U S WEST Director and Executive Officer
Information--Director Compensation."
 
COMMITTEES OF THE MEDIAONE BOARD
 
    Following the Separation, the MediaOne Board will establish the standing
committees listed below. No final determination has been made as to the
memberships of any such standing committees.
 
    AUDIT COMMITTEE.  The Audit Committee's purpose will be to oversee
MediaOne's accounting and financial reporting policies and practices and to
assist the MediaOne Board in fulfilling its fiduciary and corporate
accountability responsibilities. MediaOne's internal auditors and independent
public accountants will periodically meet with the Audit Committee and will
always have unrestricted direct access to the Audit Committee members.
 
    BOARD AFFAIRS COMMITTEE.  The Board Affairs Committee will serve as a
nominating committee for the MediaOne Board. The Board Affairs Committee will
also make recommendations regarding director compensation and committee
structure and composition. The Board Affairs Committee will oversee corporate
governance, and will consider candidates for the MediaOne Board recommended by
stockholders.
 
    FINANCE COMMITTEE.  The Finance Committee will be responsible for evaluating
MediaOne's growth strategies and financing for MediaOne's operations.
 
    HUMAN RESOURCES AND EXECUTIVE DEVELOPMENT COMMITTEE.  The Human Resources
and Executive Development Committee will be responsible to assure the
appropriateness of the compensation and
 
                                                                             158
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
benefits of the Executive Officers of MediaOne and its subsidiaries and to
provide for the orderly succession of management.
 
MEDIAONE EXECUTIVE OFFICERS
 
    Set forth below is information with respect to the current positions of the
individuals who have been selected to serve as executive officers of MediaOne
upon consummation of the Separation. It is anticipated that these individuals
will be elected by the MediaOne Board as of the Separation Time. Unless
otherwise indicated, the positions to be held by each such individual will be
similar to their current positions.
 
    A. GARY AMES, Executive Vice President, and President, MediaOne
International since 1995. Mr. Ames previously served for five and one-half years
as President of U S WEST Communications, and has held a variety of operations,
public policy and other management positions at U S WEST and its predecessors
for over 30 years. Age 53.
 
    ROGER K. CHRISTENSEN, Vice President--Group Operations and Strategy of the
Media Group since 1995. Following the Separation, Mr. Christensen will become
Senior Vice President--Administration of MediaOne and will be responsible for
human resources, public relations and certain other corporate services. Mr.
Christensen has been a Vice President of U S WEST since 1993, and has held a
variety of finance and other management positions with U S WEST and its
predecessors for over 25 years. Age 49.
 
    FRANK M. EICHLER, Vice President--Public Policy and Regulatory Law of the
Media Group since 1997. Following the Separation, Mr. Eichler will become
Executive Vice President, General Counsel and Secretary of MediaOne. Mr. Eichler
has served as a Vice President of U S WEST since 1994, and has held a variety of
positions in the Law Department of U S WEST since 1984. Age 41.
 
    CHARLES M. LILLIS, President and Chief Executive Officer of the Media Group
since 1995. Mr. Lillis previously served as President and Chief Executive
Officer of U S WEST Diversified Group. Mr. Lillis joined U S WEST in 1985 as
Vice President of Strategic Marketing and was named Executive Vice President and
Chief Planning Officer in 1987. Age 56.
 
    JANICE C. PETERS, President of the Media Group's domestic cable operations
since 1997. Ms. Peters previously served as President of the Media Group's
wireless operations. Ms. Peters has been a Vice President of U S WEST since
1992, and has held a variety of marketing and other management positions with U
S WEST and its predecessors for over 25 years. Age 46.
 
    RICHARD A. POST, Vice President and Chief Financial Officer of the Media
Group since 1997. Mr. Post previously served as President of Corporate
Development of the Media Group. Mr. Post has been a Vice President of U S WEST
since 1990, and has held a variety of finance and other management positions
with U S WEST for over ten years. Age 39.
 
    PEARRE A. WILLIAMS, Vice President and President, Multimedia Ventures, since
1997. Mr. Williams previously served as Vice President--Business Development for
the Media Group. Mr. Williams has been a Vice President of U S WEST since 1989,
and has held a variety of corporate development and other management positions
with U S WEST for over ten years. Age 43.
 
                                                                             159
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
    The following unaudited pro forma condensed combined statement of operations
of MediaOne for the year ended December 31, 1997 gives effect to (i) the
discontinuance of the businesses of New U S WEST (the "Discontinued Operations
Adjustments"), (ii) the Refinancing (including the refinancing by New U S WEST
of the Dex Indebtedness), the distribution of all of the New U S WEST Common
Stock to U S WEST's stockholders, transfers of certain assets and liabilities of
U S WEST to New U S WEST and allocations of certain costs and expenses in
connection with the Separation (the "MediaOne Separation Adjustments") and (iii)
the AirTouch Transaction (the "AirTouch Transaction Adjustments") as if such
transactions had been consummated as of January 1, 1997. The unaudited pro forma
condensed combined balance sheet as of December 31, 1997 gives effect to the
Discontinued Operations Adjustments, the MediaOne Separation Adjustments and the
AirTouch Transaction Adjustments as if such transactions had been consummated as
of December 31, 1997. The unaudited pro forma condensed combined statements of
operations for the years ended December 31, 1996 and 1995, give effect to the
Discontinued Operations Adjustments but do not give effect to the MediaOne
Separation Adjustments or the AirTouch Transaction Adjustments.
 
    The assets of New U S WEST will be accounted for at the historical book
values at which they were carried by U S WEST prior to the Separation. MediaOne
will account for the distribution of New U S WEST to U S WEST's stockholders at
fair value, and will recognize a gain on the distribution. The historical
results of New U S WEST will be reflected as discontinued operations by
MediaOne. See "Chapter 3: The Separation--Accounting Treatment."
 
    The pro forma adjustments included herein are based on available information
and certain assumptions that management believes are reasonable and are
described in the accompanying notes. The unaudited pro forma financial
statements do not necessarily represent what MediaOne's financial position or
results of operations would have been had the transactions occurred at such
dates or to project MediaOne's financial position or results of operations at or
for any future date or period. In the opinion of management, all adjustments
necessary to present fairly the unaudited pro forma financial information have
been made. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of U S WEST, including the
notes thereto, included in "Annex F--U S WEST, Inc. Consolidated Financial
Statements--to this Proxy Statement." For a discussion of the impact of the
Separation, including the Refinancing and the AirTouch Transaction, on MediaOne,
see "Chapter 5: Information About U S WEST--U S WEST Management's Discussion and
Analysis of Financial Condition and Results of Operations--Effects of the
Separation, the Refinancing and the AirTouch Transaction."
 
                                                                             160
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                              DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
                                                                             MEDIAONE                MEDIAONE PRO
                                                                               PRO                       FORMA
                                                              DISCONTINUED    FORMA     MEDIAONE       EXCLUDING       AIRTOUCH
                                                    U S WEST   OPERATIONS    EXCLUDING  SEPARATION     AIRTOUCH       TRANSACTION
                                                    HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS  TRANSACTION    ADJUSTMENTS(G)
                                                    --------  ------------   -------  ------------   -------------   -------------
<S>                                                 <C>       <C>            <C>      <C>            <C>             <C>
Sales and other revenues..........................  $15,235   $(11,388)(A)   $3,847                  $   3,847       $  (1,428)(G)
 
Operating expenses before depreciation and
  amortization....................................    9,009     (6,449)(A)    2,560                      2,560            (895)(G)
Depreciation and amortization.....................    3,420     (2,163)(A)    1,257                      1,257            (183)(G)
                                                    --------  ------------   -------  ------------   -------------   -------------
  Total operating expenses........................   12,429     (8,612)       3,817                      3,817          (1,078)
                                                    --------  ------------   -------  ------------   -------------   -------------
Operating income (loss) from continuing
  operations......................................    2,806     (2,776)          30                         30            (350)(G)
Other income (expense):
  Interest expense................................   (1,083 )      405(A)      (678 )      289(B)         (389)             90(G)
  Equity losses in unconsolidated ventures........     (909 )                  (909 )                     (909)            115(G)
  Other income (expense)--net.....................      408        (58)(A)      350         (6)(B)         344             132(G)
                                                    --------  ------------   -------  ------------   -------------   -------------
Income (loss) from continuing operations before
  income taxes and extraordinary item.............    1,222     (2,429)      (1,207 )      283            (924)            (13)
(Provision) benefit for income taxes..............     (522 )      902(A)       380        (87)(C)         293              34(C)
                                                    --------  ------------   -------  ------------   -------------   -------------
Income (loss) from continuing operations before
  extraordinary item..............................      700     (1,527)        (827 )      196            (631)             21
Discontinued operations(A):
  Results of operations, net of tax...............               1,524(A)     1,524     (1,524)(D)
  Gain on separation..............................                                      25,229(D)       25,229
                                                    --------  ------------   -------  ------------   -------------   -------------
Income before extraordinary item..................      700         (3)         697     23,901          24,598              21
Extraordinary item:
  Loss on early extinguishment of debt, net of
    tax...........................................       (3 )        3(A)                 (346)(E)        (346)
                                                    --------  ------------   -------  ------------   -------------   -------------
Net income........................................      697      --             697     23,555          24,252              21
Dividends on preferred stock......................      (52 )                   (52 )                      (52)
                                                    --------  ------------   -------  ------------   -------------   -------------
Earnings available for common stock...............  $   645   $  --          $  645   $ 23,555       $  24,200       $      21
                                                    --------  ------------   -------  ------------   -------------   -------------
                                                    --------  ------------   -------  ------------   -------------   -------------
 
<CAPTION>
 
                                                    MEDIAONE PRO
                                                        FORMA
                                                    -------------
<S>                                                 <C>
Sales and other revenues..........................  $   2,419
Operating expenses before depreciation and
  amortization....................................      1,665
Depreciation and amortization.....................      1,074
                                                    -------------
  Total operating expenses........................      2,739
                                                    -------------
Operating income (loss) from continuing
  operations......................................       (320)
Other income (expense):
  Interest expense................................       (299)
  Equity losses in unconsolidated ventures........       (794)
  Other income (expense)--net.....................        476
                                                    -------------
Income (loss) from continuing operations before
  income taxes and extraordinary item.............       (937)
(Provision) benefit for income taxes..............        327
                                                    -------------
Income (loss) from continuing operations before
  extraordinary item..............................       (610)
Discontinued operations(A):
  Results of operations, net of tax...............
  Gain on separation..............................     25,229
                                                    -------------
Income before extraordinary item..................     24,619
Extraordinary item:
  Loss on early extinguishment of debt, net of
    tax...........................................       (346)
                                                    -------------
Net income........................................     24,273
Dividends on preferred stock......................        (52)
                                                    -------------
Earnings available for common stock...............  $  24,221
                                                    -------------
                                                    -------------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             161
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
   UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
                                                                             MEDIAONE                MEDIAONE PRO
                                                                               PRO                       FORMA
                                                              DISCONTINUED    FORMA     MEDIAONE       EXCLUDING       AIRTOUCH
                                                    U S WEST   OPERATIONS    EXCLUDING  SEPARATION     AIRTOUCH       TRANSACTION
                                                    HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS  TRANSACTION    ADJUSTMENTS(G)
                                                    --------  ------------   -------  ------------   -------------   -------------
<S>                                                 <C>       <C>            <C>      <C>            <C>             <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
  STOCK...........................................  $  2.43
                                                    --------
                                                    --------
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
  COMMON STOCK....................................  $  2.41
                                                    --------
                                                    --------
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
  STOCK OUTSTANDING (millions)....................   482.75
                                                    --------
                                                    --------
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
  STOCK OUTSTANDING (millions)....................   491.23
                                                    --------
                                                    --------
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
  STOCK...........................................  $ (0.88 )
                                                    --------
                                                    --------
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
  STOCK
  OUTSTANDING (millions)..........................   606.75
                                                    --------
                                                    --------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
  MEDIAONE COMMON STOCK:
  CONTINUING OPERATIONS...........................                                                   $   (1.13)
  DISCONTINUED OPERATIONS.........................                                                       41.58(D)
  EXTRAORDINARY ITEM:
    LOSS ON EARLY EXTINGUISHMENT OF DEBT..........                                                       (0.57)
                                                                                                     -------------
BASIC AND DILUTED EARNINGS PER SHARE..............                                                   $   39.88
                                                                                                     -------------
                                                                                                     -------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
  COMMON STOCK OUTSTANDING (millions).............                                                      606.75(F)
                                                                                                     -------------
                                                                                                     -------------
 
<CAPTION>
 
                                                    MEDIAONE PRO
                                                        FORMA
                                                    -------------
<S>                                                 <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
  STOCK...........................................
 
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
  COMMON STOCK....................................
 
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
  STOCK OUTSTANDING (millions)....................
 
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
  STOCK OUTSTANDING (millions)....................
 
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
  STOCK...........................................
 
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
  STOCK
  OUTSTANDING (millions)..........................
 
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
  MEDIAONE COMMON STOCK:
  CONTINUING OPERATIONS...........................  $   (1.09)
  DISCONTINUED OPERATIONS.........................      41.58(D)
  EXTRAORDINARY ITEM:
    LOSS ON EARLY EXTINGUISHMENT OF DEBT..........      (0.57)
                                                    -------------
BASIC AND DILUTED EARNINGS PER SHARE..............  $   39.92
                                                    -------------
                                                    -------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
  COMMON STOCK OUTSTANDING (millions).............     606.75(F)
                                                    -------------
                                                    -------------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             162
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
 
                            AS OF DECEMBER 31, 1997
 
                              DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
                                                                                                MEDIAONE
                                                                    MEDIAONE                    PRO FORMA
                                                   DISCONTINUED     PRO FORMA     MEDIAONE      EXCLUDING       AIRTOUCH
                                      U S WEST      OPERATIONS      EXCLUDING    SEPARATION     AIRTOUCH       TRANSACTION
                                     HISTORICAL   ADJUSTMENTS(A)   SEPARATION    ADJUSTMENTS   TRANSACTION   ADJUSTMENTS(G)
                                     -----------  ---------------  -----------  -------------  -----------  -----------------
<S>                                  <C>          <C>              <C>          <C>            <C>          <C>
ASSETS
 
Current assets.....................   $   3,399    $  (2,432)(A)    $     967   $      (8)(H)   $     959     $    (223)(G)
Net investment in assets of
  discontinued operations(A).......                    4,367(A)         4,367      (3,831)(J)
                                                                                     (536)(D)
                                     -----------  ---------------  -----------  -------------  -----------       ------
Total current assets...............       3,399        1,935            5,334      (4,375)            959          (223)
                                     -----------  ---------------  -----------  -------------  -----------       ------
Property, plant and
  equipment--net...................      18,580      (14,308)(A)        4,272         (25)(H)       4,247        (1,006)(G)
Investment in Time Warner
  Entertainment....................       2,486                         2,486                       2,486
Investment in AirTouch
  Communications...................                                                                               4,413(G)
Net investments in international
  ventures.........................         475                           475                         475
Intangible assets--net.............      12,674          (77)(A)       12,597                      12,597          (415)(G)
Net investment in assets held for
  sale.............................         419                           419                         419
Other assets.......................       1,707         (775)(A)          932         (28)(H)         853          (491)(G)
                                                                                      (51)(K)
                                     -----------  ---------------  -----------  -------------  -----------       ------
Total assets.......................   $  39,740    $ (13,225)       $  26,515   $  (4,479)      $  22,036     $   2,278
                                     -----------  ---------------  -----------  -------------  -----------       ------
                                     -----------  ---------------  -----------  -------------  -----------       ------
 
LIABILITIES AND EQUITY
 
Short-term debt....................   $   1,430    $    (695)(A)    $     735   $     (23)(H)   $     738     $      16(G)
                                                                                       26(I)
Total other current liabilities....       4,885       (3,432)(A)        1,453         (19)(H)       1,434          (332)(G)
Long-term debt.....................      13,248       (5,020)(A)        8,228      (3,831)(J)       4,637        (1,352)(G)
                                                                                      240(K)
Deferred taxes.....................       4,068         (791)(A)        3,277          14(H)        3,291         1,735(G)
Deferred credits and other.........       3,605       (3,287)(A)          318         (33)(H)         285           (88)(G)
 
Mandatorily redeemable preferred
  stock and Preferred Securities...       1,180                         1,180                       1,180
 
Total equity.......................      11,324                        11,324     (25,831)(D)      10,471         2,299(G)
                                                                                   25,229(D)
                                                                                     (346)(E)
                                                                                      121(K)
                                                                                      (26)(I)
                                     -----------  ---------------  -----------  -------------  -----------       ------
Total liabilities and equity.......   $  39,740    $ (13,225)       $  26,515   $  (4,479)      $  22,036     $   2,278
                                     -----------  ---------------  -----------  -------------  -----------       ------
                                     -----------  ---------------  -----------  -------------  -----------       ------
 
<CAPTION>
 
                                      MEDIAONE
                                      PRO FORMA
                                     -----------
<S>                                  <C>
ASSETS
Current assets.....................   $     736
Net investment in assets of
  discontinued operations(A).......
 
                                     -----------
Total current assets...............         736
                                     -----------
Property, plant and
  equipment--net...................       3,241
Investment in Time Warner
  Entertainment....................       2,486
Investment in AirTouch
  Communications...................       4,413
Net investments in international
  ventures.........................         475
Intangible assets--net.............      12,182
Net investment in assets held for
  sale.............................         419
Other assets.......................         362
 
                                     -----------
Total assets.......................   $  24,314
                                     -----------
                                     -----------
LIABILITIES AND EQUITY
Short-term debt....................   $     754
 
Total other current liabilities....       1,102
Long-term debt.....................       3,285
 
Deferred taxes.....................       5,026
Deferred credits and other.........         197
Mandatorily redeemable preferred
  stock and Preferred Securities...       1,180
Total equity.......................      12,770
 
                                     -----------
Total liabilities and equity.......   $  24,314
                                     -----------
                                     -----------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             163
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                          YEAR ENDED DECEMBER 31, 1996
 
                              DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
                                                                                                            DISCONTINUED
                                                                                              U S WEST       OPERATIONS
                                                                                             HISTORICAL    ADJUSTMENTS(A)
                                                                                             -----------  ----------------
<S>                                                                                          <C>          <C>
Sales and other revenues...................................................................   $  12,911   $    (11,074)
 
Operating expenses before depreciation and amortization....................................       7,512         (6,105)
Depreciation and amortization..............................................................       2,544         (2,158)
                                                                                             -----------      --------
    Total operating expenses...............................................................      10,056         (8,263)
                                                                                             -----------      --------
Operating income from continuing operations................................................       2,855         (2,811)
Other income (expense):
  Interest expense.........................................................................        (612)           448
  Equity losses in unconsolidated ventures.................................................        (346)
  Other income (expense)--net..............................................................         (57)           (14)
                                                                                             -----------      --------
Income (loss) from continuing operations before income taxes and
  cumulative effect of change in accounting principle......................................       1,840         (2,377)
(Provision) benefit for income taxes.......................................................        (696)           876
                                                                                             -----------      --------
Income (loss) from continuing operations before cumulative
  effect of change in accounting principle.................................................       1,144         (1,501)
Income from discontinued operations(A).....................................................                      1,501
                                                                                             -----------      --------
Income (loss) before cumulative effect of change in accounting principle...................   $   1,144   $      --
                                                                                             -----------      --------
                                                                                             -----------      --------
 
<CAPTION>
                                                                                              MEDIAONE
                                                                                              PRO FORMA
                                                                                              EXCLUDING
                                                                                             SEPARATION
                                                                                             -----------
<S>                                                                                          <C>
Sales and other revenues...................................................................   $   1,837
Operating expenses before depreciation and amortization....................................       1,407
Depreciation and amortization..............................................................         386
                                                                                             -----------
    Total operating expenses...............................................................       1,793
                                                                                             -----------
Operating income from continuing operations................................................          44
Other income (expense):
  Interest expense.........................................................................        (164)
  Equity losses in unconsolidated ventures.................................................        (346)
  Other income (expense)--net..............................................................         (71)
                                                                                             -----------
Income (loss) from continuing operations before income taxes and
  cumulative effect of change in accounting principle......................................        (537)
(Provision) benefit for income taxes.......................................................         180
                                                                                             -----------
Income (loss) from continuing operations before cumulative
  effect of change in accounting principle.................................................        (357)
Income from discontinued operations(A).....................................................       1,501
                                                                                             -----------
Income (loss) before cumulative effect of change in accounting principle...................   $   1,144
                                                                                             -----------
                                                                                             -----------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             164
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
 
                          YEAR ENDED DECEMBER 31, 1995
 
                              DOLLARS IN MILLIONS
 
<TABLE>
<CAPTION>
                                                                                                         MEDIAONE
                                                                                        DISCONTINUED     PRO FORMA
                                                                           U S WEST      OPERATIONS      EXCLUDING
                                                                          HISTORICAL   ADJUSTMENTS(A)   SEPARATION
                                                                          -----------  ---------------  -----------
<S>                                                                       <C>          <C>              <C>
Sales and other revenues................................................   $  11,746     $   (10,416)    $   1,330
 
Operating expenses before depreciation and amortization.................       6,810          (5,774)        1,036
Depreciation and amortization...........................................       2,291          (2,066)          225
                                                                          -----------  ---------------  -----------
  Total operating expenses..............................................       9,101          (7,840)        1,261
                                                                          -----------  ---------------  -----------
Operating income from continuing operations.............................       2,645          (2,576)           69
 
Other income (expense):
  Interest expense......................................................        (527)            429           (98)
  Equity losses in unconsolidated ventures..............................        (207)                         (207)
  Other income (expense)--net...........................................         243            (101)          142
                                                                          -----------  ---------------  -----------
Income (loss) from continuing operations before income taxes and
  extraordinary item....................................................       2,154          (2,248)          (94)
(Provision) benefit for income taxes....................................        (825)            817            (8)
                                                                          -----------  ---------------  -----------
Income (loss) from continuing operations before extraordinary item......       1,329          (1,431)         (102)
Income from discontinued operations(A)..................................                       1,431         1,431
                                                                          -----------  ---------------  -----------
Income before extraordinary item........................................   $   1,329     $   --          $   1,329
                                                                          -----------  ---------------  -----------
                                                                          -----------  ---------------  -----------
</TABLE>
 
   See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
 
                                                                             165
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
      NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
 (A) Reflects the removal of the assets, liabilities, revenues and expenses of
     the businesses of New U S WEST. All transactions and receivable and payable
     balances between New U S WEST and MediaOne that will continue after the
     Separation are reflected in such amounts. Also reflects the
     reclassification of New U S WEST's results to net investment in and income
     from discontinued operations. The measurement date of the Separation, for
     discontinued operations accounting purposes, will be the date upon which U
     S WEST stockholder approval is received.
 
 (B) Reflects a reduction of historical interest expense of $304 million for the
     year ended December 31, 1997 as a result of the Refinancing, including the
     refinancing by New U S WEST of the Dex Indebtedness, and an increase in
     interest expense of $15 million for financing the costs of the Refinancing
     and Separation. Also includes incremental guaranteed minority interest
     expense (included in "other income (expense)--net") related to the
     refinancing of Preferred Securities of $6 million. The interest effects of
     the Refinancing were calculated at the anticipated rates MediaOne will
     achieve on the Refinancing. The actual interest rates achieved on
     Refinancing may vary based on movement in interest rates and the cost of
     new debt available to MediaOne. A 1/8 percentage point change in the
     assumed Refinancing rates would change annual interest expense by $4.4
     million.
 
 (C) Reflects the estimated income tax effects of the pro forma adjustments.
 
 (D) Reflects the distribution of the New U S WEST Common Stock to U S WEST's
     stockholders. The distribution will be accounted for as a dividend. Because
     the distribution is non pro-rata, as compared with the businesses
     previously attributed to U S WEST's two classes of stockholders, it will be
     accounted for at fair value. The estimated gain on the distribution
     represents the difference between the fair value of New U S WEST (as of
     February 20, 1998) and the historical investment in New U S WEST. The
     actual gain will be determined upon Separation. Since the distribution is
     accounted for at fair value, the related distribution of the net pension
     assets and net postretirement and other postemployment obligations are also
     accounted for at fair value. The estimated gain on the distribution
     includes a net gain of $1,833 million for the distribution of net pension
     assets and net postretirement and other postemployment obligations at fair
     value. The estimated gain is calculated as follows (dollars in millions):
 
<TABLE>
<S>                                                                  <C>
Market capitalization of Communications Group
  (485,061,000 shares of Communications Stock
  at $51.50 per share).............................................  $  24,981
Dex Dividend.......................................................        850
                                                                     ---------
Fair value of New U S WEST.........................................     25,831
Investment in New U S WEST.........................................       (536)
Separation costs (net of income tax benefits of $24)...............        (66)
                                                                     ---------
Gain on distribution...............................................  $  25,229
                                                                     ---------
                                                                     ---------
</TABLE>
 
 (E) Reflects debt extinguishment costs of $346 million (net of income tax
     benefits of $231 million) associated with the Refinancing. In addition to
     refinancing costs, debt extinguishment costs include the difference between
     the market and face value of the U S WEST Indebtedness and a charge for
     unamortized debt issuance costs.
 
 (F) As a result of the separation each share of Media Stock will remain
     outstanding as one share of MediaOne Common Stock.
 
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                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
 (G) Reflects the consummation of the AirTouch Transaction. MediaOne has
     retained the international portion of its wireless business segment. The
     pro forma adjustments reflect the following:
 
    - Receipt of 59.5 million shares of AirTouch common stock, representing an
      approximate 10 percent ownership interest in AirTouch. This interest will
      be accounted for by MediaOne as a marketable equity security.
 
    - Receipt of $1,500 million of AirTouch preferred stock at market value
      (liquidation value of $1,650).
 
    - Receipt of $92 million in dividends per year on the AirTouch preferred
      stock, at an annual rate of 5.14 percent.
 
    - Reduction in debt of $1,350 million and a corresponding reduction of
      annual interest expense of $90 million.
 
    - Removal of the consolidated assets, liabilities, revenues and expenses of
      MediaOne's domestic cellular operations.
 
    - Removal of MediaOne's equity method investment and related equity losses
      associated with its investment in PrimeCo.
 
    - Recognition of a gain on the disposition calculated as follows (in
      millions):
 
<TABLE>
<S>                                                                  <C>
AirTouch common stock..............................................  $   2,913
AirTouch preferred stock (at market value).........................      1,500
Debt reduction.....................................................      1,350
                                                                     ---------
Total proceeds.....................................................      5,763
Net book value of assets sold......................................     (1,686)
Sale related costs.................................................        (70)
                                                                     ---------
Gain (before income taxes).........................................      4,007
Deferred tax expense...............................................     (1,735)
                                                                     ---------
Gain (after income taxes)..........................................  $   2,272
                                                                     ---------
                                                                     ---------
</TABLE>
 
    Such gain has been excluded from the unaudited pro forma condensed combined
    statement of operations.
 
 (H) Reflects the transfer of assets and liabilities of U S WEST previously
     shared by New U S WEST and MediaOne and a corresponding reduction in debt.
 
 (I) Reflects an $18 million contribution to New U S WEST for insurance premiums
     paid by New U S WEST to MediaOne in excess of liabilities incurred and a
     payment of $8 primarily related to a lease termination.
 
 (J) Reflects a reduction in MediaOne debt totaling $3.9 billion in conjunction
     with the refinancing by New U S WEST of the Dex Indebtedness. $69 million
     of Dex debt reduction is included in the Discontinued Operations
     Adjustments and the remaining $3,831 million is reflected as a MediaOne
     Separation Adjustment.
 
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                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
                                    MEDIAONE
 
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
 (K) Reflects incremental borrowing to finance $346 million of debt
     extinguishment costs (net of income tax benefits of $231 million) and $66
     million of Separation costs (net of income tax benefits of $24 million).
     The incremental borrowing is net of a $51 million net reduction in debt
     issuance costs and a $121 million reimbursement from New U S WEST for its
     share of debt extinguishment costs. Such reimbursement is reflected as a
     dividend from New U S WEST to MediaOne. Separation costs include cash
     payments under severance agreements of $45 million and financial advisory,
     legal, registration fee, printing and mailing costs related to the
     Separation. Separation costs also include a one-time payment to terminate
     the Minnesota Sale Agreement.
 
                                                                             168
                                           CHAPTER 7: INFORMATION ABOUT MEDIAONE
<PAGE>
CHAPTER 8: CAPITAL STOCK
 
NEW U S WEST CAPITAL STOCK
 
GENERAL
 
    The following is a summary of the terms of the capital stock of New U S WEST
as of the Separation Time. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of such capital
stock set forth in the New U S WEST Restated Certificate. A copy of the form of
New U S WEST Restated Certificate has been filed as an exhibit to the New U S
WEST Registration Statement. See "Chapter 9: The Annual Meeting and Certain
Other Matters--Where You Can Find More Information."
 
    New U S WEST will be authorized by the New U S WEST Restated Certificate to
issue (i) two billion (2,000,000,000) shares of New U S WEST Common Stock and
(ii) two hundred million (200,000,000) shares of preferred stock, issuable in
series ("New U S WEST Preferred Stock"), of which ten million shares will be
designated Series A Junior Preferred Stock pursuant to the New U S WEST Restated
Certificate.
 
NEW U S WEST COMMON STOCK
 
    The holders of New U S WEST Common Stock will be entitled to receive
dividends when, as and if declared by the New U S WEST Board out of funds
legally available therefor, subject to the rights of any shares of New U S WEST
Preferred Stock at the time outstanding. The holders of New U S WEST Common
Stock will be entitled to one vote for each share on all matters voted on by
stockholders under the New U S WEST Restated Certificate, including the election
of directors. The
holders of New U S WEST Common Stock will not have any cumulative voting,
conversion, redemption or preemptive rights. In the event of dissolution,
liquidation or winding up of New U S WEST, holders of New U S WEST Common Stock
will be entitled to share ratably in any assets remaining after the satisfaction
in full of the prior rights of creditors, including holders of New U S WEST's
outstanding indebtedness, and subject to the aggregate liquidation preference
and participation rights of any New U S WEST Preferred Stock then outstanding.
The additional shares of authorized stock available for issuance by New U S WEST
may be issued at such times and under such circumstances as to have a dilutive
effect on earnings per share and on the equity ownership of the holders of New U
S WEST Common Stock.
 
NEW U S WEST PREFERRED STOCK
 
    The New U S WEST Board will be authorized to issue shares of New U S WEST
Preferred Stock, in one or more series, and to fix for each such series voting
powers, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereon as are
permitted by the DGCL. Although the New U S WEST Board has no current plans to
issue New U S WEST Preferred Stock, the issuance of shares of New U S WEST
Preferred Stock could be used to discourage an unsolicited acquisition proposal.
For example, a business combination could be impeded by the issuance of a series
of New U S WEST Preferred Stock containing class voting rights that would enable
the holder or holders of such series to block any such transaction.
Alternatively, a business combination could be facilitated by the issuance of a
series of New U S WEST Preferred Stock having sufficient voting rights to
provide a required percentage vote of the stockholders. In addition, under
certain circumstances, the issuance of New U S WEST Preferred Stock could
adversely affect the voting power of the holders of New U S WEST Common Stock.
Although the New U S WEST Board is required to make any determination to issue
any such stock based on its judgment as to the best interests of the
stockholders of New U S WEST, the New U S WEST Board could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or in
which stockholders might receive a
 
                                                                             169
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
premium for their stock over prevailing market prices of such stock. The New U S
WEST Board does not at present intend to seek stockholder approval prior to any
issuance of currently authorized stock, unless otherwise required by applicable
law, regulation or applicable stock exchange listing requirements.
 
NEW U S WEST RIGHTS AGREEMENT
 
    Prior to the Separation, the New U S WEST Board will enter into a Rights
Agreement (the "New U S WEST Rights Agreement") with State Street Bank and Trust
Company, as Rights Agent. The following is a description of the terms of the New
U S WEST Rights Agreement. A copy of the New U S WEST Rights Agreement has been
filed with the Commission as an Exhibit to the New U S WEST Registration
Statement. This summary description of the New U S WEST Rights Agreement does
not purport to be complete and is qualified in its entirety by reference to the
New U S WEST Rights Agreement which is incorporated in this summary description
herein by reference.
 
    Pursuant to the New U S WEST Rights Agreement, one preferred stock purchase
right (a "New U S WEST Right") will be distributed with each share of New U S
WEST Common Stock issued in connection with the Separation. Each New U S WEST
Right entitles the registered holder to purchase from New U S WEST one
one-hundredth (1/100) of a share of preferred stock of New U S WEST, designated
as Series A Junior Preferred Stock (the "New U S WEST Series A Preferred Stock")
at a price per one one-hundredth (1/100) of a share which will be determined as
described below (the "New U S WEST Exercise Price"). The description and terms
of the New U S WEST Rights are set forth in the New U S WEST Rights Agreement.
 
    The New U S WEST Rights, unless earlier redeemed by the New U S WEST Board,
become exercisable upon the close of business on the day (the "New U S WEST
Distribution Date") that is the earlier of (i) the tenth day following a public
announcement that a person or group of affiliated or associated persons, with
certain exceptions set forth below, has acquired beneficial ownership of 15% or
more of the outstanding voting stock of New U S WEST (a "New U S WEST Acquiring
Person") and (ii) the tenth business day (or such later date as may be
determined by the New U S WEST Board prior to such time as any person or group
of affiliated or associated persons becomes a New U S WEST Acquiring Person)
after the date of the commencement or announcement of a person's or group's
intention to commence a tender or exchange offer the consummation of which would
result in the ownership of 15% or more of New U S WEST's outstanding voting
stock (even if no shares are actually purchased pursuant to such offer). Prior
thereto, the New U S WEST Rights would not be exercisable, would not be
represented by a separate certificate, and would not be transferable apart from
the New U S WEST Common Stock, but will instead be evidenced by the book-entry
representing, or the certificate for, the New U S WEST Common Stock. A New U S
WEST Acquiring Person does not include (A) New U S WEST, (B) any subsidiary of
New U S WEST, (C) any employee benefit plan or employee stock plan of New U S
WEST or of any subsidiary of New U S WEST, or any trust or other entity
organized, appointed, established or holding New U S WEST Common Stock for or
pursuant to the terms of any such plan or (D) any person or group whose
ownership of 15% or more of the shares of voting stock of New U S WEST then
outstanding results solely from (i) any action or transaction or transactions
approved by the New U S WEST Board before such person or group became a New U S
WEST Acquiring Person or (ii) a reduction in the number of issued and
outstanding shares of voting stock of New U S WEST pursuant to a transaction or
transactions approved by the New U S WEST Board (provided that any person or
group that does not become a New U S WEST Acquiring Person by reason of clause
(i) or (ii) above shall become a New U S WEST Acquiring Person upon acquisition
of an additional 1% of New U S WEST's voting stock unless such acquisition of
additional voting stock will not result in such person or group becoming a New U
S WEST Acquiring Person by reason of such clause (i) or (ii)).
 
                                                                             170
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
    Until the New U S WEST Distribution Date (or earlier redemption or
expiration of the New U S WEST Rights), transfer on New U S WEST's Direct
Registration System of any New U S WEST Common Stock represented by a book-entry
or the surrender for transfer of any New U S WEST Common Stock represented by a
certificate will also constitute the transfer of the New U S WEST Rights
associated with the New U S WEST Common Stock represented by such book-entry or
certificate. As soon as practicable following the New U S WEST Distribution
Date, separate certificates evidencing the New U S WEST Rights will be mailed to
holders of record of the New U S WEST Common Stock as of the close of business
on the New U S WEST Distribution Date and such separate certificates alone will
evidence the New U S WEST Rights from and after the New U S WEST Distribution
Date.
 
    The New U S WEST Rights are not exercisable until the New U S WEST
Distribution Date. The New U S WEST Rights will expire at the close of business
on the tenth anniversary of the Separation Date, unless earlier redeemed by New
U S WEST as described below.
 
    The New U S WEST Series A Preferred Stock is nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, subordinate to any other series of New U S WEST's Preferred
Stock. The New U S WEST Series A Preferred Stock may not be issued except upon
exercise of New U S WEST Rights. Each share of New U S WEST Series A Preferred
Stock will be entitled to receive when, as and if declared, a quarterly dividend
in an amount equal to (i) 100 times the cash dividends declared on New U S
WEST's Common Stock and (ii) a preferential cash dividend equal to $25 per share
of New U S WEST Series A Preferred Stock less the per share amount of all cash
dividends declared on the New U S WEST Series A Preferred Stock pursuant to
clause (i) since the preceding quarterly dividend payment date. In addition, New
U S WEST Series A Preferred Stock is entitled to 100 times any non-cash
dividends (other than dividends payable in equity securities) declared on the
New U S WEST Common Stock, in like kind. In the event of the liquidation of New
U S WEST, the holders of New U S WEST Series A Preferred Stock will be entitled
to receive, for each share of New U S WEST Series A Preferred Stock, a payment
in an amount equal to the greater of $100 plus accrued and unpaid dividends
thereon or 100 times the payment made per share of New U S WEST Common Stock.
Each share of New U S WEST Series A Preferred Stock will have 100 votes, voting
together with the New U S WEST Common Stock. In the event of any merger,
consolidation or other transaction in which New U S WEST Common Stock is
exchanged, each share of New U S WEST Series A Preferred Stock will be entitled
to receive 100 times the amount received per share of New U S WEST Common Stock.
The rights of New U S WEST Series A Preferred Stock as to dividends, liquidation
and voting are protected by anti-dilution provisions.
 
    The number of shares of New U S WEST Series A Preferred Stock issuable upon
exercise of the New U S WEST Rights is subject to certain adjustments from time
to time in the event of a stock dividend on, or a subdivision or combination of,
the New U S WEST Common Stock. The New U S WEST Exercise Price for the New U S
WEST Rights is subject to adjustment in the event of extraordinary distributions
of cash or other property to holders of New U S WEST Common Stock.
 
    Unless the New U S WEST Rights are earlier redeemed, in the event that,
after the time that a person becomes a New U S WEST Acquiring Person, New U S
WEST were to be acquired in a merger or other business combination (in which any
shares of New U S WEST Common Stock are changed into or exchanged for other
securities or assets) or more than 50% of the assets or earning power of New U S
WEST and its subsidiaries (taken as a whole) were to be sold or transferred in
one or a series of related transactions, the New U S WEST Rights Agreement
provides that proper provision will be made so that each holder of record of a
Right will, from and after such date, have the right to receive, upon payment of
the New U S WEST Exercise Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the New U S WEST Exercise Price.
 
                                                                             171
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
    In addition, unless the New U S WEST Rights are earlier redeemed, in the
event that a person or group becomes a New U S WEST Acquiring Person, the New U
S WEST Rights Agreement provides that proper provisions will be made so that
each holder of record of a Right, other than the New U S WEST Acquiring Person
(whose New U S WEST Rights will thereupon become null and void), will thereafter
have the right to receive, upon payment of the New U S WEST Exercise Price, that
number of shares of the New U S WEST Series A Preferred Stock having a market
value at the time of the transaction equal to two times the New U S WEST
Exercise Price (such market value to be determined with reference to the market
value of New U S WEST's New U S WEST Common Stock as provided in the New U S
WEST Rights Agreement).
 
    At any time after any person or group becomes a New U S WEST Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding voting stock, the New U S WEST Board may exchange the New U S
WEST Rights (other than New U S WEST Rights owned by such person or group that
will have become void), in whole or in part, at an exchange ratio of one share
of New U S WEST Common Stock per New U S WEST Right (subject to adjustment).
 
    Fractions of shares of New U S WEST Series A Preferred Stock (other than
fractions that are integral multiples of one one-hundredth (1/100) of a share)
may, at the election of New U S WEST, be evidenced by depositary receipts. New U
S WEST may also issue cash in lieu of fractional shares which are not integral
multiples of one one-hundredth (1/100) of a share.
 
    At any time on or prior to the close of business on the earlier of (i) the
tenth day after the time that a person has become a New U S WEST Acquiring
Person (or such later date as a majority of the New U S WEST Board may
determine) or (ii) the tenth anniversary of the Separation Date, New U S WEST
may redeem the New U S WEST Rights in whole, but not in part, at a price of
$.005 per Right (the "New U S WEST Redemption Price"). Immediately upon the
effective time of the action of the Board of Directors of New U S WEST
authorizing redemption of the New U S WEST Rights, the right to exercise the New
U S WEST Rights will terminate and the only right of the holders of New U S WEST
Rights will be to receive the New U S WEST Redemption Price.
 
    For as long as the New U S WEST Rights are then redeemable, New U S WEST may
amend the New U S WEST Rights in any manner, including an amendment to extend
the time period in which the New U S WEST Rights may be redeemed. At any time
when the New U S WEST Rights are not then redeemable, New U S WEST may amend the
New U S WEST Rights in any manner that does not materially adversely affect the
interests of holders of the New U S WEST Rights as such. Amendments to the New U
S WEST Rights Agreement from and after the time that any Person becomes a New U
S WEST Acquiring Person requires the approval of a majority of the New U S WEST
Continuing Directors (as defined and as provided in the New U S WEST Rights
Agreement).
 
    Until a New U S WEST Right is exercised, the holder, as such, will have no
rights as a stockholder of New U S WEST, including, without limitation, the
right to vote or to receive dividends.
 
    Prior to the Separation Time, the New U S WEST Board will establish the New
U S WEST Exercise Price. It is anticipated that the New U S WEST Exercise Price
will be equal to the anticipated trading price of the New U S WEST Common Stock
on the date of expiration of the New U S WEST Rights.
 
MEDIAONE CAPITAL STOCK
 
GENERAL
 
    The following is a summary of the terms of the capital stock of MediaOne as
of the Separation Time. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of such capital
stock set forth in the U S WEST Restated Certificate, as amended by the
 
                                                                             172
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
Charter Amendments (as so amended, the "MediaOne Restated Certificate"). A copy
of the full text of the MediaOne Restated Certificate is included as Annex A-2
to this Proxy Statement.
 
    MediaOne will be authorized by the MediaOne Restated Certificate to issue
(i) 2 billion shares of MediaOne Common Stock and (ii) 200 million shares of
preferred stock, issuable in series ("MediaOne Preferred Stock"), of which (a)
10 million shares have been designated Series A Junior Participating Cumulative
Preferred Stock (the "MediaOne Series A Preferred Stock"), (b) 50,000 shares
have been designated as MediaOne Series C Preferred Stock, (c) 20 million shares
have been designated as MediaOne Series D Preferred Stock, and (d) 1 million
shares have been designated as MediaOne Series E Preferred Stock.
 
MEDIAONE COMMON STOCK
 
    The holders of MediaOne Common Stock will be entitled to receive dividends
when, as and if declared by the MediaOne Board out of funds legally available
therefor, subject to the rights of any shares of MediaOne Preferred Stock at the
time outstanding. The holders of MediaOne Common Stock will be entitled to one
vote for each share on all matters voted on by stockholders under the Restated
MediaOne Certificate, including the election of directors. The holders of
MediaOne Common Stock do not have any cumulative voting, conversion, redemption
or preemptive rights. In the event of dissolution, liquidation or winding up of
MediaOne, holders of the MediaOne Common Stock will be entitled to share ratably
in any assets remaining after the satisfaction in full of the prior rights of
creditors, including holders of MediaOne Indebtedness, and subject to the
aggregate liquidation preference and participation rights of any MediaOne
Preferred Stock then outstanding. The additional shares of authorized stock
available for issuance by MediaOne may be issued at such times and under such
circumstances as to have a dilutive effect on earnings per share and on the
equity ownership of the holders of MediaOne Common Stock.
 
MEDIAONE PREFERRED STOCK
 
    GENERAL.  The MediaOne Board will be authorized to issue shares of MediaOne
Preferred Stock, in one or more series, and to fix for each such series voting
powers, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof as are
permitted by the DGCL. Although the MediaOne Board has no current plans to issue
MediaOne Preferred Stock, the issuance of shares of MediaOne Preferred Stock
could be used to discourage an unsolicited acquisition proposal. For example, a
business combination could be impeded by the issuance of a series of MediaOne
Preferred Stock containing class voting rights that would enable the holder or
holders of such series to block any such transaction. Alternatively, a business
combination could be facilitated by the issuance of a series of MediaOne
Preferred Stock having sufficient voting rights to provide a required percentage
vote of the stockholders. In addition, under certain circumstances, the issuance
of MediaOne Preferred Stock could adversely affect the voting power of the
holders of MediaOne Common Stock. Although the MediaOne Board is required to
make any determination to issue any such stock based on its judgment as to the
best interests of the stockholders of MediaOne, the MediaOne Board could act in
a manner that would discourage an acquisition attempt or other transaction that
some, or a majority, of the stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
prevailing market prices of such stock. The MediaOne Board does not at present
intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by applicable law, regulation or
stock exchange listing requirements.
 
    MEDIAONE SERIES C PREFERRED STOCK.  Dividends on the MediaOne Series C
Preferred Stock are payable quarterly in cash at the rate of $70.00 per annum
per share. The MediaOne Series C Preferred Stock ranks senior to the MediaOne
Common Stock and PARI PASSU with the MediaOne Series A Preferred Stock, MediaOne
Series D Preferred Stock and MediaOne Series E Preferred Stock as to
 
                                                                             173
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
dividends and upon liquidation. Beginning September 2, 1999, the MediaOne Series
C Preferred Stock will be redeemable at the option of MediaOne, in whole or
part, at established redemption prices, plus accrued and unpaid dividends. The
MediaOne Series C Preferred Stock is also redeemable at the option of MediaOne
at any time upon the exercise by the holder of the MediaOne Series C Preferred
Stock of certain options to acquire shares of common stock of Financial Security
Assurance Holdings Ltd. granted to such holder by a subsidiary of MediaOne, at a
redemption price of $1,000.00 per share, plus accrued and unpaid dividends. The
MediaOne Series C Preferred Stock will be mandatorily redeemable on September 2,
2004, at a redemption price of $1,000.00 per share, plus accrued and unpaid
dividends. Except under certain limited circumstances or as required by law, the
holders of shares of the MediaOne Series C Preferred Stock do not have voting
rights. Upon the liquidation of MediaOne, the holders of shares of the MediaOne
Series C Preferred Stock will be entitled to receive $1,000.00 for each share of
the MediaOne Series C Preferred Stock plus accrued and unpaid dividends.
 
    MEDIAONE SERIES D PREFERRED STOCK.  Dividends on the MediaOne Series D
Preferred Stock are payable quarterly at the annual rate of 4.50%. The MediaOne
Series D Preferred Stock ranks senior to the MediaOne Common Stock and PARI
PASSU with the MediaOne Series A Preferred Stock, MediaOne Series C Preferred
Stock and MediaOne Series E Preferred Stock as to dividends and upon
liquidation. Shares of the MediaOne Series D Preferred Stock are convertible at
any time at the option of the holder into shares of MediaOne Common Stock. The
conversion rate at which shares of U S WEST Series D Preferred Stock are
currently convertible into Media Stock is 1.905 (subject to certain
adjustments). The MediaOne Board will appropriately adjust such conversion rate
pursuant to the formula set forth in the terms of the U S WEST Series D
Preferred Stock to reflect the fact that holders of U S WEST Series D Preferred
Stock will not receive the Dex Dividend. As a result, following the Separation,
the MediaOne Series D Preferred Stock will be convertible into shares of
MediaOne Common Stock at a rate that is higher than 1.905. The MediaOne Series D
Preferred Stock is not redeemable or exchangeable by MediaOne prior to November
15, 1999. Thereafter, the MediaOne Series D Preferred Stock is, in certain
circumstances, at the option of MediaOne, redeemable for cash at a redemption
price of $50.00 per share plus accrued and unpaid dividends and/or exchangeable
by MediaOne for shares of MediaOne Common Stock at an exchange rate equal to
$50.00 plus accrued and unpaid dividends, divided by .95, multiplied by the
current market price of MediaOne Common Stock. The MediaOne Series D Preferred
Stock will be mandatorily redeemable by MediaOne on November 15, 2016, at a
redemption price of $50.00 per share, plus accrued and unpaid dividends. Except
under certain limited circumstances or as required by law, the holders of shares
of MediaOne Series D Preferred Stock do not have voting rights. Special voting
rights exist for holders of MediaOne Series D Preferred Stock in the event that
dividends on the MediaOne Series D Preferred Stock are not paid in an amount
equivalent to the amount of dividends payable thereon for six quarterly
dividends. Upon the liquidation of MediaOne, the holders of shares of MediaOne
Series D Preferred Stock will be entitled to receive $50.00 per share, plus
accrued and unpaid dividends.
 
    MEDIAONE SERIES E PREFERRED STOCK.  Dividends on the MediaOne Series E
Preferred Stock are payable quarterly at the annual rate of 6.34%. The MediaOne
Series E Preferred Stock ranks senior to the MediaOne Common Stock and PARI
PASSU with the MediaOne Series A Preferred Stock, MediaOne Series C Preferred
Stock and MediaOne Series D Preferred Stock as to dividends and upon
liquidation. The MediaOne Series E Preferred Stock is not redeemable by MediaOne
prior to the fifth anniversary of the date of issuance. Thereafter, the MediaOne
Series E Preferred Stock is redeemable at the option of MediaOne at a redemption
price of $50.00 per share, plus accrued and unpaid dividends. Beginning on the
tenth anniversary of the date of issuance, the MediaOne Series E Preferred Stock
will be subject to a sinking fund and any remaining outstanding shares of
MediaOne Series E Preferred Stock will be mandatorily redeemable on the
twentieth anniversary of the date of issuance at a redemption price of $50.00
per share, plus accrued and unpaid dividends. At any time during the period from
the receipt by the holders of MediaOne Series E Preferred Stock from MediaOne of
a notice of redemption of the MediaOne Series E Preferred Stock until the date
of redemption, each share of MediaOne Series E
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
Preferred Stock will be convertible into shares of MediaOne Common Stock at a
conversion rate equal to $47.50 divided by the then current market price of the
MediaOne Common Stock. Except under certain limited circumstances or as required
by law, the holders of shares of MediaOne Series E Preferred Stock do not have
voting rights. Upon the liquidation of MediaOne, the holders of shares of
MediaOne Series E Preferred Stock will be entitled to receive $50.00 per share,
plus accrued and unpaid dividends.
 
MEDIAONE RIGHTS AGREEMENT
 
    U S WEST is a party to an Amended and Restated Rights Agreement, dated as of
October 31, 1995 (the "U S WEST Rights Agreement"), with State Street Bank and
Trust Company, as Rights Agent. Pursuant to the U S WEST Rights Agreement, a U S
WEST Communications Group Right (a "Communications Right") is attached to each
outstanding share of Communications Stock and a U S WEST Media Group Right (a
"Media Right") is attached to each outstanding share of Media Stock. In
connection with the Separation, the U S WEST Rights Agreement will be amended
and restated (as so amended and restated, the "MediaOne Rights Agreement") to
provide (i) that the Communications Rights and the Media Rights will not become
exercisable, distributed or unredeemable as a result of the consummation of the
Separation, (ii) that the Communications Rights will expire at the Separation
Time, (iii) that the percentage of beneficial ownership of the outstanding
voting stock of MediaOne acquired by a person or group that causes the MediaOne
Rights (as defined herein) to become exercisable will be reduced from 20% to
15%, (iv) that the percentage of beneficial ownership that would result from the
consummation of a person's or group's commencement or announcement of a tender
or exchange offer that causes the MediaOne Rights to become exercisable will be
reduced from 30% to 15%, (v) for the deletion of a provision of the U S WEST
Restated Rights Agreement, which provided that in the event MediaOne receives a
fully financed cash tender offer proposal for any and all of the voting shares
of MediaOne, the MediaOne Board of Directors is required to engage an investment
banking firm to render an opinion as to whether the tender offer purchase price
is fair and adequate to stockholders or to call a special meeting of
stockholders to vote upon such tender offer, and (vi) for certain amendments to
the terms of the Media Rights to reflect the redemption of the Communications
Stock and the modification of certain terms of the Media Stock. The Media
Rights, after giving effect to such amendments, are referred to herein as
"MediaOne Rights." The following description of the terms of the MediaOne Rights
Agreement and the MediaOne Rights does not purport to be complete and is
qualified in its entirety by reference to the MediaOne Rights Agreement, the
form of which will be filed by U S WEST with the Commission under the Exchange
Act prior to the Separation Time as an exhibit to a Current Report on Form 8-K.
 
    Each MediaOne Right entitles the registered holder to purchase from MediaOne
one one-hundredth (1/100) of a share of MediaOne Series A Preferred Stock at a
price per one one-hundredth (1/100) of a share equal to $80 (the "MediaOne
Exercise Price"), subject to adjustment. The description and terms of the
MediaOne Rights are set forth in the MediaOne Rights Agreement.
 
    The MediaOne Rights, unless earlier redeemed by the MediaOne Board, become
exercisable upon the close of business on the day (the "MediaOne Distribution
Date") that is the earlier of (i) the tenth day following a public announcement
that a person or group of affiliated or associated persons, with certain
exceptions set forth below, has acquired beneficial ownership of 15% or more of
the outstanding voting stock of MediaOne (a "MediaOne Acquiring Person") and
(ii) the tenth business day (or such later date as may be determined by the
MediaOne Board prior to such time as any person or group of affiliated or
associated persons becomes a MediaOne Acquiring Person) after the date of the
commencement or announcement of a person's or group's intention to commence a
tender or exchange offer the consummation of which would result in the ownership
of 15% or more of MediaOne's outstanding voting stock (even if no shares are
actually purchased pursuant to such offer). Prior thereto, the MediaOne Rights
would not be exercisable, would not be represented by a separate
 
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<PAGE>
certificate, and would not be transferable apart from the MediaOne Common Stock,
but will instead be evidenced by the certificates evidencing the MediaOne Common
Stock certificate. A MediaOne Acquiring Person does not include (A) MediaOne,
(B) any subsidiary of MediaOne, (C) any employee benefit plan or employee stock
plan of MediaOne or of any subsidiary of MediaOne, or any other entity
organized, appointed, established or holding MediaOne Common Stock for or
pursuant to the terms of any such plan or (D) any person or group whose
ownership of 15% or more of the shares of voting stock of MediaOne then
outstanding results solely from a reduction in the number of issued and
outstanding shares of voting stock of MediaOne resulting from a stock repurchase
program or other similar plan of MediaOne or from a self-tender offer of
MediaOne (provided that any person or group that does not become a MediaOne
Acquiring Person by reason of this clause (D) shall become a MediaOne Acquiring
Person if such person or group shall acquire an additional 1% of MediaOne's
voting stock outstanding and such person or group, together with all affiliates
and associates, shall beneficially own 15% or more of the MediaOne voting stock
outstanding).
 
    Until the MediaOne Distribution Date (or earlier redemption or expiration of
the MediaOne Rights), MediaOne Common Stock certificates issued will contain a
legend incorporating the MediaOne Rights Agreement by reference. Until the
MediaOne Distribution Date (or earlier redemption or expiration of the MediaOne
Rights), the surrender for transfer of any of the MediaOne Common Stock
certificates will also constitute the transfer of the MediaOne Rights associated
with the MediaOne Common Stock represented by such certificate. As soon as
practicable following the MediaOne Distribution Date, separate certificates
evidencing the MediaOne Rights will be mailed to holders of record of the
MediaOne Common Stock as of the close of business on the MediaOne Distribution
Date and such separate certificates alone will evidence the MediaOne Rights from
and after the MediaOne Distribution Date.
 
    The MediaOne Rights are not exercisable until the MediaOne Distribution
Date. The MediaOne Rights will expire at the close of business on April 6, 1999,
unless earlier redeemed by MediaOne as described below.
 
    The MediaOne Series A Preferred Stock is nonredeemable and, shall rank pari
passu to the MediaOne Series C Preferred Stock, MediaOne Series D Preferred
Stock and MediaOne Series E Preferred Stock and unless otherwise provided in
connection with the creation of a subsequent series of preferred stock,
subordinate to any other series of MediaOne's Preferred Stock. The MediaOne
Series A Preferred Stock may not be issued except upon exercise of MediaOne
Rights. Each share of MediaOne Series A Preferred Stock will be entitled to
receive when, as and if declared, a quarterly dividend in an amount equal to the
greater of $25 per share or 100 times the aggregate per share amount of all cash
dividends and all non-cash dividends or other distributions, other than a
dividend payable in shares of MediaOne Common Stock, declared on MediaOne Common
Stock. In the event of the liquidation of MediaOne, the holders of MediaOne
Series A Preferred Stock will be entitled to receive, for each share of MediaOne
Series A Preferred Stock, a payment in an amount equal to the greater of $100
plus an amount equal to all accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment or 100 times the
payment made per share of MediaOne Common Stock. Each share of MediaOne Series A
Preferred Stock will have 100 votes, voting together with the MediaOne Common
Stock. In the event of any merger, consolidation or other transaction in which
MediaOne Common Stock is exchanged, each share of MediaOne Series A Preferred
Stock will be entitled to receive 100 times the amount received per share of
MediaOne Common Stock. The rights of MediaOne Series A Preferred Stock as to
dividends, liquidation and voting are protected by anti-dilution provisions.
 
    Unless the MediaOne Rights are earlier redeemed, in the event that, after
the time that a person becomes a MediaOne Acquiring Person, MediaOne were to be
acquired in a merger or other business combination (in which any shares of
MediaOne Common Stock are changed into or exchanged for other securities or
assets) or more than 50% of the assets or earning power of MediaOne and its
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
subsidiaries (taken as a whole) were to be sold or transferred in one or a
series of related transactions, the MediaOne Rights Agreement provides that
proper provision will be made so that each holder of record of a MediaOne Right
will, from and after such date, have the right to receive, upon payment of the
MediaOne Exercise Price, that number of shares of common stock of the acquiring
company having a market value at the time of such transaction equal to two times
the MediaOne Exercise Price.
 
    In addition, unless the MediaOne Rights are earlier redeemed, in the event
that a person or group becomes the beneficial owner of 15% or more of MediaOne's
voting stock, the MediaOne Rights Agreement provides that proper provisions will
be made so that each holder of record of a MediaOne Right, other than the
MediaOne Acquiring Person (whose MediaOne Rights will thereupon become null and
void), will thereafter have the right to receive, upon payment of the MediaOne
Exercise Price, that number of shares of the MediaOne Series A Preferred Stock
having a market value at the time of the transaction equal to two times the
MediaOne Exercise Price (such market value to be determined with reference to
the market value of MediaOne's MediaOne Common Stock as provided in the MediaOne
Rights Agreement).
 
    At any time after any person or group becomes a MediaOne Acquiring Person
and prior to the acquisition by such person or group of 50% or more of the
outstanding voting stock, the MediaOne Board may exchange the MediaOne Rights
(other than MediaOne Rights owned by such person or group that will have become
void), in whole or in part, at an exchange ratio of one share of MediaOne Common
Stock per MediaOne Right (subject to adjustment).
 
    Fractions of shares of MediaOne Series A Preferred Stock (other than
fractions which are integral multiples of one one-hundredth (1/100) of a share)
may, at the election of MediaOne, be evidenced by depositary receipts. MediaOne
may also issue cash in lieu of fractional shares that are not integral multiples
of one one-hundredth (1/100) of a share.
 
    At any time on or prior to the close of business on the earlier of (i) the
tenth day after the time that a person has become a MediaOne Acquiring Person
(or such later date as a majority of the MediaOne Board may determine) or (ii)
April 6, 1999, MediaOne may redeem the MediaOne Rights in whole, but not in
part, at a price of $.005 per Right (the "MediaOne Redemption Price").
Immediately upon the effective time of the action of the Board of Directors of
MediaOne authorizing redemption of the MediaOne Rights, the right to exercise
the MediaOne Rights will terminate and the only right of the holders of MediaOne
Rights will be to receive the MediaOne Redemption Price.
 
    For as long as the MediaOne Rights are then redeemable, MediaOne may, except
with respect to the redemption price or date of expiration of the MediaOne
Rights, amend the MediaOne Rights in any manner, including an amendment to
extend the time period in which the MediaOne Rights may be redeemed. At any time
when the MediaOne Rights are not then redeemable, MediaOne may amend the
MediaOne Rights in any manner that does not materially adversely affect the
interests of holders of the MediaOne Rights as such. Amendments to the MediaOne
Rights Agreement from and after the time that any Person becomes a MediaOne
Acquiring Person requires the approval of a majority of the MediaOne Continuing
Directors (as defined and as provided in the MediaOne Rights Agreement).
 
    Until a MediaOne Right is exercised, the holder, as such, will have no
rights as a stockholder of MediaOne, including, without limitation, the right to
vote or to receive dividends.
 
COMPARISON OF RIGHTS OF STOCKHOLDERS
 
    U S WEST is a Delaware corporation and, following consummation of the
Separation, New U S WEST and MediaOne will be Delaware corporations. The rights
of holders of Communications Stock and Media Stock are currently governed by the
DGCL, the U S WEST Restated Certificate and U S WEST Bylaws. Following
consummation of the Separation, the rights of holders of New U S WEST Common
Stock will be governed by the DGCL, the New U S WEST Restated Certificate
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
and the New U S WEST Bylaws and the rights of holders of MediaOne Common Stock
will be governed by the DGCL, the MediaOne Restated Certificate and the MediaOne
Bylaws. The terms of the New U S WEST Restated Certificate and the MediaOne
Restated Certificate will be substantially similar to the terms of the U S WEST
Restated Certificate and the terms of the New U S WEST Bylaws and the MediaOne
Bylaws will be substantially similar to the terms of the U S WEST Bylaws, except
for the matters described below. The principal differences between the rights of
holders of Communications Stock and Media Stock, on one hand, and the holders of
New U S WEST Common Stock and MediaOne Common Stock, on the other hand, relate
to the fact that the Communications Stock and the Media Stock are Targeted
Stocks.
 
VOTING RIGHTS
 
    Under the U S WEST Restated Certificate, with respect to matters to be voted
upon by both the Communications Stock and the Media Stock as a single class,
each share of Communications Stock is entitled to one vote and each share of
Media Stock is entitled to a variable number of votes equal to the ratio of the
time-weighted average market value of one share of Media Stock to the
time-weighted average market value of one share of Communications Stock,
calculated over the 20-trading day period ending ten trading days prior to the
record date, and may have more than, less or exactly one vote per share. Under
the New U S WEST Restated Certificate, each share of New U S WEST Common Stock
will be entitled to one vote. Under the MediaOne Restated Certificate, each
share of MediaOne Common Stock will be entitled to one vote.
 
DIVIDENDS
 
    Under the U S WEST Restated Certificate, (i) dividends on the Communications
Stock are payable out of the lesser of (a) the funds of U S WEST legally
available for the payment of dividends and (b) the "Communications Group
Available Dividend Amount" (an amount similar to the amount that would be
legally available for the payment of dividends on the Communications Stock under
Delaware law if the Communications Group were a separate company) and (ii)
dividends on the Media Stock are payable out of the lesser of (a) the funds of U
S WEST legally available for the payment of dividends and (b) the "Media Group
Available Dividend Amount" (an amount similar to the amount that would be
legally available for the payment of dividends on the Media Stock under Delaware
law if the Media Group were a separate company). Holders of New U S WEST Common
Stock and MediaOne Common Stock will be entitled to receive dividends when, as
and if declared by the respective boards of directors out of funds legally
available therefor.
 
CONVERSION
 
    Pursuant to the U S WEST Restated Certificate, at any time following
November 1, 2004, U S WEST has the right to convert each share of Communications
Stock into a number of shares of Media Stock equal to 100% of the ratio of the
time-weighted average market value of one share of Communications Stock to the
time-weighted average market value of one share of Media Stock, calculated over
the 20-trading day period ending five trading days prior to the date of notice
of such conversion. In addition, U S WEST has the right, at any time, to convert
each share of Media Stock into a number of shares of Communications Stock equal
to 115% of the ratio of the time-weighted average market value of one share of
Media Stock to the time-weighted average market value of one share of
Communications Stock, calculated over the 20-trading day period ending five
trading days prior to the date of notice of such conversion, until November 1,
2000, and thereafter declining annually to 100% on November 1, 2004. Neither the
New U S WEST Restated Certificate nor the MediaOne Restated Certificate will
provide for conversion rights.
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY
 
    U S WEST may at any time redeem (i) the Communications Stock for all of the
shares of the common stock of one or more wholly owned subsidiaries of U S WEST
that hold all of the assets and liabilities attributed to the Communications
Group and/or (ii) the Media Stock for a number of the shares of the common stock
of one or more wholly owned subsidiaries of U S WEST that hold all of the assets
and liabilities attributed to the Media Group equal to the proportionate
interest in the Media Group represented by the Media Stock. Neither the New U S
WEST Restated Certificate nor the MediaOne Restated Certificate will provide for
redemption rights.
 
LIQUIDATION
 
    Pursuant to the U S WEST Restated Certificate, in the event of the
liquidation of U S WEST, holders of Communications Stock and Media Stock will be
entitled to a portion of the assets remaining for distribution to holders of
Communications Stock and Media Stock on a per share basis in proportion to the
Liquidation Units per share of Communications Stock and Media Stock. Each share
of Communications Stock has one Liquidation Unit and each share of Media Stock
has .80 of a Liquidation Unit, subject to certain adjustments. Pursuant to the
New U S WEST Restated Certificate, in the event of a liquidation of New U S
WEST, holders of New U S WEST Common Stock will be entitled to share ratably in
the assets of New U S WEST remaining for distribution to holders of New U S WEST
Common Stock. Pursuant to the MediaOne Restated Certificate, in the event of a
liquidation of MediaOne, holders of MediaOne Common Stock will be entitled to
share ratably in the assets of MediaOne remaining for distribution to holders of
MediaOne.
 
RIGHTS ON DISPOSITION
 
    Pursuant to the U S WEST Restated Certificate, subject to certain
exceptions, if U S WEST disposes of all or substantially all of the properties
and assets attributed to the Communications Group, U S WEST is required to
either (i) distribute to holders of Communications Stock an amount in cash
and/or securities or other property equal to the fair value of the net proceeds
of such disposition, either by special dividend or by redemption of all or part
of the outstanding shares of Communications Stock or (ii) convert each share of
Communications Stock into a number of shares of Media Stock equal to 110% of the
ratio of the average market value of one share of Communications Stock to the
average market value of one share of Media Stock, calculated over the
ten-trading day period beginning on the 16th trading day after consummation of
the disposition transaction. Similarly, subject to certain exceptions, if U S
WEST disposes of all or substantially all of the properties and assets
attributed to the Media Group, U S WEST is required to either (i) distribute to
holders of Media Stock an amount in cash and/or securities or other property
equal to their proportionate interest in the fair value of the net proceeds of
such disposition, either by special dividend or by redemption of all or part of
the outstanding shares of Media Stock, or (ii) convert each share of Media Stock
into a number of shares of Communications Stock equal to 110% of the ratio of
the average market value of one share of Media Stock to the average market value
of one share of Communications Stock, calculated over the ten-trading day period
beginning on the 16th trading day after consummation of the disposition
transaction. Neither the New U S WEST Restated Certificate nor the MediaOne
Restated Certificate provides for similar rights upon dispositions of assets.
 
AUTHORIZED CAPITAL
 
    Pursuant to the U S WEST Restated Certificate, the authorized capital stock
of U S WEST consists of two billion shares of Communications Stock, two billion
shares of Media Stock and 200 million shares of U S WEST Preferred Stock.
Pursuant to the New U S WEST Restated Certificate, the authorized capital stock
of New U S WEST will consist of two billion shares of New U S WEST Common Stock
and 200 million shares of New U S WEST Preferred Stock. Pursuant to the New
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
MediaOne Restated Certificate, the authorized capital stock of MediaOne will
consist of two billion shares of MediaOne Common Stock and 200 million shares of
MediaOne Preferred Stock.
 
CERTAIN ANTITAKEOVER CONSIDERATIONS
 
    The DGCL, the New U S WEST Restated Certificate and the New U S WEST Bylaws,
and the MediaOne Restated Certificate and the MediaOne Bylaws contain provisions
that could serve to discourage or make more difficult a change in control of New
U S WEST or MediaOne without the support of the New U S WEST Board or the
MediaOne Board, or without meeting various other conditions. A summary of such
provisions is set forth below.
 
    The New U S WEST Restated Certificate and the MediaOne Restated Certificate
each will provide for the issuance of preferred stock, at the discretion of the
New U S WEST Board or the MediaOne Board, as the case may be, from time to time,
in one or more series, without further action by the stockholders of New U S
WEST or MediaOne, unless approval of the stockholders is deemed advisable by the
New U S WEST Board or MediaOne Board or required by applicable law, regulation
or stock exchange listing requirements. In addition, the authorized but unissued
shares of New U S WEST Common Stock will be available for issuance from time to
time at the discretion of the New U S WEST Board without the approval of the
stockholders of New U S WEST, and the authorized but unissued shares of MediaOne
Common Stock will be available for issuance from time to time at the discretion
of the MediaOne Board without the approval of the stockholders of MediaOne, in
each case unless such approval is deemed advisable by the New U S WEST Board or
MediaOne Board, as the case may be, or required by applicable law, regulation or
stock exchange listing requirements. One of the effects of the existence of
authorized, unissued and unreserved New U S WEST Common Stock and MediaOne
Common Stock and preferred stock could be to enable the New U S WEST Board and
MediaOne Board to issue shares to persons friendly to current management that
could render more difficult or discourage an attempt to obtain control of New U
S WEST or MediaOne by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of New U S WEST's or MediaOne's
management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of New U S WEST or MediaOne.
 
    The New U S WEST Restated Certificate and the MediaOne Restated Certificate
each will provide for a classified board of directors under which one-third of
the total number of directors are elected each year and will prohibit the
removal of directors unless such removal is for cause and is approved by the
holders of 80% of the New U S WEST Common Stock or MediaOne Common Stock, as the
case may be. Pursuant to the New U S WEST Restated Certificate and the MediaOne
Restated Certificate, stockholders will not be permitted to act by written
consent. In addition, pursuant to the New U S WEST Restated Certificate and the
MediaOne Restated Certificate, only the Chairman of the Board or the Board of
Directors, and not the stockholders, will be permitted to call a special meeting
of stockholders, and no actions will be considered at such special meeting other
than those specified in the notice thereof.
 
    The New U S WEST Restated Certificate and the MediaOne Restated Certificate
will each contain a "fair price provision" pursuant to which the affirmative
vote of the holders 80% of the New U S WEST Common Stock or MediaOne Common
Stock, as the case may be, will be required to approve certain business
combinations involving New U S WEST or MediaOne, as applicable, and certain
significant stockholders. In addition, Section 203 of the DGCL will prohibit New
U S WEST or MediaOne from engaging in certain transactions with an "interested
stockholder."
 
    The New U S WEST Bylaws and MediaOne Bylaws will each establish an advance
notice procedure for stockholders to bring business before an annual or special
meeting of stockholders. The New U S WEST Bylaws and MediaOne Bylaws each will
provide that a stockholder may present a proposal for action at an annual
meeting of stockholders only if such stockholder delivers a written notice of
the proposal, together with certain specified information relating to such
stockholder's stock ownership and
 
                                                                             180
                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
identity, to the Secretary of New U S WEST or MediaOne, as applicable, at least
90 days before the annual meeting. In addition, the New U S WEST Bylaws and
MediaOne Bylaws each will provide that a stockholder may nominate individuals
for election to the Board of Directors at any annual meeting or special meeting
of stockholders at which directors are to be elected only if such stockholder
delivers written notice, containing certain specified information with respect
to the nominee and nominating stockholder, to the Secretary of New U S WEST or
MediaOne, as applicable, at least 90 days before the annual meeting or within 15
days following the announcement of the date of the special meeting.
 
    The New U S WEST Rights and the MediaOne Rights each will permit
disinterested stockholders to acquire additional shares of New U S WEST or
MediaOne, as applicable, or of an acquiring company at a substantial discount in
the event of certain described changes in control. See "--New U S WEST Capital
Stock--New U S WEST Rights Agreement" and "--MediaOne Capital Stock-- MediaOne
Rights Agreement."
 
    Certain provisions described above may have the effect of delaying
stockholder actions with respect to certain business combinations. As such, the
provisions could have the effect of discouraging open market purchases of the
New U S WEST Common Stock or the MediaOne Common Stock because such provisions
may be considered disadvantageous by a stockholder who desires to participate in
a business combination.
 
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                                                        CHAPTER 8: CAPITAL STOCK
<PAGE>
CHAPTER 9: THE ANNUAL MEETING AND CERTAIN OTHER MATTERS
 
THE ANNUAL MEETING
 
GENERAL
 
    This Proxy Statement is being furnished to holders of Communications Stock
and Media Stock in connection with the solicitation of proxies by and on behalf
of the U S WEST Board for use at the Annual Meeting to be held at 3:00 p.m.,
Eastern Time, on June 4, 1998, at The Millennium Broadway Hotel, 145 West 44th
Street, New York, New York, and at any adjournments or postponements thereof.
This Proxy Statement and the accompanying proxy card are first being mailed to
holders of Communications Stock and Media Stock entitled to notice of, and to
vote at, the Annual Meeting, on or about April 20, 1998. This Proxy Statement
constitutes notice of the Annual Meeting in accordance with the DGCL.
 
    Enclosed with this Proxy Statement is an admission ticket for use in
attending the Annual Meeting as well as a proxy card. Shares of Communications
Stock and Media Stock can be voted at the Annual Meeting by proxy or by
attending the Annual Meeting. Votes by proxy may be made (i) by mail, by
completing and returning the enclosed proxy card, (ii) by telephone, by calling
1-888-457-2966 or (iii) via the Internet, by accessing a special site at
http://www.uswest.proxyvoting.com. Stockholders who hold their shares in "street
name" will not be permitted to vote by telephone or via the Internet. Additional
information regarding voting by telephone or via the Internet is included on the
enclosed proxy card. STOCKHOLDERS ARE URGED TO VOTE BY PROXY REGARDLESS OF
WHETHER THEY PLAN TO ATTEND THE ANNUAL MEETING. If a stockholder returns a proxy
and later attends and votes at the Annual Meeting, that stockholder's proxy will
be revoked. See "--Proxies; Revocation of Proxies." Stockholders of record who
do not have admission tickets will be admitted to the Annual Meeting upon
verification of ownership at the stockholders' admission counter. Stockholders
who hold their shares in "street name" can obtain admission tickets at the
stockholders' admission counter by presenting evidence of holdings such as a
bank or brokerage firm account statement.
 
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
 
    At the Annual Meeting, stockholders will be asked to consider and vote upon
the following proposals:
 
    / /  A proposal to approve the Separation, which will also constitute
         approval and adoption of the Charter Amendments. See "Chapter 3: The
         Separation." THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
         APPROVAL OF THE SEPARATION.
 
    / /  A proposal to elect five directors to the U S WEST Board. See "Chapter
         4: Other Matters to be Considered at the Annual Meeting--Election of
         Directors." THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
         EACH OF THE DIRECTORS NOMINATED.
 
    / /  A proposal to ratify the U S WEST Board's appointment of Arthur
         Andersen LLP, Certified Public Accountants, as independent auditors to
         make an examination of the accounts of U S WEST for calendar year 1998.
         See "Chapter 4: Other Matters to be Considered at the Annual
         Meeting--Ratification of Auditors." THE U S WEST BOARD RECOMMENDS THAT
         STOCKHOLDERS VOTE "FOR" RATIFICATION OF THIS APPOINTMENT.
 
    / /  A proposal to approve the 1998 New U S WEST Stock Plan. See "Chapter 4:
         Other Matters to be Considered at the Annual Meeting--Proposal to
         Approve the 1998 New U S WEST Stock Plan." THE U S WEST BOARD
         RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
 
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                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
    / /  A proposal to approve the New U S WEST LTIP. See "Chapter 4: Other
         Matters to be Considered at the Annual Meeting--Proposal to Approve the
         New U S WEST Long-Term Incentive Plan." THE U S WEST BOARD RECOMMENDS
         THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
 
    / /  A proposal to approve the New U S WEST ESTIP. See "Chapter 4: Other
         Matters to be Considered at the Annual Meeting--Proposal to Approve the
         New U S WEST Executive Short-Term Incentive Plan." THE U S WEST BOARD
         RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THIS PROPOSAL.
 
    / /  A proposal to approve an amendment to the MediaOne Stock Plan. See
         "Chapter 4: Other Matters to be Considered at the Annual
         Meeting--Proposal to Approve an Amendment to the U S WEST 1994 Stock
         Plan." THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS
         PROPOSAL.
 
    / /  A proposal to approve an amendment to the MediaOne ESTIP. See "Chapter
         4: Other Matters to be Considered at the Annual Meeting--Proposal to
         Approve an Amendment to the U S WEST Executive Short-Term Incentive
         Plan." THE U S WEST BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS
         PROPOSAL.
 
    / /  Certain proposals made by stockholders of U S WEST pursuant to Rule
         14a-8 under the Exchange Act. See "Chapter 4: Other Matters to be
         Considered at the Annual Meeting-- Stockholder Proposals." THE U S WEST
         BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" EACH OF THESE
         PROPOSALS.
 
    The proposals to approve the New U S WEST Compensation Plans are conditioned
upon consummation of the Separation by U S WEST's stockholders. If the
Separation is not approved and consummated, the proposals to approve the New U S
WEST Compensation Plans will not be implemented.
 
    STOCKHOLDERS ARE REQUESTED PROMPTLY TO VOTE BY PROXY IN THE MANNER DESCRIBED
HEREIN.
 
RECORD DATE; VOTING AT THE ANNUAL MEETING
 
    The U S WEST Board has fixed the close of business on April 20, 1998, as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting. Accordingly, only stockholders
of record at the close of business on the Record Date will be entitled to vote
at the Special Meeting. At the close of business on the Record Date, there were
approximately 484,990,000 shares of Communications Stock and 608,600,000 shares
of Media Stock outstanding and entitled to vote. A complete list of the
stockholders entitled to vote at the Annual Meeting will be available for
examination by any stockholder for any purpose germane to the meeting, during
ordinary business hours for a period of at least 10 days prior to the Annual
Meeting, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153. Such list will also be available for examination at the
Annual Meeting.
 
    The presence, in person or by properly delivered proxy, of the holders of a
majority of the votes entitled to be cast by the holders of Communications Stock
and Media Stock as of the Record Date is necessary to constitute a quorum at the
Annual Meeting. The approval of the Separation will require (i) the affirmative
vote of the holders of a majority of the voting power of all of the outstanding
shares of Communications Stock and Media Stock, voting as a single class, (ii)
the affirmative vote of the holders of a majority of the outstanding shares of
Communications Stock, voting as a separate class, and (iii) the affirmative vote
of the holders of a majority of the outstanding shares of Media Stock, voting as
a separate class. Directors will be elected by a plurality of the votes of the
Communications Stock and the Media Stock represented in person or by proxy and
entitled to vote at the Annual
 
                                                                             183
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
Meeting, voting as a single class. All other proposals to be considered at the
Annual Meeting will require the affirmative vote of a majority of the votes cast
by holders of Communications Stock and Media Stock represented in person or by
proxy and entitled to vote at the Annual Meeting, voting as a single class. Each
stockholder's vote is confidential and will not be disclosed to any party except
to the extent necessary to meet legal requirements.
 
    Holders of record of Communications Stock are entitled to one vote per share
and holders of record of Media Stock are entitled to 0.637 of a vote per share
upon each matter properly submitted for the vote of the holders of
Communications Stock and Media Stock, voting as a single class, at the Annual
Meeting. Holders of record of Communications Stock are entitled to one vote per
share upon each matter properly submitted for the vote of the holders of
Communications Stock, voting as a separate class, at the Annual Meeting and
holders of record of Media Stock are entitled to one vote per share upon each
matter properly submitted for the vote of the holders of Media Stock, voting as
a separate class, at the Annual Meeting. The relative voting power of the
Communications Stock and the Media Stock on matters as to which the
Communications Stock and Media Stock vote as a single class has been determined
by a formula set forth in the U S WEST Restated Certificate. This formula
provides that each share of Communications Stock has one vote and each share of
Media Stock has a variable number of votes equal to the ratio of the
time-weighted average market value of one share of Media Stock to the
time-weighted average market value of one share of Communications Stock,
calculated over the 20-trading day period ending ten trading days prior to the
record date for a meeting of stockholders. For the Annual Meeting, the
20-trading day period began on March 9, 1998 and ended on April 3, 1998 (the
tenth trading day prior to the Record Date).
 
    The holders of U S WEST Series C Preferred Stock, U S WEST Series D
Preferred Stock and U S WEST Series E Preferred Stock do not have any voting
rights with respect to the matters to be voted on at the Annual Meeting.
 
PROXIES; REVOCATION OF PROXIES
 
    All shares of Communications Stock and Media Stock which are represented at
the Annual Meeting by proxies properly received and not duly and timely revoked
will be voted at the Annual Meeting in accordance with the instructions
contained therein. In the absence of contrary instructions, such shares will be
voted "FOR" each of the proposals to be considered at the Annual Meeting.
Proxies which are marked "ABSTAIN" will be counted as shares present by proxy at
the Annual Meeting for purposes of determining the presence of a quorum and for
purposes of determining the voting power of the Communications Stock and the
Media Stock present in person or by proxy and entitled to vote at the Annual
Meeting. Proxies relating to "street name" shares that are voted by brokers on
one or more but less than all of the proposals ("broker non-votes") will
nevertheless be treated as shares present for purposes of determining the
presence of a quorum, but will not be treated as shares present in person or by
proxy and entitled to vote at the Annual Meeting as to the proposal as to which
authority to vote is withheld by the broker.
 
    The required vote of stockholders on the Separation is based on the voting
power of all of the outstanding shares of Communications Stock and Media Stock
as of the Record Date. As a result, the failure by a stockholder to vote in
person or by proxy, the abstention from voting by a stockholder and broker
non-votes will all have the same effect as a vote "AGAINST" approval of the
Separation. The required vote of the stockholders on all other proposals to be
considered at the Annual Meeting is based upon the votes cast at the Annual
Meeting. With respect to any such proposal, the failure by a stockholder to vote
in person or by proxy, the abstention from voting by a stockholder and broker
non-votes will not be counted in determining the voting power of the
Communications Stock and Media Stock present in person or by proxy at the Annual
Meeting and will therefore not constitute a vote "FOR" or "AGAINST" such
proposal.
 
                                                                             184
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
    A proxy may be revoked prior to its being voted by: (i) delivering to the
Secretary of U S WEST, at or before the Annual Meeting, a written instrument
bearing a later date than the proxy which instrument, by its terms, revokes the
proxy; (ii) delivering a subsequent proxy card relating to the same shares at or
before the Annual Meeting; or (iii) attending and voting at the Annual Meeting.
Attendance at the Annual Meeting without voting will not of itself constitute
revocation of a proxy. Any written instrument revoking a proxy should be sent
to: U S WEST, Inc., 7800 East Orchard Road, Englewood, Colorado 80111,
Attention: Secretary.
 
    For participants in the U S WEST SIP, a proxy will cover the number of
shares of Communications Stock and Media Stock held in the account of a
participant as well as shares held by such participant in certificated form. For
participants in the Savings Plan/ESOP, a proxy will serve as a voting
instruction card for the trustees of the Savings Plan/ESOP with respect to the
shares of Communications Stock and Media Stock held in the participants'
accounts. The trustees shall vote shares held in the Savings Plan/ESOP for which
proxies are not received (as well as shares held in the suspense account of the
Savings Plan/ESOP) in the same proportion as the shares for which proxies are
received, provided, however, that the trustees shall in all events exercise
voting obligations consistent with the trustees' fiduciary duties under the
Employee Retirement Income Security Act of 1974, as amended.
 
    If a quorum is not obtained, or if fewer shares of Communications Stock and
Media Stock than the number required therefor are voted in favor of approval and
adoption of the Separation, it is expected that the Annual Meeting will be
postponed or adjourned in order to permit additional time for soliciting and
obtaining additional proxies or votes, and, at any subsequent reconvening of the
Annual Meeting, all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the Annual Meeting, except
for any proxies which have theretofore effectively been revoked or withdrawn. In
the absence of a quorum, the Annual Meeting may be adjourned from time to time
by the chairman of the meeting or the holders of a majority of the shares
represented at the Annual Meeting in person or by proxy.
 
    STOCKHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING COMMUNICATIONS
STOCK AND MEDIA STOCK WITH THEIR PROXY CARDS. IN THE EVENT THE SEPARATION IS
CONSUMMATED, CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS
SET FORTH IN A LETTER OF TRANSMITTAL WHICH WILL BE SENT TO STOCKHOLDERS PROMPTLY
AFTER THE SEPARATION TIME.
 
SOLICITATION OF PROXIES
 
    U S WEST will bear the costs of soliciting proxies from stockholders. U S
WEST has retained Beacon Hill Associates, Inc. at an estimated cost of $25,000,
plus reimbursement of expenses, to assist U S WEST in the solicitation of
proxies from brokerage firms and other custodians, nominees and fiduciaries. In
addition to soliciting proxies by mail, directors, officers and employees of U S
WEST, without receiving additional compensation therefor, may solicit proxies by
telephone, by telegram, or in person. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of Communications
Stock and Media Stock held of record by such persons, and U S WEST will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
 
                                                                             185
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
MARKET PRICE AND DIVIDEND DATA OF COMMUNICATIONS STOCK AND MEDIA STOCK
 
    The following table sets forth the high and low sales prices on the New York
Stock Exchange Composite Tape (the "Composite Tape"), and the dividends paid per
share, of the Communications Stock and the Media Stock for the periods
indicated.
 
<TABLE>
<CAPTION>
                                                                                HIGH SALES   LOW SALES    DIVIDENDS
                                                                                   PRICE       PRICE        PAID
                                                                                -----------  ----------  -----------
<S>                                                                             <C>          <C>         <C>
Communications Stock
  1996
    First Quarter.............................................................   $  37.500   $  30.250    $   0.535
    Second Quarter............................................................      34.625      31.125        0.535
    Third Quarter.............................................................      32.250      27.250        0.535
    Fourth Quarter............................................................      33.625      29.250        0.535
  1997
    First Quarter.............................................................   $  37.250   $  31.750    $   0.535
    Second Quarter............................................................      38.500      31.125        0.535
    Third Quarter.............................................................      39.4375     35.625        0.535
    Fourth Quarter............................................................      46.9375     36.875        0.535
  1998
    First Quarter.............................................................   $  56.75    $  43.375    $   0.535
    Second Quarter (through April 9, 1998)....................................   $  58.00    $  53.4375
Media Stock
  1996
    First Quarter.............................................................   $  23.000   $  18.875       --
    Second Quarter............................................................      21.000      16.875       --
    Third Quarter.............................................................      18.875      14.375       --
    Fourth Quarter............................................................      19.875      15.375       --
  1997
    First Quarter.............................................................   $  20.625   $  17.625       --
    Second Quarter............................................................      22.375      16.000       --
    Third Quarter.............................................................      24.250      19.8125      --
    Fourth Quarter............................................................      29.125      22.3125      --
  1998
    First Quarter.............................................................   $  37.1875  $  27.00        --
    Second Quarter (through April 9, 1998)....................................   $  36.00    $  34.1875      --
</TABLE>
 
    On October 24, 1997, the trading day prior to the announcement of the
Separation, the closing sales prices of the Communications Stock and the Media
Stock, as reported on the Composite Tape, were $39.875 and $26.5625,
respectively. On April 9, 1998, the closing sales prices of the Communications
Stock and the Media Stock, as reported on the Composite Tape, were $53.625 and
$36.00, respectively. Stockholders are urged to obtain current trading price
information with respect to the Communications Stock and Media Stock. At the
close of business on the Record Date, there were approximately 484,990,000
shares of Communications Stock and 608,600,000 shares of Media Stock outstanding
and 637,724 holders of record of Communications Stock and 612,447 holders of
record of Media Stock.
 
    U S WEST currently pays a quarterly dividend of $0.535 on the Communications
Stock. U S WEST does not currently pay dividends on the Media Stock. For a
description of the dividend policies of New U S WEST and MediaOne following
consummation of the Separation, see "Chapter 3: The Separation--Dividend
Policy." For a discussion of certain risks related to the trading prices of the
 
                                                                             186
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
New U S WEST Common Stock and MediaOne Common Stock following the Separation,
see "Chapter 2: Risk Factors--Risk Factors Related to New U S WEST--No Prior
Public Market for New U S WEST Common Stock; No Assurance as to Market Price"
and "--Risk Factors Related to MediaOne--No Assurance as to Market Price of
MediaOne Common Stock following Separation."
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 
    The following table sets forth, as of March 16, 1998, information with
respect to each person who was known by U S WEST (based upon a review of
schedules and reports filed with the Commission) to be the beneficial owner of
more than 5% of the Communications Stock or the Media Stock.
 
<TABLE>
<CAPTION>
                                                                      COMMUNICATIONS STOCK            MEDIA STOCK
                                                                    -------------------------  -------------------------
                                                                     NUMBER OF    PERCENT OF    NUMBER OF    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                                   SHARES        CLASS        SHARES        CLASS
- ------------------------------------------------------------------  ------------  -----------  ------------  -----------
<S>                                                                 <C>           <C>          <C>           <C>
Amos B. Hostetter, Jr. ...........................................                               53,318,500        8.5%(1)
 The Pilot House
 Lewis Wharf
 Boston, MA 02110
 
The Capital Group Companies, Inc. ................................    37,071,500        7.7%
 Capital Research and Management Company
 333 South Hope Street
 Los Angeles, CA 90071
 
State Street Bank and Trust Company, .............................    27,278,182        5.6%
 as trustee for the U S WEST
 Benefit Assurance Trust, the
 U S WEST Savings Plan/ESOP
 Stock Ownership Plan and the
 U S WEST Payroll Stock Ownership Plan
 225 Franklin Street
 Boston, Massachusetts 02110
</TABLE>
 
- ------------------------------
 
(1)   Includes 6,481,139 shares of Media Stock which Mr. Hostetter has the right
    to receive upon conversion of 3,402,173 shares of U S WEST Series D
    Preferred Stock beneficially owned by Mr. Hostetter.
 
                                                                             187
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
 
    The following table sets forth information concerning the shares of
Communications Stock and Media Stock beneficially owned as of February 27, 1998
(or as of such other date as may be specified) by (i) each director and named
executive officer of U S WEST and the directors and executive officers of U S
WEST as a group and (ii) each individual who will be a director or named
executive officer of New U S WEST and the individuals who will be the directors
and executive officers of New U S WEST as a group. These shares represent less
than one percent of the Communications Stock and the Media Stock outstanding.
 
<TABLE>
<CAPTION>
                                                        COMMUNICATIONS STOCK                            MEDIA STOCK
                                             ------------------------------------------  ------------------------------------------
                                                            SHARES SUBJECT                              SHARES SUBJECT
                                                             TO OPTIONS**                                TO OPTIONS**
                                             TOTAL NUMBER    (INCLUDED IN    DEFERRAL    TOTAL NUMBER    (INCLUDED IN    DEFERRAL
NAME                                           OF SHARES        TOTAL)       PLANS(1)      OF SHARES        TOTAL)       PLANS(1)
- -------------------------------------------  -------------  --------------  -----------  -------------  --------------  -----------
<S>                                          <C>            <C>             <C>          <C>            <C>             <C>
U S WEST
  Robert L. Crandall.......................         2,200          1,200           546          2,200          1,200           918
  Grant A. Dove............................        11,900          9,300                       11,900          9,300
  Allan D. Gilmour.........................        13,659          9,300                       13,773          9,300
  Michael P. Glinsky.......................        21,223         18,999           637         31,744         31,082         1,111
  Pierson M. Grieve........................        11,300          9,300         6,819         11,300          9,300        10,995
  George J. Harad*.........................         1,340          1,200           523          1,300          1,200           872
  Allen R. Jacobson*.......................        14,672(2)        9,300        4,114         14,672(2)        9,300        5,418
  Charles M. Lillis........................        26,178         11,000                      470,152        351,049        22,226
  Richard D. McCormick*....................       508,290(3)      225,400                     779,074(3)      533,899       53,720
  Marilyn Carlson Nelson*..................        11,500          9,300         3,516         23,622          9,300         4,543
  Frank Popoff*............................        12,000          7,200                       12,000          7,200
  Charles P. Russ III......................       116,916        112,660         2,971        200,505        149,749         6,332
  Louis A. Simpson.........................             0                                      10,000
  John "Jack" Slevin.......................             0                                      10,000
  Solomon D. Trujillo*.....................       236,141        191,885         5,977        203,741        173,881         5,521
  Jerry O. Williams*.......................        11,500          9,300                       11,500          9,300
  All directors and executive officers of U
    S WEST (as a group)....................     1,027,488        646,065        25,533      1,846,627      1,326,616       117,561
 
NEW U S WEST
  Linda G. Alvarado(5).....................           600(6)                                        0
  Craig R. Barrett(5)......................        10,000(6)                                        0
  Jerry J. Colangelo(5)....................           900(6)                                        0
  Peter S. Hellman(5)......................           500(6)                                        0
  Robert E. Knowling, Jr...................        35,905         28,864           423              0
  Mark D. Roellig..........................        42,715         19,933         1,381         58,112         30,706         1,922
  Allan R. Spies...........................        21,840         18,031         1,664          9,441          8,366         2,881
  Gregory M. Winn..........................        42,403(4)       23,030          371         13,436(4)        4,999          404
  All directors and executive officers of
    New U S WEST (as a group)..............       977,420        573,436        18,908      1,160,166        811,484        75,369
</TABLE>
 
 *  Will also be a director or named executive officer of New U S WEST.
 
**  Shares subject to acquisition through exercise of stock options within 60
    days.
 
(1) Includes units denominated as common share equivalents held in deferred
    compensation accounts.
 
(2) Includes 3,462 shares subject to shared voting and investment power.
 
(3) Includes 94,036 shares subject to shared voting and investment power.
 
(4) Includes 3,360 shares subject to shared voting and investment power.
 
(5) These individuals will become directors of New U S WEST at the Separation
    Time.
 
(6) Shares held as of April 9, 1998.
 
                                                                             188
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
LEGAL MATTERS
 
    The validity of the New U S WEST Common Stock to be issued in connection
with the Separation will be passed upon by Weil, Gotshal & Manges LLP, counsel
to New U S WEST.
 
EXPERTS
 
    The consolidated financial statements and the consolidated financial
statement schedule of U S WEST as of December 31, 1997 and 1996 and for the
years ended December 31, 1997 and 1996 included in this Registration Statement
and Proxy Statement, and included in U S WEST's Annual Report on Form 10-K for
the year ended December 31, 1997, as amended by Form 10-K/A filed April 13,
1998, incorporated herein by reference, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
 
    The consolidated financial statements of U S WEST for the year ended
December 31, 1995 included in this Registration Statement and Proxy Statement,
and the consolidated financial statements and consolidated financial statement
schedule of U S WEST included in U S WEST's Annual Report on Form 10-K for the
year ended December 31, 1997, as amended by Form 10-K/A filed April 13, 1998,
incorporated herein by reference, have been included or incorporated herein in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
 
    The combined financial statements of New U S WEST as of December 31, 1997
and 1996 and for the years ended December 31, 1997 and 1996 included in this
Proxy Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated on their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing on giving said reports.
 
    The combined financial statements and combined financial statement schedule
of New U S WEST for the year ended December 31, 1995 included in this
Registration Statement and Proxy Statement have been included herein in reliance
on the report of Coopers & Lybrand L.L.P., independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
 
WHERE YOU CAN FIND MORE INFORMATION
 
    U S WEST is subject to the informational requirements of the Exchange Act
and in accordance therewith file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
concerning U S WEST can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Office at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also can be obtained, at prescribed rates, from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a site on the Internet's World Wide Web at
http://www.sec.gov. that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including U S WEST. The Communications Stock and Media Stock are
listed and traded on the NYSE and the PSE and such reports, proxy statements and
other information concerning U S WEST may also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005 and at the offices of the
PSE, 115 Sansome Street, 2nd Floor, San Francisco, California 94104. As a result
of the Separation, U S WEST (as MediaOne) will continue to be subject to the
informational requirements of the Exchange Act. In addition, upon consummation
of the Separation, New U S WEST will become subject to the informational
requirements of the Exchange Act and will thereafter also file reports, proxy
statements and other information with the Commission.
 
                                                                             189
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
    New U S WEST has filed with the Commission a registration statement on Form
S-4 (such registration statement, together with all amendments, is referred to
herein as the "New U S WEST Registration Statement") under the Securities Act
covering the shares of New U S WEST Common Stock issuable in connection with the
Separation. This Proxy Statement does not contain all of the information set
forth in the New U S WEST Registration Statement and the exhibits thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the New
U S WEST Registration Statement, which is available for inspection and copying
as set forth above. Statements contained in this Proxy Statement or in any
document incorporated by reference in this Proxy Statement as to the contents of
any contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the New U S WEST Registration Statement,
or such other document, each such statement being qualified in all respects by
such reference.
 
    The following documents, which have been filed by U S WEST (File No. 1-8611)
with the Commission under the Exchange Act, are incorporated herein by
reference:
 
    (a) U S WEST's Annual Report on Form 10-K for the year ended December 31,
1997, as amended by Form 10-K/A filed April 13, 1998.
 
    (b) U S WEST's Current Reports on Form 8-K dated January 29, 1998, February
17, 1998 and March 25, 1998 (as amended by Form 8-K/A filed April 13, 1998).
 
    All documents filed with the Commission by U S WEST pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the date of the Annual Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date any such document is
filed.
 
    Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part hereof.
 
    THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED WITHOUT CHARGE TO
EACH PERSON TO WHOM A COPY OF THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST OF SUCH PERSON, FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS
WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF ANY OR ALL OF THE
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO U S WEST, INC., INVESTOR
RELATIONS, 7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111 (TELEPHONE NUMBER
(303) 793-6500). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY
REQUEST SHOULD BE MADE BEFORE MAY 30, 1998.
 
    For additional information about the Separation, please contact Beacon Hill
Associates, Inc., our information agent, toll-free at 1-800-787-3120.
 
STOCKHOLDER PROPOSALS
 
    If the Separation is consummated, stockholder proposals intended for
inclusion in the 1999 Proxy Statement of MediaOne should be sent to the
Secretary of MediaOne at 188 Inverness Drive West, Englewood, CO 80112, and must
be received by December 21, 1998, and stockholder proposals intended for
inclusion in the 1999 Proxy Statement of New U S WEST should be sent to the
Secretary of New U S WEST at 1801 California Street, Denver, Colorado 80202, and
must be received by December 21, 1998. If the Separation is not consummated,
stockholder proposals intended for inclusion in the 1999 Proxy Statement of U S
WEST should be sent to the Secretary of U S WEST at 7800 East Orchard Road,
Englewood, CO 80111, and must be received by December 21, 1998.
 
                                                                             190
                                                   CHAPTER 9: THE ANNUAL MEETING
                                                       AND CERTAIN OTHER MATTERS
<PAGE>
                                                                       ANNEX A-1
 
                            CERTIFICATE OF AMENDMENT
                                       TO
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                 U S WEST, INC.
                         Pursuant to Section 242 of the
                        Delaware General Corporation Law
 
    The undersigned, Assistant Secretary of U S WEST, Inc., a Delaware
corporation (the "Corporation"), does hereby certify that the stockholders of
the Corporation duly approved the following amendment to the Corporation's
Restated Certificate of Incorporation (the "Restated Certificate"), as
heretofore amended, in accordance with the provisions of Section 242 of the
Delaware General Corporation Law:
 
     1. RESOLVED, that Article I of the Restated Certificate is hereby amended
and restated in its entirety as follows.
 
                                   ARTICLE I
                                      NAME
 
    The Name of the Corporation is MediaOne Group, Inc. (the "Corporation").
 
     2. RESOLVED, that Subsection 2.1.2 of Article V of the Restated Certificate
is hereby amended and restated in its entirety as follows:
 
       "SECTION 2.1.2.  LIMITATION ON DIVIDENDS ON MEDIA STOCK.  Dividends on
       Media Stock may be declared and paid only out of the lesser of (i) the
       funds of the Corporation legally available therefor and (ii) the Media
       Group Available Dividend Amount; PROVIDED, HOWEVER, that the Corporation
       may declare and pay the dividend on Media Stock contemplated by
       Subsection 2.4.3(C) upon compliance with clause (i) of this Subsection
       2.1.2. only and without regard to clause (ii)."
 
     3. RESOLVED, that Subsection 2.4.3 of Article V of the Restated Certificate
is hereby amended by adding to the end of such Subsection the following
paragraph (C):
 
       "(C)  Notwithstanding the provisions of paragraphs (A) and (B) of
       subsection 2.4.3., the Board of Directors may, provided that there are
       funds of the Corporation legally available therefor (but without regard
       to the Communications Group Available Dividend Amount or the Media Group
       Available Dividend Amount), (i) redeem each of the issued and outstanding
       shares of Communications Stock for one share of common stock of a
       wholly-owned Subsidiary of the Corporation which holds, directly or
       indirectly, all of the assets and liabilities attributed to the
       Communications Group and certain other assets and liabilities including,
       without limitation, all of the outstanding capital stock of U S WEST Dex,
       Inc. ("New U S WEST") (which shares, in the aggregate together with such
       shares of common stock of New U S WEST as shall be issued to the holders
       of Media Stock in the transaction described in clause (ii) below will
       represent all of the outstanding shares of common stock of New U S WEST
       immediately following such redemption), and (ii) declare and pay a
       dividend upon each outstanding share of Media Stock payable in shares of
       common stock of New U S WEST (the transactions described in clauses (i)
       and (ii) being referred to collectively as the "Separation"), in each
       case in accordance with and on the terms and subject to the conditions of
       that certain Separation Agreement dated as of       , 1998 between the
       Corporation and USW-C, Inc. Notice of the Separation having been provided
       pursuant to the Corporation's Proxy Statement dated
 
                                     A-1-1
<PAGE>
             , 1998, the provisions of paragraphs (F) and (J) of subsection
       2.4.5 shall not be applicable to the transactions contemplated by this
       paragraph (C) of subsection 2.4.3."
 
     4. RESOLVED, that Clauses (F) and (J) of Subsection 2.4.5 of Article V of
the Restated Certificate (Notice and Other Provisions) are hereby amended by
adding to the end of each such clause the following:
 
       "The provisions of this subsection shall not apply to the transactions
       contemplated by clause (C) of subsection 2.4.3."
 
    IN WITNESS WHEREOF, the undersigned does hereby make this certificate,
hereby declaring and certifying that this is the act and deed of the Corporation
and the facts herein stated are true and, accordingly, has executed this
certificate as of this       th day of       , 1998.
 
                                          U S WEST, INC.
 
                                          By:
          ----------------------------------------------------------------------
 
                                            Name: Stephen E. Brilz
 
                                            Title: Assistant Secretary
 
                                     A-1-2
<PAGE>
                                                                       ANNEX A-2
 
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                              MEDIAONE GROUP, INC.
                     (Originally Incorporated May 12, 1995
                         Under the Name U S WEST, Inc.)
 
                                   ARTICLE I
                                      NAME
 
    The name of the corporation is MediaOne Group, Inc. (the "Corporation").
 
                                   ARTICLE II
                         ADDRESS OF REGISTERED OFFICE;
                            NAME OF REGISTERED AGENT
 
    The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
that address is The Corporation Trust Company.
 
                                  ARTICLE III
                                    PURPOSE
 
    The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law (the "Corporation Law").
 
                                   ARTICLE IV
                                     POWERS
 
    The Corporation shall have all powers that may now or hereafter be lawful
for a corporation to exercise under the Corporation law.
 
                                   ARTICLE V
                                 CAPITAL STOCK
 
    SECTION 1.  AUTHORIZATION.  Upon the filing of this Restated Certificate of
Incorporation, each share of U S WEST Media Group Common Stock, par value $0.01
per share (the "U S WEST Media Group Common Stock"), shall be and hereby is
recharacterized as one share of Common Stock (as defined below). The aggregate
number of shares of stock which the Corporation shall have authority to issue is
two billion two hundred million (2,200,000,000) shares, of which two billion
(2,000,000,000) shares shall be shares of common stock having a par value of
$0.01 per share (the "Common Stock") and two hundred million (200,000,000)
shares shall be shares of a class of preferred stock having a par value of $1.00
per share (the "Preferred Stock") and issuable in one or more series as
hereinafter provided. For purposes of this Article V, references to "Common
Stock" shall include the U S WEST Media Group Common Stock, the "Board of
Directors" shall refer to the Board of Directors of the Corporation, as
established in accordance with Article VI of the certificate of incorporation of
the Corporation and references to "the Certificate of Incorporation of the
Corporation" shall refer to this Restated Certificate of Incorporation as the
same may be amended from time to time.
 
                                     A-2-1
<PAGE>
    SECTION 2.  COMMON STOCK.  The voting powers, preferences and relative,
participating, optional or other special rights of the Common Stock, and the
qualifications and restrictions thereon, shall be as follows in this Section 2.
 
    2.1.  DIVIDENDS.  Subject to any preferences and relative, participating,
optional or special rights of any outstanding series of Preferred Stock and any
qualifications or restrictions on the Common Stock created thereby, dividends
may be declared and paid upon the Common Stock as the Board of Directors may
determine.
 
    2.2.  VOTING POWERS.  The shares of Common Stock of the Corporation shall be
of one and the same class. The holders of Common Stock shall have one vote per
share of Common Stock on all matters on which holders of Common Stock are
entitled to vote. Except as otherwise provided by law or by the terms of any
outstanding series of Preferred Stock or any provision of the Certificate of
Incorporation of the Corporation restricting the power to vote on a specified
matter to other stockholders, the entire voting power of the stockholders of the
Corporation shall be vested in the holders of Common Stock of the Corporation,
who shall be entitled to vote on any matter on which the holders of stock of the
Corporation shall, by law or by the provisions of the Certificate of
Incorporation or bylaws of the Corporation, be entitled to vote.
 
    2.3.  LIQUIDATION RIGHTS.  In the event of the voluntary or involuntary
dissolution of the Corporation or the liquidation and winding up of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and the full preferential amounts (including any
accumulated and unpaid dividends) to which the holders of Preferred Stock are
entitled, unless otherwise provided in respect of a series of preferred stock by
the resolution of the Board of Directors fixing the liquidation rights and
preferences of such series of preferred stock, the holders of the outstanding
shares of Common Stock shall be entitled to receive the remaining assets of the
Corporation. Neither the merger nor consolidation of the Corporation into or
with any other company, nor the merger or consolidation of any other company
into or with the Corporation, nor a sale, transfer or lease of all or any part
of the assets of the Corporation, shall, alone, be deemed a liquidation or
winding up of the Corporation, or cause the dissolution of the Corporation, for
purposes of this subsection 2.3.
 
    SECTION 3.  PREFERRED STOCK.  The Preferred Stock may be issued from time to
time in one or more series. Except as provided by subsection 3.1 with respect to
the Series A Preferred Stock (as hereinafter defined), by subsection 3.2 with
respect to the Series C Preferred Stock (as hereinafter defined) and by
subsection 3.4 with respect to the Series D Stock (as defined in Exhibit A
hereto) and the Series E Stock (as defined in Exhibit B hereto), the Board of
Directors is authorized, by resolution adopted and filed in accordance with law,
to fix the number of shares in each series, the designation thereof, the voting
powers, preferences and relative, participating, optional or other special
rights thereof, and the qualifications or restrictions thereon, of each series
and the variations in such voting powers and preferences and rights as between
series. Any shares of any class or series of Preferred Stock purchased,
exchanged, converted or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, without designation as to series, and may be
reissued as part of any series of Preferred Stock created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth in this Certificate of Incorporation or in
such resolution or resolutions.
 
    3.1.  SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK.  There is
hereby created a series of Preferred Stock, designated Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share (the "Series
A Preferred Stock"), of 10,000,000 shares having the following voting powers,
preferences and rights, and qualifications and restrictions thereon provided by
this subsection 3.1:
 
                                     A-2-2
<PAGE>
    3.1.1.  DIVIDENDS AND DISTRIBUTIONS.
 
   (A) The holders of shares of Series A Preferred Stock, in preference to the
holders of shares of Common Stock and any other junior stock of the Corporation
that may be outstanding, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the tenth day of January, April, July and
October in each year (each such date being referred to in this subsection 3.1 as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (i) $25 per share ($100 per annum), or (ii) subject to
the provision for adjustment hereinafter set forth in this paragraph (A), the
product of 100 multiplied by the aggregate per share amount of all cash
dividends and all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock.
 
    (B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this subsection 3.1.1
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); PROVIDED, HOWEVER,
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $25 per share
($100 per annum) on the Series A Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
 
    (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
(i) the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or (ii) the date of issue
of such shares is after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and
on or prior to the next succeeding Quarterly Dividend Payment Date, in which
case such dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
 
    3.1.2.  VOTING RIGHTS.  The holders of shares of Series A Preferred Stock
shall have the following voting rights:
 
   (A) Each holder of Series A Preferred Stock shall be entitled to a number of
votes equal to the product of (i) 100 multiplied by (ii) the maximum number of
votes per share of Common Stock at such time with respect to such matter.
 
    (B) Except as otherwise provided in the Certificate of Incorporation of the
Corporation or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
 
    (C) (1) If and whenever at any time or times dividends payable on shares of
Series A Preferred Stock shall have been in arrears and unpaid in an aggregate
amount equal to or exceeding the amount
 
                                     A-2-3
<PAGE>
of dividends payable thereon for six quarterly dividend periods, then the number
of directors constituting the Board of Directors shall be automatically
increased by two and the holders of shares of Series A Preferred Stock, together
with the holders of any shares of any shares of stock ranking on a parity
(either as to dividends or to distributions upon liquidation or dissolution and
winding-up of the Corporation) as to which in each case dividends are in arrears
and unpaid in an aggregate amount equal to or exceeding the amount of dividends
payable thereon for six quarterly dividend periods, shall have the exclusive
right, voting separately as a class with such other series, to elect two
directors of the Corporation.
 
        (2) Such voting right may be exercised initially either by written
    consent or at a special meeting of the holders of the Preferred Stock having
    such voting right, called as hereinafter provided, or at any annual meeting
    of stockholders held for the purpose of electing directors, and thereafter
    at each such annual meeting until such time as all dividends in arrears on
    the shares of this Series shall have been paid in full and all dividends
    payable on the shares of Series A Preferred Stock on four subsequent
    consecutive Quarterly Dividend Payment Dates shall have been paid in full on
    such dates or funds shall have been set aside for the payment thereof, at
    which time such voting right and the term of the directors elected pursuant
    to Section 3.1.2.(C)(1) shall terminate.
 
        (3) At any time when such voting right shall have vested in holders of
    shares of such series of Preferred Stock described in Section 3.1.2.(C)(2),
    and if such right shall not already have been exercised by written consent,
    a proper officer of the Corporation may call, and, upon the written request,
    addressed to the Secretary of the Corporation, of the record holders of
    either (i) shares representing twenty-five percent (25%) of the voting power
    of the shares then outstanding of the Series D Preferred Stock or (ii)
    shares representing twenty-five percent (25%) of the voting power of shares
    of all series of Preferred Stock having such voting right, shall call, a
    special meeting of the holders of Preferred Stock having such voting right.
    Such meeting shall be held at the earliest practicable date upon the notice
    required for annual meetings of stockholders at the place for holding annual
    meetings of stockholders of the Corporation, or, if none, at a place
    designated by the Board of Directors. Notwithstanding the provisions of this
    Section 3.1.2.(C)(3), no such special meeting shall be called during a
    period within 60 days immediately preceding the date fixed for the next
    annual meeting of stockholders.
 
        (4) At any meeting held for the purpose of electing directors at which
    the holders of such Preferred Stock shall have the right to elect directors
    as provided herein, the presence in person or by proxy of the holders of
    shares representing more than fifty percent (50%) in voting power of the
    then outstanding shares of such Preferred Stock having such right shall be
    required and shall be sufficient to constitute a quorum of such class for
    the election of directors by such class.
 
        (5) Any director elected by holders of Preferred Stock pursuant to the
    voting right created under this Section 3.1.2. shall hold office until the
    next annual meeting of stockholders (unless such term has previously
    terminated pursuant to Section 3.1.2.(C)(2) and any vacancy in respect of
    any such director shall be filled only by vote of the remaining director so
    elected, or if there be no such remaining director, by the holders of such
    Preferred Stock entitled to elect such director or directors by written
    consent or at a special meeting called in accordance with the procedures set
    forth in Section 3.1.2.(C)(3), or, if no special meeting is called or
    written consent executed, at the next annual meeting of stockholders.
 
   (D) Nothing contained in this subsection 3.1 shall prevent the Board of
Directors or stockholders from taking any action to increase the number of
authorized shares of Series A Preferred Stock, or increasing the number of
authorized shares of Preferred Stock of the same class as the Series A Preferred
Stock or the number of authorized shares of Common Stock or changing the par
value of the Common Stock or Preferred Stock, or issuing options, warrants or
rights to any class of stock of the Corporation, as may be authorized by the
Certificate of Incorporation of the Corporation.
 
                                     A-2-4
<PAGE>
    (E) Except as set forth herein, holders of shares of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote as set forth in the
Certificate of Incorporation of the Corporation or by law) for the taking of any
corporate action.
 
    3.1.3.  CERTAIN RESTRICTIONS.
 
    (A) Whenever any dividends or other distributions payable on the Series A
Preferred Stock as provided in subsection 3.1.1 hereof are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not, and shall cause its subsidiaries
not to, directly or indirectly:
 
    (1) declare or pay dividends on, or make any other distributions with
respect to, any shares of stock ranking junior (either as to dividends or to
distributions upon liquidation or dissolution and winding-up of the Corporation)
to the Series A Preferred Stock;
 
    (2) declare or pay dividends on, or make any other distributions with
respect to, any shares of stock ranking on a parity (either as to dividends or
to distributions upon liquidation or dissolution and winding-up of the
Corporation) with the Series A Preferred Stock, except dividends paid ratably on
shares of the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears, in proportion to the total amounts of such
dividends to which the holders of all such shares are then entitled;
 
    (3) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or to distributions upon
liquidation or dissolution and winding-up of the Corporation) with the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or to
distributions upon dissolution or liquidation and winding-up of the Corporation)
to the Series A Preferred Stock; or
 
    (4) purchase or otherwise acquire for consideration any shares of Series A
Preferred Stock, or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
 
    (B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this subsection
3.1.3, purchase or otherwise acquire such shares at such time and in such
manner.
 
    3.1.4.  REACQUIRED SHARES.  Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall, upon their cancellation, become authorized but unissued shares of
Preferred Stock, without designation as to series, and may be reissued as part
of any series of Preferred Stock created by resolution or resolutions of the
Board of Directors (including additional shares of Series A Preferred Stock),
subject to the conditions and restrictions on issuance set forth in the
Certificate of Incorporation of the Corporation.
 
                                     A-2-5
<PAGE>
    3.1.5.  LIQUIDATION OR DISSOLUTION AND WINDING-UP.  Upon any liquidation or
dissolution and winding-up of the Corporation, no distribution shall be made to:
 
    (A) the holders of shares of stock ranking junior (either as to dividends or
to distributions upon liquidation or dissolution and winding-up of the
Corporation) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received the greater of (i)
$100 per share ($1.00 per one-hundredth of a share), plus an amount equal to all
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, or (ii) an aggregate amount per share equal to the
product of (x) 100 multiplied by (y) the aggregate amount to be distributed in
connection with such liquidation or dissolution and winding-up per share to
holders of shares of Common Stock; or
 
    (B) the holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation or dissolution and winding-up of the Corporation)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such other parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation or dissolution and winding-up.
 
    3.1.6.  CONSOLIDATION, MERGER, ETC.  In the event that the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, or otherwise changed, then, and in
each such event, the shares of Series A Preferred Stock shall at the same time
be similarly exchanged for an amount per share equal to the product of (i) 100
multiplied by (ii) the aggregate amount of stock, securities, cash or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
 
    3.1.7.  NO REDEMPTION.  The shares of Series A Preferred Stock shall not be
redeemable. Notwithstanding the foregoing, the Corporation may acquire shares of
Series A Preferred Stock in any other manner permitted by law or the Certificate
of Incorporation of the Corporation.
 
    3.1.8.  RANK.  Unless otherwise provided in the Certificate of Incorporation
of the Corporation or a Certificate of Designations relating to a series of
preferred stock of the Corporation established after the issuance of any shares
of Series A Preferred Stock or any right, warrant, or option providing for the
issuance thereof, the Series A Preferred Stock shall rank, as to the payment of
dividends and the distribution of assets on liquidation or dissolution and
winding-up of the Corporation, PARI PASSU to the Series C Cumulative Redeemable
Preferred Stock, par value $1.00 per share, of the Corporation, junior to all
other series of the Corporation's Preferred Stock and senior to the Common
Stock.
 
    3.1.9.  AMENDMENT.  The Certificate of Incorporation of the Corporation
shall not be amended in any manner that would materially and adversely alter or
change the powers, preferences or special rights of the Series A Preferred Stock
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
series.
 
    3.1.10.  FRACTIONAL SHARES.  Series A Preferred Stock may be issued in
fractions of a share (in one one-hundredths (1/100) of a share and integral
multiples thereof) that shall entitle the holder thereof, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of shares of Series A Preferred Stock.
 
    3.2.  [INTENTIONALLY OMITTED]
 
    3.3.  SERIES C CUMULATIVE REDEEMABLE PREFERRED STOCK.  There is hereby
created a series of Preferred Stock designated as Series C Cumulative Redeemable
Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock"), of
fifty thousand (50,000) shares having the following voting powers, preferences
and rights, and qualifications and restrictions thereon:
 
                                     A-2-6
<PAGE>
    3.3.1.  DIVIDENDS.
 
   (A) The holders of shares of the Series C Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds of
the Corporation legally available therefor, cumulative cash dividends on the
shares of the Series C Preferred Stock at the rate of $70.00 per annum per
share, and no more, payable in equal quarterly installments on the first
business day of November, February, May and August, in each year, commencing on
the first business day of November, 1995. Such dividends shall accrue and be
cumulative from the date of original issue of each share of the Series C
Preferred Stock, whether or not declared and whether or not there shall be funds
legally available for the payment thereof. Each such dividend shall be paid to
the holders of record of the shares of the Series C Preferred Stock as they
appear on the share register of the Corporation on such record date, not more
than 30 days nor less than 10 days preceding the dividend payment date thereof,
as shall be fixed by the Board of Directors or a duly authorized committee
thereof. Dividends in arrears may be declared and paid at any time without
reference to any regular dividend payment date.
 
    (B) If dividends are not paid in full, or declared in full and sums set
apart for the full payment thereof, upon the shares of the Series C Preferred
Stock and shares of any other preferred stock ranking on a parity as to
dividends with the Series C Preferred Stock, all dividends declared upon shares
of the Series C Preferred Stock and of any other preferred stock ranking on a
parity as to dividends with the Series C Preferred Stock shall be paid or
declared PRO RATA so that in all cases the amount of dividends paid or declared
per share on the Series C Preferred Stock and on such other shares of preferred
stock shall bear to each other the same ratio that accumulated dividends per
share, including dividends accrued or dividends in arrears, if any, on the
shares of the Series C Preferred Stock and such other shares of preferred stock
bear to each other. Except as provided in the preceding sentence, unless full
cumulative dividends on the shares of the Series C Preferred Stock have been
paid or declared in full and sums set aside exclusively for the payment thereof,
(i) no dividends (other than dividends in shares of the Common Stock or in
shares of any other capital stock of the Corporation ranking junior to the
Series C Preferred Stock as to dividends) shall be paid or declared or set aside
for payment or other distribution made upon the Common Stock or any other
capital stock of the Corporation ranking junior to or on a parity with the
Series C Preferred Stock as to dividends, (ii) nor shall any shares of the
Common Stock or shares of any other capital stock of the Corporation ranking
junior to or on a parity with the Series C Preferred Stock as to dividends, or
any warrants, rights, calls or options exercisable for or convertible into
Common Stock or any such capital stock, be redeemed, purchased or otherwise
acquired for any consideration (or any payment made to or available for a
sinking fund or any similar fund for the redemption of any such shares) by the
Corporation or any, direct or indirect, subsidiary of the Corporation (except in
the case of clause (ii) by conversion into or exchange for shares of capital
stock of the Corporation ranking junior to the Series C Preferred Stock as to
dividends, or any warrants, rights, calls or options exercisable for or
convertible into Common Stock or any such capital stock). Holders of shares of
the Series C Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or shares of capital stock, in excess of full accrued
and cumulative dividends as herein provided. No interest or sum of money in lieu
of interest shall be payable in respect of any dividend payment or payments on
the shares of the Series C Preferred Stock that may be in arrears.
 
    The terms "accrued dividends," "dividends accrued" and "dividends in
arrears," whenever used herein with reference to shares of preferred stock shall
be deemed to mean an amount that shall be equal to dividends thereon at the
annual dividend rates per share for the respective series from the date or dates
on which such dividends commence to accrue to the end of the then current
quarterly dividend period for such preferred stock (or, in the case of
redemption, to the date of redemption), less the amount of all dividends paid,
or declared in full and sums set aside for the payment thereof, upon such shares
of preferred stock.
 
                                     A-2-7
<PAGE>
    (C) Dividends payable on the shares of the Series C Preferred Stock for any
period less than a full quarterly dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.
 
    3.3.2.  REDEMPTION.
 
    (A)  MANDATORY REDEMPTION.  On September 2, 2004, to the extent (i) the
Corporation shall have funds legally available therefor and (ii) the Corporation
shall not have been rendered insolvent pursuant to the U.S. Bankruptcy Code, the
Corporation shall redeem all remaining outstanding shares of Series C Preferred
Stock, at a redemption price of $1,000.00 per share, together with accrued and
unpaid dividends thereon to the redemption date, in cash without interest. If,
for any reason, the Corporation shall fail to discharge its mandatory redemption
obligations pursuant to this paragraph (A) of subsection 3.3.2, such mandatory
redemption obligations shall be discharged as soon as the Corporation is able to
discharge such obligations. If and so long as any mandatory redemption
obligations with respect to the shares of Series C Preferred Stock shall not be
fully discharged, (i) no dividends (other than dividends in shares of the Common
Stock) shall be paid or declared or set aside for payment or other distribution
made upon the Common Stock or any other capital stock of the Corporation ranking
junior to or on a parity with the Series C Preferred Stock as to dividends, or
any warrants, rights, calls or options exercisable for or convertible into
Common Stock or any such capital stock, (ii) nor shall any shares of the
Communications Stock or Media Stock or shares of any other capital stock of the
Corporation ranking junior to or on a parity with the Series C Preferred Stock
as to dividends, or any warrants, rights, calls or options exercisable for or
convertible into Common Stock or any such capital stock, be redeemed, purchased
or otherwise acquired for any consideration (or any payment made to or available
for a sinking or other similar fund for the redemption of any such shares) by
the Corporation or any direct or indirect subsidiary of the Corporation (except,
in the case of clause (ii), by conversion into or exchange for shares of capital
stock of the Corporation ranking junior to the Series C Preferred Stock as to
dividends).
 
    (B)  OPTIONAL REDEMPTION BEGINNING SEPTEMBER 2, 1999.  (i) Subject to
subparagraph (B)(ii) of this subsection 3.3.2, the shares of the Series C
Preferred Stock shall be redeemable at the option of the Corporation, in whole
or from time to time in part, at any time on or after September 2, 1999, subject
to the limitations set forth below, at the following redemption prices per share
plus, in each case, all dividends accrued and unpaid on the shares of the Series
C Preferred Stock up to the date fixed for redemption, upon giving notice as
provided in paragraph (D) of this subsection 3.3.2:
 
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH PERIOD BEGINNING SEPTEMBER 2,                              PRICE
- -------------------------------------------------------------------------------------------  ----------
<S>                                                                                          <C>
1999.......................................................................................  $ 1,035.00
2000.......................................................................................  $ 1,028.00
2001.......................................................................................  $ 1,021.00
2002.......................................................................................  $ 1,014.00
2003.......................................................................................  $ 1,007.00
</TABLE>
 
    The excess amount of the price per share over $1,000 (other than accrued but
unpaid dividends) is referred to herein as the "Redemption Premium".
 
        (ii) From and after the time of any exercise of any Ten-Year Options (as
    hereinafter defined), upon giving notice as provided in paragraph (D) of
    this subsection 3.3.2 below, the Corporation shall have the right to redeem,
    without the payment of the Redemption Premium thereon, a number of shares of
    Series C Preferred Stock equal to 50,000 multiplied by a fraction the
    numerator of which shall be the number of Ten-Year Options so exercised at
    such time and the denominator of which shall be the aggregate number of
    Ten-Year Options initially issued. The number of shares of Series C
    Preferred Stock which may be redeemed without the applicable Redemption
    Premium shall be cumulative with each such exercise of the Ten-Year Options
    but shall be reduced
 
                                     A-2-8
<PAGE>
    upon any redemption of Series C Preferred Stock without the payment of the
    Redemption Premium by the number of shares so redeemed. The adjustment to
    the Redemption Premium in this subparagraph (B)(ii) of subsection 3.3.2
    shall take into account any Ten-Year Options exercised prior to the time the
    shares of Series C Preferred Stock are redeemed on the Redemption Date
    regardless of whether notice of the redemption of such shares was given
    prior to the exercise of such Ten-Year Options. "Ten-Year Options" means the
    1,893,940 Options initially issued by U S WEST Capital Corporation ("USWCC")
    to Fund American Enterprises Holdings, Inc. ("FFC") pursuant to the
    Securities Purchase Agreement dated April 10, 1994, among FFC, the
    Corporation, USWCC and Financial Security Assurance Holdings Ltd. and
    referred to in such agreement as the "Ten-Year Options".
 
    (C)  SPECIAL PROCEDURE FOR PARTIAL REDEMPTION.  If less than all of the
outstanding shares of the Series C Preferred Stock are to be redeemed, the
shares to be redeemed shall be determined PRO RATA.
 
    (D)  GENERAL PROCEDURES FOR REDEMPTION.  At least 30 days but not more than
60 days prior to the date fixed for the redemption of shares of the Series C
Preferred Stock, a written notice shall be given to each holder of record of
shares of the Series C Preferred Stock to be redeemed by certified or registered
mail in a postage prepaid envelope or by a nationally recognized overnight
courier (appropriately marked for overnight delivery) addressed to such holder
at its post office address as shown on the records of the Corporation (and shall
be deemed given only upon the earlier of (i) the date when received by the
holder or (ii) three days after the Corporation has sent such notice), notifying
such holder of the election of the Corporation to redeem such shares, stating
the date fixed for redemption thereof (the "Redemption Date"), that the shares
shall be deemed to be redeemed at 5:00 p.m., New York time, on such date and the
redemption price (including a calculation of all accrued dividends up to and
including the Redemption Date, but subject to reduction as a result of any
exercises of the Ten-Year Options), and calling upon such holder to surrender to
the Corporation on the Redemption Date at the place designated in such notice
its certificate or certificates representing the number of shares specified in
such notice of redemption. Each notice of redemption shall be irrevocable. On or
after the Redemption Date, upon surrender by each holder of its certificate or
certificates for shares of the Series C Preferred Stock to be redeemed at the
place designated in such notice, the redemption price of such shares (together
with all accrued and unpaid dividends thereon up to and including the Redemption
Date) shall be paid in immediately available funds to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In case less than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares, without cost to
the holder thereof. From and after the Redemption Date (unless notice of
redemption is not received by each holder of shares as aforesaid, or default
shall be made by the Corporation in payment of the redemption price or accrued
and unpaid dividends up to and including the Redemption Date), all dividends on
the shares of the Series C Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price of such shares (including all accrued and unpaid dividends up to the
Redemption Date) upon the surrender of certificates representing the same, shall
cease and terminate, and such shares shall not be deemed to be outstanding for
any purpose whatsoever. At its election, if notice of redemption is received by
each holder of shares as aforesaid, the Corporation prior to the Redemption Date
may deposit the redemption price (including all accrued and unpaid dividends up
to the Redemption Date) of shares of the Series C Preferred Stock so called for
redemption in trust for the account of holders thereof with a bank or trust
company (having a capital surplus and undivided profits aggregating not less
than $100,000,000) in the Borough of Manhattan, City and State of New York, or
the City of Denver, State of Colorado, in which case the aforesaid notice to
holders of shares of the Series C Preferred Stock to be redeemed shall state the
date of such deposit, shall specify the office of such bank or trust company as
the place of payment of the redemption price, and shall call upon such holders
to surrender the certificates representing such shares at such place on or after
the date fixed in
 
                                     A-2-9
<PAGE>
such redemption notice (which shall not be later than the Redemption Date)
against payment of the redemption price (including all accrued and unpaid
dividends up to the Redemption Date). Any interest accrued on such funds shall
be paid to the Corporation from time to time. Any moneys so deposited that shall
remain unclaimed by the holders of such shares of the Series C Preferred Stock
at the end of two years after the Redemption Date shall be returned by such bank
or trust company to the Corporation, and thereafter the holder of any such
shares shall look to the Corporation for the payment of the redemption price
(and any accrued and unpaid dividends).
 
    (E)  SHARES REDEEMED OR REPURCHASED.  Shares of the Series C Preferred Stock
redeemed, repurchased or retired by the Corporation pursuant to the provisions
of this subsection 3.3.2, shall thereupon be retired and may not be reissued as
shares of the Series C Preferred Stock but shall thereafter have the status of
authorized but unissued shares of the Preferred Stock, without designation as to
series until such shares are once more designated as part of a particular series
of the Preferred Stock.
 
    3.3.3.  VOTING RIGHTS.
 
    Except as otherwise provided in subsection 3.3.5 or as required by law, the
holders of shares of the Series C Preferred Stock shall not be entitled to vote
on any matter on which the holders of any voting securities of the Corporation
shall be entitled to vote.
 
    3.3.4.  LIQUIDATION RIGHTS.
 
   (A) In the event of any liquidation or dissolution and winding-up of the
affairs of the Corporation, whether voluntary or otherwise, the holders of
shares of the Series C Preferred Stock shall be entitled to receive, in cash,
out of the assets of the Corporation available for distribution to stockholders,
the amount of One Thousand Dollars ($1,000.00) for each share of the Series C
Preferred Stock, plus an amount equal to all dividends accrued and unpaid on
each such share up to and including the date fixed for distribution, before any
distribution shall be made to the holders of shares of the Common Stock or any
other capital stock of the Corporation ranking (as to any such distribution)
junior to the Series C Preferred Stock. If upon any liquidation or dissolution
and winding up of the Corporation, the assets distributable among the holders of
shares of the Series C Preferred Stock and all other classes and series of
preferred stock ranking (as to any such distribution) on a parity with the
Series C Preferred Stock are insufficient to permit the payment in full to the
holders of all such shares of all preferential amounts payable to all such
holders, then the entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of the shares of the Series C Preferred
Stock and such other classes and series of preferred stock ranking (as to any
such distribution) on a parity with the Series C Preferred Stock in proportion
to the respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
 
    (B) For purposes of this subsection 3.3.4, a distribution of assets in any
liquidation or dissolution and winding-up shall not include (i) any
consolidation or merger of the Corporation with or into any other corporation,
(ii) any liquidation or dissolution and winding-up or reorganization of the
Corporation immediately followed by reincorporation of another corporation or
(iii) a sale or other disposition of all or substantially all of the
Corporation's assets to another corporation; PROVIDED, HOWEVER, that, in each
case, effective provision is made in the Certificate of Incorporation of the
resulting and surviving corporation or otherwise for the protection of the
rights of the holders of shares of the Series C Preferred Stock.
 
    (C) After the payment of the full preferential amounts provided for herein
to the holders of shares of the Series C Preferred Stock or funds necessary for
such payment have been set aside in trust for the holders thereof in the manner
provided in paragraph (D) of subsection 3.3.2, such holders shall be entitled to
no other or further participation in the distribution of the assets of the
Corporation.
 
                                     A-2-10
<PAGE>
    3.3.5.  LIMITATIONS.  In addition to any other rights provided by applicable
law, so long as any shares of the Series C Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote, or the written consent as
provided by law, of the holders of at least two-thirds ( 2/3) of the outstanding
shares of the Series C Preferred Stock, voting separately, modify, amend or
rescind the preferences, rights or powers with respect to the Series C Preferred
Stock so as to affect the Series C Preferred Stock adversely; but (except as
otherwise required by applicable law) nothing herein contained shall require
such a vote or consent (i) in connection with any increase in the total number
of authorized shares of the Common Stock, or (ii) in connection with the
authorization or increase of any class or series of shares of preferred stock.
The provisions of this subsection 3.3.5 shall not in any way limit the right and
power of the Corporation to issue its currently authorized but unissued shares
or bonds, notes, mortgages, debentures, and other obligations, and to incur
indebtedness to banks and to other lenders.
 
    3.3.6.  NO PREEMPTIVE RIGHTS.  No holder of shares of the Series C Preferred
Stock shall possess any preemptive rights to subscribe for or acquire any
unissued shares of capital stock of the Corporation (whether now or hereafter
authorized) or securities of the Corporation convertible into or carrying a
right to subscribe to or acquire shares of capital stock of the Corporation.
 
    3.3.7.  RANK.  Unless otherwise provided in the Certificate of Incorporation
of the Corporation or a Certificate of Designations relating to a series of
preferred stock of the Corporation established after the issuance of any shares
of Series C Preferred Stock or any right, warrant or option providing for the
issuance thereof, the Series C Preferred Stock shall rank, as to the payment of
dividends and the distribution of assets on liquidation or dissolution and
winding-up, whether voluntary or involuntary, of the Corporation, on a parity
with the Series A Junior Participating Cumulative Preferred Stock, par value
$1.00 per share, and the Series B Junior Participating Cumulative Preferred
Stock, par value $1.00 per share, of the Corporation, junior to all other series
of the Corporation's Preferred Stock, and senior to the Common Stock.
 
    3.4  SERIES D PREFERRED STOCK AND SERIES E PREFERRED STOCK.  Pursuant to the
authority conferred by this Article V, the following series of Preferred Stock
have been designated pursuant to Certificates of Designation previously filed,
each such series consisting of such number of shares, with such voting powers
and with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof as
are stated and expressed in the exhibit with respect to such series attached
hereto as specified below and incorporated herein by reference:
 
<TABLE>
<S>                      <C>
                         Series D Convertible Preferred
Exhibit A..............  Stock
                         Series E Convertible Preferred
Exhibit B..............  Stock
</TABLE>
 
                                   ARTICLE VI
                               BOARD OF DIRECTORS
 
    SECTION 1.  NUMBER OF DIRECTORS.  The number of Directors shall be fixed by
the Bylaws of the Corporation, but shall not be less than six nor more than
seventeen.
 
    SECTION 2.  POWERS OF THE BOARD OF DIRECTORS.  The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors selected as provided by law and the Certificate of Incorporation and
the Bylaws of the Corporation. In furtherance, and not in limitation, of the
powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to:
 
       (A) adopt, amend, alter, change or repeal Bylaws of the Corporation;
    PROVIDED, HOWEVER, that no Bylaw hereafter adopted shall invalidate any
    prior act of the Corporation that would have been valid if such new Bylaws
    had not been adopted;
 
                                     A-2-11
<PAGE>
        (B) subject to the Bylaws as from time to time in effect, determine the
    rules and procedures for the conduct of the business of the Board of
    Directors and the management and direction by the Board of Directors of the
    business and affairs of the Corporation, including the power to designate
    and empower committees of the Board of Directors, to elect, or authorize the
    appointment of, and empower officers and other agents of the Corporation,
    and to determine the time and place of, the notice requirements for, and the
    manner of conducting, Board meetings, as well as other notice requirements
    for, and the manner of taking, Board action; and
 
        (C) exercise all such powers and do all such acts as may be exercised or
    done by the Corporation, subject to the provisions of the Corporation Law
    and the Certificate of Incorporation and Bylaws of the Corporation.
 
    SECTION 3.  CLASSIFIED BOARD OF DIRECTORS.  The directors, other than those
who may be elected solely by the holders of shares of any class or series of
stock having a preference over the Common Stock of the Corporation as to
dividends or to distributions upon liquidation or dissolution and winding-up of
the Corporation pursuant to the terms of Article V of the Certificate of
Incorporation of the Corporation, shall be classified, with respect to the time
for which they severally hold office, into three classes, with each class to
hold office until its successors are elected and qualified. Subject to the
rights of the holders of any class or series of stock having a preference over
the Common Stock of the Corporation as to dividends or to distributions upon
liquidation or dissolution and winding-up of the Corporation, at each annual
meeting of the stockholders, the successors of the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
their election.
 
    SECTION 4.  VACANCIES.  Except as otherwise required by law, any vacancy in
the Board of Directors for any reason and any newly created directorship
resulting by reason of any increase in the number of directors may be filled
only by the Board of Directors (and not by the stockholders), by resolution
adopted by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum (or by a sole remaining director);
PROVIDED, HOWEVER, that if not so filled, any such vacancy shall be filled by
the stockholders at the next annual meeting or at a special meeting called for
that purpose. Any director so appointed shall hold office until the next meeting
of stockholders at which directors of the class for which such director has been
chosen are to be elected and until his or her successor is elected and
qualified.
 
    SECTION 5.  REMOVAL OF DIRECTORS.  Except as may be provided in respect of
any series of Preferred Stock pursuant to Article V with respect to any
directors elected solely by the holders of such series of Preferred Stock, any
director (including all members of the Board of Directors) may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least 80% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class. For the purposes of this Section
5, "cause" shall mean the wilful and continuous failure of a director to
substantially perform such director's duties to the Corporation (other than any
such failure resulting from incapacity due to physical or mental illness) or the
wilful engaging by a director in gross misconduct materially and demonstrably
injurious to the Corporation.
 
                                  ARTICLE VII
                STOCKHOLDER ACTIONS AND MEETINGS OF STOCKHOLDERS
 
    Subject to the rights of the holders of any series of Preferred Stock, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of such holders and
may not be effected by written consent in lieu of a meeting of such holders.
Subject to the rights of the holders of any series of Preferred Stock, special
meetings of stockholders of the Corporation may be called only by the Chairman
of the Board of Directors of the
 
                                     A-2-12
<PAGE>
Corporation or the Board of Directors pursuant to a resolution adopted by a
majority of the members of the Board of Directors then in office. Elections of
directors need not be by written ballot, unless otherwise provided in the
Bylaws. For purposes of all meetings of stockholders, a quorum shall consist of
a majority of the shares entitled to vote at such meeting of stockholders,
unless otherwise required by law or, in respect of a meeting of the holders of
any series of Preferred Stock, by the provisions of Section 3 of Article V.
 
                                  ARTICLE VIII
                      LIMITATION ON LIABILITY OF DIRECTORS
 
    No person shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, including
without limitation for serving on a committee of the Board of Directors;
PROVIDED, HOWEVER, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Any amendment,
repeal or modification of this Article VII shall not adversely affect any right
or protection of a director of the Corporation existing hereunder with respect
to any act or omission occurring prior to such amendment, repeal or
modification.
 
                                   ARTICLE IX
                         CERTAIN BUSINESS COMBINATIONS
 
    SECTION 1.  VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS.  Except as
otherwise expressly provided in Section 2 of this Article, in addition to any
affirmative vote required by law or by any other provision of the Certificate of
Incorporation of the Corporation, the affirmative vote of the holders of not
less than 80% of the outstanding shares of "Voting Stock" (as hereinafter
defined) of the Corporation voting together as a single class shall be required
for the approval or authorization of any "Business Combination" (as hereinafter
defined) of the Corporation with any "Related Person" (as hereinafter defined).
For the purpose of this Article:
 
       (A) The term "Business Combination" shall mean (1) any merger or
    consolidation of the Corporation or a Subsidiary (as hereinafter defined) of
    the Corporation with or into a Related Person or of a Related Person with or
    into the Corporation or a Subsidiary of the Corporation; (2) any sale,
    lease, exchange, transfer, or other disposition, including, without
    limitation, a mortgage or any other hypothecation or transfer as collateral,
    of all or any "Substantial Part" (as hereinafter defined) of the assets
    either of the Corporation (including, without limitation, any voting
    securities of a Subsidiary) or of a Subsidiary of the Corporation to a
    Related Person; (3) the issuance of any securities (other than by way of a
    distribution to stockholders made pro rata to all holders of the class of
    stock to receive the distribution) of the Corporation or a Subsidiary of the
    Corporation to a Related Person; (4) the acquisition by the Corporation or a
    Subsidiary of the Corporation of any securities of a Related Person; (5) any
    recapitalization that would have the effect, directly or indirectly, of
    increasing the voting power of a Related Person; (6) any merger of the
    Corporation into a Subsidiary of the Corporation; or (7) any agreement,
    contract, or other arrangement providing for any of the transactions
    described in this definition of "Business Combination."
 
        (B) The term "Continuing Director" shall mean any member of the Board of
    Directors who is neither Affiliated (as defined below) or Associated (as
    defined below) with the Related Person and who was a member of the Board of
    Directors prior to the time that the Related Person became a Related Person,
    and any successor of a Continuing Director who is recommended to
 
                                     A-2-13
<PAGE>
    succeed a Continuing Director by a majority of Continuing Directors then
    members of the Board of Directors.
 
        (C) The term "Related Person" shall mean and include any individual,
    corporation, partnership, or other person or entity which, together with its
    "Affiliates" and "Associates," "Beneficially Owns" (as hereinafter defined),
    in the aggregate ten percent (10%) or more of the outstanding Voting Stock
    of the Corporation, and any Affiliate or Associate of any such individual,
    corporation, partnership, or other person or entity.
 
       (D) The term "Substantial Part" shall mean more than 80% of the book
    value of the total consolidated assets of the Corporation as reported in the
    consolidated financial statements of the Corporation and its subsidiaries as
    of the end of its most recent fiscal year ending prior to the time as of
    which a "Substantial Part" is to be determined.
 
        (E) The term "Voting Stock" shall mean all outstanding shares of capital
    stock of the Corporation entitled to vote generally in the election of
    directors of the Corporation and each reference to a percentage of shares of
    Voting Stock shall refer to such percentage of the votes entitled to be cast
    by such shares.
 
        (F) The terms "Affiliate" and "Associate" shall have the meanings set
    forth in Rule 12b-2 under the Securities Exchange Act of 1934, as in effect
    on the Effective Date (as defined in subsection 2.6).
 
       (G) The term "Beneficially Owns" shall have the meaning set forth in Rule
    13d-3 under the Securities Exchange Act of 1934, as in effect on the
    Effective Date (as defined in subsection 2.6), PROVIDED, HOWEVER, that, any
    shares of Voting Stock of the Corporation that any Related Person has the
    right to acquire pursuant to any agreement, or upon exercise of conversion
    rights, warrants or options, or otherwise, shall be deemed Beneficially
    Owned by the Related Person whether immediately exercisable or exercisable
    within ten years of the date as of which Beneficial Ownership is to be
    determined.
 
       (H) The term "Subsidiary" with respect to the Corporation shall mean any
    corporation, partnership, limited liability company, business trust or
    similar entity of which a majority of any class of any equity security is
    owned directly or indirectly by the Corporation.
 
    SECTION 2.  WHEN HIGHER VOTE IS NOT REQUIRED.  The provisions of Section 1
of this Article shall not be applicable to any particular Business Combination
and such Business Combination shall require only such affirmative vote as may be
required by law or by any other provision of the Certificate of Incorporation of
the Corporation, if all of the conditions specified in either of the following
paragraphs (A) or (B) are met:
 
       (A) the Business Combination shall have been approved by a vote of not
    less than a majority of the Continuing Directors, or
 
        (B) all of the following conditions shall have been met:
 
            (1) the aggregate amount of cash and the Fair Market Value (as
       hereinafter defined) as of the date of the consummation of the Business
       Combination of the consideration, other than cash, to be received per
       share by holders of Common Stock in such Business Combination shall be at
       least equal to the highest of the following:
 
                (a) if applicable, the highest price per share (including any
           brokerage commissions, transfer taxes, and soliciting dealers' fees)
           paid by the Related Person for any shares of Common Stock acquired by
           it (i) within the two year period immediately prior to the first
           public announcement of the proposal of the Business Combination (the
           "Announcement Date") or (ii) in the transaction in which it became a
           Related Person; or
 
                                     A-2-14
<PAGE>
                (b) the Fair Market Value per share of Common Stock on the
           Announcement Date or on the date on which the Related Person became a
           Related Person (such latter date is referred to in this Article as
           the "Determination Date"), whichever is higher; and
 
            (2) The aggregate amount of the cash and the Fair Market Value as of
       the date of the consummation of the Business Combination of the
       consideration, other than cash, to be
 
       received per share by holders of shares of any class or series of
       outstanding Voting Stock, other than Common Stock, shall be at least
       equal to the highest of the following (it being intended that the
       requirements of this subparagraph (B)(2) shall be required to be met with
       respect to every class or series of outstanding capital stock of the
       Corporation other than Common Stock, whether or not the Related Person
       has previously acquired any shares of such class or series of Voting
       Stock):
 
                (a) if applicable, the highest per share price (including any
           brokerage commission, transfer taxes, and soliciting dealers' fees)
           paid by the Related Person for any shares of such class or series of
           Voting Stock acquired by it (i) within the two year period
           immediately prior to the Announcement Date or (ii) in the transaction
           in which it became a Related Person, whichever is higher; or
 
                (b) if applicable, the Redemption Price (as hereinafter defined)
           of the shares of such class or series, or if such shares have no
           Redemption Price, the highest amount per share which such class or
           series would be entitled to receive upon liquidation of the
           Corporation on the Announcement Date or the Determination Date,
           whichever is higher; or
 
                (c) the Fair Market Value per share of such class or series of
           Voting Stock on the Announcement Date or on the Determination Date,
           whichever is higher; and
 
            (3) the consideration to be received in such Business Combination by
       holders of each class or series of outstanding Voting Stock (including
       Common Stock) shall be in cash or in the same form as the Related Person
       has previously paid for shares of such class or series of Voting Stock;
       PROVIDED, HOWEVER, that if the Related Person has paid for shares of any
       class or series of Voting Stock with varying forms of consideration, the
       form of consideration for such class or series of Voting Stock shall be
       either cash or the form used to acquire the largest number of shares of
       such class or series of Voting Stock previously acquired by it; and
 
            (4) a proxy statement responsive to the requirements of the
       Securities Exchange Act of 1934, as amended, shall have been mailed to
       public stockholders of the Corporation for the purpose of soliciting
       stockholder approval of the Business Combination and shall have contained
       at the front thereof, in a prominent place, any recommendations as to the
       advisability (or inadvisability) of the Business Combination that the
       Continuing Directors, or any of them, may choose to state and, if deemed
       advisable by a majority of the Continuing Directors, an opinion of a
       reputable investment banking firm as to the fairness (or not) of the
       terms of the Business Combination, from the point of view of the
       remaining public stockholders of the Corporation (such investment banking
       firm to be selected by a majority of the Continuing Directors and to be
       paid a reasonable fee for their services by the Corporation upon receipt
       of the opinion).
 
    SECTION 3.  CERTAIN DEFINITIONS AND ADDITIONAL PROVISIONS.  For the purposes
of this Article:
 
       (A) "Fair Market Value" shall mean:
 
            (1) in the case of stock, the highest closing sale price during the
       30-day period immediately preceding the date in question of a share of
       such stock on the Composite Tape for New York Stock Exchange Listed
       Stocks, or, if such stock is not quoted on the Composite Tape, on the New
       York Stock Exchange, or, if such stock is not listed on such Exchange, on
       the principal United States securities exchange registered under the
       Securities Exchange Act of
 
                                     A-2-15
<PAGE>
       1934, as amended, on which such stock is listed, or, if such stock is not
       listed on any such exchange, the highest closing bid quotation with
       respect to a share of such stock during the 30-day period preceding the
       date in question on the NASDAQ National Market or any quotations system
       then generally in use, or, if no such quotations are available, the Fair
       Market Value on the date in question of a share of such stock as
       determined by the Continuing Directors in good faith, which determination
       shall be final; and
 
            (2) in the case of property other than cash or stock, the Fair
       Market Value of such property on the date in question as determined by
       the Continuing Directors in good faith, which determination shall be
       final.
 
        (B) The Board of Directors, with the approval of a majority of the total
    number of Continuing Directors, shall have the power and duty to determine,
    on the basis of information known to it after reasonable inquiry, all facts
    necessary to determine compliance with this Article, including, without
    limitation, (i) whether a person is a Related Person, (ii) the number of
    shares of Voting Stock Beneficially Owned by any person, (iii) whether a
    person is an Affiliate or Associate of another person, (iv) whether the
    applicable conditions set forth in paragraph (B) of Section 2 have been met
    with respect to any Business Combination, and (v) whether the proposed
    transaction is a Business Combination. Any such determinations shall be
    final.
 
    SECTION 4.  AMENDMENT OF THIS ARTICLE.  This Article may be amended,
altered, changed, or repealed only by the affirmative vote of the holders of at
least 80% of the outstanding shares of Voting Stock voting together as a single
class unless the proposed amendment, alteration, change, or repeal has been
recommended to the stockholders by the Board of Directors with the approval of
at least two-thirds of the Continuing Directors, in which event the proposed
amendment, alteration, change, or repeal shall require for approval the
affirmative vote of the holders of at least 66 2/3% of the outstanding shares of
Voting Stock, voting as a single class.
 
                                   ARTICLE X
                                     BYLAWS
 
    The Board of Directors shall have the power to adopt, amend, alter, change
or repeal Bylaws of and for the Corporation by the affirmative vote of 66 2/3%
of the members then in office. The affirmative vote of the holders of at least
80% of the voting power of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election of directors, voting together as
a single class shall be required to adopt, amend, alter, change or repeal Bylaws
of the Corporation (notwithstanding the fact that approval by a lesser
percentage may be permitted by the Corporation Law).
 
                                   ARTICLE XI
                   AMENDMENT OF CERTIFICATE OF INCORPORATION
 
    The Corporation hereby reserves the right from time to time to amend, alter,
change or repeal any provision contained in the Certificate of Incorporation of
the Corporation in any manner permitted by the Corporation Law and all rights
and powers conferred upon stockholders, directors and officers herein are
granted subject to this reservation. In addition to any vote otherwise required
by law, and except as may otherwise be provided in Article V or IX hereof, any
such amendment, alteration, change or repeal shall require approval of both (i)
the Board of Directors by the affirmative vote of a majority of the members then
in office and (ii) the holders of a majority of the voting power of all of the
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, except that any
proposal to amend, alter, change or repeal the provisions of Section 3 of
Article VI, Section 5 of Article VI, Article VII, Article X and this Article XI
shall require the affirmative vote of the holders of 80% of the voting power of
all of the shares of
 
                                     A-2-16
<PAGE>
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
 
    IN WITNESS WHEREOF, this Restated Certificate of Incorporation which
restates, integrates and amends the provisions of the certificate of
incorporation of the Corporation, and which has been duly adopted by the
stockholders of the Corporation in accordance with the provisions of Sections
242 and 245 of the Delaware General Corporation Law, has been executed by
                  , its                   , this       day of             ,
1998.
 
                                          MEDIAONE GROUP, INC.
 
                                          By:
                                          --------------------------------------
                                             Name: Stephen E. Brilz
                                             Title: Assistant Secretary
 
                                     A-2-17
<PAGE>
                                                                       EXHIBIT A
 
                      SERIES D CONVERTIBLE PREFERRED STOCK
 
    The series of Preferred Stock hereby established shall consist of 20,000,000
shares designated as Series D Convertible Preferred Stock. The rights,
preferences and limitations of such series shall be as follows:
 
    1.  DEFINITIONS.  Unless otherwise defined herein, terms used herein shall
have the meanings assigned to them in Section 2.6 of Article V of the Restated
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and the following terms shall have the indicated meanings:
 
    1.1 "Board of Directors" shall mean the Board of Directors of the
Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.
 
    1.2 "Capital Stock" shall mean any and all shares of corporate stock of a
Person (however designated and whether representing rights to vote, rights to
participate in dividends or distributions upon liquidation or otherwise with
respect to the Corporation, or any division or subsidiary thereof, or any joint
venture, partnership, corporation or other entity).
 
    1.3 "Certificate" shall mean the certificate of the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, originally
filed by the Corporation with respect to the Series D Stock with the Secretary
of State of the State of Delaware pursuant to Section 151 of the General
Corporation Law of the State of Delaware.
 
    1.4 "Closing Price" shall mean the last reported sale price of the Media
Stock (or such other class or series of common stock into which shares of this
Series are then convertible), regular way, as shown on the Composite Tape of the
NYSE, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices on the NYSE, or, if the Media Stock (or such other
class or series of common stock) is not listed or admitted to trading on the
NYSE, on the principal national securities exchange on which such stock is
listed or admitted to trading, or, if it is not listed or admitted to trading on
any national securities exchange, the last reported sale price of the Media
Stock (or such other class or series of common stock), or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case as reported by Nasdaq.
 
    1.5 "Communications Stock" shall mean the class of U S WEST Communications
Group Common Stock, par value $.01 per share, of the Corporation or any other
class of stock resulting from (x) successive changes or reclassifications of
such stock consisting solely of changes in par value, or from par value to no
par value or (y) a subdivision or combination, and in any such case including
any shares thereof authorized after the date of the Certificate, together with
any associated rights to purchase other securities of the Corporation which are
at the time represented by the certificates representing such shares.
 
    1.6 "Conversion Date" shall have the meaning set forth in Section 3.5.
 
    1.7 "Conversion Price" shall have the meaning set forth in Section 3.1
hereof.
 
    1.8 "Conversion Rate" shall have the meaning set forth in Section 3.1
hereof.
 
    1.9 "Converting Holder" shall have the meaning set forth in Section 3.5
hereof.
 
   1.10 "Current Market Price" on any applicable record date, Conversion Date or
Redemption Date referred to in Section 3 or Section 4 shall mean the average of
the daily Closing Prices per share of
 
                                     A-2-18
<PAGE>
Media Stock (or such other class or series of common stock into which shares of
this Series are then convertible) for the ten (10) consecutive Trading Days
ending on the third Trading Day immediately preceding such record date,
Conversion Date or Redemption Date.
 
   1.11 "Dividend Payment Date" shall have the meaning set forth in Section 2.1
hereof.
 
   1.12 "Effective Time" shall mean the effective time of the Merger.
 
   1.13 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
 
   1.14 "Exchange Rate" for each share of this Series called for exchange shall
be a number of shares of Media Stock (or such other class or series of common
stock into which shares of this Series are then convertible) equal to the
quotient of (x) the sum of (I) the Liquidation Value plus (II) the amount of
accrued and unpaid dividends on such share of Series D Stock to the Redemption
Date divided by (y) the product of (I) .95 multiplied by (II) the Current Market
Price on the Redemption Date.
 
   1.15 "Extraordinary Cash Distributions" shall mean, with respect to any
consecutive 12-month period, all cash dividends and cash distributions on the
outstanding shares of Media Stock during such period (other than cash dividends
or cash distributions for which a prior adjustment to the Conversion Rate was
previously made) to the extent such cash dividends and cash distributions
exceed, on a per share of Media Stock basis, 10% of the average daily Closing
Price of the Media Stock over such period.
 
   1.16 "Junior Stock" shall mean the Media Stock, the Communications Stock and
the shares of any other class or series of stock of the Corporation which, by
the terms of the Certificate of Incorporation or of the instrument by which the
Board of Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be junior to the Series D Stock in respect of the right to
receive dividends or to participate in any distribution of assets other than by
way of dividends.
 
   1.17 "Liquidation Value" shall have the meaning set forth in Section 6.2
hereof.
 
   1.18 "Media Group Disposition Redemption" shall have the meaning set forth in
Section 4.1 hereof.
 
   1.19 "Media Group Disposition Dividend" shall have the meaning set forth in
Section 4.1 hereof.
 
   1.20 "Media Group Special Dividend" shall have the meaning set forth in
Section 4.1 hereof.
 
   1.21 "Media Group Special Events" shall have the meaning set forth in Section
4.1 hereof.
 
   1.22 "Media Group Subsidiary Redemption" shall have the meaning set forth in
Section 4.1 hereof.
 
   1.23 "Media Stock" shall mean the class of U S WEST Media Group Common Stock,
par value $.01 per share, of the Corporation (or, following the
recharaterization described in Section 1 of Article V of the Certificate of
Incorporation, the class of Common Stock, par value $.01 per share, of the
Corporation) or any other class of stock resulting from (x) successive changes
or reclassifications of such stock consisting solely of changes in par value, or
from par value to no par value or (y) a subdivision or combination, and in any
such case including any shares thereof authorized after the date of the
Certificate, together with any associated rights to purchase other securities of
the Corporation which are at the time represented by the certificates
representing such shares.
 
   1.24 "Media Group Tender or Exchange Offer" shall have the meaning set forth
in Section 4.1 hereof.
 
                                     A-2-19
<PAGE>
   1.25 "Merger" shall mean either (i) the merger of Continental Cablevision,
Inc., a Delaware corporation, with and into Continental Cablevision, Inc. or
(ii) the merger of Continental Merger Corporation, a Delaware corporation, with
and into the Corporation, pursuant to the terms of the Merger Agreement.
 
   1.26 "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of February 27, 1996, as amended and restated as of June 27, 1996 and as further
amended as of October 7, 1996, among the Corporation, Continental Merger
Corporation, a Delaware corporation, and Continental Cablevision, Inc., a
Delaware corporation.
 
   1.27 "Nasdaq" shall mean the Nasdaq National Market.
 
   1.28 "NYSE" shall mean the New York Stock Exchange, Inc.
 
   1.29 "Parity Stock" shall mean the Series A Stock, the Series B Stock, the
Series C Stock and the shares of any other class or series of stock of the
Corporation (other than Junior Stock) which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall, in the event that
the stated dividends thereon are not paid in full, be entitled to share ratably
with the Series D Stock in the payment of dividends, including accumulations, if
any, in accordance with the sums which would be payable on such shares if all
dividends were declared and paid in full, or shall, in the event that the
amounts payable thereon on liquidation are not paid in full, be entitled to
share ratably with the Series D Stock in any distribution of assets other than
by way of dividends in accordance with the sums which would be payable in such
distribution if all sums payable were discharged in full; PROVIDED, HOWEVER,
that the term "Parity Stock" shall be deemed to refer (i) in Section 6 hereof,
to any stock which is Parity Stock in respect of the distribution of assets; and
(ii) in Sections 5.1 and 5.2 hereof, to any stock which is Parity Stock in
respect of either dividend rights or the distribution of assets and which,
pursuant to the Certificate of Incorporation or any instrument in which the
Board of Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall so designate, is entitled to vote with the holders of
Series D Stock.
 
   1.30 "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
 
   1.31 "Preferred Stock" shall mean the class of Preferred Stock, par value
$1.00 per share, of the Corporation authorized at the date of the Certificate,
including any shares thereof authorized after the date of the Certificate.
 
   1.32 "Record Date" shall have the meaning set forth in Section 2.1 hereof.
 
   1.33 "Redemption Date" shall mean the date on which the Corporation shall
effect the redemption or exchange of all or any part of the outstanding shares
of this Series pursuant to Section 4.1.
 
   1.34 "Redemption Price" for each share of this Series called for redemption
shall be equal to the sum of (x) the Liquidation Value plus (y) an amount equal
to the accrued and unpaid dividends on such share of Series D Stock to the
Redemption Date.
 
   1.35 "Redemption Rescission Event" shall mean the occurrence of (a) any
general suspension of trading in, or limitation on prices for, securities on the
principal national securities exchange on which shares of Media Stock (or such
other class or series of common stock into which shares of this Series are then
convertible) are registered and listed for trading (or, if shares of Media Stock
(or such other class or series of common stock) are not registered and listed
for trading on any such exchange, in the over-the-counter market) for more than
six-and-one-half (6 1/2) consecutive trading hours, (b) any decline in either
the Dow Jones Industrial Average or the Standard & Poor's Index of 500
Industrial Companies (or any successor index published by Dow Jones & Company,
Inc. or Standard & Poor's Corporation) by either (i) an amount in excess of 10%,
measured from the close of business on any
 
                                     A-2-20
<PAGE>
Trading Day to the close of business on the next succeeding Trading Day during
the period commencing on the Trading Day preceding the day notice of any
redemption or exchange of shares of this Series is given (or, if such notice is
given after the close of business on a Trading Day, commencing on such Trading
Day) and ending at the Redemption Date or (ii) an amount in excess of 15% (or,
if the time and date fixed for redemption or exchange is more than 15 days
following the date on which notice of redemption or exchange is given, 20%),
measured from the close of business on the Trading Day preceding the day notice
of such redemption or exchange is given (or, if such notice is given after the
close of business on a Trading Day, from such Trading Day) to the close of
business on any Trading Day on or prior to the Redemption Date, (c) a
declaration of a banking moratorium or any suspension of payments in respect of
banks by Federal or state authorities in the United States or (d) the
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States which in the
reasonable judgment of the Corporation could have a material adverse effect on
the market for the Media Stock (or such other class or series of common stock
into which shares of this Series are then convertible).
 
   1.36 "Rescission Date" shall have the meaning set forth in Section 4.5
hereof.
 
   1.37 "Senior Stock" shall mean the shares of any class or series of stock of
the Corporation which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be senior to the Series D Stock in
respect of the right to receive dividends or to participate in any distribution
of assets other than by way of dividends.
 
   1.38 "Series A Stock" shall mean the series of Preferred Stock authorized and
designated as Series A Junior Participating Cumulative Preferred Stock at the
date of the Certificate, including any shares thereof authorized and designated
after the date of the Certificate.
 
   1.39 "Series B Stock" shall mean the series of Preferred Stock authorized and
designated as Series B Junior Participating Cumulative Preferred Stock at the
date of the Certificate, including any shares thereof authorized and designated
after the date of the Certificate.
 
   1.40 "Series C Stock" shall mean the series of Preferred Stock authorized and
designated as Series C Cumulative Redeemable Preferred Stock at the date of the
Certificate, including any shares thereof authorized and designated after the
date of the Certificate.
 
   1.41 "Series D Stock" and "this Series" shall mean the series of Preferred
Stock authorized and designated as the Series D Convertible Preferred Stock,
including any shares thereof authorized and designated after the date of the
Certificate.
 
   1.42 "Surrendered Shares" shall have the meaning set forth in Section 3.5
hereof.
 
   1.43 "Trading Day" shall mean, so long as the Media Stock (or such other
class or series of common stock into which shares of this Series are then
convertible) is listed or admitted to trading on the NYSE, a day on which the
NYSE is open for the transaction of business, or, if the Media Stock (or such
other class or series of common stock) is not listed or admitted to trading on
the NYSE, a day on which the principal national securities exchange on which the
Media Stock (or such other class or series of common stock) is listed is open
for the transaction of business, or, if the Media Stock (or such other class or
series of common stock) is not so listed or admitted for trading on any national
securities exchange, a day on which Nasdaq is open for the transaction of
business.
 
    2.  DIVIDENDS.
 
    2.1 The holders of the outstanding Series D Stock shall be entitled to
receive dividends, as and when declared by the Board of Directors out of funds
legally available therefor, and any dividends declared by the Board of Directors
out of funds legally available therefor in accordance with Section 3.6(d). Each
dividend shall be at the annual rate equal to 4.500% per share of Series D Stock
(which is equivalent to $0.56 quarterly and $2.25 annually per share). All
dividends shall be payable in
 
                                     A-2-21
<PAGE>
cash on or about the first day of February, May, August and November in each
year, beginning on the first such date that is more than 15 days after the
Effective Time, as fixed by the Board of Directors, or such other dates as are
fixed by the Board of Directors (each a "Dividend Payment Date"), to the holders
of record of Series D Stock at the close of business on or about the 15th day of
the month next preceding such first day of February, May, August and November,
as the case may be, as fixed by the Board of Directors, or such other dates as
are fixed by the Board of Directors (each a "Record Date"). Such dividends shall
accrue on each share cumulatively on a daily basis, whether or not there are
unrestricted funds legally available for the payment of such dividends and
whether or not earned or declared, from and after the day immediately succeeding
the Effective Time and any such dividends that become payable for any partial
dividend period shall be computed on the basis of the actual days elapsed in
such period. All dividends that accrue in accordance with the foregoing
provisions shall be cumulative from and after the day immediately succeeding the
Effective Time. The per share dividend amount payable to each holder of record
of Series D Stock on any Dividend Payment Date shall be rounded to the nearest
cent. The dividend rate per share of this Series shall be appropriately adjusted
from time to time to reflect any split or combination of the shares of this
Series.
 
    2.2 Except as hereinafter provided in this Section 2.2 and except for
redemptions by the Corporation pursuant to Sections 4.1(b), 4.1(c) or 4.1(d),
unless all dividends on the outstanding shares of Series D Stock and any Parity
Stock that shall have accrued through any prior Dividend Payment Date shall have
been paid, or declared and funds set apart for payment thereof, no dividend or
other distribution (payable other than in shares of Junior Stock) shall be paid
to the holders of Junior Stock or Parity Stock, and no shares of Series D Stock,
Parity Stock or Junior Stock shall be purchased, redeemed or otherwise acquired
by the Corporation or any of its subsidiaries (except by conversion into or
exchange for Junior Stock), nor shall any monies be paid or made available for a
purchase, redemption or sinking fund for the purchase or redemption of any
Series D Stock, Junior Stock or Parity Stock. When dividends are not paid in
full upon the shares of this Series and any Parity Stock, all dividends declared
upon shares of this Series and all Parity Stock shall be declared pro rata so
that the amount of dividends declared per share on this Series and all such
Parity Stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of this Series and all such Parity Stock bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
 
    3.  CONVERSION RIGHTS.
 
    3.1 (a) Subject to Section 3.1(b), each holder of a share of this Series
shall have the right at any time to convert such share into a number of shares
of Media Stock equal to 1.905 shares of Media Stock for each share of this
Series, subject to adjustment as provided in this Section 3 (such rate, as so
adjusted from time to time, is herein called the "Conversion Rate"; and the
"Conversion Price" at any time shall mean the Liquidation Value per share
divided by the Conversion Rate in effect at such time (rounded to the nearest
one hundredth of a cent)). As a result of the consummation of the transactions
contemplated by the Separation Agreement, dated as of         , 1998, between
the Corporation and USW-C, Inc., the Conversion Rate was adjusted pursuant to
the provisions of Section 3.6(c) hereof to     .
 
       (b) The right of a holder of a share of this Series called for redemption
or exchange pursuant to Sections 4.1(a) or 4.1(c) to convert such share into
Media Stock (or such other class or series of common stock into which shares of
this Series are then convertible) pursuant to Section 3.1(a) shall terminate at
the close of business on the Redemption Date unless the Corporation defaults in
the payment of the Redemption Price or Exchange Rate or, in the case of a
redemption or exchange pursuant to Section 4.1(a), the Corporation exercises its
right to rescind such redemption or exchange pursuant to Section 4.5, in which
case such right of conversion shall not terminate at the close of business on
such date. The right of a holder of a share of this Series called for redemption
pursuant to Section 4.1(b): (i) in connection with a Media Group Subsidiary
Redemption, a Media Group Tender or Exchange Offer or a Media Group Disposition
Redemption involving a Disposition of all (not
 
                                     A-2-22
<PAGE>
merely substantially all) of the properties and assets attributed to the Media
Group, to convert such share into Media Stock pursuant to Section 3.1(a) shall
terminate at the close of business on the Redemption Date; (ii) in connection
with a Media Group Disposition Dividend or Media Group Special Dividend, to
convert such share into Media Stock pursuant to Section 3.1(a) shall terminate
at the close of business on the record date for determining holders entitled to
receive such dividend; and (iii) in connection with a Media Group Disposition
Redemption involving a Disposition of substantially all (but not all) of the
properties and assets attributed to the Media Group, to convert such share into
Media Stock shall terminate at the close of business on the date on which shares
of Media Stock are selected to be redeemed in such Media Group Disposition
Redemption, unless, in any of the foregoing cases, the Corporation defaults in
the payment of the Redemption Price or the conditions to such redemption set
forth in the last sentence of Section 4.1(b) shall not have been satisfied, in
which event such right of conversion shall not terminate at the close of
business on such date. In the event the Corporation converts all of the
outstanding shares of Media Stock into shares of Communications Stock (or, if
the Communications Stock is not Publicly Traded at such time and shares of any
other class or series of common stock of the Corporation (other than Media
Stock) are then Publicly Traded, of such other class or series of common stock
as has the largest Market Capitalization), the right of a holder of a share of
this Series called for redemption pursuant to Section 4.1(d) in connection with
an event substantially similar to a Media Group Special Event to convert such
share into Communications Stock (or such other class or series of common stock)
shall terminate on a date comparable to the date specified in the preceding
sentence with respect to a Media Group Special Event substantially similar to
such event.
 
    3.2 If any shares of this Series are surrendered for conversion subsequent
to the Record Date preceding a Dividend Payment Date but on or prior to such
Dividend Payment Date (except shares called for redemption or exchange on a
Redemption Date between such Record Date and Dividend Payment Date and with
respect to which such redemption or exchange has not been rescinded), the
registered holder of such shares at the close of business on such Record Date
shall be entitled to receive the dividend, if any, payable on such shares on
such Dividend Payment Date notwithstanding the conversion thereof. Except as
provided in this Section 3.2, no adjustments in respect of payments of dividends
on shares surrendered for conversion or any dividend on the Media Stock issued
upon conversion shall be made upon the conversion of any shares of this Series.
 
    3.3 The Corporation may, but shall not be required to, in connection with
any conversion of shares of this Series, issue a fraction of a share of Media
Stock, and if the Corporation shall determine not to issue any such fraction,
the Corporation shall, subject to Section 3.6(g), make a cash payment (rounded
to the nearest cent) equal to such fraction multiplied by the Closing Price of
the Media Stock on the last Trading Day prior to the date of conversion.
 
    3.4 Any holder of shares of this Series electing to convert such shares into
Media Stock shall surrender the certificate or certificates for such shares at
the office of the transfer agent or agents therefor (or at such other place in
the United States as the Corporation may designate by notice to the holders of
shares of this Series) during regular business hours, duly endorsed to the
Corporation or in blank, or accompanied by instruments of transfer to the
Corporation or in blank, or in form satisfactory to the Corporation, and shall
give written notice to the Corporation at such office that such holder elects to
convert such shares of this Series. The Corporation shall, as soon as
practicable and in any event within five Trading Days (subject to Section
3.6(g)) after such surrender of certificates for shares of this Series,
accompanied by the written notice above prescribed issue and deliver at such
office to the holder for whose account such shares were surrendered, or to his
nominee, (i) certificates representing the number of shares of Media Stock to
which such holder is entitled upon such conversion and (ii) if less than the
full number of shares of this Series represented by such certificate or
certificates is being converted, a new certificate of like tenor representing
the shares of this Series not converted.
 
                                     A-2-23
<PAGE>
    3.5 Conversion shall be deemed to have been made immediately prior to the
close of business as of the date that certificates for the shares of this Series
to be converted, and the written notice prescribed in Section 3.4, are received
by the transfer agent or agents for this Series (such date being referred to
herein as the "Conversion Date"). The Person entitled to receive the Media Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such Media Stock as of the close of business on the Conversion Date
and such conversion shall be at the Conversion Rate in effect on such date.
Notwithstanding anything to the contrary contained herein, in the event the
Corporation shall have rescinded a redemption or exchange of shares of this
Series pursuant to Section 4.5, any holder of shares of this Series that shall
have surrendered shares of this Series for conversion following the day on which
notice of the redemption or exchange shall have been given but prior to the
later of (a) the close of business on the Trading Day next succeeding the date
on which public announcement of the rescission of such redemption or exchange
shall have been made and (b) the date which is three Trading Days following the
mailing of the notice of rescission required by Section 4.5 (a "Converting
Holder") may rescind the conversion of such shares surrendered for conversion by
(i) properly completing a form prescribed by the Corporation and mailed to
holders of shares of this Series (including Converting Holders) with the
Corporation's notice of rescission, which form shall provide for the
certification by any Converting Holder rescinding a conversion on behalf of any
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
shares of this Series that the beneficial ownership (within the meaning of such
Rule) of such shares shall not have changed from the date on which such shares
were surrendered for conversion to the date of such certification and (ii)
delivering such form to the Corporation no later than the close of business on
that date which is fifteen (15) Trading Days following the date of the mailing
of the Corporation's notice of rescission. The delivery of such form by a
Converting Holder shall be accompanied by (x) any certificates representing
shares of Media Stock issued to such Converting Holder upon a conversion of
shares of this Series that shall be rescinded by the proper delivery of such
form (the "Surrendered Shares"), (y) any securities, evidences of indebtedness
or assets (other than cash) distributed by the Corporation to such Converting
Holder by reason of such Converting Holder's being a record holder of the
Surrendered Shares and (z) payment in New York Clearing House funds or other
funds acceptable to the Corporation of an amount equal to the sum of (I) any
cash such Converting Holder may have received in lieu of the issuance of
fractional shares upon conversion and (II) any cash paid or payable by the
Corporation to such Converting Holder by reason of such Converting Holder being
a record holder of the Surrendered Shares. Upon receipt by the Corporation of
any such form properly completed by a Converting Holder and any certificates,
securities, evidences of indebtedness, assets or cash payments required to be
returned or made by such Converting Holder to the Corporation as set forth
above, the Corporation shall instruct the transfer agent or agents for shares of
Media Stock and shares of this Series to cancel any certificates representing
the Surrendered Shares (which Surrendered Shares shall be deposited in the
treasury of the Corporation) and reissue certificates representing shares of
this Series to such Converting Holder (which shares of this Series shall,
notwithstanding their surrender for conversion, be deemed to have been
outstanding at all times). The Corporation shall, as promptly as practicable,
and in no event more than five (5) Trading Days, following the receipt of any
such properly completed form and any such certificates, securities, evidences of
indebtedness, assets or cash payments required to be so returned or made, pay to
the Converting Holder or as otherwise directed by such Converting Holder any
dividend or other payment made on such shares of this Series during the period
from the time such shares shall have been surrendered for conversion to the
rescission of such conversion. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any form submitted to
the Corporation to rescind the conversion of shares of this Series, including
questions as to the proper completion or execution of any such form or any
certification contained therein, shall be resolved by the Corporation, whose
good faith determination shall be final and binding. The Corporation shall not
be required to deliver certificates for shares of Media Stock while the stock
transfer books for such stock or for this Series are duly closed for any purpose
(but not for a period in excess of two Trading Days) or during any period
commencing at a Redemption Rescission Event and
 
                                     A-2-24
<PAGE>
ending at either (i) the time and date at which the Corporation's right of
rescission shall expire pursuant to Section 4.5 if the Corporation shall not
have exercised such right or (ii) the close of business on that day which is
fifteen (15) Trading Days following the date of the mailing of a notice of
rescission pursuant to Section 4.5 if the Corporation shall have exercised such
right of rescission, but certificates for shares of Media Stock shall be
delivered as soon as practicable after the opening of such books or the
expiration of such period.
 
    3.6 The Conversion Rate shall be adjusted from time to time as follows for
events occurring after the Effective Time:
 
        (a) In case the Corporation shall, at any time or from time to time, (i)
    pay a dividend or make a distribution in shares of Media Stock, (ii) combine
    the outstanding shares of Media Stock into a smaller number of shares, or
    (iii) subdivide or reclassify the outstanding shares of Media Stock, then
    the Conversion Rate in effect immediately before such action shall be
    adjusted so that immediately following such event the holders of the Series
    D Stock shall be entitled to receive upon conversion thereof the kind and
    amount of shares of capital stock of the Corporation which they would have
    owned or been entitled to receive upon or by reason of such event if such
    shares of Series D Stock had been converted immediately before the record
    date (or, if no record date, the effective date) for such event. An
    adjustment made pursuant to this Section 3.6(a) shall become effective
    immediately after the opening of business on the day next following the
    record date in the case of a dividend or distribution and shall become
    effective immediately after the opening of business on the day next
    following the effective date in the case of a subdivision, combination or
    reclassification. For the purposes of this Section 3.6(a), if holders of
    Media Stock are entitled to elect the kind or amount of securities
    receivable upon the payment of any such divided, subdivision, combination or
    reclassification, each holder of Series D Stock shall be deemed to have
    failed to exercise any such right of election (provided that if the kind or
    amount of securities receivable upon such dividend, distribution,
    subdivision, combination or reclassification is not the same for each
    nonelecting share, then the kind and amount of securities receivable upon
    such dividend, distribution, subdivision, combination or reclassification
    for each nonelecting share shall be deemed to be the kind and amount so
    receivable per share by a plurality of the nonelecting shares).
 
        (b) If the Corporation shall issue rights, warrants or options to all
    holders of Media Stock entitling them (for a period not exceeding 45 days
    from the record date referred to below) to subscribe for or purchase shares
    of Media Stock at a price per share less than the Current Market Price
    (determined as of the record date for the determination of stockholders
    entitled to receive such rights, warrants or options), then, in any such
    event, the Conversion Rate shall be adjusted by multiplying the Conversion
    Rate in effect immediately prior to the opening of business on such record
    date by a fraction, the numerator of which shall be the number of shares of
    Media Stock outstanding on such record date plus the maximum number of
    additional shares of Media Stock offered for subscription pursuant to such
    rights, warrants or options, and the denominator of which shall be the
    number of shares of Media Stock outstanding on such record date plus the
    maximum number of additional shares of Media Stock which the aggregate
    offering price of the maximum number of shares of Media Stock so offered for
    subscription or purchase pursuant to such rights, warrants or options would
    purchase at such Current Market Price (determined by multiplying such
    maximum number of shares by the exercise price of such rights, warrants or
    options (plus any other consideration received by the Corporation upon the
    issuance or exercise of such rights, warrants or options) and dividing the
    product so obtained by such Current Market Price). Such adjustment shall
    become effective at the opening of business on the day next following the
    record date for the determination of stockholders entitled to receive such
    rights, warrants or options. To the extent that shares of Media Stock are
    not delivered after the expiration of such rights, warrants or options, the
    Conversion Rate shall be readjusted to the Conversion Rate which would then
    be in effect had the adjustments made upon the record date for the
    determination of stockholders
 
                                     A-2-25
<PAGE>
    entitled to receive such rights, warrants or options been made upon the
    basis of delivery of only the number of shares of Media Stock actually
    delivered and the amount actually paid therefor. In determining whether any
    rights, warrants or options entitle the holders to subscribe for or purchase
    shares of Media Stock at a price per share less than such Current Market
    Price, there shall be taken into account any consideration received by the
    Corporation upon issuance and upon exercise of such rights, warrants or
    options. The value of such consideration, if other than cash, shall be
    determined by the good faith business judgment of the Board of Directors,
    whose determination shall be conclusive.
 
        (c) If the Corporation shall pay a dividend or make a distribution to
    all holders of outstanding shares of Media Stock, of capital stock, cash,
    evidences of its indebtedness or other assets of the Corporation (but
    excluding (x) any cash dividends or distributions (other than Extraordinary
    Cash Distributions) and (y) dividends or distributions referred to in
    Section 3.6(a)), then the Conversion Rate shall be adjusted by multiplying
    the Conversion Rate in effect immediately prior to the opening of business
    on the record date for the determination of stockholders entitled to receive
    such dividend or distribution by a fraction, the numerator of which shall be
    the Current Market Price (determined as of such record date), and the
    denominator of which shall be such Current Market Price less either (A) the
    fair market value (as determined by the good faith business judgment of the
    Board of Directors, whose determination shall be conclusive), as of such
    record date, of the portion of the capital stock, assets or evidences of
    indebtedness to be so distributed applicable to one share of Media Stock or
    (B), if applicable, the amount of the Extraordinary Cash Distribution to be
    distributed per share of Media Stock. The adjustment pursuant to the
    foregoing provisions of this Section 3.6(c) shall become effective at the
    opening of business on the day next following the record date for the
    determination of stockholders entitled to receive such dividend or
    distribution.
 
        (d) In lieu of making an adjustment to the Conversion Rate pursuant to
    Sections 3.6(a), 3.6(b) or 3.6(c) above for a dividend or distribution or an
    issue of rights, warrants or options, the Corporation may distribute out of
    funds legally available therefor to the holders of shares of this Series, or
    reserve for distribution out of funds legally available therefor with each
    share of Media Stock delivered to a person converting a share of this Series
    pursuant to this Section 3, such dividend or distribution or such rights,
    warrants or options; PROVIDED, HOWEVER, that in the case of such a
    reservation, on the date, if any, on which a person converting a share of
    this Series would no longer be entitled to receive such dividend or
    distribution or receive or exercise such rights, warrants or options, such
    dividend or distribution shall be deemed to have occurred, or such rights,
    warrants or options shall be deemed to have issued, and the Conversion Rate
    shall be adjusted as provided in Section 3.6(a), 3.6(b) or 3.6(c), as the
    case may be (with such termination date being the relevant date of
    determination for purposes of determining the Current Market Price).
 
        (e) The Corporation shall be entitled to make such additional increases
    in the Conversion Rate, in addition to the adjustments required by
    subsections 3.6(a) through 3.6(c), as shall be determined by the Board of
    Directors to be necessary in order that any dividend or distribution in
    Media Stock, any subdivision, reclassification or combination of shares of
    Media Stock or any issuance of rights or warrants referred to above, shall
    not be taxable to the holders of Media Stock for United States Federal
    income tax purposes.
 
        (f) To the extent permitted by applicable law, the Corporation may from
    time to time increase the Conversion Rate by any amount for any period of
    time if the period is at least 20 Trading Days, the increase is irrevocable
    during such period and the Board of Directors shall have made a
    determination that such increase would be in the best interests of the
    Corporation, which determination shall be conclusive.
 
        (g) In any case in which this Section 3.6 shall require that any
    adjustment be made effective as of or immediately following a record date,
    the Corporation may elect to defer (but only for five
 
                                     A-2-26
<PAGE>
    (5) Trading Days following the occurrence of the event which necessitates
    the filing of the statement referred to in Section 3.9(a)) issuing to the
    holder of any shares of this Series converted after such record date (i) the
    shares of Media Stock and other capital stock of the Corporation issuable
    upon such conversion over and above the shares of Media Stock and other
    capital stock of the Corporation issuable upon such conversion on the basis
    of the Conversion Rate prior to adjustment and (ii) paying to such holder
    any amount in cash in lieu of any fraction thereof pursuant to Section 3.3;
    PROVIDED, HOWEVER, that the Corporation shall deliver to such holder a due
    bill or other appropriate instrument evidencing such holder's right to
    receive such additional shares upon the occurrence of the event requiring
    such adjustment.
 
        (h) All calculations under this Section 3 shall be made to the nearest
    cent, one-hundredth of a share or, in the case of the Conversion Rate, one
    hundred-thousandth. Notwithstanding any other provision of this Section 3,
    the Corporation shall not be required to make any adjustment of the
    Conversion Rate unless such adjustment would require an increase or decrease
    of at least 1.00000% of such Conversion Rate. Any lesser adjustment shall be
    carried forward and shall be made at the time of and together with the next
    subsequent adjustment which, together with any adjustment or adjustments so
    carried forward, shall amount to an increase or decrease of at least
    1.00000% in such rate. Any adjustments under this Section 3 shall be made
    successively whenever an event requiring such an adjustment occurs.
 
        (i) If the Corporation shall take a record of the holders of Media Stock
    for the purpose of entitling them to receive a dividend or other
    distribution, and shall thereafter and before the distribution to
    stockholders thereof legally abandon its plan to pay or deliver such
    dividend or distribution, then thereafter no adjustment in the Conversion
    Rate then in effect shall be required by reason of the taking of such
    record.
 
        (j) Subject to Section 3.6(e) hereof, no adjustment shall be made
    pursuant to this Section 3.6 with respect to any share of Series D Stock
    that is converted prior to the time such adjustment otherwise would be made.
 
    3.7 In case of (a) any consolidation or merger to which the Corporation is a
party, other than a merger or consolidation in which the Corporation is the
surviving or continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as a result of a
subdivision or combination) in, outstanding shares of Media Stock (or such other
class or series of common stock into which shares of this Series are then
convertible) or (b) any sale or conveyance of all or substantially all of the
property and assets of the Corporation, then lawful provision shall be made as
part of the terms of such transaction whereby the holder of each share of Series
D Stock which is not converted into the right to receive stock or other
securities and property in connection with such transaction shall have the right
thereafter, during the period such share shall be convertible, to convert such
share into the kind and amount of shares of stock or other securities and
property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible) into which
such shares of this Series could have been converted immediately prior to such
consolidation, merger, sale or conveyance, subject to adjustment which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. If holders of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible) are entitled
to elect the kind or amount of securities or other property receivable upon such
consolidation, merger, sale or conveyance, all adjustments made pursuant to this
Section 3.7 shall be based upon (i) the election, if any, made in writing to the
Secretary of the Corporation by the record holder of the largest number of
shares of Series D Stock prior to the earlier of (x) the last date on which a
holder of Media Stock (or such other class or series of common stock) may make
such an election and (y) the date which is five (5) Trading Days prior to the
record date for determining the holders of Media Stock (or such other class or
series of common stock) entitled to participate in the transaction (or if no
such record date is established, the
 
                                     A-2-27
<PAGE>
effective date of such transaction) or (ii) if no such election is timely made,
an assumption that each holder of Shares of this Series failed to exercise such
rights of election (provided that if the kind or amount of securities or other
property receivable upon such consolidation, merger, sale or conveyance is not
the same for each nonelecting share, then the kind and amount of securities or
other property receivable upon such consolidation, merger, sale or conveyance
for each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Concurrently
with the mailing to holders of Media Stock (or such other class or series of
common stock) of any document pursuant to which such holders may make an
election regarding the kind or amount of securities or other property that will
be receivable by such holder in any transaction described in clause (a) or (b)
of the first sentence of this Section 3.7, the Corporation shall mail a copy
thereof to the holders of shares of the Series D Stock. The Corporation shall
not enter into any of the transactions referred to in clauses (a) or (b) of the
first sentence of this Section 3.7 unless, prior to the consummation thereof,
effective provision shall be made in a certificate or articles of incorporation
or other constituent document or written instrument of the Corporation or the
entity surviving the consolidation or merger, if other than the Corporation, or
the entity acquiring the Corporation's assets, unless, in either case, such
entity is a direct or indirect subsidiary of another entity, in which case such
provision shall be made in the certificate or articles of incorporation or other
constituent document or written instrument of such other entity (any such entity
or other entity being the "Surviving Entity") so as to assume the obligation to
deliver to each holder of shares of Series D Stock such stock or other
securities and property and otherwise give effect to the provisions set forth in
this Section 3.7. The provisions of this Section 3.7 shall apply similarly to
successive consolidations, mergers, sales or conveyances.
 
    3.8 After the date, if any, on which all outstanding shares of Media Stock
(or such other class or series of common stock into which shares of this Series
are then convertible) are converted into or exchanged for shares of another
class or series of common stock of the Corporation, each share of this Series
shall thereafter be convertible into or exchangeable for the number of shares of
such other class or series of common stock receivable upon such conversion or
exchange by a holder of that number of shares or fraction thereof of Media Stock
(or such other class or series of common stock into which shares of this Series
are then convertible) into which one share of this Series was convertible
immediately prior to such conversion or exchange. From and after any such
conversion or exchange, Conversion Rate adjustments as nearly equivalent as may
be practicable to the adjustments pursuant to Sections 3.6 and 3.7 which, prior
to such exchange, were made in respect of Media Stock (or such other class or
series of common stock into which shares of this Series are then convertible)
shall instead be made pursuant to such Sections 3.6 and 3.7 in respect of shares
of such other class or series of common stock.
 
    3.9 (a) Whenever the Conversion Rate is adjusted as provided in this Section
3, the Corporation (or, in the case of Section 3.7, the Corporation or the
Surviving Entity, as the case may be), shall forthwith place on file with its
transfer agent or agents for this Series a statement signed by a duly authorized
officer of the Corporation or the Surviving Entity, as the case may be, stating
the adjusted Conversion Rate determined as provided herein. Such statements
shall set forth in reasonable detail such facts as shall be necessary to show
the reason for and the manner of computing such adjustment. Promptly after the
adjustment of the Conversion Rate, the Corporation or the Surviving Entity, as
the case may be, shall mail a notice thereof to each holder of shares of this
Series. Whenever the Conversion Rate is increased pursuant to Section 3.6(f),
such notice shall be mailed to each holder of shares of this Series as promptly
as possible after the Corporation shall have determined to effect such increase
and, in any event, at least 15 Trading Days prior to the date such increased
Conversion Rate takes effect, and such notice shall state such increased
Conversion Rate and the period during which it will be in effect. Where
appropriate, the notice required by this Section 3.9(a) may be given in advance
and included as part of the notice required pursuant to Section 3.9(b) or
3.9(c).
 
                                     A-2-28
<PAGE>
    (b) Subject to the provisions of Section 3.9(c), if: (i) the Corporation
takes any action that would require an adjustment of the Conversion Rate
pursuant to Sections 3.6 through 3.8; (ii) there shall be any consolidation or
merger to which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or the sale or transfer of all or
substantially all of the assets of the Corporation; or (iii) there shall occur
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, then the Corporation shall, as promptly as possible, but at least
10 Trading Days prior to the record date or other date set for definitive action
if there shall be no record date, cause notice to be filed with the transfer
agent or agents for this Series and given to each record holder of outstanding
shares of this Series stating the action or event for which such notice is being
given and the record date for and the anticipated effective date of such action
or event. Failure to give or receive such notice or any defect therein shall not
affect the legality or validity of the related transaction.
 
    (c) If the Corporation intends to convert all of the outstanding shares of
Media Stock into shares of Communications Stock (or, if the Communications Stock
is not Publicly Traded at such time and shares of any other class or series of
common stock of the Corporation (other than Media Stock) are then Publicly
Traded, of such other class or series of common stock as has the largest Market
Capitalization) (as provided in Section 2.4 of Article V of the Certificate of
Incorporation), then the Corporation shall, not later than the 35th Trading Day
and not earlier than the 45th Trading Day prior to the date of such conversion,
cause notice to be filed with the transfer agent or agents for this Series and
given to each record holder of shares of this Series, setting forth: (1) a
statement that all outstanding shares of Media Stock shall be converted; (2) the
date of such conversion; (3) the per share number of shares of Communications
Stock (or such other class or series of common stock) to be received with
respect to each share of Media Stock, including details as to the calculation
thereof; (4) the place or places where certificates for shares of Media Stock,
properly endorsed or assigned for transfer (unless the Corporation shall waive
such requirement), are to be surrendered for delivery of certificates for shares
of Communications Stock (or such other class or series of common stock); (5) the
number of shares of Media Stock outstanding and the number of shares of Media
Stock into or for which outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof, including the number of outstanding shares of this Series and the
Conversion Price; (6) a statement to the effect that, subject to Section
2.4.5(I) of Article V of the Certificate of Incorporation, dividends on shares
of such Media Stock shall cease to be paid as of the date of such conversion;
(7) that a holder of shares of this Series shall be entitled to receive shares
of Communications Stock (or such other class or series of common stock) pursuant
to such conversion if such holder converts shares of this Series on or prior to
the date of such conversion; and (8) a statement as to what such holder will be
entitled to receive pursuant to the terms of Section 3.8 if such holder
thereafter properly converts shares of this Series. In addition, from and after
any conversion of Media Stock effected in accordance with Section 2.4 of Article
V of the Certificate of Incorporation, if (x) a class or series of common stock
of the Corporation exists in addition to the class or series of common stock
into which the Media Stock was converted and (y) the Corporation intends to
convert the class or series of common stock into which the Media Stock was
converted into another such class or series of common stock of the Corporation,
then the Corporation shall give notice comparable to the notice described in the
preceding sentence of its intention to effect such a conversion. In the event of
any conflict between the notice provisions of this Section 3.9(c) and Section
3.9(b), the notice provisions of this Section 3.9(c) shall govern.
 
   3.10 There shall be no adjustment of the Conversion Rate in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section 3. If
any action or transaction would require adjustment of any Conversion Rate
established hereunder pursuant to more than one paragraph of this Section 3,
only the adjustment which would result in the largest increase of such
Conversion Rate shall be made.
 
                                     A-2-29
<PAGE>
   3.11 The Corporation shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued stock, for the purpose of
effecting the conversion of the shares of this Series, such number of its duly
authorized shares of Media Stock (or, if applicable, any other shares of Capital
Stock of the Corporation) as shall from time to time be sufficient to effect the
conversion of all outstanding shares of this Series into such Media Stock (or
such other shares of Capital Stock) at any time; PROVIDED, HOWEVER, that nothing
contained herein shall preclude the Corporation from satisfying its obligations
in respect of the conversion of the shares by delivery of purchased shares of
Media Stock (or such other shares of Capital Stock) that are held in the
treasury of the Corporation. All shares of Media Stock (or such other shares of
Capital Stock of the Corporation) which shall be deliverable upon conversion of
the shares of this Series shall be duly and validly issued, fully paid and
nonassessable. For purposes of this Section 3, the number of shares of Media
Stock or any other class or series of common stock of the Corporation at any
time outstanding shall not include any shares of Media Stock or such other class
or series of common stock then owned or held by or for the account of
Corporation or any subsidiary of the Corporation.
 
   3.12 If any shares of Media Stock (or such other class or series of common
stock into which shares of this Series are then convertible) which would be
issuable upon conversion of shares of this Series hereunder require registration
with or approval of any governmental authority before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible cause such shares to be duly registered or approved, as the case may
be. The Corporation will endeavor to list the shares of (or depositary shares
representing fractional interests in) Media Stock (or such other class or series
of common stock into which shares of this Series are then convertible) required
to be delivered upon conversion of shares of this Series prior to such delivery
upon the principal national securities exchange upon which the outstanding Media
Stock (or such other class or series of common stock) is listed at the time of
such delivery.
 
   3.13 The Corporation shall pay any and all issue, stamp, documentation,
transfer or other taxes that may be payable in respect of any issue or delivery
of shares of Media Stock (or such other class or series of common stock into
which shares of this Series are then convertible) on conversion of shares of
this Series pursuant hereto. The Corporation shall not, however, be required to
pay any tax which is payable in respect of any transfer involved in the issue or
delivery of Media Stock (or such other class or series of common stock) in a
name other than that in which the shares of this Series so converted were
registered, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Corporation the amount of such tax,
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
 
    4.  REDEMPTION OR EXCHANGE.
 
    4.1 (a) Except as provided in Section 4.1(b), the shares of this Series
shall not be redeemable by the Corporation prior to the third anniversary of the
Effective Time. The Corporation may, at its sole option, subject to Section 2.2
hereof, from time to time on and after the third anniversary of the Effective
Time and prior to the fifth anniversary of the Effective Time, exchange shares
of Media Stock (or such other class or series of common stock into which shares
of this Series are then convertible) for all or any part of the outstanding
shares of this Series at the Exchange Rate; PROVIDED, HOWEVER, that such an
exchange may only be effected if the Closing Price shall be greater than the
product of (x) the Conversion Price multiplied by (y) 1.35, on 20 of the 30
Trading Days immediately prior to the date of the notice delivered by the
Corporation pursuant to Section 4.3(a) to holders of shares of this Series to be
exchanged. The Corporation may, at its sole option, subject to Section 2.2
hereof, from time to time on and after the fifth anniversary of the Effective
Time, at its election either: (i) redeem, out of funds legally available
therefor, all or any part of the outstanding shares of this Series at the
Redemption Price; (ii) exchange shares of Media Stock (or such other class or
series of common stock into which shares of this Series are then convertible)
for all or any part of the outstanding shares of this Series at the Exchange
Rate; or (iii) effect a combination of the options described in the foregoing
clauses
 
                                     A-2-30
<PAGE>
(i) and (ii) (in which event each holder of shares of this Series which are
selected for redemption and exchange pursuant to Section 4.2 shall receive the
same proportion of cash and shares of Media Stock (or such other class or series
of common stock into which shares of this Series are then convertible) (except
for cash paid in lieu of fractional shares) paid to other holders of shares of
this Series selected for redemption and exchange).
 
    (b) The Corporation shall redeem, out of funds legally available therefor,
all of the outstanding shares of this Series, at the Redemption Price, if any of
the following events with respect to the Media Group occur (such events being
collectively referred to herein as the "Media Group Special Events"):
 
    (i) (A) the Corporation redeems all of the outstanding shares of Media Stock
in exchange for shares of common stock of the Media Group Subsidiaries as
provided in Section 2.4.3 of Article V of the Certificate of Incorporation (the
"Media Group Subsidiary Redemption") or (B) following a Disposition of all or
substantially all of the properties and assets attributed to the Media Group,
the Corporation either (1) pays a dividend on the Media Stock in an amount equal
to the product of the Outstanding Media Fraction multiplied by the Fair Value of
the Net Proceeds of such Disposition as provided in Section 2.4.1(A)(1)(a) of
Article V of the Certificate of Incorporation (the "Media Group Disposition
Dividend"), or (2) redeems shares of Media Stock for an amount equal to the
product of the Outstanding Media Fraction multiplied by the Fair Value of the
Net Proceeds of such Disposition as provided in Section 2.4.1(A)(1)(b) of
Article V of the Certificate of Incorporation (the "Media Group Disposition
Redemption"); or
 
    (ii) the Corporation pays a dividend on, or the Corporation or any of its
subsidiaries consummates a tender offer or exchange offer for, shares of Media
Stock and the aggregate amount of such dividend or the consideration paid in
such tender offer or exchange offer is an amount equal to the Fair Value of all
or substantially all of the properties and assets attributed to the Media Group
(the "Media Group Special Dividend" or the "Media Group Tender or Exchange
Offer", respectively); PROVIDED, HOWEVER, that the calculation of the Fair Value
of all or substantially all of the properties and assets attributed to the Media
Group shall be made without giving effect to any money borrowed by the
Corporation or any of its subsidiaries in connection with such dividend or
tender offer or exchange offer, as the case may be.
 
    The Redemption Date for shares of this Series to be redeemed by the
Corporation pursuant to this Section 4.1(b) shall be, if the applicable Media
Group Special Event is (I) the Media Group Subsidiary Redemption, the date of
such exchange, (II) the Media Group Disposition Dividend or the Media Group
Special Dividend, the date of payment of such dividend, (III) the Media Group
Disposition Redemption, the date of such redemption or (IV) the Media Group
Tender or Exchange Offer, the date such tender offer or exchange offer is
consummated. Notwithstanding anything to the contrary contained in this Section
4.1(b), any redemption pursuant to this Section 4.1(b) shall be conditioned upon
the actual redemption of Media Stock for shares of common stock of the Media
Group Subsidiaries, payment of the Media Group Disposition Dividend or the
amount due as a result of the Media Group Disposition Redemption (in each case
in the required kind of capital stock, cash, securities and/or other property),
payment of the Media Group Special Dividend or the consummation of the Media
Group Tender or Exchange Offer, as the case may be.
 
    (c) The Corporation shall, on the twentieth anniversary of the Effective
Time, at its election either: (i) redeem, out of funds legally available
therefor, all of the outstanding shares of this Series at the Redemption Price;
(ii) exchange shares of Media Stock (or such other class or series of common
stock into which shares of this Series are then convertible) for all of the
outstanding shares of this Series at the Exchange Rate; or (iii) effect a
combination of the options described in the foregoing clauses (i) and (ii) (in
which event each holder of shares of this Series shall receive the same
proportion of cash and shares of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible) (except for
cash paid in lieu of fractional shares) paid to other holders of shares of this
Series).
 
                                     A-2-31
<PAGE>
    (d) The Corporation shall redeem, out of funds legally available therefore,
all of the outstanding shares of this Series at the Redemption Price, if (i) the
Corporation converts all of the outstanding shares of Media Stock into shares of
Communications Stock (or, if the Communications Stock is not Publicly Traded at
such time and shares of any other class or series of common stock of the
Corporation (other than Media Stock) are then Publicly Traded, of such other
class or series of common stock as has the largest Market Capitalization) as
provided in Section 2.4 of Article V of the Certificate of Incorporation and
(ii) at any time following such conversion (A) an event substantially similar to
any Media Group Special Event occurs in respect to the Communications Stock (or
such other class or series of common stock) and (B) at the time of such event
shares of another class or series of common stock of the Corporation (other then
Communications Stock or such other class or series of common stock) are then
Publicly Traded. The Redemption Date for, and the conditions to, any such
redemption shall be determined in a manner consistent with the Redemption Date
and conditions set forth in Section 4.1(b) for a redemption resulting from a
substantially similar Media Group Special Event.
 
    (e) The Corporation shall be entitled to effect an exchange of shares of
Media Stock (or such other class or series of common stock into which shares of
this Series are then convertible) for shares of Series D Stock pursuant to
Section 4.1(a) or 4.1(c) only to the extent Media Stock (or such other class or
series of common stock) shall be available for issuance (including delivery of
previously issued shares of Media Stock (or such other class or series) held in
the Corporation's treasury on the Redemption Date). The Corporation may, but
shall not be required to, in connection with any exchange of shares of this
Series pursuant to Section 4.1(a) or 4.1(c), issue a fraction of a share of
Media Stock (or such other class or series of common stock into which shares of
this Series are then convertible), and if the Corporation shall determine not to
issue any such fraction, the Corporation shall make a cash payment (rounded to
the nearest cent) equal to such fraction multiplied by the Closing Price of the
Media Stock (or such other class or series of common stock) on the last Trading
Day prior to the Redemption Date.
 
    4.2 In the event that fewer than all of the outstanding shares of this
Series are to be redeemed and/or exchanged pursuant to Section 4.1(a), subject
to clause (iii) of the third sentence of Section 4.1(a), the aggregate number of
shares of this Series held by each holder which will be redeemed and/or
exchanged shall be determined by the Corporation by lot or pro rata or by any
other method as may be determined by the Board of Directors in its sole
discretion to be equitable, and the certificate of the Corporation's Secretary
or an Assistant Secretary filed with the transfer agent or transfer agents for
this Series in respect of such determination by the Board of Directors shall be
conclusive.
 
    4.3 (a) If the Corporation determines to redeem and/or exchange shares of
this Series pursuant to Section 4.1(a) or 4.1(c), the Corporation shall, not
later than the 15th Trading Day nor earlier than the 60th Trading Day prior to
the Redemption Date, cause notice to be filed with the transfer agent or agents
for this Series and to be given to each record holder of the shares to be
redeemed and/or exchanged, setting forth: (1) the Redemption Date; (2) in the
case of a redemption or exchange pursuant to Section 4.1(c), that all shares of
this Series outstanding on the Redemption Date shall be redeemed and/or
exchanged by the Corporation; (3) in the case of a redemption or exchange
pursuant to Section 4.1(a), the total number of shares of this Series to be
redeemed and/or exchanged and, if fewer than all the shares held by such holder
are to be redeemed and/or exchanged, the aggregate number of such shares which
will be redeemed and/or exchanged; (4) the Redemption Price and/or the manner in
which the Exchange Rate will be calculated prior to the Redemption Date; (5)
that, if applicable, the Corporation shall determine on or prior to the second
Trading Day preceding the Redemption Date the percentage of such holder's shares
to be redeemed and the percentage of such holder's shares to be exchanged; (6)
that shares of this Series called for redemption or exchange may be converted at
any time prior to the Redemption Date (unless the Corporation (i) shall, in the
case of a redemption, default in payment of the Redemption Price or, in the case
of an exchange, fail to exchange the shares of this Series for the applicable
number of shares of Media Stock or (ii) shall, in the case of a redemption
pursuant to Section 4.1(a), exercise its right to rescind such redemption or
 
                                     A-2-32
<PAGE>
exchange pursuant to Section 4.5, in which case such right of conversion shall
not terminate at such time and date); (7) the applicable Conversion Price; (8)
the place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price and/or the Exchange Rate, as the case may be;
and (9) that dividends on the shares to be redeemed and/or exchanged will cease
to accrue on the Redemption Date. Promptly, following the Redemption Date, the
Corporation shall cause notice to be filed with the transfer agent or agents for
this Series and to be given to each record holder of the shares to be redeemed
and/or exchanged setting forth the percentage of such holder's shares which the
Corporation has elected to redeem and the percentage of such holder's shares
which the Corporation has elected to exchange.
 
    (b) If the Corporation determines to effect a Media Group Subsidiary
Redemption, the Corporation shall, not later than the 30th Trading Day and not
earlier than the 45th Trading Day prior to the Redemption Date, cause notice to
be filed with the transfer agent or agents for this Series and given to each
record holder of shares of this Series, setting forth: (1) the Redemption Date
(which, pursuant to the penultimate sentence of Section 4.1(b), shall be the
same as the date specified in clause (8) below); (2) that all shares of this
Series outstanding on the Redemption Date shall be redeemed by the Corporation;
(3) the Redemption Price; (4) that the redemption of the shares of this Series
shall be conditioned upon the consummation of the Media Group Subsidiary
Redemption; (5) the place or places where certificates for shares of this
Series, properly endorsed or assigned for transfer (unless the Corporation
waives such requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to accrue on
the Redemption Date; (7) a statement that all shares of Media Stock outstanding
on the date of the Media Group Subsidiary Redemption shall be redeemed in
exchange for shares of common stock of the Media Group Subsidiaries; (8) the
date of such Media Group Subsidiary Redemption; (9) the Outstanding Media
Fraction on the date of such notice; (10) the place or places where certificates
for shares of Media Stock, properly endorsed or assigned for transfer (unless
the Corporation shall waive such requirement), are to be surrendered for
delivery of certificates for shares of the Media Group Subsidiaries; (11) a
statement to the effect that, subject to Section 2.4.5(I) of Article V of the
Certificate of Incorporation, dividends on the Media Stock shall cease to be
paid as of the Redemption Date; (12) the number of shares of Media Stock
outstanding and the number of shares of Media Stock into or for which
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, including
the number of outstanding shares of this Series and the Conversion Price; and
(13) that a holder of shares of this Series shall be entitled to receive shares
of common stock of the Media Group Subsidiaries upon the Media Group Subsidiary
Redemption in lieu of the Redemption Price only if such holder converts such
shares of this Series on or prior to the Redemption Date.
 
    (c) If the Corporation determines to effect a Media Group Disposition
Dividend, the Corporation shall, not later than the 30th Trading Day following
the consummation of the Disposition by the Corporation of all or substantially
all of the properties and assets attributed to the Media Group, cause notice to
be filed with the transfer agent or agents for this Series and given to each
record holder of shares of this Series, setting forth: (1) the anticipated
Redemption Date (which, pursuant to the penultimate sentence of Section 4.1(b),
shall be the same as the date specified in clause (8) below); (2) that all
shares of this Series outstanding on the Redemption Date shall be redeemed by
the Corporation; (3) the Redemption Price; (4) that the redemption of the shares
of this Series shall be conditioned upon the payment of the Media Group
Disposition Dividend; (5) the place or places where certificates for shares of
this Series, properly endorsed or assigned for transfer (unless the Corporation
waives such requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to accrue on
the Redemption Date; (7) the record date for determining holders of Media Stock
entitled to receive the Media Group Disposition Dividend, which shall be not
earlier than the 40th Trading Day and not later than the 50th Trading Day
following the consummation of such Disposition; (8) the anticipated date of
payment of the Media Group Disposition
 
                                     A-2-33
<PAGE>
Dividend (which shall not be more than 85 Trading Days following the
consummation of such Disposition); (9) the type of property to be paid as such
dividend in respect of the outstanding shares of Media Stock; (10) the Net
Proceeds of such Disposition; (11) the Outstanding Media Fraction on the date of
such notice; (12) the number of outstanding shares of Media Stock and the number
of shares of Media Stock into or for which outstanding Convertible Securities
are then convertible, exchangeable or exercisable and the conversion, exchange
or exercise price thereof, including the number of outstanding shares of this
Series and the Conversion Price in effect at such time; and (13) that a holder
of shares of this Series shall be entitled to receive such dividend in lieu of
the Redemption Price only if such holder properly converts such shares on or
prior to the record date referred to in clause (7) of this sentence and that
shares of this Series shall not be convertible after such record date.
 
    (d) If the Corporation determines to effect a Media Group Disposition
Redemption following a Disposition of all (not merely substantially all) of the
properties and assets attributed to the Media Group (in accordance with Section
2.4.1(A)(1)(b)(i) of Article V of the Certificate of Incorporation), the
Corporation shall, not later than the 35th Trading Day and not earlier than the
45th Trading Day prior to the Redemption Date, cause notice to be filed with the
transfer agent or agents for this Series and given to each record holder of
shares of this Series, setting forth: (1) the Redemption Date (which, pursuant
to the penultimate sentence of Section 4.1(b), shall be the same as the date
specified in clause (8) below); (2) that all shares of this Series outstanding
on the Redemption Date shall be redeemed by the Corporation; (3) the Redemption
Price; (4) that the redemption of shares of this Series shall be conditioned
upon the consummation of the Media Group Disposition Redemption; (5) the place
or places where certificates for shares of this Series, properly endorsed or
assigned for transfer (unless the Corporation waives such requirement), are to
be surrendered for payment of the Redemption Price; (6) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date; (7) that all
shares of Media Stock outstanding on the date of such Media Group Disposition
Redemption shall be redeemed; (8) the date of such Media Group Disposition
Redemption (which shall not be more than 85 Trading Days following the
consummation of such Disposition); (9) the type of property in which the
redemption price for the shares of Media Stock to be redeemed is to be paid;
(10) the Net Proceeds of such Disposition; (11) the Outstanding Media Fraction
on the date of such notice; (12) the place or places where certificates for
shares of Media Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), are to be surrendered for delivery of cash
and/or securities or other property; (13) the number of outstanding shares of
Media Stock and the number of shares of Media Stock into or for which such
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, including
the number of outstanding shares of this Series and the Conversion Price in
effect at such time; (14) that a holder of shares of this Series shall be
entitled to participate in the Media Group Disposition Redemption in lieu of
participating in the redemption of the shares of this Series only if such holder
properly converts such shares of this Series on or prior to the Redemption Date;
and (15) that, except as otherwise provided by Section 2.4.5(I) of Article V of
the Certificate of Incorporation, dividends on shares of Media Stock shall cease
to be paid as of the Redemption Date.
 
    (e) If the Corporation determines to effect a Media Group Disposition
Redemption following a Disposition of substantially all (but not all) of the
properties and assets attributed to the Media Group (in accordance with Section
2.4.1(A)(1)(b)(ii) of Article V of the Certificate of Incorporation), the
Corporation shall, not later than the 30th Trading Day following the
consummation of such Disposition, cause notice to be filed with the transfer
agent or agents for this Series and given to each record holder of shares of
this Series, setting forth: (1) the anticipated Redemption Date (which, pursuant
to the penultimate sentence of Section 4.1(b), shall be the same as the date
specified in clause (8) below); (2) that all shares of this Series outstanding
on the Redemption Date shall be redeemed by the Corporation; (3) the Redemption
Price; (4) that the redemption of shares of this Series shall be conditioned
upon the consummation of the Media Group Disposition Redemption; (5) the place
or places where certificates for shares of this Series, properly endorsed or
assigned for transfer (unless the
 
                                     A-2-34
<PAGE>
Corporation waives such requirement), are to be surrendered for payment of the
Redemption Price; (6) that dividends on the shares to be redeemed will cease to
accrue on the Redemption Date; (7) a date not earlier than the 40th Trading Day
and not later than the 50th Trading Day following the consummation of such
Disposition on which shares of Media Stock shall be selected for redemption
pursuant to such Media Group Disposition Redemption; (8) the anticipated date of
such Media Group Disposition Redemption (which shall not be more than 85 Trading
Days following the consummation of such Disposition); (9) the type of property
in which the redemption price for the shares of Media Stock to be redeemed is to
be paid; (10) the Net Proceeds of such Disposition; (11) the Outstanding Media
Fraction; (12) the number of shares of Media Stock outstanding and the number of
shares of Media Stock into or for which outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof, including the number of outstanding shares of this
Series and the Conversion Price in effect at such time; (13) that a holder of
shares of this Series shall be eligible to participate in such selection for
redemption pursuant to such Media Group Disposition Redemption in lieu of
participating in the redemption of shares of this Series only if such holder
properly converts such shares of this Series on or prior to the date referred to
in clause (7) of this sentence and that shares of this Series shall not be
convertible after such date; and (14) a statement that the Corporation will not
be required to register a transfer of any shares of Media Stock for a period of
15 Trading Days next preceding the date referred to in clause (7) of this
sentence.
 
    (f) If the Corporation determines to effect a Media Group Special Dividend,
the Corporation shall, not later than the 45th Trading Day and not earlier than
the 60th Trading day prior to the date of payment of such dividend, cause notice
to be filed with transfer agent or agent for this Series and given to each
record holder of shares of this Series, setting forth: (1) the anticipated
Redemption Date (which, pursuant to the penultimate sentence of Section 4.1(b),
shall be the same as the date specified in clause (8) below); (2) that all
shares of this Series outstanding on the Redemption Date shall be redeemed by
the Corporation; (3) the Redemption Price; (4) that the redemption of the shares
of this Series shall be conditioned upon the payment of the Media Group Special
Dividend; (5) the place or places where certificates for shares of this Series,
properly endorsed or assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for payment of the Redemption Price; (6)
that dividends on the shares to be redeemed will cease to accrue on the
Redemption Date; (7) the record date for determining holders of Media Stock
entitled to receive the Media Group Special Dividend, which shall be not earlier
than the 20th Trading Day prior to the date of payment of such dividend; (8) the
anticipated date of payment of the Media Group Special Dividend; (9) the type of
property to be paid as such dividend in respect of the outstanding shares of
Media Stock; (10) the Outstanding Media Fraction on the date of such notice;
(11) the number of outstanding shares of Media Stock and the number of shares of
Media Stock into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof, including the number of outstanding shares of this
Series and the Conversion Price in effect at such time; and (12) that a holder
of shares of this Series shall be entitled to receive such dividend in lieu of
the Redemption Price only if such holder properly converts such shares on or
prior to the record date referred to in clause (7) of this sentence and that
shares of this Series shall not be convertible after such record date.
 
    (g) If the Corporation or any of its subsidiaries determines to effect a
Media Group Tender or Exchange Offer, the Corporation shall, on the date of the
public announcement of such tender offer or exchange offer by the Corporation or
any of its subsidiaries but in any event not later than the 35th Trading Day
prior to such redemption, cause notice to be filed with the transfer agent or
agent for this Series and given to each record holder of shares of this Series,
setting forth: (1) the anticipated
 
                                     A-2-35
<PAGE>
Redemption Date (which, pursuant to the penultimate sentence of Section 4.1(b),
shall be the same as the date specified in clause (7) below); (2) that all
shares of this Series outstanding on the Redemption Date shall be redeemed by
the Corporation; (3) the Redemption Price; (4) that the redemption of shares of
this Series shall be conditioned upon the consummation of the Media Group Tender
or Exchange Offer; (5) the place or places where certificates for shares of this
Series, properly endorsed or assigned for transfer (unless the Corporation
waives such requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to accrue on
the Redemption Date; (7) the anticipated date of consummation of such Media
Group Tender or Exchange Offer; (8) the type of consideration to be paid by the
Corporation or its subsidiary in such Media Group Tender Offer or Exchange Offer
for shares of Media Stock; (9) the date on which such Media Group Tender or
Exchange Offer commenced, the date on which such Media Group Tender or Exchange
Offer is scheduled to expire unless extended and any other material terms
thereof (or the material terms of any amendment thereto); (10) the Outstanding
Media Fraction on the date of such notice; (11) the number of outstanding shares
of Media Stock and the number of shares of Media Stock into or for which such
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, including
the number of outstanding shares of this Series and the Conversion Price in
effect at such time; and (12) that a holder of shares of this Series shall be
entitled to participate in the Media Group Tender or Exchange Offer in lieu of
participating in the redemption of the shares of this Series only if such holder
properly converts such shares of this Series on or prior to the Redemption Date
and then complies with the terms and conditions of the Media Group Tender or
Exchange Offer and that such holder shall be permitted to tender or exchange
shares of Media Stock upon conversion of shares of this Series by notice of
guaranteed delivery so long as physical certificates are tendered as soon as
practicable after physical receipt thereof.
 
    (h) In the event the Corporation shall redeem shares of this Series pursuant
to Section 4.1(d), notice of such redemption shall be given by the Corporation
at a time, and such notice shall contain information, comparable to the time or
information, as the case may be, specified in Sections 4.3(b) through (g) with
respect to a notice of a redemption pursuant to Section 4.1(b) resulting from a
substantially similar Media Group Special Event.
 
    4.4 If notice of redemption or exchange shall have been given by the
Corporation as provided in Section 4.3, from and after the Redemption Date,
dividends on the shares of this Series so called for redemption or exchange
shall cease to accrue, such shares shall n