USW-C INC, S-4/A, 1998-03-18

USW-C INC
S-4/A, 1998-03-18
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1998

REGISTRATION NO. 333-45765

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1
TO

FORM S-4

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

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USW-C, INC.

(Exact name of registrant as specified in its charter)

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DELAWARE 4811 84-0953188
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
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USW-C, INC.
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(303) 793-6500

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

STEPHEN E. BRILZ, ESQ.
U S WEST, INC.
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(303) 793-6500

(Name and address, including zip code, of agent for service)

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COPIES TO:

DENNIS J. BLOCK, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the transactions described herein.

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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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SUBJECT TO COMPLETION, DATED MARCH 18, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROXY STATEMENT FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
OF U S WEST, INC.
TO BE HELD ON
, JUNE , 1998

You are invited to attend our 1998 Annual Meeting of Stockholders, which
will be held on , June , 1998, at 1:30 p.m., Eastern Time, at
. 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.

, 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................................................................................ 19
Description of the Separation.......................................................................... 19
Background of the Separation........................................................................... 23
Reasons for the Separation............................................................................. 30
Recommendation of the Board of Directors............................................................... 34
Opinions of Financial Advisors......................................................................... 34
Accounting Treatment................................................................................... 40
Regulatory Requirements................................................................................ 41
Interest of Certain Persons in the Separation.......................................................... 41
Stock Exchange Listings................................................................................ 43
Dividend Policy........................................................................................ 43
Treatment of Indebtedness.............................................................................. 43
Treatment of Preferred Stock........................................................................... 45
Federal Securities Laws Consequences................................................................... 45
Certain U.S. Federal Income Tax Consequences........................................................... 45
Employee Benefits and Compensation Matters............................................................. 46
Appraisal Rights....................................................................................... 51
Relationship Between New U S WEST and MediaOne After the Separation.................................... 51

CHAPTER 4: OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING.......................................... 54

Election of Directors.................................................................................. 54
Ratification of Auditors............................................................................... 56
Proposal to Approve the 1998 New U S WEST Stock Plan................................................... 56
Proposal to Approve the New U S WEST Long-Term Incentive Plan.......................................... 61
Proposal to Approve the New U S WEST Executive Short-Term Incentive Plan............................... 62
Proposal to Approve an Amendment to the U S WEST 1994 Stock Plan....................................... 63
Proposal to Approve an Amendment to the U S WEST Executive Short-Term
Incentive Plan....................................................................................... 64
Stockholder Proposals.................................................................................. 65
U S WEST Director and Executive Officer Information.................................................... 67

CHAPTER 5: INFORMATION ABOUT U S WEST.................................................................... 82
Business of U S WEST................................................................................... 82
U S WEST Selected Historical Financial Information..................................................... 84
U S WEST Management's Discussion and Analysis of Financial Condition and Results of Operations......... 86

CHAPTER 6: INFORMATION ABOUT NEW U S WEST................................................................ 112
Business of New U S WEST............................................................................... 112
Management of New U S WEST............................................................................. 119
New U S WEST Selected Historical Financial Information................................................. 128
New U S WEST Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................ 129
New U S WEST Unaudited Pro Forma Condensed Combined Financial Statements............................... 142

CHAPTER 7: INFORMATION ABOUT MEDIAONE.................................................................... 146
Business of MediaOne................................................................................... 146
Management of MediaOne................................................................................. 154
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PAGE
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MediaOne Management's Discussion and Analysis of Financial Condition and Results of Operations......... 156
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MediaOne Unaudited Pro Forma Condensed Combined Financial Statements................................... 157

CHAPTER 8: CAPITAL STOCK................................................................................. 165
New U S WEST Capital Stock............................................................................. 165
MediaOne Capital Stock................................................................................. 169
Comparison of Rights of Stockholders................................................................... 174
Certain Antitakeover Considerations.................................................................... 176

CHAPTER 9: THE ANNUAL MEETING AND CERTAIN OTHER MATTERS.................................................. 178
The Annual Meeting..................................................................................... 178
Market Price and Dividend Data of Communications Stock and Media Stock................................. 182
Security Ownership of Certain Beneficial Owners and Management......................................... 183
Legal Matters.......................................................................................... 185
Experts................................................................................................ 185
Where You Can Find More Information.................................................................... 185
Stockholder Proposals.................................................................................. 187

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................................... 153
1995 Recapitalization............................ 9
1998 New U S WEST Stock Plan..................... 48
A/N.............................................. 148
Access Reform Order.............................. 89
AFOR............................................. 109
AirTouch......................................... 1
AirTouch Determination Price..................... 151
AirTouch Joint Venture........................... 110
AirTouch Merger Agreement........................ 151
AirTouch Transaction............................. 1
AirTouch Transaction Adjustments................. 156
AT&T............................................. 88
Bain............................................. 26
Bellcore......................................... 8
Broker Non-votes................................. 180
Cable Comparables................................ 39
Cable Index...................................... 38
Cable Plus....................................... 90
Capital Funding.................................. 43
Capital Funding Indebtedness..................... 43
CAPs............................................. 14
CDMA............................................. 114
Charter.......................................... 147
Charter Amendments............................... 21
Chofu............................................ 149
CLECs............................................ 14
Code............................................. 26
Comcast.......................................... 38
Commission....................................... 23
Committee........................................ 74
Communications Businesses........................ 129
Communications Group............................. 1
Communications Group Region...................... 1
Communications Indebtedness...................... 43
Communications Peer Group........................ 80
Communications Redemption........................ 19
Communications Right............................. 171
Communications Stock............................. 1
Communications Stock Awards...................... 46
Composite Tape................................... 182
Continental...................................... 3
Continental Acquisition.......................... 8
Continental Adjustments.......................... 123
Continental Indebtedness......................... 43
Cox.............................................. 38
CPE.............................................. 82
DBS.............................................. 17
DECs............................................. 106
Deferred Benefit Plans........................... 53
DEUs............................................. 61
Dex.............................................. 2
Dex Alignment.................................... 2
Dex Dividend..................................... 19
Dex Dividend Number.............................. 20
Dex Equity Value................................. 20
Dex Indebtedness................................. 2
Dex Value........................................ 20
DGCL............................................. 21

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Discontinued Operations Adjustments.............. 156
Distribution..................................... 45
DLS Formula...................................... 73
Draft Proxy Statement............................ 35
EBITDA........................................... 37
EBITDA Multiple.................................. 38
Eighth Circuit................................... 116
Employee Matters Agreement....................... 53
Enhance.......................................... 106
EPS.............................................. 37
ESOP............................................. 49
Exchange Act..................................... 23
Executives....................................... 42
FCC.............................................. 5
FCC Order........................................ 116
Financial Forecasts.............................. 35
Fintelco......................................... 95
FSA.............................................. 106
GAAP............................................. 86
GSM.............................................. 149
HFC.............................................. 146
Home Box Office.................................. 150
Incentive Stock Options.......................... 57
IRS.............................................. 4
IRS Ruling....................................... 4
ISPs............................................. 14
IXCs............................................. 14
LATAs............................................ 14
Lazard Freres.................................... 4
Lazard Freres Opinion............................ 34
LEC Index........................................ 38
LECs............................................. 14
Lehman........................................... 28
LMDS............................................. 17
Media Group...................................... 1
Media Peer Group................................. 81
Media Right...................................... 171
Media Stock...................................... 1
Media Stock Awards............................... 46
MediaOne......................................... 2
MediaOne Acquiring Person........................ 171
MediaOne Board................................... 4
MediaOne Bylaws.................................. 18
MediaOne Common Stock............................ 3
MediaOne Delaware................................ 3
MediaOne Distribution Date....................... 171
MediaOne ESOP.................................... 49
MediaOne ESTIP................................... 64
MediaOne Exercise Price.......................... 171
MediaOne Human Resources Committee............... 64
MediaOne Indebtedness............................ 44
MediaOne Pension Plan............................ 50
MediaOne Preferred Stock......................... 169
MediaOne Redemption Price........................ 173
MediaOne Restated Certificate.................... 169
MediaOne Right................................... 171
MediaOne Rights Agreement........................ 171
MediaOne Savings Plan/ESOP....................... 49
MediaOne Separation Adjustments.................. 156
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TERM PAGE
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MediaOne Series A Preferred Stock................ 169
MediaOne Series C Preferred Stock................ 45
MediaOne Series D Preferred Stock................ 45
MediaOne Series E Preferred Stock................ 45
MediaOne Stock Plan.............................. 63
Merrill.......................................... 28
Minnesota Sale Agreement......................... 147
Minnesota System................................. 147
MMDS............................................. 17
MTCPs............................................ 89
New PrimeStar.................................... 90
NewVector........................................ 151
New U S WEST..................................... 2
New U S WEST Acquiring Person.................... 166
New U S WEST Board............................... 4
New U S WEST Bylaws.............................. 15
New U S WEST Committee........................... 57
New U S WEST Common Stock........................ 2
New U S WEST Compensation Plans.................. 49
New U S WEST Distribution Date................... 166
New U S WEST Employee Benefit Committee.......... 56
New U S WEST Exercise Price...................... 166
New U S WEST ESOP................................ 50
New U S WEST ESTIP............................... 49
New U S WEST Human Resources Committee........... 48
New U S WEST Indebtedness........................ 44
New U S WEST LTIP................................ 48
New U S WEST Named Executive Officers............ 122
New U S WEST Pension Plan........................ 50
New U S WEST Preferred Stock..................... 165
New U S WEST Redemption Price.................... 168
New U S WEST Registration Statement.............. 186
New U S WEST Restated Certificate................ 21
New U S WEST Right............................... 166
New U S WEST Rights Agreement.................... 166
New U S WEST Savings Plan/ESOP................... 49
New U S WEST Separation Adjustments.............. 142
New U S WEST Series A Preferred Stock............ 166
New U S WEST SIP................................. 22
Non-employer Stock............................... 50
Nonqualified Stock Options....................... 57
NYSE............................................. 15
Old Common Stock................................. 9
One 2 One........................................ 83
Opinions......................................... 34
OPUC............................................. 109
Oregon Circuit Court............................. 110
Original AirTouch Transaction.................... 25
PCS.............................................. 82
PCS Holdings..................................... 151
P/E.............................................. 38
PICCs............................................ 118
Plan............................................. 76
POPs............................................. 114
Preferred Securities............................. 9
Price Cap Order.................................. 89
PrimeCo.......................................... 83
PrimeStar........................................ 82
Pro Forma Financial Statements................... 35
PSE.............................................. 15
PUCs............................................. 14
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TERM PAGE
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RBOCs............................................ 95
Record Date...................................... 179
Refinancing...................................... 44
Reorganization................................... 21
S&P.............................................. 38
SARs............................................. 56
Savings Plan/ESOP................................ 49
SBC Warburg Dillon Read.......................... 4
SBC Warburg Dillon Read Opinion.................. 34
Section 83(b) election........................... 60
Securities Act................................... 22
Separation....................................... 1
Separation Agreement............................. 19
Separation Date.................................. 19
Separation Time.................................. 19
Separation Transactions.......................... 35
Severance Agreements............................. 42
SFAS............................................. 8
SLCs............................................. 118
SMATV............................................ 17
SOP.............................................. 111
Special Committee................................ 24
Stock Awards..................................... 46
Targeted Stocks.................................. 1
Tax Sharing Agreement............................ 52
TCG.............................................. 95
TCI.............................................. 39
TCI Exchange..................................... 147
Telecommunications Act........................... 14
Telewest......................................... 9
Tenth Circuit.................................... 119
Time Warner Cable................................ 147
Titus............................................ 149
Transition Team.................................. 28
TWE.............................................. 23
TWE-A/N.......................................... 148
TWE Japan........................................ 151
TWE Non-Competition Restrictions................. 151
TWX.............................................. 95
Universal Service Order.......................... 117
UPSC............................................. 110
U. S. District Court............................. 116
U S WEST......................................... 1
U S WEST Board................................... 2
U S WEST Bylaws.................................. 15
U S WEST Communications.......................... 3
U S WEST Financial Advisors...................... 34
U S WEST Indebtedness............................ 43
U S WEST Named Executive Officers................ 69
U S WEST Pension Plan............................ 50
U S WEST Preferred Stock......................... 45
U S WEST Restated Certificate.................... 15
U S WEST Rights Agreement........................ 171
U S WEST Series C Preferred Stock................ 45
U S WEST Series D Preferred Stock................ 45
U S WEST Series E Preferred Stock................ 45
U S WEST SIP..................................... 22
U S WEST Stock Plans............................. 46
Washington Rate Order............................ 8
WUTC............................................. 87
xDSL............................................. 24
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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 185. 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. In January 1998, U S WEST entered into an
agreement to sell the Media Group's domestic wireless
business to AirTouch Communications, Inc. ("AirTouch")
for approximately $5.7 billion 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." 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 common stock of New U S WEST ("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").

We believe that the inclusion of Dex among New U S
WEST's businesses will better position New U S WEST 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
New U S WEST (which is a newly formed indirect
subsidiary of U S WEST) and then distribute all of the
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.
After 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."

After the Separation, 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.

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
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CHAPTER 1: INTRODUCTION
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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, MediaOne will have approximately
$6.4 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 $3.5 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. If the AirTouch Transaction is consummated,
MediaOne's post-Separation indebtedness will be reduced
by approximately $1.4 billion. Following the Separation,
MediaOne intends to monetize the AirTouch securities it
receives in the AirTouch Transaction and use a portion
of the proceeds of such monetization to further 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
February 20, 1998, this fraction would have equalled
0.02896 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
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$48.27--the average market price of the Communications
Stock for the 20 trading days ending 5 days prior to
February 20, 1998, and $1.49 per share of Media Stock,
based upon $51.50--the closing price of the
Communications Stock on February 20, 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 are asking the Internal Revenue Service (the
"IRS") for a ruling 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"). We will only
complete the Separation if we receive this 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.

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 depends
upon meeting a number of conditions, including the
approval of the Separation by our stockholders and our
receipt of the IRS Ruling and certain approvals from the
Federal Communications Commission (the "FCC"). We
currently expect to complete the Separation by
, 1998.

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 Annual Meeting will be held on June , 1998 at 1:30
p.m., Eastern Time, at . 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
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)
</TABLE>

5
CHAPTER 1: INTRODUCTION
<PAGE>

<TABLE>
<S> <C>
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 with a later date.

WHEN YOU WILL RECEIVE NEW Following completion of the Separation, stockholders
SHARES.......................... 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 In order to assist you in reviewing the terms of the
INFORMATION..................... 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
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
</TABLE>

6
CHAPTER 1: INTRODUCTION
<PAGE>

<TABLE>
<S> <C>
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:
Sale 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
trusts 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."

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

(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)............................................................ (611)
Loss from continuing operations available for common stock(1)................................. (663)
Basic and diluted loss per share from continuing operations(1)................................ (1.09)

BALANCE SHEET INFORMATION:
Total assets.................................................................................. 24,090
Total debt.................................................................................... 4,021
Mandatorily redeemable preferred stock and Preferred Securities............................... 1,180
Total equity.................................................................................. 12,666
Book value per share.......................................................................... 20.84
</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....................................................................... 20.84

PRO FORMA EQUIVALENT(4):
U S WEST
Basic and diluted loss per share of Media Stock............................................ (1.01)
Cash dividends per share of Media Stock(2)................................................. .06
Book value per share of Media Stock........................................................ 20.86
</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 0.02896
(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 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 million shares of New U S WEST Common Stock will be issued and
outstanding immediately after the Separation, which shares will have 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. 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; (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

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<PAGE>
activity requiring new pricing for services; (ix) higher than anticipated
start-up costs associated with new business opportunities; (x) delays in New 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.

As a result of the AirTouch Transaction, MediaOne's post-Separation
indebtedness will be reduced. See "Chapter 3: The Separation--Treatment of
Indebtedness." 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

16
CHAPTER 2: RISK FACTORS
<PAGE>

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 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. During late 1997, the value of
Asian currencies as compared with the U. S. dollar declined significantly,
particularly in Indonesia. These declines coupled with political uncertainties
led to a fourth-quarter 1997 Media Group pretax charge of $200 million.

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."

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,

17
CHAPTER 2: RISK FACTORS
<PAGE>
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; (viii) consumer acceptance of
broadband services, including telephony and data services, and wireless
services; (ix) competition from new providers of wireless services in MediaOne's
wireless markets; (x) increases in fraudulent activity with respect to broadband
and wireless services; or (xi) delays in the development of anticipated
technologies, or the failure of such technologies to perform according to
expectations.

18
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.

19
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 February 20, 1998, based upon $48.27 (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 February 20, 1998, the Dex Dividend Number would have equalled
0.02896. This equates to $1.40 per share of Media Stock, based

20
CHAPTER 3: THE SEPARATION
<PAGE>

upon the $48.27--the average market price of the Communications Stock for the 20
trading days ending 5 days prior to February 20, 1998, and $1.49 per share of
Media Stock, based upon $51.50--the market price of the Communications Stock on
February 20, 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

In order to consummate the Separation, the U S WEST Restated Certificate
will be amended prior to the Separation Time to, among other things, (i) prior
to the consummation of the Separation, (a) permit the Communications Redemption
and the Dex Dividend and (b) change the name of U S WEST to "MediaOne Group,
Inc." and (ii) following consummation of the Separation, (a) delete all
references in the U S WEST Restated Certificate to the Communications Stock
(which will no longer be outstanding as a result of the Communications
Redemption) and (b) amend certain terms of the Media Stock set forth in the U S
WEST Restated Certificate that will no longer be necessary due to the fact that
the Media Stock will no longer be a Targeted Stock (collectively, the "Charter
Amendments"). The Charter Amendments described in clause (i) above will be set
forth in a certificate of amendment, in the form attached as Annex A-1 to this
Proxy Statement, to be filed immediately prior to the Separation Time and the
Charter Amendments described in clause (ii) above will be set forth in a
Restated Certificate of Incorporation of MediaOne, in the form attached as Annex
A-2 to this Proxy Statement, to be filed 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."

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CHAPTER 3: THE SEPARATION
<PAGE>
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.

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

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CHAPTER 3: THE SEPARATION
<PAGE>
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 NYSE and 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 receipt by U S
WEST of the IRS Ruling and the IRS Ruling being in full 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.

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.

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<PAGE>
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 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 has entered into 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

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<PAGE>
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.

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

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<PAGE>
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
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

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<PAGE>
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 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.

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<PAGE>
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 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

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<PAGE>
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 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 and certain costs and expenses
associated with the Separation. Mr. Eichler noted that the Transition Team was
comprised of an equal number of representatives of New U S WEST and

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<PAGE>

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 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. 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

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<PAGE>
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 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

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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.

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.

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<PAGE>
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.

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.

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<PAGE>
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 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

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<PAGE>
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 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

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<PAGE>
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, discussed with, or reviewed by or for 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, and the Media Group, 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
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.

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<PAGE>
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.

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

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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, (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

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<PAGE>
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 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

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CHAPTER 3: THE SEPARATION
<PAGE>
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 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

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

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CHAPTER 3: THE SEPARATION
<PAGE>

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 filed with the IRS a request for a private letter ruling
substantially to the effect that, 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 under Section 355 and other Sections of the Code.
See "--Certain U.S. Federal Income Tax Consequences."

Consummation of the Separation will require numerous filings with the FCC
related to the transfer of various types of FCC licenses and authorizations held
by various subsidiaries and partnerships of U S WEST. All necessary applications
seeking FCC approval were filed in January 1998.

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."

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CHAPTER 3: THE SEPARATION
<PAGE>

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 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.

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). 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,

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CHAPTER 3: THE SEPARATION
<PAGE>
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."

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
Communications Stock will cease to be outstanding and will be delisted from the
NYSE and the PSE. Application will be made by New U S WEST to list the New U S
WEST Common Stock on the NYSE and the PSE under the symbol "USW" as of the
Separation Time. Following consummation of the Separation, the Media Stock
(which will thereafter represent MediaOne Common Stock) will continue to 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, U S WEST and its subsidiaries had outstanding
approximately $15.7 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 $7.5 billion of indebtedness
issued or guaranteed by U S WEST (the "U S WEST Indebtedness"). The U S WEST
Indebtedness includes approximately $6.0 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

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CHAPTER 3: THE SEPARATION
<PAGE>

or guaranteed by U S WEST. Of the U S WEST Indebtedness, approximately $7.4
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 $7.5 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, 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 $3.5
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 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, a portion of the U S WEST Indebtedness that is not
refinanced may be retained by MediaOne as part of the MediaOne 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 $6.4 billion of indebtedness, consisting of
the MediaOne Indebtedness, the Continental Indebtedness and indebtedness
incurred by MediaOne to fund the costs and expenses of the Separation. 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.

As a result of the AirTouch Transaction, U S WEST's indebtedness will be
reduced by $1.4 billion. This $1.4 billion of indebtedness is currently included
in the U S WEST Indebtedness allocated to the Media Group. If the AirTouch
Transaction is consummated prior to the consummation of the Separation, the U S
WEST Indebtedness (and the amount of U S WEST Indebtedness to be refinanced by
MediaOne in connection with the Separation) will be reduced by $1.4 billion. If
the AirTouch Transaction is consummated after the Separation is consummated, the
MediaOne Indebtedness will be reduced by $1.4 billion. Following the Separation,
MediaOne intends to monetize the AirTouch securities it receives in the AirTouch
Transaction and use a portion of the proceeds of such monetization to further
reduce the MediaOne Indebtedness. See "Chapter 7: Information About
MediaOne--Business of MediaOne--AirTouch Transaction."

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CHAPTER 3: THE SEPARATION
<PAGE>
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.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

The Separation is conditioned upon receipt by U S WEST of the IRS Ruling
substantially to the effect that, 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 expected to result from the Distribution:

/ / 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.

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<PAGE>
/ / 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 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

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<PAGE>

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.

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.

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<PAGE>
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 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,

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<PAGE>
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 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

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<PAGE>
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.

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. If the AirTouch
Transaction is consummated prior to the Separation Time, 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. If the AirTouch Transaction is
consummated after the Separation Time, it is anticipated, subject to final
adjustments, that the MediaOne Pension Plan will

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CHAPTER 3: THE SEPARATION
<PAGE>

receive approximately $240 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 $5
million and $3 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.

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

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<PAGE>

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.

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

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CHAPTER 3: THE SEPARATION
<PAGE>
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.

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<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)

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CHAPTER 4: OTHER MATTERS TO BE
CONSIDERED AT THE ANNUAL MEETING
<PAGE>
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.

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.

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. Messrs. Crandall, Dove, Gilmour,
Grieve, Lillis, Russ, Simpson and Slevin will continue as directors of MediaOne
following the Separation Time.

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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

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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

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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.

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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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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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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 exercise of stock options and in respect of other stock awards.
Under Section 162(m) of the Code, stockholder approval of

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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 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 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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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 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.

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<PAGE>

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").

The MediaOne ESTIP is intended to provide key executives of MediaOne with
incentive compensation based upon the achievement of pre-established performance
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 Human
Resources and Executive Development Committee of the MediaOne Board (the
"MediaOne Human Resources Committee") has 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 MediaOne and its
consolidated subsidiaries, determined in accordance with the standards of the
Financial Accounting Standards Board, less any amount the MediaOne Human
Resources Committee deems appropriate. In the event that the MediaOne 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 MediaOne 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 considers a number of
performance factors, including, but not limited to, MediaOne's cash flow,
quality indicators, and other operating and strategic results. 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 earnings before interest, taxes, depreciation and
amortization (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. 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 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 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.

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<PAGE>

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, 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,

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<PAGE>

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 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.

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<PAGE>
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.

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.

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<PAGE>
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.

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<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

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

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<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."

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<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.

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<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

72
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<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

73
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<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.

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

74
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<PAGE>

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.

75
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<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

76
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<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.

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

77
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<PAGE>

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

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.

79
CHAPTER 4: OTHER MATTERS TO BE
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<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.

80
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<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.

81
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)
domestic and international cable and broadband communications; (ii) domestic and
international wireless communications; and (iii) domestic and international
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 a 10.4% interest in
PrimeStar Partners, L.P. ("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.

82
CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>

WIRELESS COMMUNICATIONS. The Media Group provides cellular services to
customers in 12 mountain and western states. In addition, the Media Group holds
a 25% interest in PrimeCo Personal Communications, L.P. ("PrimeCo"), a provider
of PCS services in various domestic markets. The Media Group also 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.

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 agreed to sell 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."

83
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:
Sale 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

84
CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>

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.

(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.

(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 Consolidated Financial Statements-- Note 16--Earnings Per
Share."

85
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 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)
--------- --------- --- --------- --------- --------- ---------
--------- --------- --- --------- --------- --------- ---------

%
---------
<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

86
CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>

percent, as compared to 1996. The decrease is primarily due to a $152 after-tax
regulatory charge ($250 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>

87
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 services 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").

88
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 charge.

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

89
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 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.

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 in
several markets and discounting of 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. Media Group has entered into an agreement to
contribute its DBS customers and certain assets to a newly formed company to be
called "PrimeStar, Inc." ("New PrimeStar"). In exchange, the Media Group will
receive a combination of cash and stock in New PrimeStar. The transaction is
subject to various approvals and is expected to close in 1998. See "Chapter 7:
Information About MediaOne--Business of MediaOne--Business--Domestic Broadband
Communications--Other Broadband Interests."

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<PAGE>

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. Media Group believes that increasing
competition in its wireless markets, including new market entrants offering PCS
technology, will result in continued decreases in revenue per subscriber and
slowing subscriber growth.

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. Media Group believes that growth in
equipment revenue could decline in 1998 as a result of promotional pricing
pressures associated with increased competition.

Media Group expects to sell its domestic wireless business to AirTouch by
mid-1998 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>

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<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 principle
collective bargaining agreements expire in August 1998. Negotiations with
respect to future collective bargaining agreements are expected to commence in
mid-1998.

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

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<PAGE>

use taxes. Partially offsetting the increases were the effects of favorable tax
valuation and mill levies on 1997 property taxes as compared with 1996.

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 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 activity 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

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<PAGE>

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 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. Management believes
such competitive impacts will continue in 1998.

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 principle
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.

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<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 late 1997, the value of Asian
currencies as compared with the U. S. dollar declined significantly,
particularly in Indonesia. These declines, coupled with political uncertainties
led to a fourth-quarter 1997 pretax charge of $200. This charge combined with a
significant increase in foreign exchange losses at the Asian ventures related to
U. S. dollar denominated debt and increased amortization of license fees led to
the increase in equity losses.

GAINS ON SALES OF INVESTMENTS. During 1997, Media Group sold: (i) its 90
percent interest in Fintelco, S.A., a cable and telecommunications venture
located in Argentina ("Fintelco"), for a pretax gain of $135 ($80 after tax),
(ii) its shares of Teleport Communications Group, Inc. ("TCG"), acquired 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

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<PAGE>

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.

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.

96
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<PAGE>

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.

97
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<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. 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>

98
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<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 (i.e., 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.

99
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

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<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.

101
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<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

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<PAGE>

(4) losses related to Continental's cable and telecommunications investments.
Domestically, improved 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 expenses 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
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.

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<PAGE>

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 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
the domestic cable network upgrade, 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, if consummated, the monetization
of the securities to be received by Media Group from AirTouch in connection with
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 $4.5 billion, of
which $2.6 billion pertains to the Communications Group and $1.9 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 costs for Media Group to
continue upgrading its domestic cable network and its domestic cellular network.
The actual domestic cellular capital requirements could vary depending on the
timing of the consummation of the AirTouch Transaction.

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. Funding
requirements in 1998 are expected to approximate $230. However, actual

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<PAGE>

funding requirements could vary depending on the timing of the consummation of
the AirTouch Transaction.

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.

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.

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.

105
CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>

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 rate of 7.47
percent. The proceeds were used to refinance such 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 U S WEST Series E
Preferred Stock is redeemable at U S WEST's option beginning five years from the
acquisition date. 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.

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 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. During the second quarter
of 1997, Moody's placed U S WEST Communications' senior unsecured debt rating
under

106
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<PAGE>

review in connection with U S WEST Communications' regulatory rulings, which may
result in a downgrading. See "Contingencies."

U S WEST Communications' senior unsecured debt and commercial paper ratings
by Moody's, Standard & Poor's and Duff & Phelps were Aa3, A and AA-, and P1, A1
and D1+, respectively, at December 31, 1997.

In connection with U S WEST's announcement of the Separation, Standard &
Poor's placed U S WEST Communications' senior unsecured debt rating 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.

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 $175,
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.

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.

EFFECTS OF THE SEPARATION

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, the U S
WEST Indebtedness totaled approximately $7.5 billion and includes 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

107
CHAPTER 5: INFORMATION ABOUT U S WEST
<PAGE>

the difference between the market and face value of the U S WEST Indebtedness
and a charge for unamortized debt issuance costs.

New U S WEST does not expect the Separation will adversely affect its
ability to access the capital markets or the financing terms available to it.

As a result of being a wholly owned business group of U S WEST, Media Group
has been able to borrow money using U S WEST's credit rating, which is supported
by the cash flows generated by the businesses of both Communications Group and
Media Group. Management believes the ability of Media Group to borrow money
using U S WEST's consolidated credit rating has permitted 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 the U S WEST indebtedness include few covenants and therefore have not
interfered with the operations of Media Group or limited the flexibility of
Media Group to pursue its business objectives.

Upon consummation of the Separation, MediaOne will not have access to the
cash flows generated by the businesses of New U S WEST, including cash flows
generated by Dex, to support its credit rating or otherwise. Based upon the
anticipated capitalization of MediaOne, which includes the refinancing by New U
S WEST of $3.9 billion of U S WEST debt currently allocated to Media Group, it
is expected that MediaOne's credit rating will be lower than the current credit
rating of U S WEST. This could result in higher borrowing costs and reduced
access to the commercial paper market. As a result, MediaOne 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. See "Chapter 2:
Risk Factors--Risk Factors Related to MediaOne--Loss of Availability of
Communications Group and Dex Cash Flows and Credit Support."

EFFECTS OF THE AIRTOUCH TRANSACTION

Under the terms of the proposed AirTouch Transaction, Media Group debt will
be reduced by $1.4 billion. In addition, Media Group and AirTouch will enter
into an investment agreement, pursuant to which AirTouch will agree to provide
to Media Group registration rights with respect to the shares of AirTouch
preferred stock and AirTouch common stock which it receives in the AirTouch
Transaction and to assist the Media Group in the monetization of such shares. 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.

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

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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.

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.

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.

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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
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

Media Group and AirTouch are currently parties to a multi-phased joint
venture (the "AirTouch Joint Venture") pursuant to which they have 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.

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

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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 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
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.

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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

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downtown locations. The geographic coverage of Network 21 is measured in
hundreds of square miles 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

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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.

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.

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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 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 described above 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

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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 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

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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 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.

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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 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

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<PAGE>

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 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 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
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

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<PAGE>

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."

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 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.

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<PAGE>
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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<PAGE>
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

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

(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>

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<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

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

(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.

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<PAGE>

(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.

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.

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<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

SECOND 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.

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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

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<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.

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<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."

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

(2) The increase in the return on equity since 1993 is primarily due to the
effects of discontinuing SFAS No. 71 in 1993.

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<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

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<PAGE>

increase of 10.3 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 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 services revenues, and interest
expense. Absent the effects of the charge, revenues were $10,549, an increase of
4.7 percent as compared with 1996.

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<PAGE>

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.

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."

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

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<PAGE>

interLATA basis. A portion of revenues lost to competition, however, is
recovered through access 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

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<PAGE>

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. 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 principle
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 valuation
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 significantly 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.

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<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.

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<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

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.

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<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.

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<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

The following discussion excludes certain financing and other effects of the
Separation, the principal results of which are the refinancing of $3.9 billion
of Dex Indebtedness by New U S WEST and the issuance of $850 of New U S WEST
Common Stock in connection with the Dex Alignment. See "--New U S WEST Unaudited
Pro Forma Condensed Combined Financial Statements" and "Chapter 3: The
Separation--Accounting Treatment."

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.

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<PAGE>

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.

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.

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. See "--New U S WEST Unaudited Pro
Forma Condensed Combined Financial Statements."

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.

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

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<PAGE>

In connection with U S WEST's announcement of the Separation, Standard &
Poor's placed U S WEST Communications' senior unsecured debt rating on credit
watch with positive implications and reaffirmed U S WEST Communications'
commercial paper ratings, and Duffs & Phelps reaffirmed U S WEST Communications'
senior unsecured debt and commercial paper ratings.

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 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 does not expect the
Separation will adversely affect its ability to access the capital markets or
the financing terms available to it.

Under the terms of the Dex Alignment, U S WEST will distribute, as a
dividend to Media Group shareholders, a fractional share of New U S WEST Common
Stock based on each share of Media Stock held, up to an aggregate of $850.
Management anticipates that the New U S WEST Board will declare dividends on New
U S WEST Common Stock initially at the 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 cash
dividends paid will increase as a result of the issuance of $850 of New U S WEST
Common Stock. New U S WEST expects to fund the additional dividend requirement
through operations.

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

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change in the 30-day commercial paper rate would not have a material effect on
the annual earnings of New U S WEST.

CONTINGENCIES

At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.

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.

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."

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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 approximates $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
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.

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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.

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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.

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NEW U S WEST

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1997

DOLLARS IN MILLIONS

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.

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<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,
net of affiliated transactions.

(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.

(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. Separation costs include severance, 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.

(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 more
than 70 percent 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 more than 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 has the right to terminate the Minnesota Sale Agreement at any
time upon the payment to Charter of a $30 million termination fee. On February
26, 1998, MediaOne terminated the Minnesota Sale Agreement.

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 TWE owns a 66.7% interest, and
the Advance/Newhouse Partnership ("A/N") owns 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 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 a 10.4% interest in PrimeStar, a nationwide provider of DBS
services. TWE and TWE-A/N also collectively hold a 31% interest in PrimeStar.
MediaOne, TWE and TWE-A/N generally have the non-exclusive right to distribute
PrimeStar's services to customers in their respective service areas. MediaOne,
TWE, TWE-A/N and the other partners in PrimeStar have entered into an agreement
whereby each partner's interest in PrimeStar, as well as its PrimeStar
subscribers and certain

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related assets, will be contributed to New PrimeStar, which will be a newly
formed company. MediaOne will receive shares of New PrimeStar and cash and TWE
will receive shares of New PrimeStar and realize a reduction in indebtedness in
connection with such contribution. In addition, in a related, independent
transaction, following such contribution, New 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 New PrimeStar. These transactions, which are subject to various
regulatory and other approvals, are 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.

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 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.

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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 and a 49%
interest in Six Flags theme parks. On February 9, 1998, TWE entered into an
agreement to sell its 49% ownership interest in Six Flags theme parks to Premier
Parks, Inc. The transaction is expected to close in the second quarter of 1998.

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, 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.

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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 January 29, 1998, 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 entered into an Agreement and Plan of Merger (the
"AirTouch Merger Agreement") pursuant to which U S WEST agreed to sell the Media
Group's domestic wireless business to AirTouch in a tax-efficient transaction.
The Media Group's domestic wireless business is currently conducted by
NewVector, which conducts the Media Group's domestic cellular business, and by
PCS Holdings, which holds the Media Group's interest in PrimeCo, a provider of
PCS services. Pursuant to the AirTouch Merger Agreement, NewVector and PCS
Holdings will merge with and into AirTouch and, as a result, AirTouch will
acquire the businesses of NewVector and PCS Holdings.

Pursuant to the AirTouch Transaction, AirTouch will pay MediaOne
approximately $5.7 billion in consideration (subject to certain closing
adjustments), which will consist of (i) the assumption by AirTouch of
approximately $1.4 billion of indebtedness of NewVector and PCS Holdings, (ii)
the issuance to MediaOne of $1.6 billion in liquidation preference of AirTouch
Preferred Stock, and (iii) approximately $2.7 billion in value of AirTouch
Common Stock. The number of shares of AirTouch Common Stock to be received by
MediaOne in the AirTouch Transaction will depend upon the average
volume-weighted trading price of the AirTouch Common Stock during a 30-day
period ending on the fifth trading day prior to the closing of the AirTouch
Transaction (the "AirTouch Determination Price"). If the AirTouch Determination
Price is less than or equal to $40, MediaOne will receive 67.1 million shares of
AirTouch Common Stock. If the AirTouch Determination Price is greater than or
equal to $45, MediaOne will receive 60.8 million shares of AirTouch Common
Stock. If the AirTouch Determination Price is between $40 and $45, the number of
shares of AirTouch Common Stock to be received by MediaOne will decrease from
67.1 million to 60.8 million on a proportionate basis.

MediaOne and AirTouch are currently parties to a multi-phased joint venture
pursuant to which they have agreed to combine their domestic cellular
businesses. The AirTouch Transaction has been entered into in lieu of such joint
venture.

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MediaOne expects to consummate the AirTouch Transaction in the second
quarter of 1998, subject to the receipt of certain regulatory and other third
party approvals. The approval of U S WEST's stockholders is not required to
consummate the AirTouch Transaction.

Following consummation of the AirTouch Transaction, MediaOne intends to take
appropriate actions to monetize the shares of AirTouch Preferred Stock and
AirTouch Common Stock which it receives in the AirTouch Transaction. In
connection with the AirTouch Transaction, MediaOne and AirTouch will enter into
an Investment Agreement, pursuant to which AirTouch will agree to provide to
MediaOne registration rights with respect to the shares of AirTouch Preferred
Stock and AirTouch Common Stock which it receives 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. One2One 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

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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 to include systems acquired by
Continental. The social contract is a six-year agreement covering all of
Continental's franchises, including those that were unregulated, and settled
Continental's rate cases. 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
has been substantially met. Under the social contract, Continental also reduced
its benchmark broadcast service tier service rates. 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.

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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 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 to the
MediaOne Board, effective as of the Separation Time, to fill the vacancies
created by such resignations. The following is a brief listing of the principal
occupations, other major affiliations and ages of each such individual who will
serve on the MediaOne Board as of the Separation Time 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 Officer Information."

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 benefits of the Executive Officers of
MediaOne and its subsidiaries and to provide for the orderly succession of
management.

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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.

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MEDIAONE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

For a discussion of the financial condition and results of operations of the
businesses which will comprise MediaOne, see the discussion of the financial
condition and results of operations of the Media Group (other than the
discussion of Dex) included in "Chapter 5: Information About U S WEST--U S WEST
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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 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 Consolidated Financial
Statements--to this Proxy Statement."

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MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
DOLLARS IN MILLIONS

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) 92(G)
Equity losses in unconsolidated ventures........ (909 ) (909 ) (909) 115(G)
Other income (expense)--net..................... 408 (58)(A) 350 (6)(B) 344 130(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 33(C)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
extraordinary item.............................. 700 (1,527) (827 ) 196 (631) 20
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 20
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 20
Dividends on preferred stock...................... (52 ) (52 ) (52)
-------- ------------ ------- ------------ ------------- -------------
Earnings available for common stock............... $ 645 $ -- $ 645 $ 23,555 $ 24,200 $ 20
-------- ------------ ------- ------------ ------------- -------------
-------- ------------ ------- ------------ ------------- -------------

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................................ (297)
Equity losses in unconsolidated ventures........ (794)
Other income (expense)--net..................... 474
-------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. (937)
(Provision) benefit for income taxes.............. 326
-------------
Income (loss) from continuing operations before
extraordinary item.............................. (611)
Discontinued operations(A):
Results of operations, net of tax...............
Gain on separation.............................. 25,229
-------------
Income before extraordinary item.................. 24,618
Extraordinary item:
Loss on early extinguishment of debt, net of
tax........................................... (346)
-------------
Net income........................................ 24,272
Dividends on preferred stock...................... (52)
-------------
Earnings available for common stock............... $ 24,220
-------------
-------------
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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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)
-------------
-------------

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.

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<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................... 4,179(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 (481)(G)
(51)(K)
----------- --------------- ----------- ------------- ----------- ------
Total assets....................... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,054
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------

LIABILITIES AND EQUITY

Short-term debt.................... $ 1,430 $ (695)(A) $ 735 $ (23)(H) $ 738 $ (52)(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 (1,302)(G)
240(K)
Deferred taxes..................... 4,068 (791)(A) 3,277 14(H) 3,291 1,648(G)
Deferred credits and other......... 3,605 (3,287)(A) 318 (33)(H) 285 (103)(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 2,195(G)
25,229(D)
(346)(E)
121(K)
(26)(I)
----------- --------------- ----------- ------------- ----------- ------
Total liabilities and equity....... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,054
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------

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................... 4,179
Net investments in international
ventures......................... 475
Intangible assets--net............. 12,182
Net investment in assets held for
sale............................. 419
Other assets....................... 372

-----------
Total assets....................... $ 24,090
-----------
-----------
LIABILITIES AND EQUITY
Short-term debt.................... $ 686

Total other current liabilities.... 1,102
Long-term debt..................... 3,335

Deferred taxes..................... 4,939
Deferred credits and other......... 182
Mandatorily redeemable preferred
stock and Preferred Securities... 1,180
Total equity....................... 12,666

-----------
Total liabilities and equity....... $ 24,090
-----------
-----------
</TABLE>

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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<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.

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<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.

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<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. Such amounts exclude all transactions and
receivable and payable balances between MediaOne and New U S WEST. 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, necessary regulatory
approvals and a favorable IRS Ruling are received.

(B) Reflects a reduction of historical interest expense of $289 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. 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.

(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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<PAGE>
MEDIAONE

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

(G) Reflects the consummation of the AirTouch Transaction. MediaOne will retain
the international portion of its wireless business segment. The pro forma
adjustments reflect the following:

- Receipt of 67.1 million to 60.8 million shares of AirTouch common stock,
representing an approximate 11 to 12 percent ownership interest in
AirTouch. This interest will be accounted for by MediaOne as a marketable
equity security. Applying the AirTouch Determination Price as of February
20, 1998, MediaOne would receive 62,831,600 shares of AirTouch common
stock with a market value of $43.4375 per share or $2,729 million in the
aggregate. See "Chapter 7: Business of MediaOne--AirTouch Transaction."

- Receipt of $1,450 million of AirTouch preferred stock at market value
(liquidation value of $1,600).

- Receipt of $90 million in dividends per year on the AirTouch preferred
stock, at an estimated annual rate of 5.12 percent. The actual dividend
rate will vary based on the 30 year U. S. Treasury rate and will be
determined upon closing of the AirTouch Transaction.

- Reduction in debt of $1,400 million and a corresponding reduction of
annual interest expense of $92 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.............................................. $ 2,729
AirTouch preferred stock (at market value)......................... 1,450
Debt reduction..................................................... 1,400
---------
Total proceeds..................................................... 5,579
Net book value of assets sold...................................... (1,686)
Sale related costs................................................. (50)
---------
Gain (before income taxes)......................................... 3,843
Deferred tax expense............................................... (1,648)
---------
Gain (after income taxes).......................................... $ 2,195
---------
---------
</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

163
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<PAGE>
MEDIAONE

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

Discontinued Operations Adjustments and the remaining $3,831 million is
reflected as a MediaOne Separation Adjustment.

(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 severance,
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.

164
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

165
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 book-entry or certificate, and would not be
transferable apart from the New U S WEST Common Stock, but will instead be
evidenced by the book-entry or certificate representing 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)).

166
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), New U S WEST Common Stock certificates
will contain a legend, and holders of shares of New U S WEST Common Stock issued
in book-entry form will receive a notice, incorporating the New U S WEST Rights
Agreement by reference. Until the New U S WEST Distribution Date (or earlier
redemption or expiration of the New U S WEST Rights), the surrender for transfer
of any New U S WEST Common Stock in book-entry or certificated form 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 book entries
representing New U S WEST Rights will be established for shares of New U S WEST
Common Stock held in uncertificated book-entry form and separate certificates
evidencing the New U S WEST Rights will be mailed to holders of record of the
New U S WEST Common Stock in certificated form as of the close of business on
the New U S WEST Distribution Date and such separate book entries and
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

167
CHAPTER 8: CAPITAL STOCK
<PAGE>
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.

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.

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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 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

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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 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

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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
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

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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 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 trust or 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 pursuant to a transaction or
transactions approved by the MediaOne Board (provided that any person or group
that does not become a MediaOne Acquiring Person by reason of clause (i) or (ii)
above shall become a MediaOne Acquiring Person upon acquisition of an additional
1% of MediaOne's voting stock unless such acquisition of additional voting stock
will not result in such person or group becoming a MediaOne Acquiring Person by
reason of such clause (i) or (ii)).

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

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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
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).

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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 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

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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.

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.

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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
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.

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CHAPTER 8: CAPITAL STOCK
<PAGE>
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 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 1:30 p.m.,
Eastern Time, on June , 1998, at , Colorado, 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
, 1998.

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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<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 , 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 shares of Communications Stock and shares of Media
Stock outstanding and entitled to vote.

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 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

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CHAPTER 9: THE ANNUAL MEETING
AND CERTAIN OTHER MATTERS
<PAGE>
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 . 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 , 1998 and ended
on , 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.

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

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AND CERTAIN OTHER MATTERS
<PAGE>

instrument, by its terms, revokes the proxy; (ii) delivering a subsequent proxy
relating to the same shares (by mail or telephone or via the Internet) 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.

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<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 (through March 16, 1998).................................... $ 55.375 $ 45.1825 $ 0.535
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............................................................ 28.125 22.3125 --
1998
First Quarter (through March 16, 1998).................................... $ 35.250 $ 27.1875
</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 March 16, 1998, the closing sales prices of the Communications
Stock and the Media Stock, as reported on the Composite Tape, were $55.375 and
$35.250, respectively. Stockholders are urged to obtain current trading price
information with respect to the Communications Stock and Media Stock. As of
March 13, 1998, there were 485,021,509 shares of Communications Stock and
608,569,473 shares of Media Stock outstanding and 648,926 holders of record of
Communications Stock and 623,276 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
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."

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<PAGE>
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.

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CHAPTER 9: THE ANNUAL MEETING
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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
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
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
Gregory M. Winn.......................... 42,403(4) 23,030 371 13,436(4) 4,999 404
Allan R. Spies........................... 21,840 18,031 1,664 9,441 8,366 2,881
All directors and executive officers of
New U S WEST (as a group).............. 973,382 573,436 18,908 1,157,096 811,484 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.

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<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 the consolidated financial statements and the
consolidated financial statement schedule of U S WEST and the combined financial
statements of the Communications Group and the Media Group as of December 31,
1996 and for the year ended December 31, 1996 included in U S WEST's Annual
Report on Form 10-K for the year ended December 31, 1996, 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
have been included herein, and the consolidated financial statements and the
consolidated financial statement schedule of U S WEST and the combined financial
statements of the Communications Group and the Media Group as of December 31,
1995 and for each of the two years in the period ended December 31, 1995
included in U S WEST's Annual Report on Form 10-K for the year ended December
31, 1996 are incorporated herein by reference, in reliance on the reports of
Coopers & Lybrand L.L.P., independent certified public accountants, given upon
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,

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<PAGE>
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.

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,
1996.

(b) U S WEST's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.

(d) U S WEST's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997.

(e) U S WEST's Current Reports on Form 8-K dated January 12, 1997, March 27,
1997, March 28, 1997, March 31, 1997, May 16, 1997, June 30, 1997, August 7,
1997, October 29, 1997, January 29, 1998 and February 17, 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 , 1998.

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<PAGE>

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 , 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 , 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 , 1998.

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<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, 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

A-2-4
<PAGE>
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.

(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:

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<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.

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<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

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

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(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:

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principal United States securities exchange registered under the
Securities Exchange Act of 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

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shall require the affirmative vote of the holders of 80% 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.

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

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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

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<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.

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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

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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

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(which is equivalent to $0.56 quarterly and $2.25 annually per share). All
dividends shall be payable in 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

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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 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

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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).

(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

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<PAGE>
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 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.

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<PAGE>
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
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.

A-2-34
<PAGE>
(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) 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.

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 no longer be deemed to be outstanding,
and all rights of the holders thereof as stockholders of the Corporation with
respect to shares so called for redemption or exchange (except, in the case of a
redemption, the right to receive from the Corporation the Redemption Price
without interest and, in the case of an exchange, the right to receive from the
Corporation the Exchange Rate without interest) shall cease (including any right
to receive dividends otherwise payable on any Dividend Payment Date that would
have occurred after the Redemption Date), unless (a) the Corporation, in the
case of a redemption, defaults in the payment of the Redemption Price and, in
the case of an exchange, the Corporation fails to exchange the shares of this
Series for the applicable number of shares of Media Stock, (b) 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 or (c) in
the case of a redemption pursuant to Section 4.1(b) or 4.1(d), the conditions to
such redemption shall not have been satisfied, in which case such rights shall
not terminate at the close of business on such date. On or before the Redemption
Date, the Corporation shall deposit with a bank or trust company doing business
in New York, as paying agent, in the case of a redemption, money sufficient to
pay the Redemption Price on the Redemption Date, and in the case of an exchange,
certificates representing the shares of Media Stock to be exchanged on the
Redemption Date, in trust, with irrevocable instructions that such money or
shares be applied to the redemption or exchange of shares of this Series so
called for redemption or exchange. Any money or certificates so deposited with
any such paying agent which shall not be required for such redemption or
exchange because of the exercise of any right of conversion, rescission or
otherwise (including if the

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<PAGE>
conditions to a redemption pursuant to Section 4.1(b) or 4.1(d) are not
satisfied) shall be returned to the Corporation forthwith. Upon surrender (in
accordance with the notice of redemption or exchange) of the certificate or
certificates for any shares of this Series to be so redeemed or exchanged
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the notice of redemption or exchange shall so state), such shares shall be
redeemed by the Corporation at the Redemption Price or exchanged by the
Corporation at the Exchange Rate, as applicable (unless, in the case of a
redemption or exchange pursuant to Section 4.1(a), the Corporation shall have
exercised its right to rescind such redemption or exchange pursuant to Section
4.5 or, in the case of a redemption pursuant to Section 4.1(b) or 4.1(d), the
conditions to such redemption shall not have been satisfied). In case fewer than
all the shares represented by any such certificate are to be redeemed or
exchanged, a new certificate shall be issued representing the unredeemed and
unexchanged shares (or fractions thereof as provided in Section 7.4), without
cost to the holder thereof. Subject to applicable escheat laws, any moneys or
shares so set aside by the Corporation and unclaimed at the end of two years
from the Redemption Date shall revert to the general funds of the Corporation,
after which reversion the holders of such shares so called for redemption or
exchange shall look only to the Corporation for the payment of the Redemption
Price or the Exchange Rate, as the case may be, without interest. Any interest
accrued on any funds so deposited shall be paid to the Corporation from time to
time.

4.5 If notice of redemption or exchange pursuant to Section 4.1(a) shall
have been given by the Corporation pursuant to Section 4.3(a), in the event that
a Redemption Rescission Event shall occur following the date of such notice but
at or prior to the Redemption Date, the Corporation may, at its sole option, at
any time prior to the earlier of (i) the close of business on that day which is
five (5) Trading Days following such Redemption Rescission Event and (ii) the
Redemption Date, rescind such redemption or exchange by making a public
announcement of such rescission (the date on which such public announcement
shall have been made being hereinafter referred to as the "Rescission Date").
The Corporation shall be deemed to have made such announcement if it shall issue
a release to the Dow Jones News Service and Reuters Information Services or any
successor news wire service. From and after the making of such announcement, the
Corporation shall have no obligation to effect such redemption or exchange or to
pay the Redemption Price or Exchange Rate therefor and all rights of holders of
shares of this Series shall be restored as if notice of redemption or exchange
had not been given. The Corporation shall give notice of any such rescission by
first-class mail, postage prepaid, mailed as promptly as practicable, but in no
event later than the close of business on that date which is five (5) Trading
Days following the Rescission Date to each record holder of shares of this
Series at the close of business on the Rescission Date and to any other Person
or entity that was a record holder of shares of this Series and that shall have
surrendered shares of this Series for conversion following the giving of notice
of the subsequently rescinded redemption or exchange. Each notice of rescission
shall (w) state that such redemption or exchange has been rescinded, (x) state
that any Converting Holder shall be entitled to rescind the conversion of shares
of this Series surrendered for conversion following the day on which notice of
such redemption or exchange was given but on or prior to the later of (I) 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 (II) the date which is three Trading Days following the mailing of the
Corporation's notice of rescission, (y) be accompanied by a form prescribed by
the Corporation to be used by any Converting Holder rescinding the conversion of
shares so surrendered for conversion (and instructions for the completion and
delivery of such form, including instructions with respect to payments that may
be required to accompany such delivery in accordance with Section 3.5) and (z)
state that such form must be properly completed and received by the Corporation
no later than the close of business on a date that shall be fifteen (15) Trading
Days following the date of the mailing of such notice of rescission.

5. VOTING. The shares of this Series shall have no voting rights except as
required by law or as set forth below.

5.1 (a) So long as any shares of this Series remain outstanding, unless a
greater percentage shall then be required by law, the Corporation shall not,
without the affirmative vote at a meeting or the

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written consent with or without a meeting of the holders of shares of this
Series representing at least a majority of the shares of this Series then
outstanding (i) authorize any Senior Stock or reclassify any Junior Stock or
Parity Stock as Senior Stock, or (ii) amend, alter or repeal any of the
provisions of this Exhibit or the Certificate of Incorporation, so as in any
such case to materially and adversely affect the voting powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of the shares of this Series;
PROVIDED, HOWEVER, that an amendment which effects a split of this Series or
which effects a combination of the shares of this Series into a fewer number of
Shares shall not be deemed to have any such material adverse effect.

(a) No vote or consent of holders of shares of this Series shall be required
for (i) the creation of any indebtedness of any kind of the Corporation, (ii)
the authorization or issuance of any class of Junior Stock (including any class
or series of common stock of the Corporation) or Parity Stock, (iii) the
authorization, designation or issuance of additional shares of Series D Stock or
(iv) subject to Section 5.1(a), the authorization or issuance of any other
shares of Preferred Stock.

5.2 (a) If and whenever at any time or times dividends payable on shares of
this Series shall have been in arrears and unpaid in an aggregate amount equal
to or exceeding the amount 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
this Series, together with the holders of any shares of any Parity Stock 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.

(b) 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 this
Series on four subsequent consecutive 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 5.2(a) shall terminate.

(c) At any time when such voting right shall have vested in holders of shares
of such series of Preferred Stock described in Section 5.2(b), 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 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 5.2(c), 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.

(d) 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.

(e) Any director elected by holders of Preferred Stock pursuant to the voting
right created under this Section 5.2 shall hold office until the next annual
meeting of stockholders (unless such term has previously terminated pursuant to
Section 5.2(b)) and any vacancy in respect of any such director shall

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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 5.2(c), or, if no
special meeting is called or written consent executed, at the next annual
meeting of stockholders.

(f) In exercising the voting rights set forth in this Section 5.2, each share
of this Series shall have a number of votes equal to its Liquidation Value.

6. LIQUIDATION RIGHTS.

6.1 Upon the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of this Series shall
be entitled to receive out of the assets of the Corporation available for
distribution to stockholders, in preference to the holders of, and before any
payment of distribution shall be made on, Junior Stock, the Liquidation Value in
effect at such time, plus an amount equal to all accrued and unpaid dividends to
the date of final distribution.

6.2 The Liquidation Value shall initially be equal to $50 per share of Series
D Stock. The Liquidation Value shall be subject to adjustment from time to time
to appropriately give effect to any split or combination of the shares of this
Series.

6.3 Neither the sale, exchange or other conveyance (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property and assets of the Corporation nor the merger or consolidation of the
Corporation into or with any other corporation, or the merger or consolidation
of any other corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section 6.

6.4 After the payment to the holders of the shares of this Series of full
preferential amounts provided for in this Section 6, the holders of this Series
as such shall have no right or claim to any of the remaining assets of the
Corporation.

6.5 In the event the assets of the Corporation available for distribution to
the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to Section 6.1, no such distribution shall be made on account of any
shares of any Parity Stock upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the shares
of this Series, ratably, in proportion to the full distributable amounts for
which holders of all Parity Stock are entitled upon such dissolution,
liquidation or winding up.

7. OTHER PROVISIONS.

7.1 All notices from the Corporation to the holders shall be given by first
class mail, postage prepaid, to the holders of shares of this Series at their
last address as it shall appear on the stock register. With respect to any
notice to a holder of Shares of this Series required to be provided hereunder,
neither failure to mail such notice, nor any defect therein or in the mailing
thereof, shall affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice or affect the legality or validity of any
distribution, right, warrant, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any such action. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the holder
receives the notice.

7.2 All notices and other communications from a holder of shares of this
Series shall be deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to the Corporation at the following
address (or at such other address as the Corporation shall specify in a notice
pursuant to Section 7.1): MediaOne Group, Inc., 188 Inverness Drive West,
Englewood, Colorado 80112, Attention: General Counsel.

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cause such shares to obtain the status of authorized but unissued shares of
Preferred Stock, without designation as to series, until such shares are once
more designated as part of a particular series by the Board of Directors. The
Corporation may cause a certificate setting forth a resolution adopted by the
Board of Directors that none of the authorized shares of this Series are
outstanding to be filed with the Secretary of State of the State of Delaware.
When such certificate becomes effective, all references to Series D Stock shall
be eliminated from the Certificate of Incorporation and the shares of Preferred
Stock designated hereby as Series D Stock shall have the status of authorized
and unissued shares of Preferred Stock and may be reissued as part of any new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors.

7.4 The shares of this Series shall be issuable in whole shares or in any
fraction of a whole share or any integral multiple of such fraction.

7.5 The Corporation shall, to the fullest extent permitted by law, be
entitled to recognize the exclusive right of a Person registered on its records
as the holder of shares of this Series, and such record holder shall be deemed
the holder of such shares for all purposes.

7.6 All notice periods referred to in this Exhibit shall commence on the date
of the mailing of the applicable notice.

7.7 Subject to applicable law, any determinations made in the exercise of the
good faith business judgment of the Board of Directors under any provision of
this Exhibit shall be final and binding on all stockholders of the Corporation,
including the holders of shares of this Series.

7.8 Certificates for shares of this Series shall bear such legends as the
Corporation shall from time to time deem appropriate.

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EXHIBIT B

SERIES E CONVERTIBLE PREFERRED STOCK

The series of Preferred Stock hereby established shall consist of 1 million
shares designated as Series E Convertible Preferred Stock. The rights,
preferences and limitations of such series shall be as follows:

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 E 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.

1.5 "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 (a) successive changes or reclassifications of
such stock consisting solely of changes in par value, or from par value to no
par value or (b) 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 or Redemption Date
referred to in Section 3 or Section 4 shall mean the average of the daily
Closing Prices per share of Media Stock (or such other class or series of common
stock into which shares of this Series are then convertible) for the

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ten (10) consecutive Trading Days ending on the third (3rd) 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 "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 E Stock in respect of the right to
receive dividends or to participate in any distribution of assets other than by
way of dividends.

1.15 "Liquidation Value" shall have the meaning set forth in Section 6.2
hereof.

1.16 "Media Group Disposition Redemption" shall have the meaning set forth in
Section 4.1 hereof.

1.17 "Media Group Disposition Dividend" shall have the meaning set forth in
Section 4.1 hereof.

1.18 "Media Group Special Dividend" shall have the meaning set forth in
Section 4.1 hereof.

1.19 "Media Group Special Events" shall have the meaning set forth in Section
4.1 hereof.

1.20 "Media Group Subsidiary Redemption" shall have the meaning set forth in
Section 4.1 hereof.

1.21 "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
recharacterization 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 (a) successive changes
or reclassifications of such stock consisting solely of changes in par value, or
from par value to no par value or (b) 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.

1.22 "Media Group Tender or Exchange Offer" shall have the meaning set forth
in Section 4.1 hereof.

1.23 "Merger" shall mean the merger of Booth Communications of SE Michigan,
Inc., a Michigan corporation, Booth Communications of Mid-Michigan, Inc., a
Michigan corporation, and Booth Communications of Mid-Michigan Assets, Inc., a
Michigan corporation, with and into MediaOne of Michigan, Inc., a Delaware
corporation, pursuant to the terms of the Merger Agreement.

1.24 "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of December 3, 1996, among the Corporation, MediaOne of Michigan, Inc., a
Delaware corporation, Booth Communications of SE Michigan, Inc., a Michigan
corporation, Booth Communications of Mid-Michigan, Inc., a Michigan corporation,
and Booth Communications of Mid-Michigan Assets, Inc., a Michigan corporation.

1.25 "Nasdaq" shall mean the Nasdaq National Market.

1.26 "NYSE" shall mean the New York Stock Exchange, Inc.

1.27 "Parity Stock" shall mean the Series A Stock, the Series B Stock, the
Series C Stock, the Series D 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

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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 E 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 E 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 (a) in
Section 6 hereof, to any stock which is Parity Stock in respect of the
distribution of assets; and (b) 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 E Stock.

1.28 "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.

1.29 "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.

1.30 "Record Date" shall have the meaning set forth in Section 2.1 hereof.

1.31 "Redemption Date" shall mean the date on which the Corporation shall
effect the redemption of all or any part of the outstanding shares of Series E
Stock pursuant to Section 4.1.

1.32 "Redemption Price" for each share of Series E Stock called for
redemption shall be equal to the sum of (a) the Liquidation Value plus (b) an
amount equal to the accrued and unpaid dividends on such share of Series E Stock
to the Redemption Date.

1.33 "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 (61/2) 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 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 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 is more
than 15 days following the date on which notice of redemption is given, 20%),
measured from the close of business on the Trading Day preceding the day notice
of such redemption 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).

1.34 "Rescission Date" shall have the meaning set forth in Section 4.5
hereof.

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1.35 "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 E Stock in
respect of the right to receive dividends or to participate in any distribution
of assets other than by way of dividends.

1.36 "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.

1.37 "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.

1.38 "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.

1.39 "Series D Stock" shall mean the series of Preferred Stock authorized and
designated as Series D Convertible Preferred Stock at the date of the
Certificate, including any shares thereof authorized and designated after the
date of the Certificate.

1.40 "Series E Stock" and "this Series" shall mean the series of Preferred
Stock authorized and designated as the Series E Convertible Preferred Stock,
including any shares thereof authorized and designated after the date of the
Certificate.

1.41 "Surrendered Shares" shall have the meaning set forth in Section 3.5
hereof.

1.42 "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 shares of Series E Stock shall be
entitled to receive dividends, as and when declared by the Board of Directors
out of funds legally available therefor. Each dividend shall be at the annual
rate equal to 6.342% per share of Series E Stock (which is equivalent to $0.79
quarterly and $3.17 annually per share). All dividends shall be payable in 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 E 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 E Stock on any Dividend Payment Date shall be rounded to the

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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)(i),
4.1(c)(iii) or 4.1(d), unless all dividends on the outstanding shares of Series
E Stock and any Parity Stock that shall have accrued through any prior Dividend
Payment Date shall have been paid in full, 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 E 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 or any other properties be paid or made available for a purchase,
redemption or sinking fund for the purchase or redemption of any Series E 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 after receipt of a notice of redemption given
by the Corporation pursuant to (i) Section 4.3(a) with respect to a redemption
pursuant to Section 4.1(a), or (ii) Section 4.3(b) with respect to a redemption
in connection with a Media Group Subsidiary Redemption, or (iii) Section 4.3(c)
with respect to a redemption in connection with a Media Group Disposition
Dividend, or (iv) pursuant to Section 4.3(d) with respect to a redemption in
connection with a Media Group Disposition Redemption following a Disposition of
all (not merely substantially all) of the properties and assets attributed to
the Media Group, or (v) Section 4.3(e) with respect to a redemption in
connection with a Media Group Disposition Redemption following Disposition of
substantially all (but not all) of the properties and assets attributed to the
Media Group, or (vi) Section 4.3(f) with respect to a redemption in connection
with a Media Group Tender or Exchange Offer, to convert such share into 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 (a)
the product of (i) the Liquidation Value per share of the Series E Stock
multiplied by (ii) 0.95, divided by (b) the Current Market Price, 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 Redemption Price per share divided by the Conversion Rate in
effect at such time (rounded to the nearest one hundredth of a cent)).

(b) The right of a holder of a share of this Series called for redemption
pursuant to Sections 4.1(a) 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, in the case of a redemption pursuant to Section 4.1(a), the
Corporation exercises its right to rescind such redemption 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 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

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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 on a Redemption Date
between such Record Date and Dividend Payment Date and with respect to which
such redemption 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(c), 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(c)) 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, (a) certificates representing the number of shares of Media Stock to
which such holder is entitled upon such conversion and (b) 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.

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

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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
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 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 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 (A) 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"), (B) 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 (C) 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 Stock 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 ending at either (1) 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 (2) 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

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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) The Corporation shall be entitled to make such increases in the
Conversion Rate 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 warrant to purchase shares of Media Stock, shall not
be taxable to the holders of Media Stock for United States Federal income
tax purposes.

(b) 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.

(c) In any case in which an adjustment to the Conversion Rate pursuant
to this Section 3.6 is to be made effective as of or immediately following a
record date, the Corporation may elect to defer (but only for five (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.

(d) Subject to Section 3.6(a) hereof, no adjustment shall be made
pursuant to this Section 3.6 with respect to any share of Series E 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
E 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 (assuming that shares of this Series
were then convertible pursuant to Section 3.1), 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

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the Corporation by the record holder of the largest number of shares of Series E
Stock prior to the earlier of (A) 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
(B) 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 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 E 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 E 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 equal to the quotient of (a) $50 divided by (b) the product of (i) 0.95
multiplied by (ii) the Current Market Price for such other class or series of
common stock. 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(b),
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

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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).

(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: (i) a statement that all outstanding shares of Media Stock shall be
converted; (ii) the date of such conversion; (iii) 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; (iv) 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; and (v) 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 (A) 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 (B) 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.

3.11 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

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(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.

4. REDEMPTION.

4.1 (a) The Corporation may, at its sole option, subject to Section 2.2
hereof, from time to time on and after the fifth (5th) anniversary of the
Effective Time, redeem, out of funds legally available therefor, all or any part
of the outstanding shares of this Series at the Redemption Price.

(b) The Corporation shall redeem at the Redemption Price, out of funds
legally available therefor, all of the outstanding shares of this Series, 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 (I) 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
(II) 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

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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 (1) the Media Group Subsidiary Redemption, the date of such exchange,
(2) the Media Group Disposition Dividend or the Media Group Special Dividend,
the date of payment of such dividend, (3) the Media Group Disposition
Redemption, the date of such redemption or (4) 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) (i) Commencing with the first Dividend Payment Date after the tenth
(10th) anniversary of the Effective Time and on each anniversary of such
Dividend Payment Date thereafter through the ninth (9th) anniversary of such
Dividend Payment Date, the Corporation shall redeem at the Redemption Price,
out of funds legally available therefor, 49,704 shares of the Series E Stock
or such lesser number of shares of Series E Stock as shall then remain
outstanding.

(ii) Commencing with the first Dividend Payment Date after the tenth
(10th) anniversary of the Effective Time and on each anniversary of such
Dividend Payment Date thereafter through the ninth (9th) anniversary of such
Dividend Payment Date, the Corporation may, at its sole option, subject to
Section 2.2 hereof, redeem at the Redemption Price, out of funds legally
available therefor, 49,704 shares of the Series E Stock or such lesser
number of shares of Series E Stock as shall then remain outstanding.

(iii) The Corporation shall, on the twentieth (20th) anniversary of
the Effective Time, redeem at the Redemption Price, out of funds legally
available therefor, all of the outstanding shares of the Series E Stock.

(d) The Corporation shall redeem, out of funds legally available
therefor, 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.

4.2 In the event that fewer than all of the outstanding shares of this
Series are to be redeemed pursuant to Section 4.1(a) or 4.1(c), the aggregate
number of shares of this Series held by each holder which will be redeemed shall
be determined by the Corporation by lot or pro rata or by any other

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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 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, setting
forth: (i) the Redemption Date; (ii) in the case of a redemption pursuant to
Section 4.1(c)(iii), that all shares of this Series outstanding on the
Redemption Date shall be redeemed by the Corporation; (iii) in the case of a
redemption pursuant to Section 4.1(a) or 4.1(c)(i) or 4.1(c)(ii), the total
number of shares of this Series to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the aggregate number of such shares
which will be redeemed; (iv) the Redemption Price (v) in the case of a
redemption pursuant to Section 4.1(a), that shares of this Series called for
redemption may be converted at any time prior to the Redemption Date (unless the
Corporation (A) shall default in payment of the Redemption Price or (B) shall
exercise its right to rescind such redemption pursuant to Section 4.5, in which
case such right of conversion shall not terminate at such time and date); (vi)
in the case of a redemption pursuant to Section 4.1(a), a description of the
manner in which the Conversion Price will be determined in accordance with the
Certificate; (vii) the place or places where certificates for such shares are to
be surrendered for payment of the Redemption Price; and (viii) that dividends on
the shares to be redeemed 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 setting forth the percentage of such
holder's shares which the Corporation has elected to redeem.

(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: (i) the Redemption Date
(which, pursuant to the penultimate sentence of Section 4.1(b), shall be the
same as the date specified in clause (viii) below); (ii) that all shares of this
Series outstanding on the Redemption Date shall be redeemed by the Corporation;
(iii) the Redemption Price; (iv) that the redemption of the shares of this
Series shall be conditioned upon the consummation of the Media Group Subsidiary
Redemption; (v) 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; (vi) that dividends on the shares to be redeemed will cease to accrue on
the Redemption Date; (vii) 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;
(viii) the date of such Media Group Subsidiary Redemption; (ix) the Outstanding
Media Fraction on the date of such notice; (x) 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; (xi) 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; (xii) the number of shares of
Media Stock outstanding and, to the extent determinable on the 3rd Trading Date
prior to the date of such notice, 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 a description of the manner
in which the Conversion Price will be determined in accordance with the
certificate; and (xiii) 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

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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: (i) 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 (viii) below); (ii) that all
shares of this Series outstanding on the Redemption Date shall be redeemed by
the Corporation; (iii) the Redemption Price; (iv) that the redemption of the
shares of this Series shall be conditioned upon the payment of the Media Group
Disposition Dividend; (v) 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; (vi) that dividends on the shares to be redeemed will cease to accrue on
the Redemption Date; (vii) 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; (viii) the anticipated date of
payment of the Media Group Disposition Dividend (which shall not be more than 85
Trading Days following the consummation of such Disposition); (ix) the type of
property to be paid as such dividend in respect of the outstanding shares of
Media Stock; (x) the Net Proceeds of such Disposition; (xi) the Outstanding
Media Fraction on the date of such notice; (xii) the number of outstanding
shares of Media Stock and, to the extent determinable on the 3rd Trading Date
prior to the date of such notice, 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 a description of the manner
in which the Conversion Price will be determined in accordance with the
Certificate at such time; and (xiii) 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 (vii) 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: (i) the Redemption Date (which, pursuant
to the penultimate sentence of Section 4.1(b), shall be the same as the date
specified in clause (viii) below); (ii) that all shares of this Series
outstanding on the Redemption Date shall be redeemed by the Corporation; (iii)
the Redemption Price; (iv) that the redemption of shares of this Series shall be
conditioned upon the consummation of the Media Group Disposition Redemption; (v)
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; (vi)
that dividends on the shares to be redeemed will cease to accrue on the
Redemption Date; (vii) that all shares of Media Stock outstanding on the date of
such Media Group Disposition Redemption shall be redeemed; (viii) the date of
such Media Group Disposition Redemption (which shall not be more than 85 Trading
Days following the consummation of such Disposition); (ix) the type of property
in which the redemption price for the shares of Media Stock to be redeemed is to
be paid; (x) the Net Proceeds of such Disposition; (ix) the Outstanding Media
Fraction on the date of such notice; (xii) 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; (xii) the number of
outstanding shares of

A-2-54
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Media Stock and, to the extent determinable on the 3rd Trading Date prior to the
date of such notice, 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 a description of the manner
in which the Conversion Price will be determined in accordance with the
Certificate; (xiv) 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 (xv)
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: (i) 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 (viii) below); (ii) that all shares of this Series
outstanding on the Redemption Date shall be redeemed by the Corporation; (iii)
the Redemption Price; (iv) that the redemption of shares of this Series shall be
conditioned upon the consummation of the Media Group Disposition Redemption; (v)
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; (vi)
that dividends on the shares to be redeemed will cease to accrue on the
Redemption Date; (vii) 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; (viii) the anticipated date of such Media
Group Disposition Redemption (which shall not be more than 85 Trading Days
following the consummation of such Disposition); (ix) the type of property in
which the redemption price for the shares of Media Stock to be redeemed is to be
paid; (x) the Net Proceeds of such Disposition; (xi) the Outstanding Media
Fraction; (xii) the number of shares of Media Stock outstanding and, to the
extent determinable on the 3rd Trading Date prior to the date of such notice,
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 a description of the manner in which the Conversion Price
will be determined in accordance with the Certificate; (xiii) 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 (vii) of this sentence and that shares of this Series shall not be
convertible after such date; and (xiv) 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 (vii) of this
sentence.

A-2-55
<PAGE>
Corporation waives such requirement), are to be surrendered for payment of the
Redemption Price; (vi) that dividends on the shares to be redeemed will cease to
accrue on the Redemption Date; (vii) 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; (viii) the anticipated date of payment of the Media Group Special
Dividend; (ix) the type of property to be paid as such dividend in respect of
the outstanding shares of Media Stock; (x) the Outstanding Media Fraction on the
date of such notice; (xi) the number of outstanding shares of Media Stock and,
to the extent determinable on the 3rd Trading Date prior to the date of such
notice, 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 a description of the manner in which the
Conversion Price will be determined in accordance with the Certificate; and
(xii) 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 (vii) 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: (i) 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 (vii) below); (ii) that all shares of this Series outstanding on the
Redemption Date shall be redeemed by the Corporation; (iii) the Redemption
Price; (iv) that the redemption of shares of this Series shall be conditioned
upon the consummation of the Media Group Tender or Exchange Offer; (v) 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; (vi) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date; (vii) the
anticipated date of consummation of such Media Group Tender or Exchange Offer;
(viii) 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;
(ix) 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); (x) the Outstanding Media Fraction on the date of such
notice; (xi) the number of outstanding shares of Media Stock and, to the extent
determinable on the 3rd Trading Date prior to the date of such notice, 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 a description of the manner in which the Conversion will be
determined in accordance with the Certificate; and (xii) 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.

A-2-56
<PAGE>
4.4 If notice of redemption 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 shall cease to accrue, such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation with respect to shares so
called for redemption (except, the right to receive from the Corporation the
Redemption Price without interest) shall cease (including any right to receive
dividends otherwise payable on any Dividend Payment Date that would have
occurred after the Redemption Date), unless (a) the Corporation defaults in the
payment of the Redemption Price, (b) in the case of a redemption pursuant to
Section 4.1(a), the Corporation exercises its right to rescind such redemption
pursuant to Section 4.5, or (c) in the case of a redemption pursuant to Section
4.1(b) or 4.1(d), the conditions to such redemption shall not have been
satisfied, in which case such rights shall not terminate at the close of
business on such date. On or before the Redemption Date, the Corporation shall
deposit with a bank or trust company doing business in New York, as paying
agent, money sufficient to pay the Redemption Price on the Redemption Date, in
trust, with irrevocable instructions that such money be applied to the
redemption of shares of this Series so called for redemption. Any money so
deposited with any such paying agent which shall not be required for such
redemption because of the exercise of any right of conversion, rescission or
otherwise (including if the conditions to a redemption pursuant to Section
4.1(b) or 4.1(d) are not satisfied) shall be returned to the Corporation
forthwith. Upon surrender (in accordance with the notice of redemption) of the
certificate or certificates for any shares of this Series to be so redeemed
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the notice of redemption shall so state), such shares shall be redeemed by
the Corporation at the Redemption Price (unless, in the case of a redemption
pursuant to Section 4.1(a), the Corporation shall have exercised its right to
rescind such redemption pursuant to Section 4.5 or, in the case of a redemption
pursuant to Section 4.1(b) or 4.1(d), the conditions to such redemption shall
not have been satisfied). In case fewer than all the shares represented by any
such certificate are to be redeemed, a new certificate shall be issued
representing the unredeemed shares (or fractions thereof as provided in Section
7.4), without cost to the holder thereof. Subject to applicable escheat laws,
any moneys so set aside by the Corporation and unclaimed at the end of two (2)
years from the Redemption Date shall revert to the general funds of the
Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the Corporation for the payment of the Redemption
Price, without interest. Any interest accrued on any funds so deposited shall be
paid to the Corporation from time to time upon request of the Corporation.

4.5 If notice of redemption pursuant to Section 4.1(a)or 4.1(c)(ii) shall
have been given by the Corporation pursuant to Section 4.3(a), in the event that
a Redemption Rescission Event shall occur following the date of such notice but
at or prior to the Redemption Date, the Corporation may, at its sole option, at
any time prior to the earlier of (a) the close of business on that day which is
five (5) Trading Days following such Redemption Rescission Event and (b) the
Redemption Date, rescind such redemption by making a public announcement of such
rescission (the date on which such public announcement shall have been made
being hereinafter referred to as the "Rescission Date"). The Corporation shall
be deemed to have made such announcement if it shall issue a release to the Dow
Jones News Service and Reuters Information Services or any successor news wire
service. From and after the making of such announcement, the Corporation shall
have no obligation to effect such redemption or to pay the Redemption Price
therefor and all rights of holders of shares of this Series shall be restored as
if notice of redemption had not been given. The Corporation shall give notice of
any such rescission by first-class mail, postage prepaid, mailed as promptly as
practicable, but in no event later than the close of business on that date which
is five (5) Trading Days following the Rescission Date to each record holder of
shares of this Series at the close of business on the Rescission Date and to any
other Person or entity that was a record holder of shares of this Series and
that shall have surrendered shares of this Series for conversion following the
giving of notice of the subsequently rescinded redemption. Each notice of
rescission shall (i) state that such redemption has been rescinded, (ii) state
that any Converting Holder shall be entitled to rescind the conversion of shares
of this

A-2-57
<PAGE>
Series surrendered for conversion following the day on which notice of such
redemption was given but on or 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 shall have been made and (B) the date which is
three (3) Trading Days following the mailing of the Corporation's notice of
rescission, (iii) be accompanied by a form prescribed by the Corporation to be
used by any Converting Holder rescinding the conversion of shares so surrendered
for conversion (and instructions for the completion and delivery of such form,
including instructions with respect to payments that may be required to
accompany such delivery in accordance with Section 3.5) and (iv) state that such
form must be properly completed and received by the Corporation no later than
the close of business on a date that shall be fifteen (15) Trading Days
following the date of the mailing of such notice of rescission.

5. VOTING. The shares of this Series shall have no voting rights except as
required by law or as set forth below.

5.1 So long as any shares of this Series remain outstanding, unless a
greater percentage shall then be required by law, the Corporation shall not,
without the affirmative vote at a meeting or the written consent with or without
a meeting of the holders of shares of this Series representing at least a
majority of the shares of this Series then outstanding (a) authorize any Senior
Stock or reclassify any Junior Stock or Parity Stock as Senior Stock, or (b)
amend, alter or repeal any of the provisions of this Exhibit or the Certificate
of Incorporation, so as in any such case to materially and adversely affect the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions of the
shares of this Series; PROVIDED, HOWEVER, that an amendment which effects a
split of this Series or which effects a combination of the shares of this Series
into a fewer number of Shares shall not be deemed to have any such material
adverse effect.

5.2 No vote or consent of holders of shares of this Series shall be required
for (a) the creation of any indebtedness of any kind of the Corporation, (b) the
authorization or issuance of any class of Junior Stock (including any class or
series of common stock of the Corporation) or Parity Stock, (c) the
authorization, designation or issuance of additional shares of Series E Stock or
(iv) subject to Section 5.1(a), the authorization or issuance of any other
shares of Preferred Stock.

6. LIQUIDATION RIGHTS.

6.2 The Liquidation Value shall initially be equal to $50 per share of
Series E Stock. The Liquidation Value shall be subject to adjustment from time
to time to appropriately give effect to any split or combination of the shares
of this Series.

A-2-58
<PAGE>
to Section 6.1, no such distribution shall be made on account of any shares of
any Parity Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
this Series, ratably, in proportion to the full distributable amounts for which
holders of all Parity Stock are entitled upon such dissolution, liquidation or
winding up.

7. OTHER PROVISIONS.

7.1 All notices from the Corporation to the holders shall be given by first
class mail, postage prepaid, to the holders of shares of this Series at their
last address as it shall appear on the stock register. With respect to any
notice to a holder of shares of this Series required to be provided hereunder,
neither failure to mail such notice, nor any defect therein or in the mailing
thereof, shall affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice or affect the legality or validity of any
distribution, right, warrant, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any such action. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the holder
receives the notice.

7.2 All notices and other communications from a holder of shares of this
Series shall be deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to the Corporation at the following
address (or at such other address as the Corporation shall specify in a notice
pursuant to Section 7.1): MediaOne Group, Inc., 181 Inverness Drive West,
Englewood, Colorado 80112, Attention: General Counsel.

7.3 Any shares of this Series which have been converted, redeemed, exchanged
or otherwise acquired by the Corporation shall, after such conversion,
redemption, exchange or acquisition, as the case may be, be retired and promptly
canceled and the Corporation shall take all appropriate action to cause such
shares to obtain the status of authorized but unissued shares of Preferred
Stock, without designation as to series, until such shares are once more
designated as part of a particular series by the Board of Directors. The
Corporation may cause a certificate setting forth a resolution adopted by the
Board of Directors that none of the authorized shares of this Series are
outstanding to be filed with the Secretary of State of the State of Delaware.
When such certificate becomes effective, all references to Series E Stock shall
be eliminated from the Certificate of Incorporation and the shares of Preferred
Stock designated hereby as Series E Stock shall have the status of authorized
and unissued shares of Preferred Stock and may be reissued as part of any new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors.

7.4 The shares of this Series shall be issuable in whole shares or in any
fraction of a whole share or any integral multiple of such fraction.

7.6 All notice periods referred to in this Exhibit shall commence on the
date of the mailing of the applicable notice.

7.7 Subject to applicable law, any determinations made in the exercise of
the good faith business judgment of the Board of Directors under any provision
of this Exhibit shall be final and binding on all stockholders of the
Corporation, including the holders of shares of this Series.

7.8 Certificates for shares of this Series shall bear such legends as the
Corporation shall from time to time deem appropriate.

A-2-59
<PAGE>
ANNEX B-1

<TABLE>
<C> <S>
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
----
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
</TABLE>

February 6, 1998

The Board of Directors
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111

Members of the Board:

We understand that the Board of Directors of U S WEST, Inc. (the "Company")
is considering the separation (the "Separation") of the U S WEST Communications
Group (the "Communications Group") and the U S WEST Media Group (the "Media
Group") into two separately-traded public companies and, in connection
therewith, the alignment of U S WEST Dex, Inc., a Colorado corporation ("U S
WEST Dex"), a business currently attributed to the Media Group, with the
Communications Group (the "Dex Alignment"). In order to effect the Separation,
pursuant to the Separation Agreement (as defined below) and subject to the terms
and conditions thereof, the Company will (i) redeem (the "Communications
Redemption") each issued and outstanding share of U S WEST Communications Group
Common Stock, par value $.01 per share ("Communications Stock"), of the Company
(other than shares of Communications Stock held as treasury stock by the
Company) for one share of common stock ("New U S WEST Stock") of a subsidiary of
the Company ("New U S WEST") holding (a) all of the assets and liabilities
attributed to the Communications Group, (b) U S WEST Dex, which is currently
attributed to the Media Group and (c) $3.9 billion of indebtedness currently
attributed to the Media Group and (ii) distribute as a dividend (the "Dex
Dividend") on each outstanding share of U S WEST Media Group Common Stock, par
value $.01 per share ("Media Stock"), of the Company a fraction of a share of
New U S WEST Stock (with the number of shares of New U S WEST Stock to be
distributed for each outstanding share of Media Stock to be determined in the
manner set forth in the Separation Agreement). We also understand that, in
connection with the Separation, pursuant to the Separation Agreement, the
Company and its subsidiaries 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 U S WEST Dex from the other businesses of the Media Group and
contribute to New U S WEST all the assets and liabilities of the Company and its
subsidiaries relating to the businesses of the Communications Group and U S WEST
Dex, as well as certain other assets and liabilities of U S WEST (the
"Reorganization"). You have also informed us that in connection with the
Separation substantially all of the outstanding indebtedness incurred or
guaranteed by the Company will be refinanced (the "Refinancing"). The Separation
and the Reorganization will be effected in accordance with the terms of the
Separation Agreement to be entered into between the Company and New U S WEST
(the "Separation Agreement"). The Company, after giving effect to the Separation
is referred to herein as "MediaOne" and the shares of Media Stock after giving
effect to the Separation are referred to herein as "MediaOne Stock". As used
herein, the term "Separation Transactions" means, collectively (x) the Dex
Alignment and, in connection therewith, 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 and (y) the Communications Redemption. For
purposes hereof, the "Separation Consideration to be received by

B-1-1
<PAGE>

the Communications Stockholders and the Media Stockholders in the Separation
Transactions" means (x) with respect to the Communications Stockholders (as
defined below), the receipt by the Communications Stockholders of one share of
New U S WEST Stock for each share of Communications Stock pursuant to the
Communications Redemption and (y) with respect to the Media Stockholders (as
defined below), the receipt of the Dex Dividend and the shares of MediaOne Stock
to be retained by the Media Stockholders.

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of Communications Stock ("Communications Stockholders") and
the holders of Media Stock ("Media Stockholders"), of the Separation
Consideration to be received by the Communications Stockholders and the Media
Stockholders, respectively, in the Separation Transactions pursuant to the terms
of the Separation Agreement. You have also requested our opinion as to the
fairness, from a financial point of view, to each of the Communications
Stockholders and the Media Stockholders of 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.

In connection with this opinion, we have:

(i) Reviewed a draft of the Separation Agreement in the form provided to us
and have assumed that the final form of such agreement will not vary in
any regard that is material to our analysis;

(ii) Analyzed certain historical business and financial information relating
to U S WEST Dex, the Communications Group, the Media Group and the
Company, including the Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the five years ended December
31, 1996;

(iii) Reviewed certain financial forecasts and other data provided to us by
the Company relating to the business of U S WEST Dex, the
Communications Group, the Media Group and the Company (the "Financial
Forecasts"), including certain financial forecasts for MediaOne and New
U S WEST prepared by management of the Company;

(iv) Reviewed certain pro forma financial statements for MediaOne and New U
S WEST (the "Pro Forma Financial Statements") prepared by management of
the Company;

(v) Reviewed reported prices and trading activity 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 Company's Restated Certificate of Incorporation as
currently in effect;

(vii) Reviewed a draft of the proxy statement for the 1998 Annual Meeting of
Stockholders of the Company in the form provided to us (the "Proxy
Statement");

(viii) Held discussions with members of the senior management of U S WEST Dex,
the Communications Group, the Media Group and the Company with respect
to the businesses, prospects and strategic objectives of U S WEST Dex,
the Communications Group, the Media Group and the Company and the
expected impact of the Separation Transactions, the Reorganization and
the Refinancing on such matters; and

(ix) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.

B-1-2
<PAGE>

been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company, the Communications Group, the Media
Group, and U S WEST Dex, and we have relied on the Financial Forecasts and the
Pro Forma Financial Statements in rendering our opinion. We have not acted as
appraisers and we have neither made nor obtained any independent evaluations or
appraisals of the assets or liabilities of U S WEST Dex, the Media Group, the
Communication Group or the Company, nor have we conducted a physical inspection
of the properties and facilities of U S WEST Dex, the Communications Group, the
Media Group or the Company. We have assumed that under generally accepted
accounting principles, following the Separation the assets and liabilities of
MediaOne and New U S WEST will be reflected at the Company's historical book
basis and that there will 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. We have assumed that for U.S.
tax purposes no income or gain will be recognized by the Communications
Stockholders, the Media Stockholders, the Company, MediaOne, New U S WEST or any
subsidiaries of the Company, MediaOne or New U S WEST in connection with the
Separation Transactions, the Reorganization, the Refinancing or any transactions
related thereto. We have assumed that the Separation Transactions, the
Reorganization, the Refinancing and the transactions related thereto will be
consummated in the manner set forth in the Separation Agreement, and that, in
all respects material to our analysis, the Refinancing will be completed on the
terms reflected in the Pro Forma Financial Statements and the aggregate costs
and expenses relating to the Separation Transactions, the Reorganization, the
Refinancing and the transactions relating thereto will not exceed, in any
respect material to our analysis, the amounts reflected in the Pro Forma
Financial Statements and, in all respects material to our analysis, will be
allocated between MediaOne and New U S WEST in the manner reflected in the Pro
Forma Financial Statements. In addition, we have assumed that the terms of the
New U S WEST Stock, the MediaOne Stock, the Restated Certificates of
Incorporation of New U S WEST and MediaOne, the New U S WEST Rights Agreement
(as defined in the Proxy Statement) and the amendment to the U S WEST Rights
Agreement (as defined in the Proxy Statement) will not vary, in any respect
material to our analysis, from the descriptions thereof contained in the Proxy
Statement. We have assumed that the consummation of the Separation Transactions,
the Reorganization, the Refinancing and the transactions relating thereto will
not result in any default or similar event under any instrument of indebtedness
(other than the indebtedness of the Company to be repaid pursuant to the
Refinancing) or other contract of the Company or any of its subsidiaries that
will not be waived.

Our opinion herein is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. We were not requested to and did not solicit third-party
indications of interest with respect to a business combination or other
extraordinary transaction involving U S WEST Dex, the Communications Group or
the Media Group, or any of their respective assets. Our opinion is limited to
the fairness, from a financial point of view, (i) to the Communications
Stockholders and the Media Stockholders, of the Separation Consideration to be
received by the Communications Stockholders and the Media Stockholders in the
Separation Transactions, and (ii) to each of the Communications Stockholders and
the Media Stockholders, of 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, in each case pursuant to the
terms of the Separation Agreement, and we express no opinion as to the merits of
the underlying decisions by the Company to engage in the Separation Transactions
and the Dex Alignment, or any of the transactions related thereto or on any
other aspects of the transactions contemplated by the Separation Agreement. In
addition, we express no opinion as to the prices at which shares of New U S WEST
Stock or MediaOne Stock actually will trade following the consummation of the
Separation Transactions. This opinion does not constitute a recommendation to
any Company stockholder as to how such stockholder should vote with respect to
the Separation Transactions, or the transactions related thereto.

B-1-3
<PAGE>

Lazard Freres & Co. LLC is acting as financial advisor to the Company in
connection with the Separation and will receive a fee for our services. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. In the ordinary course of business, we or our affiliates
may trade in the debt and equity securities of the Company for our own accounts
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.

This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Separation Transactions and shall not be used
for any other purpose without the prior written consent of Lazard Freres & Co.
LLC. We hereby consent, however, to the inclusion of this opinion as an appendix
to any proxy statement distributed by the Company in connection with a
stockholder vote to approve the Separation Transactions or in any registration
statement relating to the distribution of New U S WEST Stock in the Separation
Transactions.

Based upon and subject to the foregoing and based upon such other matters as
we deem relevant, it is our opinion as of the date hereof that (i) the
Separation Consideration to be received by the Communications Stockholders and
the Media Stockholders in the Separation Transactions pursuant to the terms of
the Separation Agreement is fair, from a financial point of view, to the
Communications Stockholders and the Media Stockholders, 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 each of the Communications
Stockholders and the Media Stockholders.

Very truly yours,

LAZARD FRERES & CO. LLC

By /s/ ADAM PARTEN
--------------------------------------

MANAGING DIRECTOR

B-1-4
<PAGE>
ANNEX B-2

<TABLE>
<S> <C>
SBC WARBURG DILLON READ INC. 535 Madison Ave.
New York, NY 10022
Tel: 212-906-7000
</TABLE>

February 6, 1998

The Board of Directors
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111

Members of the Board:

B-2-1
<PAGE>

pursuant to the Communications Redemption and (y) with respect to the Media
Stockholders (as defined below), the receipt of the Dex Dividend and the shares
of MediaOne Stock to be retained by the Media Stockholders.

In connection with this opinion, we have:

(i) Reviewed a draft of the Separation Agreement in the form provided to us
and have assumed that the final form of such agreement will not vary in
any regard that is material to our analysis;

(iv) Reviewed certain pro forma financial statements for MediaOne and New U
S WEST (the "Pro Forma Financial Statements") prepared by management of
the Company;

(v) Reviewed reported prices and trading activity 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 Company's Restated Certificate of Incorporation as
currently in effect;

(vii) Reviewed a draft of the proxy statement for the 1998 Annual Meeting of
Stockholders of the Company in the form provided to us (the "Proxy
Statement");

(ix) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.

We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available for purposes of this opinion. In that regard, we have assumed, with
your consent, that the Financial Forecasts and the Pro Forma Financial
Statements have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company, the Communications
Group, the Media Group, and U S WEST Dex, and we have relied on the Financial
Forecasts and the Pro Forma Financial Statements in rendering our opinion. We
have

B-2-2
<PAGE>

not acted as appraisers and we have neither made nor obtained any independent
evaluations or appraisals of the assets or liabilities of U S WEST Dex, the
Media Group, the Communication Group or the Company, nor have we conducted a
physical inspection of the properties and facilities of U S WEST Dex, the
Communications Group, the Media Group or the Company. We have assumed that under
generally accepted accounting principles, following the Separation the assets
and liabilities of MediaOne and New U S WEST will be reflected at the Company's
historical book basis and that there will 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.
We have assumed that for U.S. tax purposes no income or gain will be recognized
by the Communications Stockholders, the Media Stockholders, the Company,
MediaOne, New U S WEST or any subsidiaries of the Company, MediaOne or New U S
WEST in connection with the Separation Transactions, the Reorganization, the
Refinancing or any transactions related thereto. We have assumed that the
Separation Transactions, the Reorganization, the Refinancing and the
transactions related thereto will be consummated in the manner set forth in the
Separation Agreement, and that, in all respects material to our analysis, the
Refinancing will be completed on the terms reflected in the Pro Forma Financial
Statements and the aggregate costs and expenses relating to the Separation
Transactions, the Reorganization, the Refinancing and the transactions relating
thereto will not exceed, in any respect material to our analysis, the amounts
reflected in the Pro Forma Financial Statements and, in all respects material to
our analysis, will be allocated between MediaOne and New U S WEST in the manner
reflected in the Pro Forma Financial Statements. In addition, we have assumed
that the terms of the New U S WEST Stock, the MediaOne Stock, the Restated
Certificates of Incorporation of New U S WEST and MediaOne, the New U S WEST
Rights Agreement (as defined in the Proxy Statement) and the amendment to the U
S WEST Rights Agreement (as defined in the Proxy Statement) will not vary, in
any respect material to our analysis, from the descriptions thereof contained in
the Proxy Statement. We have assumed that the consummation of the Separation
Transactions, the Reorganization, the Refinancing and the transactions relating
thereto will not result in any default or similar event under any instrument of
indebtedness (other than the indebtedness of the Company to be repaid pursuant
to the Refinancing) or other contract of the Company or any of its subsidiaries
that will not be waived.

SBC Warburg Dillon Read Inc. is acting as financial advisor to the Company
in connection with the Separation and will receive a fee for our services. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. In the ordinary course of business, we or our affiliates
may trade in the debt and equity securities of the Company for our own accounts
and for

B-2-3
<PAGE>

the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.

This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Separation Transactions and shall not be used
for any other purpose without the prior written consent of SBC Warburg Dillon
Read Inc. We hereby consent, however, to the inclusion of this opinion as an
appendix to any proxy statement distributed by the Company in connection with a
stockholder vote to approve the Separation Transactions or in any registration
statement relating to the distribution of New U S WEST Stock in the Separation
Transactions.

Very truly yours,

SBC WARBURG DILLON READ INC.

By /s/ S. DAVIS TERRY, JR.
--------------------------------------

MANAGING DIRECTOR

By /s/ KARIM F. TABET
--------------------------------------

EXECUTIVE DIRECTOR

B-2-4
<PAGE>
ANNEX C

1998 U S WEST STOCK PLAN

I. PURPOSE.

This 1998 U S WEST Stock Plan (the "Plan"), is intended to promote the long
term success of USW-C, Inc. (to be renamed "U S WEST, Inc.") (the "Company") by
affording certain eligible employees, executive officers, non-employee directors
of the Company and its Subsidiaries (as defined below) and certain outside
consultants or advisors to the Company and its affiliates with an opportunity to
acquire a proprietary interest in the Company, in order to incentivize such
persons and to align the financial interests of such persons with the
stockholders of the Company.

II. DEFINITIONS.

The following defined terms are used in the Plan:

A. "Agreement" shall mean the agreement or grant letter accepted by the
Participant as described in Section VIII of the Plan between the Company and a
Participant under which the Participant receives an Award pursuant to this Plan.

B. "Award" shall mean individually, collectively or in tandem, an incentive
award granted under the Plan, whether in the form of Options, SARs, Stock Awards
or Phantom Units.

C. "Board" or "Board of Directors" shall mean the Board of Directors of the
Company.

D. "Change of Control" shall mean any of the following:

1. any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) who is or becomes a beneficial owner of (or otherwise has the
authority to vote), directly or indirectly, securities representing twenty
percent (20%) or more of the total voting power of all of the Company's then
outstanding voting securities, unless through a transaction arranged by, or
consummated with the prior approval of the Board of Directors; or

2. any period of two (2) consecutive calendar years during which there
shall cease to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds ( 2/3) 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; or

3. the Company becomes a party to a merger or consolidation in which either
(i) the Company will not be the surviving corporation or (ii) the Company will
be the surviving corporation and any outstanding shares of Common Stock of the
Company will be converted into shares of any other company (other than a
reincorporation or the establishment of a holding company involving no change of
ownership of the Company) or other securities or cash or other property
(excluding payments made solely for fractional shares); or

4. any other event that a majority of the Board of Directors, in its sole
discretion, shall determine constitutes a Change of Control.

E. "Code" shall mean the Internal Revenue Code of 1986, as amended.

F. "Committee" shall mean the Human Resources Committee or the Employee
Benefits Committee or their delegates, as applicable, pursuant to provisions of
Section III of the Plan.

G. "Common Stock" shall mean the common stock, $.01 par value, of the
Company.

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<PAGE>
H. "Company" shall mean USW-C, Inc., a Delaware corporation to be renamed "U
S WEST, Inc.", and any successor thereof.

I. "Director Compensation" shall mean all cash or stock remuneration
payable to an Outside Director for service to the Company as a director, other
than reimbursement for expenses or Common Stock received upon exercise of an
Option, and shall include retainer fees for service on, and fees for attendance
at meetings of, the Board and any committees thereof.

J. "Disabled" or "Disability" shall mean long-term disability as determined
under the provisions of any U S WEST disability plan maintained for the benefit
of eligible employees of the Company or any Related Entity, provided, however,
that in the case of an Incentive Option, "disability" shall have the meaning
specified in Section 22(e)(3) of the Code.

K. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) and its successor promulgated under the Exchange Act.

L. "Dividend Equivalent Rights" shall mean the right to receive the amount
of any dividends that are paid on an equivalent number of shares of Common Stock
underlying an Option or Phantom Unit, which shall be payable either in cash or
in the form of additional Phantom Units or Stock.

M. "Effective Date" shall mean , 1998, the date on which the
Plan was approved by the stockholders of the Company.

N. "Eligible Employee" shall mean any employee of the Company or any Related
Entity who is so employed on the date of the grant of an Award.

O. "Eligible Non-Employee" shall mean any consultant or advisor to the
Company or any Related Entity, including any member of the State Executive
Board(s) of the Company or any Related Entity that the Committee selects to
receive an Award.

P. "Employee Benefits Committee" shall mean a committee of the Company
consisting of employees of the Company or any Related Entity appointed by the
Human Resources Committee and which shall administer the Plan as provided in
Section III hereof.

Q. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

R. "Executive Officers" shall mean any Officer of the Company or any Related
Entity who, at the time of an Award, is subject to the reporting requirements of
Section 16(a) of the Exchange Act.

S. "Fair Market Value" shall mean the closing price of a share of Common
Stock as reported on the New York Stock Exchange for the applicable date, or if
there were no sales on such date, on the last day on which there were sales.

T. "Human Resources Committee" shall mean the human resources committee of
the Board or any other committee of the Board appointed by the Board to
administer the Plan in lieu of the Human Resources Committee, which committee
shall consist of no fewer than three (3) persons, each of whom shall be a
Disinterested Person.

U. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.

V. "Indexed" shall mean the periodic adjustment of an Option Price based
upon adjustment criteria determined by the Committee, but in no event shall the
Option Price be adjusted to an amount less than the original Option Price.

W. "Nonqualified Option" shall mean an Option which does not qualify under
Section 422 of the Code.

C-2
<PAGE>
X. "Officer" shall mean any executive of the Company or any Related Entity
who participates in the Company's executive compensation programs.

Y. "Option" shall mean an option granted by the Company to purchase Common
Stock pursuant to the provisions of this Plan, including Incentive Options,
Nonqualified Options and Reload Options.

Z. "Optionee" shall mean a Participant to whom one or more Options have
been granted.

AA. "Option Price" shall mean the price per share payable to the Company for
shares of Common Stock upon the exercise of an Option.

AB. "Outside Director" shall mean an individual not employed by the Company
or any Related Entity and who serves on the Board.

AC. "Parent Corporation" shall mean any corporation within the meaning of
Section 424(e) of the Code.

AD. "Participant" shall mean an Eligible Employee, Eligible Non-Employee,
Executive Officer or Outside Director who is granted an Award.

AE. "Phantom Unit" shall mean a notional account representing a value
equivalent to one share of Common Stock on the Award date.

AF. "Plan" shall mean the 1998 U S WEST, Inc. Stock Plan.

AG. "Related Entity" shall mean any Parent Corporation or Subsidiary of the
Company.

AH. "Reload Option" shall mean the right to receive a further Option for a
number of shares equal to the number of shares of Common Stock surrendered by
the Optionee upon exercise of the original Option as provided in Section IX.E of
the Plan.

AI. "Restricted Period" shall mean the period of time from the date of grant
of Restricted Stock until the lapse of restrictions attached thereto under the
terms of the Agreement granting such Restricted Stock, pursuant to the
provisions of the Plan or by action of the Committee.

AJ. "Restricted Stock" shall mean an Award made by the Committee entitling
the Participant to acquire, at no cost or for a purchase price determined by the
Committee at the time of grant, shares of Common Stock which are subject to
restrictions in accordance with the provisions of Section XII hereof.

AK. "Retirement" shall mean with respect to any Eligible Employee, that such
person has terminated employment with the Company or any Related Entity other
than "for cause" (as defined in subsection IX.H.(v)) and (i) such person is
eligible to receive an immediate service pension benefit under the U S WEST
Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
January 1, 1997, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, custom, written
agreement or arrangement between the Company or any Related Entity and the
Eligible Employee. "Retirement" shall not apply to any Eligible Non-Employee.

AL. "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.

AM. "Separation" shall mean the separation of U S WEST Communications Group
and U S WEST Media Group into two separate companies pursuant to the terms of
the Separation Agreement dated , 1998 between the Company and U S
WEST, Inc. (to be renamed "MediaOne Group, Inc.").

AN. "Stock Appreciation Right" or "SAR" shall mean a grant entitling the
Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if

C-3
<PAGE>
the Committee shall so determine at the time of a grant, less than) the excess
of the Fair Market Value of a share of Common Stock on the date of exercise over
the Fair Market Value of a share of Common Stock on the date of grant (or over
the Option Price, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of shares with respect to which the Stock
Appreciation Right shall have been exercised, with the Committee having sole
discretion to determine the form or forms of payment at the time of grant of the
SAR.

AO. "Stock Awards" shall mean any Award which is in the form of Restricted
Stock and any outright grants of Common Stock approved by the Committee pursuant
to the Plan.

AP. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture or partnership in which the
Company owns, directly or indirectly, (i) with respect to a corporation, stock
possessing twenty percent (20%) or more of the total combined voting power of
all classes of stock in the corporation or (ii) in the case of a joint venture
or partnership, the Company possesses a twenty percent (20%) interest in the
capital or profits of such joint venture or partnership. In the case of any
Incentive Option, Subsidiary shall mean any corporation within the meaning of
Section 424(f) of the Code.

AQ. "Vested" shall mean the status that results with respect to an Option or
other Award which may be immediately exercised under the terms of the Agreement
granting such Option or other Award, pursuant to the provisions of the Plan or
by action of the Committee.

III. ADMINISTRATION.

A. The Plan shall be administered by the Human Resources Committee with
respect to Officers, Executive Officers and Outside Directors and by the
Employee Benefits Committee with respect to all other Eligible Employees and
Eligible Non-Employees. The Human Resources Committee may adopt such rules,
regulations and guidelines as it determines necessary for the administration of
the Plan. Subject to any such rules, regulations and guidelines adopted by the
Human Resources Committee, the Employee Benefits Committee shall have the power
to adopt rules, regulations and guidelines to permit such Committee to
administer the Plan with respect to Eligible Employees (other than Officers and
Executive Officers) and with respect to Eligible Non-Employees.

B. The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ such
legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company or such Related Entity whose employees have benefited from the Plan, as
determined by the Committee. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or a
Related Entity against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's gross
negligence or willful misconduct.

C. In furtherance of and not in limitation of the Committee's discretionary
authority, subject to the provisions of the Plan, the Committee shall have the
authority to:

1. determine the Participants to whom Awards shall be granted and the
number of and terms and conditions upon which Awards shall be granted (which
need not be the same for all Awards or types of Awards);

C-4
<PAGE>
2. establish, in its sole discretion, annual or long-term financial goals
of the Company, Related Entity, or division, department, or group of the Company
or Related Entity, or individual goals which the Committee shall consider in
granting Awards, if any;

3. determine the satisfaction of performance goals established by the
Committee based upon periods of time or any combinations thereof;

4. determine the time when Awards shall be granted, the Option Price of
each Option, the period(s) during which Options shall be exercisable (whether in
whole or in part), the restrictions to be applicable to Awards, and the other
terms and provisions of Awards;

5. modify grants of Awards pursuant to Paragraph D. of this Section III or
rescind grants of Awards pursuant to Section IX.H(v), respectively;

6. provide the establishment of a procedure whereby a number of shares of
Common Stock or other securities may be withheld from the total number of shares
of Common Stock or other securities to be issued upon exercise of an Option, the
lapse of restrictions on Restricted Stock and the vesting of Phantom Units
(other than an Incentive Option) to meet the obligation of withholding for
income, social security and other taxes incurred by a Participant upon such
exercise or required to be withheld by the Company in connection with such
exercise;

7. adopt, modify and rescind rules and regulations and guidelines relating
to the Plan;

8. adopt modifications to the Plan and procedures, as may be necessary to
comply with provisions of the laws and applicable regulatory rulings of
countries in which the Company or a Related Entity operates in order to assure
the legality of Awards granted under the Plan to Participants who reside in such
countries;

9. obtain the approval of the stockholders of the Company with respect to
Awards consisting of Phantom Units or Restricted Stock; provided, however, no
action shall be proposed to stockholders without the approval of the Board of
Directors; and

10. make all determinations, perform all other acts, exercise all other
powers and establish any other procedures determined by the Committee to be
necessary, appropriate or advisable in administering the Plan and to maintain
compliance with any applicable law.

D. The Committee may at any time, in its sole discretion, accelerate the
exercisability of any Awards and waive or amend any and all restrictions and
conditions of any Awards.

E. Subject to and not inconsistent with the express provisions of the Plan,
the Code and Rule 16b-3 of the Exchange Act, the Committee shall have the
authority to require, as a condition to the granting of any Option, SAR or other
Award (to the extent applicable) to any Executive Officer of the Company or any
Related Entity that the Executive Officer receiving such Option, SAR or other
Award agree not to sell or otherwise dispose of such Option, SAR or other Award
or Common Stock acquired pursuant to such Option, SAR or other Award (to the
extent applicable) or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of six (6) months following the
later of (i) the date of the grant of such Option, SAR or other Award (to the
extent applicable) or (ii) the date when the other Option Price of such Option,
SAR or other Award is fixed, if such Option Price is not fixed at the date of
grant of such Option, SAR or other Award.

IV. DECISIONS FINAL.

Any decision, interpretation or other action made or taken in good faith by
the Committee arising out of or in connection with the Plan shall be final,
binding and conclusive on the Company and all Participants and their respective
heirs, executors, administrators, successors and assigns.

C-5
<PAGE>
V. ARBITRATION.

Any agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the Committee, in its sole
discretion.

VI. DURATION OF THE PLAN.

The Plan shall remain in effect for a period of five (5) years from the
Effective Date, unless terminated by the Board pursuant to Section XX.

VII. SHARES AVAILABLE; LIMITATIONS.

A. Up to 4,800,000 shares of Common Stock may be granted in calendar year
1998 and the maximum aggregate number of shares of Common Stock that may be
granted in any other calendar year for all purposes under the Plan shall be one
percent (1.0%) of the shares outstanding (excluding shares held in the Company's
treasury) on the first day of such calendar year, provided, however, that in the
event that fewer than the full aggregate number of shares available for issuance
in any calendar year are issued in such year, the shares not issued shall be
added to the shares available for issuance in any subsequent year or years. If,
for any reason, any shares of Common Stock as to which Options, SARs, Restricted
Stock, or Phantom Units have been granted cease to be subject to exercise or
purchase hereunder (other than the exercise of SARs for cash), the underlying
shares of Common Stock shall thereafter be available for grants to Participants
under the Plan during any calendar year. Awards granted under the Plan may be
fulfilled in accordance with the terms of the Plan with (i) authorized and
unissued shares of the Common Stock or (ii) issued shares of Common Stock
reacquired by the Company, in each situation, as the Board of Directors or the
Committee may determine from time to time at its sole discretion.

B. The maximum number of shares of Common Stock that shall be subject to
the grant of an Award in any calendar year for Awards other than Options or SARs
shall not exceed one-third ( 1/3) of the total number of shares of Common Stock
subject to Awards granted under the Plan for such calendar year.

C. The maximum number of shares of Common Stock with respect to which
Awards may be granted to any individual Participant in any calendar year may not
exceed eight hundred thousand (800,000).

D. The cumulative number of shares of Common Stock that may be issued under
this Plan in connection the exercise of Incentive Options shall not exceed ten
million (10,000,000).

VIII. GRANT OF AWARDS.

A. The Committee shall determine the type or types of Award(s) to be made to
each Participant. Awards may be granted singly, in combination or in tandem
subject to restrictions set forth in Section IX.C for Incentive Options. The
types of Awards that may be granted under the Plan are Options, with or without
Reload Options, SARs, Stock Awards and Phantom Units, and with respect to
Phantom Units and Restricted Stock, with or without Dividend Equivalent Rights.

B. Each grant of an Award under this Plan shall be evidenced by an
Agreement dated as of the date of the grant of the Award, other than Stock
Awards consisting of an outright grant of shares of Common Stock. This Agreement
shall set forth the terms and conditions of the Award, as may be determined by
the Committee, and if the Agreement relates to the grant of an Option, shall
indicate whether the Option that it evidences, is intended to be an Incentive
Option or a Nonqualified Option. Each grant of an Award is conditioned upon the
acceptance by the Participant of the terms of the Agreement. Unless otherwise
extended by the Committee, a Participant shall have ninety (90) days from the
date of the Agreement to accept its terms.

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<PAGE>
IX. OPTIONS.

The Committee, in its sole discretion, may grant Incentive Options or
Nonqualified Options to Eligible Employees, Officers and Executive Officers and
Nonqualified Options to Eligible Non-Employees. Any Options granted to a
Participant under the Predecessor Plan which remain outstanding as of the
Effective Date shall be governed by the terms and conditions of the Plan, except
to the extent the provisions of the Plan are inconsistent with the terms of the
Options granted under the Predecessor Plans, in which event the applicable
provisions of the Predecessor Plans shall govern; provided, however, that in no
event shall there be a modification of the terms of any Incentive Option granted
under the Predecessor Plan. The terms and conditions of the Options granted
under this Section IX shall be determined from time to time by the Committee, as
set forth in the Agreement granting the Option, and subject to the following
conditions:

A. NONQUALIFIED OPTIONS. The Option Price for each share of Common Stock
issuable pursuant to a Nonqualified Option may be an amount at or above the Fair
Market Value on the date such Option is granted, may be Indexed from the
original Option Price and may be granted with or without Dividend Equivalent
Rights; provided, however, that with respect to Nonqualified Options granted to
any Executive Officer, no Dividend Equivalent Rights may be granted.

B. INCENTIVE OPTIONS. The Option Price for each share of Common Stock
issuable pursuant to an Incentive Option shall not be less than one hundred
percent (100%) of the Fair Market Value on the date such Option is granted and
may be Indexed from the original Option Price.

C. INCENTIVE OPTIONS; SPECIAL RULES. Options granted in the form of
Incentive Options shall be subject to the following provisions:

1. GRANT. No Incentive Option shall be granted pursuant to this Plan more
than ten (10) years after the Effective Date.

2. ANNUAL LIMIT. The aggregate Fair Market Value (determined at the time
the Option is granted) of the shares of Common Stock with respect to which one
or more Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan or under any other stock plan of the
Company or any Related Entity shall not exceed $100,000 or such other maximum
amount permitted under Section 422 of the Code. Any Option purporting to
constitute an Incentive Option in excess of such limitation shall constitute a
Nonqualified Option.

3. 10% STOCKHOLDER. If any Optionee to whom an Incentive Option is to be
granted pursuant to the provisions of the Plan is, on the date of grant, an
individual described in Section 422(b)(6) of the Code, then the following
special provisions shall be applicable to the Option granted to such individual:

(a) the Option Price of shares subject to such Incentive Option shall not be
less than 110% of the Fair Market Value of Common Stock on the date of grant;
and

(b) the Option shall not have a term in excess of (5) years from the date of
grant.

D. OTHER OPTIONS. The Committee may establish rules with respect to, and
may grant to Eligible Employees, Options to comply with any amendment to the
Code made after the Effective Date providing for special tax benefits for stock
options.

E. RELOAD OPTIONS. Without in any way limiting the authority of the
Committee to make Awards hereunder, the Committee shall have the authority to
grant Reload Options. Any such Reload Option shall be subject to such other
terms and conditions as the Committee may determine. Notwithstanding the above,
(i) the Committee shall have the right, in its sole discretion, to withdraw a
Reload Option to the extent that the grant thereof will result in any adverse
accounting consequences to the Company and (ii) no additional Reload Options
shall be granted upon the exercise of a Reload Option.

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<PAGE>
F. TERM OF OPTION. No Option shall be exercisable after the expiration of
ten (10) years from the date of grant of the Option.

G. EXERCISE OF STOCK OPTION. Each Option shall be exercisable in one or
more installments as the Committee in its sole discretion may determine at the
time of the Award and as provided in the Agreement. The right to purchase shares
shall be cumulative so that when the right to purchase any shares has accrued
such shares or any part thereof may be purchased at any time thereafter until
the expiration or termination of the Option, subject to rules on sequential
exercise for Incentive Options pursuant to Paragraph C.2. of this Section IX.
The Option Price shall be payable (i) in cash or by an equivalent means
acceptable to the Committee, (ii) by delivery (constructive or otherwise) to the
Company of shares of Common Stock owned by the Optionee or (iii) by any
combination of the above as provided in the Agreement. Shares delivered to the
Company in payment of the Option Price shall be valued at the Fair Market Value
on the date of the exercise of the Option.

H. VESTING. The Agreement shall specify the date or dates on which the
Optionee may begin to exercise all or a portion of his Option. Subsequent to
such date or dates, the Option shall be deemed vested and fully exercisable.

(i) DEATH. In the event of the death of any Optionee, all Options held by
such Optionee on the date of his death shall become Vested Options and the
estate of such Optionee, shall have the right, at any time and from time to time
within one year after the date of death, or such other period, if any, as the
Committee in its sole discretion may determine, to exercise the Options of the
Optionee (but not after the earlier of the expiration date of the Option or, in
the case of an Incentive Option, one (1) year from the date of death).

(ii) DISABILITY. If the employment of any Optionee is terminated because of
Disability, all Options held by such Optionee on the date of his or her
termination shall be retained by such Optionee, and such Options that are not
yet Vested Options shall become Vested Options in accordance with the vesting
schedule established at the time such Options were issued. The Optionee shall
have the right to exercise Vested Options at any time and from time to time, but
not after the expiration date of the Option or, in the case of Incentive Options
where tax-advantaged treatment is desired, one year from the date of termination
of employment.

(iii) RETIREMENT. Upon an Optionee's Retirement, all Options held by such
Optionee on the date of his or her Retirement shall be retained by such
Optionee, and such Options that are not yet Vested Options shall become Vested
Options in accordance with the vesting schedule established at the time such
Options were issued, unless the Committee, in its sole discretion, determines
otherwise. Unless the Committee, in its sole discretion, determines otherwise,
the Optionee shall have the right to exercise Vested Options at any time and
from time to time, but not after the expiration date of the Option. In the case
of Incentive Options where tax-advantaged treatment is desired, the Optionee
shall have the right to exercise Vested Options three months from the date of
Retirement.

(iv) OTHER TERMINATION. If the employment with the Company or a Related
Entity of an Optionee is terminated for any reason other than for death or
Disability and other than "for cause" as defined in subparagraph (v) below, such
Optionee shall have the right, in the case of a Vested Option, for a period of
three (3) months after the date of such termination or such longer period as
determined by the Committee, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.

(v) TERMINATION FOR CAUSE. Notwithstanding any other provision of the Plan
to the contrary, if the Optionee's employment is terminated by the Company or
any Related Entity "for cause" (as defined below), such Optionee shall
immediately forfeit all rights under his Options except as to the shares of
Common Stock already purchased prior to such termination. Termination "for
cause" shall mean (unless another definition is agreed to in writing by the
Company and the Optionee) termination by the

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Company because of: (a) the Optionee's willful and continued failure to
substantially perform his duties (other than any such failure resulting from the
Optionee's incapacity due to physical or mental impairment) after a written
demand for substantial performance is delivered to the Optionee by the Company,
which demand specifically identifies the manner in which the Company believes
the Optionee has not substantially performed his duties, (b) the willful conduct
of the Optionee which is demonstrably and materially injurious to the Company or
Related Entity, monetarily or otherwise, or (c) the conviction of the Optionee
for a felony by a court of competent jurisdiction.

X. FOREIGN OPTIONS AND RIGHTS.

The Committee may make Awards of Options to Eligible Employees, Officers,
Executive Officers and Eligible Non-Employees who are subject to the tax laws of
nations other than the United States, which Awards may have terms and conditions
as determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action which it deems advisable to obtain
approval of such Option by the appropriate foreign governmental entity;
provided, however, that no such Award may be granted pursuant to this Section X
and no action may be taken which would result in a violation of the Exchange
Act, the Code or any other applicable law.

XI. STOCK APPRECIATION RIGHTS.

The Committee shall have the authority to grant SARs to Eligible Employees,
Officers, Executive Officers and Eligible Non-Employees either alone or in
connection with an Option. SARs granted in connection with an Option shall be
granted either at the time of grant of the Option or by amendment to the Option.
SARs granted in connection with an Option shall be subject to the same terms and
conditions as the related Option and shall be exercisable only at such times and
to such extent as the related Option is exercisable. A SAR granted in connection
with an Option may be exercised only when the Fair Market Value of the Common
Stock of the Company exceeds the Option Price of the related Option. A SAR
granted in connection with an Option shall entitle the Participant to surrender
to the Company unexercised the related Option, or any portion thereof and to
receive from the Company cash and/or shares of Common Stock equal to that number
of shares of Common Stock having an aggregate value equal to the excess of (i)
the Fair Market Value of one share of Common Stock on the day of the surrender
of such Option over (ii) the Option Price per share of Common Stock multiplied
by (iii) the number of shares of Common Stock that may be exercised under the
Option, or surrendered; provided, however, that no fractional shares shall be
issued. A SAR granted singly shall entitle the Participant to receive the excess
of (i) the Fair Market Value of a share of Common Stock on the date of exercise
over (ii) the Fair Market Value of a share of Common Stock on the date of the
grant of the SAR multiplied by (iii) the number of SARs exercised. Payment of
any fractional shares of Common Stock shall be made in cash. A SAR shall become
a Vested Award upon (i) a Participant becoming Disabled, or (ii) the death of a
Participant.

XII. RESTRICTED STOCK.

The Committee may, in its sole discretion, grant Restricted Stock to
Eligible Employees, Eligible Non-Employees, Officers or Executive Officers
subject to the provisions below.

A. RESTRICTIONS. A stock certificate representing the number of shares of
Restricted Stock granted shall be held in custody by the Company for the
Participant's account. The Participant shall have all rights and privileges of a
stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled

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or the death of a Participant. If a Participant ceases to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the Committee, and all rights of the
Participant to such shares shall terminate without further obligation on the
part of the Company. Upon the forfeiture (in whole or in part) of shares of
Restricted Stock, such forfeited shares shall become shares of Common Stock held
in the Company's treasury without further action by the Participant.

B. TERMS AND CONDITIONS. The Committee shall establish the terms and
conditions for Restricted Stock pursuant to Section III of the Plan, including
whether any shares of Restricted Stock shall have voting rights or a right to
any dividends that are declared. Terms and conditions established by the
Committee need not be the same for all grants of Restricted Stock. The Committee
may provide for the restrictions to lapse with respect to a portion or portions
of the Restricted Stock at different times or upon the occurrence of different
events, and the Committee may waive, in whole or in part, any or all
restrictions applicable to a grant of Restricted Stock. Restricted Stock Awards
may be issued for no cash consideration or for such minimum consideration as may
be required by applicable law or such other consideration as may be determined
by the Committee.

C. DELIVERY OF RESTRICTED SHARES. At the end of the Restricted Period as
herein provided, a stock certificate for the number of shares of Restricted
Stock with respect to which the restrictions have lapsed shall be delivered
(less any shares delivered pursuant to Section XIX.C in satisfaction of any
withholding tax obligation), free of all such restrictions, except applicable
securities law restrictions, to the Participant or the Participant's estate, as
the case may be. The Company shall not be required to deliver any fractional
share of Common Stock but shall pay, in lieu thereof, the Fair Market Value
(measured as of the date the restrictions lapse) of such fractional share to the
Participant or the Participant's estate, as the case may be. Notwithstanding the
foregoing, the Committee may authorize the delivery of the Restricted Stock to a
Participant during the Restricted Period, in which event any stock certificates
in respect of shares of Restricted Stock thus delivered to a Participant during
the Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.

XIII. PHANTOM UNITS.

A. GENERAL. The Committee may, in its sole discretion, grant the right to
earn Phantom Units to Eligible Employees, Officers, Executive Officers and
Eligible Non-Employees. The Committee shall determine the criteria for the
earning of Phantom Units, pursuant to Section III of the Plan. Upon satisfaction
of such criteria, a Phantom Unit shall be deemed a Vested Award. A Phantom Unit
granted by the Committee shall provide for payment in shares of Common Stock. A
Phantom Unit shall become a Vested Award upon (i) a Participant becoming
Disabled, or (ii) the death of a Participant. Shares of Common Stock issued
pursuant to this Section XIII may be issued for no cash consideration or for
such minimum consideration as may be required by applicable law or such other
consideration as may be determined by the Committee. The Committee shall
determine whether a Participant granted a Phantom Unit shall be entitled to a
Dividend Equivalent Right.

B. UNFUNDED CLAIM. The establishment of Phantom Units under the Plan are
unfunded obligations of the Company. The interest of a Participant in any such
units shall be considered a general unsecured claim against the Company to the
extent that the conditions for the earning of the Phantom Units have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the Committee.

C. ISSUANCE OF COMMON STOCK. Upon a Phantom Unit becoming a Vested Award,
unless a Participant has elected to defer under Paragraph D. below, shares of
Common Stock representing the Phantom Units shall be distributed to the
Participant, unless the Committee, with the consent of the Participant, provides
for the payment of the Phantom Units in cash or partly in cash and partly in

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shares of Common Stock equal to the value of the shares of Common Stock which
would otherwise be distributed to the Participant.

D. DEFERRAL OF PHANTOM UNITS. Prior to the year with respect to which a
Phantom Unit may become a Vested Award, the Participant may elect not to receive
Common Stock upon the vesting of such Phantom Unit and for the Company to
continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.

E. FINANCIAL HARDSHIP. Notwithstanding any other provision hereof, at the
written request of a Participant who has elected to defer pursuant to Paragraph
D. above, the Committee, in its sole direction, upon a finding that continued
deferral will result in financial hardship to the Participant, may authorize the
payment of all or a part of a Participant's Vested Phantom Units in a single
installment or the acceleration of payment of any multiple installments thereof;
provided, however, that distributions will not be made under this paragraph if
such distribution would result in liability of an Executive Officer under
Section 16 of the Exchange Act.

F. DISTRIBUTION UPON DEATH. The Committee shall pay the Fair Market Value
of the Phantom Units of a deceased Participant to the estate of the Participant,
as soon as practicable following the death of the Participant. The value of the
Phantom Units for the purpose of such distribution shall be based upon the Fair
Market Value of shares of Common Stock underlying the Phantom Units on the date
of the Participant's death.

XIV. STOCK AWARDS TO OUTSIDE DIRECTORS.

Each Outside Director shall be granted a Stock Award consisting of 400
shares of Common Stock, without restrictions, on the date of the Annual Meeting
of the Company's stockholders following the first anniversary date of such
Outside Director's initial election to the Board, and a like amount on each of
the next four Annual Meeting dates for a total maximum Stock Award of 2,000
shares of Common Stock.

XV. OUTSIDE DIRECTOR'S COMPENSATION.

A. PAYMENT IN COMMON STOCK. Each Outside Director may elect to receive
payment of all or any portion of Director Compensation comprised of retainer
fees for service on the Board and any committees thereof in Common Stock. The
amount of Common Stock then issuable shall be based on the Fair Market Value of
the Common Stock on the dates such retainer fees are otherwise due and payable
to the Outside Director. When any fees are paid in Common Stock under this
Section XV.A, any fractional shares of Common Stock shall be paid in cash.
Certificates evidencing such Common Stock shall be delivered promptly following
such date. If an Outside Director elects to receive payment of retainer fees in
Common Stock as described in this Section XV.A, the election shall be (i) in
writing, (ii) delivered to the Secretary of the Company at least six months in
advance of the payment date, and (iii) irrevocable.

B. DEFERRAL OF PAYMENT. Each Outside Director may elect to defer the
receipt of Common Stock payable pursuant to Section XV.A, in which event such
Outside Director shall receive an equivalent number of Phantom Units with
Dividend Equivalent Rights. Any such Phantom Units shall become Vested Awards at
such time as the Outside Director no longer serves as a member of the Board. If
an Outside Director elects to defer receipt of Common Stock and receive Phantom
Units pursuant to this Section XV.B, the election shall be (i) in writing, (ii)
delivered to the Secretary of the Company in the year preceding the year in
which the Director Compensation would otherwise be paid and at least six months
in advance of the date when Common Stock would otherwise be issued, and (iii)
irrevocable.

C. DIRECTOR STOCK OPTIONS. On , 1998 and on the first
business day of each calendar year thereafter, each Director shall be granted an
Option to purchase three thousand (3,000) shares

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Common Stock, such Options (i) to become Vested Options in increments of 40
percent upon grant and 30 percent on the first and second anniversaries
following the date of grant or, if earlier, in full upon the retirement of the
Director, (ii) to remain exercisable notwithstanding the retirement of the
Director from the Board (but in no event after the expiration date of the
Option), and (iv) to expire ten years from the date of grant.

XVI. FEDERAL SECURITIES LAW.

With respect to grants of Awards to Directors and Executive Officers, the
Company intends that the provisions of this Plan and all transactions effected
in accordance with Plan shall comply with Rule 16b-3 under the Exchange Act.
Accordingly, the Committee shall administer and interpret the Plan to the extent
practicable, to maintain compliance with such rule.

XVII. CHANGE OF CONTROL; ACCELERATION.

Upon the occurrence of a Change of Control:

A. in the case of all outstanding Options and SARs, each such Option and SAR
shall automatically become immediately fully exercisable by the Participant;

B. restrictions applicable to Restricted Stock shall automatically be
deemed lapsed and conditions applicable to Phantom Units shall automatically be
deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and

C. the Human Resources Committee, in its discretion, shall have the right
to accelerate payment of any deferrals of Vested Phantom Units.

XVIII. ADJUSTMENT OF SHARES.

A. In the event there is any change in the Common Stock by reason of any
consolidation, combination, liquidation, reorganization, recapitalization, stock
dividend, stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares or other like change in capital structure of the Company, the
number or kind of shares or interests subject to an Award and the per share
price or value thereof shall be appropriately adjusted by the Committee at the
time of such event, provided that each Participant's economic position with
respect to the Award shall not, as a result of such adjustment, be worse than it
had been immediately prior to such event. Any fractional shares or interests
resulting from such adjustment shall be rounded up to the next whole share of
Common Stock. Notwithstanding the foregoing, (i) each such adjustment with
respect to an Incentive Option shall comply with the rules of Section 424(a) of
the Code, and (ii) in no event shall any adjustment be made which would render
any Incentive Option granted hereunder other than an "incentive stock option"
for purposes of Section 422 of the Code.

B. In the event of an acquisition by the Company of another corporation
where the Company assumes outstanding stock options or similar obligations of
such corporation, the number of Awards available under the Plan shall be
appropriately increased to reflect the number of such options or other
obligations assumed.

XIX. SUBSTITUTE OPTIONS.

Options, shares of Restricted Stock and Phantom Units issued in substitution
of outstanding options for U S WEST Communications Group Stock, restricted
shares of U S WEST Communications Group Stock and phantom units with respect to
U S WEST Communications Group Stock pursuant to the terms of the Employee
Matters Agreement to be entered into by the Company and U S WEST, Inc. (to be
renamed "MediaOne Group, Inc.") in connection with the Separation shall be
administered pursuant to the provisions of the Plan to the extent not
inconsistent with the terms of the grant of such options, restricted stock and
phantom units and such Employee Matters Agreement.

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XX. MISCELLANEOUS PROVISIONS.

A. ASSIGNMENT OR TRANSFER. Except as otherwise permitted by this Section
XIX.A, no grant of any "derivative security" (as defined in the rules issued
under Section 16 of the Exchange Act) made under the Plan or any rights or
interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferrable pursuant to a domestic
relations order. An Optionee who is an Officer or an Outside Director may assign
or transfer an Option (other than an Incentive Option) as a gift to one or more
members of his or her immediate family or to trusts maintained for the benefit
of such immediate family members if such assignment or transfer is not pursuant
to a domestic relations order and (i) such assignment or transfer is expressly
approved in advance by the Committee or its delegate(s) or (ii) such Option was
granted to the Optionee on or after , 199 , and the Agreement
pertaining to such Option expressly permits the assignment or transfer of the
Option.

B. INVESTMENT REPRESENTATION; LEGENDS. The Committee may require each
Participant acquiring shares of Common Stock pursuant to an Award to represent
to and agree with the Company in writing that such Participant is acquiring the
shares without a view to distribution thereof. No shares of Common Stock shall
be issued pursuant to an Award until all applicable securities law and other
legal and stock exchange requirements have been satisfied. The Committee may
require the placing of stop-orders and restrictive legends on certificates for
Common Stock as it deems appropriate.

C. WITHHOLDING TAXES. In the case of distributions of Common Stock or
other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.

D. COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Award nor to
any Participant receiving an Award.

E. OTHER INCENTIVE PLANS. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.

F. EFFECT ON EMPLOYMENT. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall affect, or be construed as affecting,
the terms of employment of any Participant except to the extent specifically
provided herein or therein. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall impose, or be construed as imposing,
an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.

G. NONCOMPETITION. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the Committee, in its sole
discretion.

H. GOVERNING LAW. This Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the State of Colorado.

XXI. AMENDMENT OR TERMINATION OF PLAN.

The Board shall have the right to amend, modify, suspend or terminate the
Plan at any time, provided that, with respect to Incentive Options, no amendment
shall be made that (i) decreases the minimum Option Price in the case of any
Incentive Option, or (ii) modifies the provisions of the Plan with respect to
Incentive Options, unless such amendment is made by or with the approval of the
stockholders or unless the Board receives an opinion of counsel to the Company
that stockholder approval is not necessary with respect to any modifications
relating to Incentive Options; and provided further that no amendment shall be
made that (i) increases the number of shares of Common Stock

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that may be issued under the Plan, (ii) permits the Option Price for any Option
to be less than Fair Market Value on the date such Option is granted, or (iii)
extends the period during which awards may be granted under the Plan beyond five
(5) years from the Effective Date, unless such amendment is made by or with the
approval of stockholders. No amendment, modification, suspension or termination
of the Plan shall alter or impair any Awards previously granted under the Plan,
without the consent of the holder thereof.

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ANNEX D

U S WEST
LONG-TERM INCENTIVE PLAN
SECTION I
PURPOSE

The purpose of the U S WEST Long-Term Incentive Plan (the "Plan") is to
offer key executives of USW-C, Inc. (to be renamed "U S WEST, Inc."), (the
"Company") the opportunity to earn incentive compensation based on the
accomplishment of strategic goals. These goals are designed to deliver sustained
long-term returns to stockholders of the Company. Payouts under the Plan shall
be determined based on the achievement of these pre-established and objective
goals. Specifically, the Plan grants incentive compensation based upon a
percentage (ranging from 0% to 150%) of the sum of regular cash dividends, if
any, paid on the Company's common stock ("Common Stock") over a multiple-year
performance period. The Plan is effective from , 1998 to December 31,
2000, contingent on the approval of stockholders of the Company.

SECTION II
DEFINITIONS

2.1 "Change of Control" shall mean any of the following:

(i) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended, is or becomes a beneficial
owner of (or otherwise has the authority to vote), directly or indirectly,
securities representing twenty percent (20%) or more of the total voting
power of all of the Company's then outstanding voting securities, unless
through a transaction arranged by, or consummated with the prior approval of
the Company's Board of Directors; or

(ii) any period of two consecutive calendar years during which there
shall cease to be a majority of the Company's Board of Directors comprised
as follows: individuals who at the beginning of such period constitute the
Company's Board of Directors and any new director(s) whose election by the
Company's Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds ( 2/3) 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; or

(iii) the Company becomes a party to a merger or consolidation in which
either (1) the Company will not be the surviving corporation or (2) the
Company will be the surviving corporation and any outstanding shares of
Common Stock of the Company will be converted into shares of any other
company (other than a reincorporation or the establishment of a holding
company involving no change of ownership of the Company) or other securities
or cash or other property (excluding payments made solely for fractional
shares); or

(iv) for a Participant who has executed a Change of Control Agreement
with the Company, any event that constitutes a "Change of Control" as set
forth in such Change of Control Agreement, or any other event that a
majority of the Company's Board of Directors, in its sole discretion, shall
determine constitutes a Change of Control.

2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.3 "Company" shall mean USW-C, Inc., a Delaware corporation to be renamed
"U S WEST, Inc." and any successor thereof.

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2.4 "Committee" shall mean the Human Resources Committee of the Company's
Board of Directors or its delegate.

2.5 "Common Stock" shall mean the common stock, $.01 par value, issued by
the Company.

2.6 "Disability" shall mean long-term disability as determined under the
provisions of any Company disability plan maintained for the benefit of eligible
employees of the Company.

2.7 "Dividend Equivalent Unit" or "DEU" shall mean a unit representing the
sum of regular cash dividends on a share of Common Stock paid during a
Performance Period.

2.8 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

2.9 "Participant" shall mean an executive or key employee of the Company
whom the Committee has determined shall participate in the Plan pursuant to
Section III below.

2.10 "Performance Period" shall mean the period of time during which the
performance of the Company is measured for purposes of determining a
Participant's payout under the Plan, as set forth in Section IV below.

2.11 "Plan" shall mean the U S WEST, Inc. Long-Term Incentive Plan.

2.12 "Restricted Stock" shall mean shares of Common Stock that are subject to
a vesting period and to any other terms and conditions determined by the
Committee for any Participant, as set forth in the Participant's Restricted
Stock Agreement.

2.13 "Retirement" or "Retires" shall mean for any Participant, that such
Participant has retired from the Company and currently is eligible to receive a
service pension benefit under the U S WEST Pension Plan or a pension benefit
under any individually negotiated, custom written agreement or arrangement
executed by a duly authorized representative of the Company, or any subsidiary
of the Company, and the Participant.

SECTION III
ELIGIBILITY

Participation in the Plan shall be limited to executives and key employees
of the Company as determined by the Committee. The Committee members all qualify
as "outside directors" within the meaning of Code section 162(m).

SECTION IV
PERFORMANCE PERIODS

The Plan shall be effective for three (3) Performance Periods. Each
Performance Period shall have a duration of three calendar years, as follows:
the first Performance Period shall commence on January 1, 1996, and shall
terminate on December 31, 1998; the second Performance Period shall commence on
January 1, 1997, and shall terminate on December 31, 1999; and the third
Performance Period shall commence on January 1, 1998, and shall terminate on
December 31, 2000.

SECTION V
DIVIDEND EQUIVALENT UNITS

The Committee shall assign DEUs to each Participant 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 Committee shall assign
additional DEUs to Participants, upon selection for participation in the Plan
and upon such other occasions as the Committee shall determine, each of which
shall represent the sum of regular cash dividends, if any, on a share of Common
Stock paid during a Performance Period.

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SECTION VI
PAYMENT OF SHARES

6.1 CALCULATION OF ACTUAL PAYOUT VALUE. At the conclusion of each
Performance Period, the total number of DEUs granted to a Participant shall be
multiplied by the total dividend payout per share of Common Stock during the
Performance Period. The resulting product shall be equal to the Participant's
target payout value for such Performance Period. The Participant's actual payout
value shall be determined by applying a percentage, not to exceed one hundred
fifty percent (150%), to the Participant's maximum payout value. Such percentage
shall be determined by comparing the performance of the Company to the payout
formula established by the Committee, as provided in Section VII below.

6.2 FORM AND MANNER OF PAYOUT. The DEU award payment to each Participant
shall be made in shares of Common Stock and shall be determined by dividing the
actual payout value by the average closing price of Common Stock over a
twenty-trading day period. Such period shall commence ten trading days prior to
the end of the Performance Period. Any shares of Common Stock payable to a
Participant shall be paid as soon as practicable following the Performance
Period. At the discretion of the Committee, such Common Stock may be Restricted
Stock. The Participant shall be entitled to certificates representing shares of
such Restricted Stock only if the Participant abides by all terms and conditions
of the underlying Restricted Stock Agreement, to the extent those conditions are
not waived by the Committee in its sole discretion. At the discretion of the
Committee, dividends, if any, paid on shares of Restricted Stock during the
vesting period shall be paid to the Participants. Such dividends shall be
payable in cash, shares of Common Stock or Restricted Stock as determined by the
Committee in its sole discretion.

6.3 TAXATION. Any shares of Common Stock paid pursuant to this Plan are
taxable at the time they are paid unless they are paid in the form of Restricted
Stock. Restricted Stock is taxable upon vesting.

6.4 MAXIMUM PAYOUT; SHARES AVAILABLE. Subject to the adjustments set forth
in Section IX, no Participant shall be entitled to receive more than 500,000
DEUs for any Performance Period, and the maximum aggregate number of shares of
Common Stock that may be paid over the life of this Plan is 1,300,000.

SECTION VII
PERFORMANCE GOALS

Within 90 days of the commencement of each Performance Period, the Committee
shall establish specific, objective, performance goals and a payout formula in
connection with such performance goals. The performance goals shall be based on
one or more of the following performance measures of the Company: financial
results; revenue; productivity and efficiency; service and customer care; and
employees' and/or management's satisfaction.

(a) Financial results shall be measured in terms of one or more of the
following: free cash flow; operating cash flow; cash operating income
(Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"));
net income; earnings per share; total stockholder return; and relative
stockholder return.

(b) Revenue shall be measured in terms of one or more of the following:
revenue expressed in dollars or percent growth; revenue per access line; new
product revenue expressed in dollars; percent of revenue or percent growth;
and market share.

(c) Productivity and efficiency shall be measured in terms of one or
more of the following: revenue per employee; labor dollars as a percent of
revenue; cash outlay per access line; and general and administrative expense
as a percent of revenue.

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<PAGE>
(d) Service and customer care shall be measured in terms of one or more
of the following: customer access; customer commitments met; held orders;
and overall customer satisfaction, as measured by survey.

(e) Employees' and management's satisfaction shall be measured by
survey.

SECTION VIII
SPECIAL DISTRIBUTION RULES

8.1 CHANGE OF CONTROL. In the event of a Change of Control, the following
shall occur:

(a) For any DEUs issued in any calendar year(s) prior to the date of the
Change of Control, the total dividend payout shall be determined as if the
Change of Control occurred on the date on which the pre-set Performance
Period is scheduled to end, as set forth in Section IV. For any DEUs issued
in the calendar year of the Change of Control, the total dividend payout
shall be determined as if the Change of Control occurred on the date on
which the pre-set Performance Period is scheduled to end, calculated on a
pro rata basis for the amount of time elapsed in that calendar year;

(b) The value of dividends yet to be paid in any current Performance
Period shall be valued at the amount of the most recent dividend paid prior
to the Change of Control, and assuming that dividends would continue to be
paid for the full duration of such Performance Period with the same
frequency as prior to the Change of Control;

(d) The Participant shall be paid immediately the number of shares of
Common Stock, or its equivalent value, that results in his or her case from
the foregoing provisions. Any such shares of Common Stock shall not be
Restricted Stock; and

(e) Any vesting period applicable to Restricted Stock previously issued
under the Plan shall lapse immediately.

8.2 DEATH OR DISABILITY. If a Participant dies or becomes Disabled during
any Performance Period, then solely for purposes of the Plan, the Participant
shall be deemed to have died or become Disabled as of the last day of the
calendar quarter during which the Participant died or became Disabled, and the
benefit, if any, payable under the Plan to the Participant or his or her estate
shall be paid in the same manner set forth in Subsection 8.1, substituting in
each instance, as applicable, the term "death" or "Disability" for the term
"Change of Control."

8.3 RETIREMENT. If a Participant Retires during any Performance Period (i)
any Restricted Stock issued under the Plan shall continue to vest in accordance
with the vesting schedule established at the time such Restricted Stock was
issued and shall continue to be subject to all other terms and conditions of the
underlying Restricted Stock Agreement, (ii) the DEUs held by such Participant
shall be valued as if the last day of any current Performance Period is the last
day of the calendar quarter during which the Participant Retires, and (iii) any
shares of Common Stock payable to the Participant shall be calculated at the end
of the Performance Period and paid to the Participant pursuant to the provisions
of Section VI; provided, however, that the continuation of vesting and of
participation in the Plan shall be contingent upon such Participant's execution
and delivery to the Company, on or prior to the effective date of the
Participant's Retirement, of the Company's standard "Waiver & Release" form,
available from the Human Resources Department of the Company. If, however, the
Committee in its sole discretion determines that, prior to the end of the
Performance Period, the Participant directly or indirectly receives payment for
services rendered to, or is otherwise employed by, any person, firm or
corporation that is in competition with the Company or engaged in providing any
goods or services that

D-4
<PAGE>
are substantially the same as goods or services provided or under development by
the Company, unless the Committee in its sole discretion determines otherwise,
or unless the Participant is in full compliance with the Company's Policy on
Service on Outside Boards of Directors, as interpreted solely by the Company's
Senior Management Compliance Committee, the Participant immediately shall
forfeit all DEUs and Restricted Stock granted under the Plan, and no payments of
Common Stock shall thereafter be made. The foregoing provisions apply unless
otherwise determined by the Committee in its sole discretion.

8.4 OTHER TERMINATION. Unless the Committee in its sole discretion
determines otherwise, if a Participant's employment terminates for any other
reason, the Participant immediately shall forfeit all DEUs and Restricted Stock
granted under the Plan, and no payments of Common Stock shall thereafter be
made.

SECTION IX
ADJUSTMENT OF DEUS OR SHARES OF COMMON STOCK

In the event of any change in the Common Stock of the Company by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, slit-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number of DEUs and the maximum number of shares of Common Stock
remaining for issue under the Plan shall be adjusted appropriately by the
Committee at or about the time of such event, provided that each Participant's
position with respect to DEUs or shares of Common Stock or other interests
payable under this Plan shall not, as a result of such adjustment, be worse than
it had been immediately prior to such event. Any fractional DEUs, shares or
other interests resulting from such adjustment shall be rounded up to the next
whole DEU, share or other interest, as the case may be. To the extent that any
event set forth in this Section IX constitutes a Change of Control for any
participant, the provisions of this Section IX shall apply prior to any
calculation made pursuant to Subsection 8.1.

SECTION X
ARBITRATION

10.1 SCOPE OF ARBITRATION. Any claim, controversy or dispute between a
Participant and the Company or its subsidiaries or affiliated companies, whether
sounding in contract, statute, tort, fraud, misrepresentation, discrimination or
any other legal theory, including, but not limited to, disputes relating to the
interpretation of this Plan; claims under Title VII of the Civil Rights Act of
1964, as amended; claims under the Civil Rights Act of 1991; claims under the
Age Discrimination in Employment Act of 1967, as amended; claims under 42 U.S.C.
Section 1981, Section 1981a, Section 1983, Section 1985, or Section 1988; claims
under the Family and Medical Leave Act of 1993; claims under the Americans with
Disabilities Act of 1990, as amended; claims under the Rehabilitation Act of
1973, as amended; claims under the Fair Labor Standards Act of 1938, as amended;
the Employee Retirement Income Security Act of 1974, as amended; claims under
the Colorado Anti-Discrimination Act; or claims under any other similar federal,
state or local law or regulation, whenever brought, shall be resolved by
arbitration. The only legal claims between a Participant and the Company that
are not included for arbitration are claims by the Participant for workers'
compensation or unemployment compensation benefits and/or claims for benefits
under a benefit plan maintained by the Company, if the plan does not provide for
arbitration of such disputes. In consideration of any DEU, Common Stock or any
Restricted Stock granted to a Participant under the terms of the Plan, such
Participant shall voluntarily, knowingly and intelligently waive any right such
Participant may otherwise have to seek remedies in court or other forums,
including the right to a jury trial and the right to recover punitive damages on
any common law and/or contract claims. The Federal Arbitration Act, 9 U.S.C.
SectionSection 1-16 ("FAA") shall govern the arbitrability of all claims,
provided that they are enforceable under the FAA, as it may be amended from time
to time.

D-5
<PAGE>
In the event the FAA does not govern, the Colorado Uniform Arbitration Act shall
apply. Additionally, the substantive law of Colorado, to the extent it is
consistent with the terms stated in this Plan for arbitration, shall apply to
any common law claims.

10.2 ARBITRATION PROCEEDINGS. A single arbitrator engaged in the practice
of law shall conduct the arbitration under the applicable rules and procedures
of the American Arbitration Association ("AAA"). Any dispute that relates to the
Participant's employment with the Company or to the termination of the
Participant's employment shall be conducted under the AAA Employment Dispute
Resolution Rules, effective June 1, 1997. The arbitrator shall be chosen from a
state other than the Participant's state of residence and other than Colorado.
Other than as set forth in this Plan, the arbitrator shall have no authority to
add to, detract from, change, amend, or modify existing law. The arbitrator may
award punitive damages, as allowed by Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment
Act of 1967, as amended; and the Americans with Disabilities Act of 1990, as
amended, regardless of any limitations imposed by federal, state or local laws
regarding punitive damage awards in arbitration proceedings. All arbitration
proceedings, including, without limitation, settlements and awards, under this
Plan shall be confidential. No participant shall be required to pay more than
One Hundred Fifty Dollars ($150) of the arbitrator's hourly fees and expenses.
The prevailing party in any arbitration may be entitled to receive reasonable
attorneys' fees. The arbitrator's decision and award shall be final and binding,
as to all claims that were, or could have been, raised in the arbitration, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. If any party hereto files a judicial or
administrative action asserting claims subject to this arbitration provision,
and another party successfully stays such action and/or compels arbitration of
such claims, the party filing said action shall pay the other party's costs and
expenses incurred in seeking such stay and/or compelling arbitration, including
reasonable attorneys' fees, not to exceed Two Thousand Five Hundred Dollars
($2,500).

SECTION XI
MISCELLANEOUS PROVISIONS

11.1. ASSIGNMENT OR TRANSFER. No DEUs or other interest or rights under
the Plan shall be subject in any manner to anticipation, hypothecation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Participant or the Participant's beneficiary.

11.2 COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Participant.

11.3 TAXATION. The Company shall have the right to deduct from any Plan
distribution any federal, state or local income and employment taxes that it is
required by law to withhold.

11.4 OTHER INCENTIVE PLANS. The adoption of this Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees of
the Company.

11.5 EFFECT ON EMPLOYMENT. Nothing contained in this Plan or any related
agreement or any agreement referred to herein shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
specifically provided. Nothing contained in this Plan or any related agreement
or any agreement referred to herein shall impose, or be construed as imposing,
any obligation on (i) the Company to continue the employment of any Participant
or (ii) any Participant to remain in the employ of the Company.

11.6 AMENDMENT OF PLAN. The Committee shall have the right to amend,
modify, suspend or terminate this Plan at any time, provided that, in the case
of Participants who are subject to Section 16(a) of the Exchange Act, no
amendment shall be made that (i) materially increases the benefits accruing to
such Participants, (ii) materially increases the number of shares of Common
Stock that may

D-6
<PAGE>
be issued under this Plan, or (iii) materially modifies the requirements of
eligibility for such Participants, unless such amendment is made by or with the
approval of stockholders. The Committee or its designee shall be authorized to
make any other amendments to the Plan.

11.7 FEDERAL SECURITIES LAW. With respect to grants of Common Stock to
individuals subject to Section 16 of the Exchange Act, the Company intends that
the provisions of this Plan and all transactions effected in accordance with the
Plan shall comply with Rule 16b-3 under the Exchange Act. Accordingly, the
Committee shall administer and interpret the Plan to the extent practicable
consistently with such rule.

11.8 SECURITIES LAW COMPLIANCE. No shares of Common Stock shall be issued
under this Plan until all applicable securities law and other legal and stock
exchange requirements have been satisfied. The Committee may require the placing
of stop-orders and restrictive legends on certificates for common stock as it
deems appropriate.

11.9 ADMINISTRATION. The Plan shall be administered by the Committee,
which may adopt such rules, regulations and guidelines as it determines
necessary for the administration of the Plan. The Committee may delegate to one
or more of its members, or to one or more agents, such administrative duties as
it may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice on any
responsibility that the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company. The Company shall indemnify members of
the Committee and any agent of the Committee who is an employee of the Company
against any and all liabilities or expenses to which they may be subject by
reason of any act or failure to act with respect to their duties on behalf of
the Plan, except in circumstances involving such person's gross negligence or
willful misconduct.

11.10 GOVERNING LAW. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.

SECTION XII
ADOPTION OF THE PLAN

This Plan shall become effective on . All awards granted under
this Plan shall be contingent on .

SECTION XIII
TERMINATION OF THE PLAN

The Plan shall terminate on December 31, 2000, except that any outstanding
DEUs granted prior to the termination of the Plan shall remain subject to all
terms and conditions of the Plan as if the Plan were not terminated. Any
Restricted Stock granted under the Plan shall continue to vest in accordance
with the vesting schedule established at the time such Restricted Stock was
issued and shall continue to be subject to all other terms and conditions of the
underlying Restricted Stock Agreement, unless the Committee determines otherwise
in its sole discretion.

D-7
<PAGE>
ANNEX E

U S WEST
EXECUTIVE SHORT-TERM INCENTIVE PLAN
SECTION 1
PURPOSE

The purpose of the U S WEST Executive Short-Term Incentive Plan (the "Plan")
is to provide key executives of USW-C, Inc. (to be renamed "U S WEST, Inc.") and
its subsidiaries (the "Company") with incentive compensation based upon the
achievement of established performance goals.

SECTION 2
ELIGIBILITY

Eligibility for the Plan is limited to the Chief Executive Officer of U S
WEST, Inc. and any individuals employed by the Company (at the end of any
calendar year) who appear in the Summary Compensation Table of the Company's
Proxy Statement to Stockholders for that year. The Human Resources Committee
(the "Committee") of the Board of Directors of U S WEST, Inc. (the "U S WEST
Board of Directors") shall certify eligibility for participation. Individuals
eligible to participate in the Plan are herein called "Participants."

SECTION 3
AWARDS

Participants will be eligible to receive equal shares of a cash bonus pool
established annually, as described in Section 5, provided that the Committee
shall have the authority to reduce the share of any participant to the extent it
deems appropriate. Any such reduction of a participant's share will not result
in an increase of another participant's share.

SECTION 4
PERFORMANCE PERIODS

Each performance period ("Period") shall have a duration of one calendar
year, commencing on January 1, and terminating on December 31.

SECTION 5
PERFORMANCE FORMULA

5.1 At the end of each Period the Committee will certify the amount of the
cash bonus pool pursuant to Section 5.2.

5.2 The cash bonus pool for any Period will be one-quarter of one percent
(0.25%) of Cash Provided by Operating Activities for U S WEST, Inc. and its
consolidated subsidiaries, determined in accordance with the standards of the
Financial Accounting Standards Board, less any amount that the Committee deems
appropriate. In the event that the Committee elects to reduce the cash bonus
pool to an amount that is less than one-quarter of one percent (0.25%) of Cash
Provided by Operating Activities, the amount by which the pool is reduced may,
at the Committee's sole discretion, be added to the cash bonus pool that is
available for any subsequent Period or Periods.

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<PAGE>
5.3 A Participant's share of the cash bonus pool shall be calculated by
dividing the amount of the cash bonus pool by the number of Participants in the
Plan. The Committee shall have the authority to reduce any Participant's share
of the cash bonus pool to the extent it deems appropriate. In determining the
amount to be paid to a Participant for any Period, the Committee will consider a
number of performance factors, including, but not limited to, the Company's net
income and cash flow, quality indicators, and other relative operating and
strategic results.

5.4 Shares of the cash bonus pool will be paid in the year following the
completion of the performance period.

SECTION 6
SPECIAL DISTRIBUTION RULES

6.1 CHANGE OF CONTROL. Notwithstanding any other provisions of this Plan,
in the event of a Change of Control, as defined below, the following shall
occur:

(a) The cash bonus pool shall be calculated as if the end of the Period
were the date of the Change of Control;

(b) Each Participant's share of the cash bonus pool shall be determined
subject to Section 5.3; and

(c) Each Participant shall be immediately paid his or her share of the
cash bonus pool that results from the foregoing calculation.

For the purposes of the Plan, a "Change of Control" shall mean any of the
following:

(i) Any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended, is or becomes a beneficial
owner of (or otherwise has the authority to vote), directly or indirectly,
securities representing twenty percent (20%) or more of the total voting
power of all the Company's then outstanding voting securities, unless
through a transaction arranged by, or consummated with the prior approval of
the U S WEST Board of Directors;

(ii) Any period of two (2) consecutive calendar years during which there
shall cease to be a majority of the U S WEST Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the U S
WEST Board of Directors and any new director(s) whose election by the U S
WEST Board of Directors or nominations for election by the Company's
stockholders was approved by a vote of at least two-thirds ( 2/3) 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;

(iii) The Company becomes a party to a merger or consolidation in which
either (i) the Company will not be the surviving corporation or (ii) the
Company will be the surviving corporation and any outstanding shares of
common stock of the Company will be converted into shares of any other
company (other than a reincorporation or the establishment of a holding
company involving no change of ownership of the Company) or other securities
or cash or other property (excluding payments made solely for fractional
shares); or

(iv) Any other event that a majority of the U S WEST Board of Directors,
is in its sole discretion, shall determine constitutes a Change of Control.

6.2 SPECIAL CIRCUMSTANCES. If, prior to a distribution from the cash bonus
pool, a Participant (i) is discharged by the Company, (ii) is demoted, or (iii)
becomes associated with, employed by or renders services to, or owns a material
interest in any business that is competitive with the Company, the Committee
shall have the authority to (a) reduce or cancel payments that would otherwise
be paid

E-2
<PAGE>
from the cash bonus pool, (b) permit continued participation in the Plan or an
early distribution therefrom, or (c) any combination of the foregoing.

SECTION 7
MISCELLANEOUS PROVISIONS

7.1 ASSIGNMENT OR TRANSFER. No opportunity shall be assignable or
transferable by a Participant.

7.2 COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Participant.

7.3 OTHER INCENTIVE PLANS. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.

7.4 EFFECT ON EMPLOYMENT. Nothing contained in this Plan or any agreement
related hereto or referred to herein shall affect, or be construed as affecting,
the terms of employment of any Participant except to the extent specifically
provided herein or therein. Nothing contained in this Plan or any agreement
related hereto or referred to herein shall impose, or be construed as imposing,
any obligation on (i) the Company to continue the employment of any Participant
and (ii) any Participant to remain in the employ of the Company.

7.5 PENSION FORMULA. Unless otherwise prohibited by the Committee, awards
under the Plan shall be used to compute a pension amount in the U S WEST
Executive Non-Qualified Pension Plan and will be used to calculate coverage in
the U S WEST Executive Life Insurance Program (if such coverage is elected).
Awards shall not be considered compensation for purposes of the U S WEST Savings
Plan/ESOP.

7.6 TAXATION. The Company shall have the right to deduct from any award to
be paid under the Plan any federal, state or local taxes required by law to be
withheld with respect to such payment.

7.7 AMENDMENT OF PLAN. The U S WEST Board of Directors shall have the right
to suspend or terminate this Plan at any time and may amend or modify the Plan
prior to the beginning of any Period.

SECTION 8
PLAN ADMINISTRATION

8.1 COMMITTEE AUTHORITY DELEGATION. The Committee shall have full power to
administer and interpret the Plan and to establish rules for its administration.
The Committee may designate Company employees to act in its behalf to engage in
daily administration of the Plan. The Committee or its designee may administer
the Plan in all respects including the proration or adjustment of awards in the
case of retirements, terminations, entrance to or exit from a level of
management, changes in base salary, dismissal or death and other conditions as
appropriate.

8.2 GOVERNING LAW. The Plan shall be governed by the laws of the state of
Colorado and applicable federal law.

8.3 COMMITTEE RELIANCE. The Committee, in making any determination under or
referred to in the Plan shall be entitled to rely on opinions, reports or
statements of officers or employees of the Company and other entities and of
counsel, public accountants and other professional expert persons.

E-3
<PAGE>
SECTION 9
CLAIMS AND APPEALS

9.1 COMMITTEE PROCEDURE. Claims and appeals will be processed in accordance
with the following procedures:

(a) Any claim under the Plan by a Participant or anyone claiming through
a Participant shall be presented to the Committee.

(b) Any person whose claim under the Plan has been denied may, within
sixty (60) days after receipt of notice of denial, submit to the Committee a
written request for review of the decision denying the claim.

9.2 SCOPE OF ARBITRATION. Any claim, controversy or dispute between a
Participant and the Company or its subsidiaries or affiliated companies, whether
sounding in contract, statute, tort, fraud, misrepresentation, discrimination or
any other legal theory, including, but not limited to, disputes relating to the
interpretation of this Plan; claims under Title VII of the Civil Rights Act of
1964, as amended; claims under the Civil Rights Act of 1991; claims under the
Age Discrimination in Employment Act of 1967, as amended; claims under 42 U.S.C.
Section 1981, Section 1981a, Section 1983, Section 1985, or Section 1988; claims
under the Family and Medical Leave Act of 1993; claims under the Americans with
Disabilities Act of 1990, as amended; claims under the Rehabilitation Act of
1973, as amended; claims under the Fair Labor Standards Act of 1938, as amended;
the Employee Retirement Income Security Act of 1974, as amended; claims under
the Colorado Anti-Discrimination Act; or claims under any other similar federal,
state or local law or regulation, whenever brought, shall be resolved by
arbitration. The only legal claims between a Participant and the Company that
are not included for arbitration are claims by the Participant for workers'
compensation or unemployment compensation benefits and/or claims for benefits
under a benefit plan maintained by the Company, if the plan does not provide for
arbitration of such disputes. In consideration of any payment to a Participant
under the terms of the Plan, such Participant shall voluntarily, knowingly and
intelligently waive any right such Participant may otherwise have to seek
remedies in court or other forums, including the right to a jury trial and the
right to recover punitive damages on any common law and/or contract claims. The
Federal Arbitration Act, 9 U.S.C. SectionSection 1-16 ("FAA") shall govern the
arbitrability of all claims, provided that they are enforceable under the FAA,
as it may be amended from time to time. In the event the FAA does not govern,
the Colorado Uniform Arbitration Act shall apply. Additionally, the substantive
law of Colorado, to the extent it is consistent with the terms stated in this
Plan for arbitration, shall apply to any common law claims.

9.3 ARBITRATION PROCEEDINGS. A single arbitrator engaged in the practice
of law shall conduct the arbitration under the applicable rules and procedures
of the American Arbitration Association ("AAA"). Any dispute that relates to the
Participant's employment with the Company or to the termination of the
Participant's employment shall be conducted under the AAA Employment Dispute
Resolution Rules, effective June 1, 1997. The arbitrator shall be chosen from a
state other than the Participant's state of residence and other than Colorado.
Other than as set forth in this Plan, the arbitrator shall have no authority to
add to, detract from, change, amend, or modify existing law. The arbitrator may
award punitive damages, as allowed by Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment
Act of 1967, as amended; and the Americans with Disabilities Act of 1990, as
amended, regardless of any limitations imposed by federal, state or local laws
regarding punitive damage awards in arbitration proceedings. All arbitration
proceedings, including, without limitation, settlements and awards, under this
Plan shall be confidential. No participant shall be required to pay more than
One Hundred Fifty Dollars ($150) of the arbitrator's hourly fees and expenses.
The prevailing party in any arbitration may be entitled to receive reasonable

E-4
<PAGE>

attorneys' fees. The arbitrator's decision and award shall be final and binding,
as to all claims that were, or could have been, raised in the arbitration, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. If any party hereto files a judicial or
administrative action asserting claims subject to this arbitration provision,
and another party successfully stays such action and/or compels arbitration of
such claims, the party filing said action shall pay the other party's costs and
expenses incurred in seeking such stay and/or compelling arbitration, including
reasonable attorneys' fees, not to exceed Two Thousand Five Hundred Dollars
($2,500).

SECTION 10
ADOPTION OF THE PLAN

This Plan shall become effective on .

E-5
<PAGE>

ANNEX F

U S WEST, INC.
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Reports of Independent Public Accountants............................................ F-2
Report of Management................................................................. F-4
Consolidated Statements of Operations................................................ F-5
Consolidated Balance Sheets.......................................................... F-7
Consolidated Statements of Cash Flows................................................ F-9
Notes to Consolidated Financial Statements........................................... F-10
Supplementary Selected Proportionate Results of Operations........................... F-60
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of U S WEST, Inc.:

We have audited the accompanying Consolidated Balance Sheets of U S WEST,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996,
and the related Consolidated Statements of Operations and Cash Flows for the
years then ended. These consolidated financial statements and the Supplementary
Selected Proportionate Results of Operations referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and supplementary information
based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of U S WEST, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the consolidated results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.

We have also audited the Supplementary Selected Proportionate Results of
Operations for the years ended December 31, 1997 and 1996, presented on page
F-60. The Supplementary Selected Proportionate Results of Operations have been
prepared by management to present relevant financial information that is not
provided by the consolidated financial statements and is not intended to be a
presentation in conformity with generally accepted accounting principles. In our
opinion, the Supplementary Selected Proportionate Results of Operations referred
to above fairly states, in all material respects, the information set forth
therein on the basis of accounting described on page F-60.

ARTHUR ANDERSEN LLP

Denver, Colorado,
February 12, 1998.

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowners of U S WEST, Inc.:

We have audited the accompanying Consolidated Statements of Operations and
Cash Flows of U S WEST, Inc. for the year ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations of U S WEST,
Inc. and its cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Denver, Colorado
February 12, 1996

F-3
<PAGE>

REPORT OF MANAGEMENT

The Consolidated Financial Statements of U S WEST have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis. The integrity and objectivity of information in these financial
statements, including estimates and judgments, are the responsibility of
management, as is all other financial information included in this report.

U S WEST maintains a system of internal accounting controls designed to
provide reasonable assurance as to the integrity and reliability of financial
statements, the safeguarding of assets and the prevention and detection of
material errors or fraudulent financial reporting. Monitoring of such systems
includes an internal audit program designed to objectively assess the
effectiveness of internal controls and recommend improvements therein.

Limitations exist in any system of internal accounting controls based upon
the recognition that the cost of the system should not exceed the benefits
derived. U S WEST believes that the Company's system does provide reasonable
assurance that transactions are executed in accordance with management's general
or specific authorizations and is adequate to accomplish the stated objectives.

The independent certified public accountants, whose reports are included
herein, were engaged to express an opinion on our Consolidated Financial
Statements. Their opinions are based on procedures performed in accordance with
generally accepted auditing standards, including examining, on a test basis,
evidence supporting the amounts and disclosures in the Consolidated Financial
Statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.

In an attempt to assure objectivity, the financial information contained in
this report is subject to review by the Audit Committee of the Board of
Directors. The Audit Committee is composed of outside directors who meet
regularly with management, internal auditors and independent auditors to review
financial reporting matters, the scope of audit activities and the resolution of
audit findings.

Richard D. McCormick
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Michael P. Glinsky
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER

February 12, 1998

F-4
<PAGE>

U S WEST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Sales and other revenues......................................................... $ 15,235 $ 12,911 $ 11,746

Operating expenses:
Employee-related expenses...................................................... 4,917 4,412 4,071
Other operating expenses....................................................... 3,617 2,671 2,323
Taxes other than income taxes.................................................. 475 429 416
Depreciation and amortization.................................................. 3,420 2,544 2,291
--------- --------- ---------
Total operating expenses..................................................... 12,429 10,056 9,101
--------- --------- ---------

Operating income................................................................. 2,806 2,855 2,645

Interest expense................................................................. (1,083) (612) (527)
Equity losses in unconsolidated ventures......................................... (909) (346) (207)
Gains on asset sales:
Investments.................................................................... 474 -- --
Rural telephone exchanges...................................................... 77 59 136
Merger of joint venture interest............................................... -- -- 157
Guaranteed minority interest expense............................................. (87) (55) (14)
Other expense--net............................................................... (56) (61) (36)
--------- --------- ---------
Income before income taxes, extraordinary items and cumulative effect of change
in accounting principle........................................................ 1,222 1,840 2,154
Provision for income taxes....................................................... (522) (696) (825)
--------- --------- ---------
Income before extraordinary items and cumulative effect of change in accounting
principle...................................................................... 700 1,144 1,329

Extraordinary items--early extinguishment of debt--net of tax.................... (3) -- (12)
--------- --------- ---------
Income before cumulative effect of change in accounting principle................ 697 1,144 1,317
Cumulative effect of change in accounting principle--net of tax.................. -- 34 --
--------- --------- ---------
NET INCOME....................................................................... $ 697 $ 1,178 $ 1,317
--------- --------- ---------
--------- --------- ---------
Dividends on preferred stock..................................................... (52) (9) (3)
--------- --------- ---------
EARNINGS AVAILABLE FOR COMMON STOCK.............................................. $ 645 $ 1,169 $ 1,314
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-5
<PAGE>

U S WEST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
IN THOUSANDS
(EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
COMMUNICATIONS GROUP BASIC EARNINGS PER COMMON SHARE: (See Note 16)
Income before extraordinary items and cumulative effect of change in accounting
principle.................................................................... $ 2.44 $ 2.55 $ 2.52
Extraordinary items--early extinguishment of debt.............................. (0.01) -- (0.02)
Cumulative effect of change in accounting principle............................ -- 0.07 --
--------- --------- ---------
COMMUNICATIONS GROUP BASIC EARNINGS PER COMMON SHARE............................. $ 2.43 $ 2.62 $ 2.50
--------- --------- ---------
--------- --------- ---------
COMMUNICATIONS GROUP BASIC AVERAGE COMMON SHARES OUTSTANDING..................... 482,751 477,549 470,716
--------- --------- ---------
--------- --------- ---------
COMMUNICATIONS GROUP DILUTED EARNINGS PER COMMON SHARE: (See Note 16)
Income before extraordinary items and cumulative effect of change in accounting
principle.................................................................... $ 2.42 $ 2.51 $ 2.48
Extraordinary items--early extinguishment of debt.............................. (0.01) -- (0.02)
Cumulative effect of change in accounting principle............................ -- 0.07 --
--------- --------- ---------
COMMUNICATIONS GROUP DILUTED EARNINGS PER COMMON SHARE........................... $ 2.41 $ 2.58 $ 2.46
--------- --------- ---------
--------- --------- ---------
COMMUNICATIONS GROUP DILUTED AVERAGE COMMON SHARES OUTSTANDING................... 491,232 488,591 481,933
--------- --------- ---------
--------- --------- ---------

MEDIA GROUP BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: (See Note 16)
Income (loss) before extraordinary item........................................ $ (0.88) $ (0.16) $ 0.30
Extraordinary item--early extinguishment of debt............................... -- -- (0.01)
--------- --------- ---------
MEDIA GROUP BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE................... $ (0.88) $ (0.16) $ 0.29
--------- --------- ---------
--------- --------- ---------
MEDIA GROUP BASIC AVERAGE COMMON SHARES OUTSTANDING.............................. 606,749 491,924 470,549
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-6
<PAGE>

U S WEST, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 211 $ 201
Accounts and notes receivable, less allowance for credit
losses of $136 and $125, respectively................................................... 2,249 2,113
Inventories and supplies.................................................................. 179 159
Deferred directory costs.................................................................. 257 259
Deferred tax asset........................................................................ 373 213
Prepaid and other......................................................................... 130 167
--------- ---------
Total current assets........................................................................ 3,399 3,112

Property, plant and equipment--net.......................................................... 18,580 18,281
Investment in Time Warner Entertainment..................................................... 2,486 2,477
Net investment in international ventures.................................................... 475 1,548
Net investment in assets held for sale...................................................... 419 409
Intangible assets--net...................................................................... 12,674 12,595
Other assets................................................................................ 1,707 2,433
--------- ---------
Total assets................................................................................ $ 39,740 $ 40,855
--------- ---------
--------- ---------
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-7
<PAGE>

U S WEST, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
DOLLARS IN MILLIONS
(EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt........................................................................... $ 1,430 $ 1,051
Accounts payable.......................................................................... 1,751 1,316
Due to Continental Cablevision shareowners................................................ -- 1,150
Employee compensation..................................................................... 521 470
Dividends payable......................................................................... 268 263
Deferred revenues and customer deposits................................................... 444 379
Other..................................................................................... 1,901 1,445
--------- ---------
Total current liabilities................................................................... 6,315 6,074

Long-term debt.............................................................................. 13,248 14,300
Postretirement and other postemployment benefit obligations................................. 2,570 2,479
Deferred income taxes....................................................................... 4,068 4,349
Unamortized investment tax credits.......................................................... 168 173
Deferred credits and other.................................................................. 867 800

Commitments and contingencies

Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding
solely Company-guaranteed debentures...................................................... 1,080 1,080
Preferred stock subject to mandatory redemption............................................. 100 51

Shareowners' equity:
Series D Preferred Stock--$1.00 per share par value, 20,000,000 shares authorized,
19,999,478 shares issued and outstanding................................................ 923 920
Common shares--
Communications Stock--$0.01 per share par value, 2,000,000,000 shares authorized,
484,522,015 and 480,460,536 issued, 484,515,415 and 480,457,336 outstanding,
respectively..........................................................................
Media Stock--$0.01 per share par value, 2,000,000,000 shares authorized, 626,565,410 and
624,782,710 issued, 607,807,934 and 608,863,327 outstanding, respectively............. 10,876 10,741
Retained earnings (deficit)............................................................... (334) 18
LESOP guarantee........................................................................... (46) (91)
Foreign currency translation adjustments.................................................. (95) (39)
--------- ---------
Total shareowners' equity................................................................... 11,324 11,549
--------- ---------
Total liabilities and shareowners' equity................................................... $ 39,740 $ 40,855
--------- ---------
--------- ---------
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-8
<PAGE>

U S WEST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 697 $ 1,178 $ 1,317
Adjustments to net income:
Depreciation and amortization................................................. 3,420 2,544 2,291
Equity losses in unconsolidated ventures...................................... 909 346 207
Gains on asset sales:
Rural telephone exchanges................................................... (77) (59) (136)
Merger of joint venture interest............................................ -- -- (157)
Investments................................................................. (474) -- --
Cumulative effect of change in accounting principle........................... -- (34) --
Deferred income taxes and amortization of investment tax credits.............. (164) 18 274
Changes in operating assets and liabilities:
Restructuring payments........................................................ (70) (242) (334)
Postretirement medical and life costs, net of cash fundings................... 90 39 (24)
Accounts and notes receivable................................................. (138) (56) (169)
Inventories, supplies and other current assets................................ (104) 31 (79)
Accounts payable and accrued liabilities...................................... 782 225 45
Other--net...................................................................... 295 40 185
--------- --------- ---------
Cash provided by operating activities........................................... 5,166 4,030 3,420
--------- --------- ---------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment.................................. (3,690) (3,071) (2,825)
Payment to Continental Cablevision shareowners.................................. (1,150) -- --
Investments in international ventures........................................... (325) (243) (681)
Proceeds from sales of investments.............................................. 1,883 -- --
Proceeds from disposals of property, plant and equipment........................ 98 189 201
Cash from net investment in assets held for sale................................ 231 213 --
Other--net...................................................................... (347) (136) (201)
--------- --------- ---------
Cash (used for) investing activities............................................ (3,300) (3,048) (3,506)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt............................... (4,195) 3,987 (1,281)
Repayments of long-term debt.................................................... (824) (4,699) (1,058)
Proceeds from issuance of Preferred Securities--net............................. -- 465 581
Proceeds from issuance of long-term debt........................................ 4,152 383 2,732
Proceeds from issuance of common stock.......................................... 106 136 87
Purchases of treasury stock..................................................... (53) (297) (63)
Dividends paid on common and preferred stock.................................... (1,042) (948) (929)
--------- --------- ---------
Cash (used for) provided by financing activities................................ (1,856) (973) 69
--------- --------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease)............................................................. 10 9 (17)
Beginning balance............................................................... 201 192 209
--------- --------- ---------
Ending balance.................................................................. $ 211 $ 201 $ 192
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-9
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 1: RECAPITALIZATION PLAN

In 1995, U S WEST, Inc., ("U S WEST" or the "Company") divided its
businesses into two groups: U S WEST Communications Group (the "Communications
Group") and U S WEST Media Group (the "Media Group") and created two separate
classes of common stock under a recapitalization plan (the "Recapitalization
Plan"). One class of stock, U S WEST Communications Group Common Stock (the
"Communications Stock"), reflects the performance of the communications
businesses comprising the Communications Group, and the other class of stock, U
S WEST Media Group Common Stock (the "Media Stock"), reflects the performance of
the multimedia businesses comprising the Media Group. Effective November 1,
1995, each share of common stock of U S WEST was converted into one share each
of Communications Stock and Media Stock.

The Communications Group is comprised of U S WEST Communications, Inc. ("U S
WEST Communications"), U S WEST Communications Services, Inc., U S WEST Federal
Services, Inc., U S WEST Advanced Technologies, Inc., U S WEST Business
Resources, Inc., U S WEST Long Distance, Inc. and U S WEST Information
Technologies, Inc. Primary services provided include telecommunications services
for more than 25 million residential and business customers in the
Communications Group's 14 state region (the "Region"). The Region includes the
states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New
Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.
Primary telecommunications services offered include local telephone services,
exchange access services (which connect customers to the facilities of carriers,
including long-distance providers and wireless operators), and long-distance
services within Local Access and Transport Areas ("LATAs") in the Region. Other
products and services include wireless personal communications services ("PCS"),
high-speed data and Internet access services, and certain other communications
equipment sales and services for business customers and governmental agencies.

Media Group is the third largest cable operator in the United States,
organized into six operating regions including large clusters in Atlanta,
Georgia, Eastern Massachusetts, Southern California, Southern Florida, Detroit,
Michigan, and Minneapolis/St. Paul, Minnesota. Media Group is comprised of
MediaOne of Delaware, Inc ("MediaOne Delaware", formerly Continental
Cablevision, Inc., "Continental"); U S WEST Multimedia Communications, Inc.,
which owns an investment in Time Warner Entertainment Company, L.P., ("TWE" or
"Time Warner Entertainment"); U S WEST Dex, Inc. ("Dex"), which publishes White
and Yellow Pages telephone directories and provides directory and information
services; U S WEST NewVector Group, Inc., which provides communications and
information products and services over wireless networks; and U S WEST
International Holdings, Inc., which primarily owns investments in international
cable and broadband, wireless communications and directory publishing
operations.

NOTE 2: U S WEST SEPARATION

On October 25, 1997, the Board of Directors of U S WEST (the "Board")
adopted a proposal to separate U S WEST into two independent companies (the
"Separation"). As a result of the Separation, the Communications Group will
become an independent public company and will be renamed "U S WEST, Inc." ("New
U S WEST"). In addition, the Media Group's directory business known as Dex will
be aligned with New U S WEST (the "Dex Alignment"). The assets of New U S WEST
will be accounted for at the historical values at which they were carried by U S
WEST prior to the Separation. Following the Separation, U S WEST will continue
as an independent public company comprised of the

F-10
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: U S WEST SEPARATION (CONTINUED)

current businesses of Media Group other than Dex and will be renamed "MediaOne
Group, Inc." ("MediaOne").

The Separation will be implemented pursuant to the terms of a separation
agreement between U S WEST and New U S WEST (the "Separation Agreement"). Under
the Separation Agreement, 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, and 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.

In connection with the Dex Alignment, (i) U S WEST will distribute, as a
dividend, an aggregate of $850 in value of New U S WEST Common Stock to holders
of Media Stock (the "Dex Dividend") and (ii) $3.9 billion of U S WEST debt,
currently allocated to Media Group, will be refinanced by New U S WEST (the "Dex
Indebtedness").

The transaction is subject to a number of approvals, including approvals by
regulators and both shareowner groups, and receipt of a favorable ruling from
the Internal Revenue Service ("IRS"). The Separation is expected to be complete
sometime after mid-1998.

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 as of which U S WEST stockholder
approval, all necessary regulatory approvals and a favorable IRS ruling are
obtained. 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. Based on the number of shares of
Communications Stock outstanding and market price as of February 20, 1998, the
gain (net of Separation costs) is estimated at approximately $25.2 billion. The
Company will incur total Separation costs during 1998 of approximately $150,
which includes severance, financial advisory, legal, registration fee, printing
and mailing costs. Separation costs also include a one-time payment to terminate
the sale of the Media Group cable systems in Minnesota.

In connection with the Separation, U S WEST's existing employee benefit and
incentive compensation plans will be amended and adjusted. In addition, New U S
WEST and MediaOne will enter into a series of agreements governing the
allocation of tax and certain other liabilities and obligations arising from
periods prior to the Separation. The effects of such items will be included in
the financial statements upon effectiveness of the Separation. Following is a
summary of the more significant items:

- STOCK INCENTIVE PLANS. Stock options, 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 and New U S WEST Common
Stock following the Separation. In the case of MediaOne, 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.

F-11
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: U S WEST SEPARATION (CONTINUED)

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 has approximately $12
billion of assets. Subject to final adjustments, it is anticipated that
the MediaOne Pension Plan will receive between approximately $190 and $240
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 MediaOne to the MediaOne
Pension Plan after the Separation will be substantially the same as the
benefit expense and required cash contributions of the Media Group to the
U S WEST Pension Plan prior to the Separation.

- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. 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 postretirement benefit obligations basis. It is
anticipated that approximately $5 and $3, respectively, will be
transferred by the U S WEST trusts to the MediaOne trusts out of the total
assets of $225 and $600, respectively, of the U S WEST trusts.

- TAX SHARING AGREEMENT. U S WEST and New U S WEST will enter into a 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. 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. 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, 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.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. The Consolidated Financial Statements include the
accounts of U S WEST and its majority-owned subsidiaries, except for the capital
assets segment, which is held for sale. All significant intercompany amounts and
transactions have been eliminated. Investments in less than majority-owned
ventures are generally accounted for using the equity method.

Certain reclassifications within the Consolidated Financial Statements have
been made to conform to the current year presentation.

INDUSTRY SEGMENTS. The Communications Group operates in one industry
segment (communications and related services) and the Media Group operates in
four industry segments (cable and broadband, wireless communications, directory
and information services, and capital assets, which is held for sale) as

F-12
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

defined in Statement of Financial Accounting Standards ("SFAS") No. 14,
"Financial Reporting for Segments of a Business Enterprise."

USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH AND CASH EQUIVALENTS. Cash and cash equivalents include highly liquid
investments with original maturities of three months or less that are readily
convertible into cash and are not subject to significant risk from fluctuations
in interest rates.

INVENTORIES AND SUPPLIES. New and reusable materials of U S WEST
Communications are carried at average cost, except for significant individual
items that are valued based on specific costs. Nonreusable material is carried
at its estimated salvage value. Inventories of all other U S WEST subsidiaries
are carried at the lower of cost or market on a first-in, first-out basis.

PROPERTY, PLANT AND EQUIPMENT. The investment in property, plant and
equipment is carried at cost less accumulated depreciation. Additions,
replacements and substantial betterments are capitalized. Costs for normal
repair and maintenance of property, plant and equipment are expensed as
incurred.

U S WEST Communications and in certain cases, MediaOne Delaware, provide for
depreciation of property, plant and equipment using various straight-line group
methods and remaining useful (economic) lives based on industry-wide studies.
When the depreciable property, plant and equipment of U S WEST Communications
and MediaOne Delaware is retired or sold, the original cost less the net salvage
value is generally charged to accumulated depreciation. The remaining assets are
depreciated using the straight-line method. When such depreciable property,
plant and equipment is retired or sold, the resulting gain or loss is included
in income.

Communications Group average depreciable lives for major categories of
property, plant and equipment follow:

<TABLE>
<CAPTION>
AVERAGE LIFE
CATEGORY (YEARS)
- -------------------------------------------------------------------------- -------------------
<S> <C>
General purpose computers................................................. 6
Digital switching and circuit equipment................................... 10
Aerial and underground copper cable....................................... 15
Buried copper and fiber cable............................................. 20
Buildings................................................................. 27-49
</TABLE>

Media Group depreciates buildings between 10 to 40 years, cable distribution
systems between 3 to 15 years, cellular systems between 5 to 15 years, and
general purpose computers and other between 3 to 20 years.

Depreciation expense was $2,890, $2,411 and $2,215 in 1997, 1996 and 1995,
respectively.

Interest related to qualifying construction projects, including construction
projects of equity method investees, is capitalized and reflected as a reduction
of interest expense. Amounts capitalized were $56, $67 and $72 in 1997, 1996 and
1995, respectively.

F-13
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPUTER SOFTWARE. Communications Group capitalizes and amortizes initial
operating systems software over the life of the related hardware. Also, initial
network applications software costs are capitalized and amortized over three
years. All other computer software costs, whether purchased or developed
internally, are expensed. MediaOne Delaware capitalizes computer software,
whether purchased or developed internally. Capitalized software costs are
amortized over five years. All other Media Group computer software costs,
whether purchased or developed internally, are expensed.

Capitalized computer software of $157 and $223 at December 31, 1997 and
1996, respectively, is recorded in property, plant and equipment. The Company
amortized capitalized computer software costs of $87, $83 and $70 in 1997, 1996
and 1995, respectively.

INTANGIBLE ASSETS. Intangible assets are recorded when the cost of acquired
companies exceeds the fair value of their tangible assets. The costs of
identified intangible assets and goodwill are amortized by the straight-line
method over periods ranging from 5 to 40 years. These assets are evaluated for
impairment, with other related assets, using the methodology as prescribed by
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."

INVESTMENTS IN DEBT AND EQUITY SECURITIES. Debt and equity securities are
classified as available for sale and are carried at fair market value with
unrealized gains and losses included in equity.

FOREIGN CURRENCY TRANSLATION. Assets and liabilities of international
subsidiaries and investments are translated at year-end exchange rates, and
income statement items are translated at average exchange rates for the year.
Resulting translation adjustments are recorded as a separate component of
equity. Gains and losses resulting from foreign currency transactions are
included in income.

FINANCIAL INSTRUMENTS. Synthetic instrument accounting is used for interest
rate swaps and foreign currency swaps if the index, maturity, and amount of the
instrument match the terms of the underlying debt. Net interest accrued is
recognized over the life of the instruments as an adjustment to interest expense
and is a component of cash provided by operating activities. Any gain or loss on
the termination of an instrument that qualifies for synthetic instrument
accounting would be deferred and amortized over the remaining life of the
original instrument.

Hedge accounting is used for foreign currency forward and option contracts
which qualify for and are designated as hedges of firm equity investment
commitments and for forward and option contracts which qualify as hedges of
future debt issues or investments in equity securities. To qualify for hedge
accounting, the contracts must have a high inverse correlation to the exposure
being hedged, and reduce the risk or volatility associated with changes in
foreign exchange rates, interest rates or equity prices. Qualified foreign
exchange contracts and equity contracts are carried at market value with gains
and losses recorded in equity until sale of the investment. Qualified interest
rate contracts are associated with the related debt and amortized as yield
adjustments. Any gain or loss on the termination of a contract that qualifies
for hedge accounting would be deferred and accounted for with the underlying
transaction being hedged.

Market value accounting is used for derivative contracts which do not
qualify for synthetic instrument or hedge accounting. Market value accounting is
also used for foreign exchange contracts designated as hedges of foreign
denominated receivables and payables. These contracts are carried at market
value in other assets or liabilities with gains and losses recorded as other
income (expense). U S WEST does not use derivative financial instruments for
trading purposes.

F-14
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK OPTIONS. The Company accounts for its stock incentive plans in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." Effective January 1, 1996, U S WEST adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." See Note 17--Stock Incentive Plans--to the Consolidated Financial
Statements.

REVENUE RECOGNITION AND DEFERRED DIRECTORY COSTS. Local telephone,
wireless, cellular and cable television services are generally billed monthly in
advance, and revenues are recognized the following month when services are
provided. Revenues derived from other cable television services, including pay-
per-view and advertising, other telephone services, including exchange access
and long-distance, and wireless airtime usage are billed and recognized monthly
as services are provided.

Directory advertising revenues and related directory costs of selling,
composition, printing and distribution are generally deferred and recognized
over the period during which directories are used, normally 12 months.

ADVERTISING COSTS. Costs related to advertising are expensed as incurred.
Advertising expense was $421, $190 and $135 in 1997, 1996 and 1995,
respectively.

INCOME TAXES. The provision for income taxes consists of an amount for
taxes currently payable and an amount for tax consequences deferred to future
periods. For financial statement purposes, investment tax credits of U S WEST
Communications are being amortized over the economic lives of the related
property, plant and equipment in accordance with the deferred method of
accounting for such credits.

EARNINGS PER COMMON SHARE. 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, among other things, requires presentation of basic
and diluted earnings per common share on the face of the income statement. See
Note 16--Earnings Per Share--to the Consolidated Financial Statements. Unless
otherwise indicated, all per share amounts in the notes to the Consolidated
Financial Statements are computed on basic weighted average shares outstanding.

For 1995, earnings per share for Communications Stock and Media Stock 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
recapitalization, the average common shares outstanding are assumed to be equal
to the average common shares outstanding for U S WEST.

NEW ACCOUNTING STANDARDS. 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.

F-15
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. The Company is currently
evaluating the impact of SOP 98-1 and believes that it could initially have a
significant impact upon results of operations.

NOTE 4: CONTINENTAL ACQUISITION

On November 15, 1996, U S WEST acquired Continental Cablevision, Inc. (the
"Continental Acquisition" or the "Acquisition"), the third largest cable
operator in the United States. The aggregate consideration paid by U S WEST to
shareowners of Continental consisted of 150,615,000 shares of Media Stock valued
at $2.59 billion, 20,000,000 shares of U S WEST Series D Preferred Stock with a
market value of $920 and $1.15 billion in cash. In connection with the
Acquisition, U S WEST also assumed all of Continental's outstanding indebtedness
and other liabilities as of November 15, 1996, which approximated $7.1 billion
for a total purchase price of $11.8 billion.

The Acquisition was accounted for by the purchase method of accounting.
Accordingly, the purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair values. Because Continental
was acquired late in 1996 and is a large and complex operation, a comprehensive
appraisal of asset values and liabilities was not completed until 1997. The
determination of the final fair value resulted in an increase to intangibles and
a decrease to property, plant and equipment. The $8.7 billion excess of purchase
price over net tangible assets acquired and goodwill related to a deferred
income tax liability of $3.0 billion are being amortized over 25 years.
Intangible amortization related to Continental's equity method investments is
recorded as a component of equity losses in unconsolidated ventures. The
intangible assets acquired consist principally of the cable television
franchises of Continental and goodwill. Continental's results of operations have
been included in the consolidated results of operations since the Acquisition
date.

Following are summarized, combined, unaudited pro forma results of
operations for U S WEST for the years ended December 31, 1996 and 1995. Amounts
are before non-recurring items directly attributable to the Acquisition and
assume that the Acquisition occurred as of the beginning of the respective
periods:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
SUMMARIZED RESULTS OF OPERATIONS 1996 1995
- ---------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Revenues.................................................................... $ 14,618 $ 13,528
Income before extraordinary item and cumulative effect of change in
accounting principle....................................................... 702 835
Net income.................................................................. 736 823

Media Group basic and diluted loss per common share*........................ (0.90) (0.64)
</TABLE>

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

* Before extraordinary item.

In May 1997, pursuant to a Federal Communications Commission ("FCC") order,
U S WEST entered into an agreement to sell its cable systems in Minnesota for
proceeds of $600. Under the terms of the agreement, Media Group had the right to
terminate the agreement at any time upon payment of a $30 termination fee. As a
result of the Separation, Media Group will no longer be prohibited by federal
law from owning the Minnesota cable systems. In February 1998, in response to U
S WEST's petition, the FCC granted to U S WEST a waiver which would permit Media
Group to retain the Minnesota cable

F-16
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: CONTINENTAL ACQUISITION (CONTINUED)

systems so long as the Separation is consummated by July 31, 1998. On February
26, 1998, Media Group terminated the agreement to sell the Minnesota cable
systems.

Media Group owns a 10.4 percent interest in PrimeStar Partners, L.P.
("PrimeStar"), a nationwide provider of direct broadcast satellite ("DBS")
services. Each of the partners of PrimeStar, including Media Group, have entered
into an agreement whereby each partner's DBS customers and certain related
assets will be contributed to PrimeStar, Inc., which will be a newly formed
company. In exchange, Media Group will receive a combination of cash and stock
in PrimeStar, Inc. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
Media Group has stopped depreciation and amortization related to these assets.
The transaction is subject to various approvals and is expected to close in
1998.

NOTE 5: INDUSTRY SEGMENTS

The businesses comprising the Communications Group operate in a single
industry segment-- communications and related services. Approximately 97 percent
of the revenues of the Communications Group 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 Media Group operates in four industry segments: cable and broadband,
wireless communications, directory and information services, and capital assets,
which is held for sale. The cable and broadband segment consists of cable
television properties serving 4.9 million domestic subscribers and passing 8.4
million domestic homes. The wireless communications segment provides information
products and services over wireless networks in 12 western and midwestern
states. The directory and information services segment publishes White and
Yellow Pages telephone directories, and provides database marketing and
interactive services in domestic markets. Yellow Pages advertising generates
approximately 95 percent of the revenue of the directory and information
services segment.

On June 4, 1997, U S WEST sold Thomson Directories, its directory operation
in the United Kingdom, for proceeds of $121. On October 1, 1997, U S WEST sold U
S WEST Polska, its directory operation in Poland, for proceeds of $30, and a
pretax gain of $29. These sales have resulted in the disposition of U S WEST's
wholly owned international directory operations.

F-17
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: INDUSTRY SEGMENTS (CONTINUED)

Industry segment financial information follows:

<TABLE>
<CAPTION>
COMMUNI-
CATIONS AND CABLE AND WIRELESS DIRECTORY AND CORPORATE INTER-
RELATED BROAD- COMMUNI- INFORMATION AND SEGMENT
SERVICES BAND(1) CATIONS(2) SERVICES(3) OTHER ELIMINATIONS
----------- ----------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1997
Sales and other revenues........ $ 10,319 $ 2,341 $ 1,428 $ 1,245 $ 29 $ (127)
Operating income (loss)......... 2,210 (126) 340 537 (155) --
Identifiable assets............. 17,246 18,687 2,370 606 951 (120)
Depreciation and amortization... 2,126 1,050 182 45 17 --
Capital expenditures............ 2,643 1,232 258 31 10 --

1996
Sales and other revenues........ 10,079 494 1,183 1,259 19 (123)
Operating income (loss)......... 2,340 (20) 240 454 (159) --
Identifiable assets............. 16,915 20,146 2,371 716 828 (121)
Depreciation and amortization... 2,122 212 150 48 12 --
Capital expenditures............ 2,806 353 266 36 13 --

1995
Sales and other revenues........ 9,484 215 941 1,180 38 (112)
Operating income (loss)......... 2,178 23 147 398 (101) --
Identifiable assets............. 16,585 5,163 2,000 614 838 (129)
Depreciation and amortization... 2,042 77 121 36 15 --
Capital expenditures............ 2,739 64 277 37 23 --

CONSOLIDATED
-------------
<S> <C>
1997
Sales and other revenues........ $ 15,235
Operating income (loss)......... 2,806
Identifiable assets............. 39,740
Depreciation and amortization... 3,420
Capital expenditures............ 4,174
1996
Sales and other revenues........ 12,911
Operating income (loss)......... 2,855
Identifiable assets............. 40,855
Depreciation and amortization... 2,544
Capital expenditures............ 3,474
1995
Sales and other revenues........ 11,746
Operating income (loss)......... 2,645
Identifiable assets............. 25,071
Depreciation and amortization... 2,291
Capital expenditures............ 3,140
</TABLE>

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

(1) Includes results for Continental since the date of Acquisition. Includes
revenues of $18 and $6, operating losses of $15 and $7, and identifiable
assets of $103 and $122 associated with cable operations in the Czech
Republic for 1997 and 1996, respectively.

(2) Includes operating losses from wireless communication operations in Russia
of $(13) and $(3), and identifiable assets of $105 and $121 in 1997 and
1996, respectively.

(3) Includes revenues from directory publishing activities in the United Kingdom
and Poland of $48, $139 and $122, and operating income (loss) of $(11), $2,
and $(1) for 1997, 1996 and 1995, respectively, and identifiable assets of
$154 and $133 in 1996 and 1995, respectively.

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

Certain costs relating to U S WEST's general and administrative services,
including executive management, legal, tax, accounting and auditing, treasury,
strategic planning and public policy services, are directly assigned by U S WEST
to the Communications Group (the communications and related services segment)
and the Media Group (the cable and broadband, wireless communications, and
directory and information services segments). U S WEST costs are directly
assigned based on actual utilization or are allocated based on operating
expenses, number of employees, external revenues, average capital and/or average
equity.

Corporate and other operating losses include such U S WEST costs related to
services provided by U S WEST to the Media Group. Also included are Media Group
costs related to managing its international operations. Corporate and other
operating losses increased in 1996 primarily as a result of a change in cost
allocation policy.

Identifiable assets are those assets and investments that are used in, or
pertain to, each segment's operations. Corporate and other assets consist
primarily of cash, debt and equity securities, the net investment in assets held
for sale and other corporate assets.

F-18
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: INDUSTRY SEGMENTS (CONTINUED)

SIGNIFICANT CONCENTRATIONS. The largest volume of the Communications
Group's services are provided to AT&T. During 1997, 1996 and 1995, revenues from
services provided to AT&T were $1,049, $1,046 and $1,085, respectively. Related
accounts receivable at December 31, 1997 and 1996, totaled $80 and $89,
respectively. As of December 31, 1997, the Communications Group is not aware of
any other significant concentration of business transacted with a particular
customer or supplier that could, if suddenly eliminated, severely impact
operations.

The domestic cellular business utilizes Motorola as its primary vendor for
cellular infrastructure equipment and cellular mobile telephone equipment and
accessories. In addition, Motorola provides ongoing technological support for
the infrastructure equipment. As a result, the wireless segment receives
significant discounts on the purchase of cellular equipment from Motorola. The
infrastructure of approximately 75 percent of the Media Group's cellular markets
are comprised of Motorola equipment.

At December 31, 1997, approximately 69 percent of the communications and
related services segment employees and 64 percent of the directory and
information services segment employees are represented by unions. The Company's
principle collective bargaining agreements expire in May, August and October
1998. Negotiations with respect to future collective bargaining agreements are
underway.

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT

On September 15, 1993, U S WEST acquired 25.51 percent pro-rata priority
capital and residual equity interests ("equity interests") in Time Warner
Entertainment for an aggregate purchase price of $2.553 billion. TWE owns and
operates substantially all of the entertainment assets previously owned by Time
Warner, Inc. ("Time Warner"), consisting primarily of its filmed entertainment,
programming-HBO and cable television businesses.

U S WEST has an option to increase its pro-rata priority capital and
residual equity interests in TWE from 25.51 percent up to 31.84 percent
depending upon cable operating performance. The option is exercisable, in whole
or part, between January 1, 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 TWE or U S WEST may elect that the exercise price for
the option be paid with partnership interests rather than cash.

Pursuant to the TWE Partnership Agreement, there are four levels of capital.
From the most to least senior, the capital accounts are: senior preferred (held
by the general partners); A preferred priority capital (held pro rata by the
general and limited partners); B preferred priority capital (held by the general
partners); and residual equity capital (held pro rata by the general and limited
partners). Of the $2.553 billion contributed by U S WEST, $1.658 billion
represents A preferred priority capital and $895 represents residual equity
capital. The TWE Partnership Agreement provides for special allocations of
income and distributions of partnership capital. Partnership income, to the
extent earned, is allocated as follows: (1) to the partners so that the economic
burden of the income tax consequences of partnership operations is borne as
though the partnership was taxed as a corporation ("special tax allocations");
(2) to the partners' preferred capital accounts in order of priority described
above, at various rates of return ranging from 8 percent to 13.25 percent; and
(3) to the partners' residual equity capital accounts according to their
residual partnership interests. To the extent partnership income is insufficient
to satisfy all special allocations in a particular accounting period, the
unearned portion is carried over until satisfied out of future partnership
income. Partnership losses generally are allocated in reverse order, first to
eliminate prior allocations of partnership income, except senior preferred and
special tax income, next to reduce

F-19
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)

initial capital amounts, other than senior preferred, then to reduce the senior
preferred account and finally, to eliminate special tax allocations.

A summary of the contributed capital and priority capital rates of return
follows:

<TABLE>
<CAPTION>
PRIORITY
CAPITAL RATES LIMITED PARTNERS
OF RETURN(D) TIME (OWNERSHIP %)
UNDISTRIBUTED CUMULATIVE (% PER ANNUM WARNER --------------------
CONTRIBUTED PRIORITY COMPOUNDED GENERAL TIME U S
PRIORITY OF CONTRIBUTED CAPITAL CAPITAL(A) CAPITAL(B) QUARTERLY) PARTNERS WARNER WEST
- ------------------------------------- ------------- ----------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Senior preferred..................... $ 900 $ 1,100(c) 8.00% 100.00% -- --
A preferred priority capital......... 5,600 11,300 13.00% 63.27% 11.22% 25.51%
B preferred priority capital......... 2,900 6,000 13.25% 100.00% -- --
Residual equity capital.............. 3,300 3,300 -- 63.27% 11.22% 25.51%
</TABLE>

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

(a) Based on estimated fair value, upon formation of TWE, of net assets
contributed, excluding partnership income or loss allocated thereto.

(b) Cumulative priority capital is not necessarily indicative of the fair value
of the underlying priority capital interests.

(d) To the extent income allocations are concurrently distributed, the priority
capital rates of return on the A preferred capital and the B preferred
capital are 11% and 11.25%, respectively.

Cash distributions are required to be made to the partners to permit them to
pay income taxes at statutory rates based on their allocable taxable income from
TWE ("Tax Distributions"). The aggregate amount of such Tax Distributions is
computed generally by reference to the taxes that TWE would have been required
to pay if it were a corporation. Tax Distributions are paid to the partners on a
current basis. For distributions other than those related to taxes or the senior
preferred, the TWE Partnership Agreement requires certain cash distribution
thresholds be met to the limited partners before the general partners receive
their full share of distributions. No cash distributions have been made to U S
WEST.

Through the TWE management committee, U S WEST and Time Warner jointly
direct the businesses and affairs of TWE 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
Time Warner. 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.

U S WEST accounts for its investment in TWE under the equity method of
accounting. The excess of fair market value over the book value of total
partnership net assets implied by U S WEST's initial investment was $5.7
billion. This excess is being amortized on a straight-line basis over 25 years.
U S WEST's recorded share of TWE operating results represents allocated TWE net
income or loss adjusted for the amortization of the excess of fair market value
over the book value of the partnership net assets. As a result of this
amortization and the special income allocations described above, U S WEST's
recorded pretax share of TWE operating results before extraordinary item was
$11, $(4) and $(31) in 1997, 1996 and 1995, respectively. In addition, TWE
recorded an extraordinary loss for the early extinguishment of debt in 1995. U S
WEST's share of this extraordinary loss was $4, net of income tax benefits of
$2.

F-20
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)

As consideration for its expertise and participation in the cable operations
of TWE, U S WEST earns a management fee of $130 over five years, which is
payable over a four-year period beginning in 1995. Management fees of $26 were
recorded to other income in each of 1997, 1996 and 1995. The Consolidated
Balance Sheets include management fee receivables of $42 and $56 at December 31,
1997 and 1996, respectively. In addition, Media Group purchases cable television
programming from TWE at market prices. These services totaled $110, $23 and $10
in 1997, 1996 and 1995, respectively.

Summarized financial information for TWE is presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
SUMMARIZED OPERATING RESULTS 1997 1996 1995
- ---------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Revenues.......................................................................... $ 11,318 $ 10,852 $ 9,517
Operating expenses(1, 2).......................................................... 9,874 9,774 8,557
Interest and other expense, net(3, 4)............................................. 722 798 777
Income before income taxes and extraordinary item................................. 722 280 183
Income before extraordinary item.................................................. 637 210 97
Net income........................................................................ 614 210 73
</TABLE>

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

(1) Includes depreciation and amortization of $1,370, $1,235, and $1,039 in
1997, 1996 and 1995, respectively.

(2) 1997 operating expenses are reflected net of approximately $200 of net gains
related to the sale or exchange of certain cable television systems.

(3) Includes corporate services of $72, $69 and $64 in 1997, 1996 and 1995,
respectively, and minority interest of $305, $207 and $133 in 1997, 1996 and
1995, respectively.

(4) 1997 interest and other expense includes a gain of approximately $250
related to the sale of TWE's interest in E! Entertainment Television, Inc.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
SUMMARIZED FINANCIAL POSITION 1997 1996
- -------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Current assets(5)........................................................................... $ 3,622 $ 3,146
Noncurrent assets(6)........................................................................ 17,109 16,827
Current liabilities......................................................................... 3,974 4,075
Noncurrent liabilities, including minority interest......................................... 9,306 7,781
Senior preferred capital.................................................................... 1,118 1,543
Partners' capital(7)........................................................................ 6,333 6,574
</TABLE>

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

(5) Includes cash of $322 and $216 at December 31, 1997 and 1996, respectively.

(6) Includes a loan receivable from Time Warner of $400 at December 31, 1997 and
1996.

(7) Contributed capital is based on the estimated fair value of the net assets
that each partner contributed to the partnership. The aggregate of such
amounts is significantly higher than TWE's partners' capital as reflected in
this Summarized Financial Position, which is based on the historical cost of
the contributed net assets.

F-21
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES

U S WEST's equity method investments in international ventures follow:

<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP DECEMBER
31,
--------------------
VENTURE 1997 1996
- ------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
CABLE AND BROADBAND
Telewest Communications, United Kingdom....................................... 26.8 26.8
Binariang SDN BHD, Malaysia................................................... 19.0(1) 20.0
A2000 (KTA), Netherlands...................................................... 50.0 50.0
Fintelco, S.A., Argentina..................................................... -- 50.0
Telenet Flanders, Belgium..................................................... 25.0(1) 28.0
Aria WEST, Indonesia.......................................................... 35.0 35.0
Singapore Cablevision, Singapore.............................................. 25.0 25.0
Titus Communications Corp., Japan............................................. 25.0 25.0
Chofu Cable Television, Japan................................................. 19.1 19.1

WIRELESS
One 2 One, United Kingdom..................................................... 50.0 50.0
Delta Telecommunications, Russia(2)........................................... 42.5 42.5
Moscow Cellular Communications, Russia(2)..................................... 22.0 22.0
Westel Radiotelefon, Hungary.................................................. 49.0 49.0
Westel 900 GSM Mobile Telecommunications, Hungary............................. 46.6 46.6
Eurotel Praha, Czech Republic................................................. 24.5 24.5
Eurotel Bratislava, Slovak Republic........................................... 24.5 24.5
Polska Telefonia Cyfrowa, Poland.............................................. 22.5 22.5
U S WEST BPL Cellular Telecommunications, India............................... 49.0 49.0

DIRECTORY
Listel, Brazil................................................................ 50.0 50.0
</TABLE>

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

(1) Decrease in ownership reflects venture equity issuances in 1997.

(2) Investments are held by Russian Telecommunications Development
Corporation owned 66.5 percent by U S WEST.

At December 31, 1997 and 1996, the difference between the carrying amount
and U S WEST's interest in the underlying equity of the international ventures
was approximately $162 and $365, respectively. This difference has been
allocated primarily to licenses and is being amortized over lives ranging from 5
to 20 years.

During late 1997, the value of Asian currencies as compared with the U. S.
dollar declined significantly, particularly in Indonesia. These declines,
coupled with political uncertainties led to a fourth-quarter 1997 pretax charge
of $200.

F-22
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)

The following table shows summarized combined financial information for U S
WEST's investments in international ventures, accounted for on the equity
method:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
COMBINED RESULTS OF OPERATIONS 1997 1996 1995
- -------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Revenues............................................................ $ 3,353 $ 1,869 $ 1,163
Operating losses.................................................... (601) (540) (373)
Net loss............................................................ (1,696) (857) (514)
</TABLE>

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

Note: Combined Results of Operations for Continental ventures have been
included since the date of Acquisition.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
COMBINED FINANCIAL POSITION 1997 1996
- ------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Current assets................................................................. $ 1,140 $ 1,126
Property, plant and equipment--net............................................. 6,625 5,105
Other assets................................................................... 1,610 2,226
--------- ---------
Total assets................................................................... $ 9,375 $ 8,457
--------- ---------
--------- ---------
Current liabilities............................................................ $ 1,570 $ 1,275
Long-term debt................................................................. 5,527 3,880
Other liabilities.............................................................. 389 478
Equity......................................................................... 1,889 2,824
--------- ---------
Total liabilities and equity................................................... $ 9,375 $ 8,457
--------- ---------
--------- ---------
</TABLE>

During the first quarter of 1997, U S WEST sold its five percent interest in
a French wireless venture for proceeds of $81. U S WEST recognized a gain of
$31, net of income tax expenses of $20.

On October 27, 1997, U S WEST sold its 90 percent interest in Fintelco, S.A.
("Fintelco"), a cable and telecommunications venture located in Argentina, for
proceeds of $641. U S WEST acquired a 50 percent interest in Fintelco in
connection with the Continental Acquisition and then acquired an additional 40
percent interest in August 1997, to bring its total interest in Fintelco to 90
percent. U S WEST recognized a gain on the sale of $80, net of income tax
expenses of $55.

On October 2, 1995, Telewest and SBC CableComms (UK) completed a merger of
their UK cable television and telecommunications interests, creating the largest
provider of combined cable and broadband services in the United Kingdom. U S
WEST recognized a gain of $95, net of $62 in deferred income taxes, in
conjunction with the merger.

Telewest, which is the only equity method investment of U S WEST for which a
quoted market price is available, had a market value of $464 and $786 at
December 31, 1997 and 1996, respectively.

FOREIGN CURRENCY TRANSACTIONS. 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. All
foreign exchange contracts have maturities of one year or less. The

F-23
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)

use of such contracts was limited in 1997 and 1996. As of December 31, 1997, the
market value of foreign exchange contracts outstanding was not material and
there were none outstanding at December 31, 1996.

Forward contracts were selectively used to hedge foreign denominated
proceeds from the sale of foreign investments and foreign denominated
receivables during 1997 and 1996. Foreign currency pretax hedging gains of $5
and pretax hedging losses of $24 were included in earnings in the years ended
December 31, 1997 and 1996, respectively.

The counterparties to these contracts are major financial institutions. U S
WEST is exposed to credit loss in the event of nonperformance by these
counterparties. The Company does not have significant exposure to an individual
counterparty and does not anticipate nonperformance by any counterparty.

Foreign currency transaction pretax losses of $40 and pretax gains of $27
were included in earnings in the years ended December 31, 1997 and 1996,
respectively.

NOTE 8: PROPERTY, PLANT AND EQUIPMENT

The composition of property, plant and equipment follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Land and buildings...................................................... $ 2,764 $ 2,722
Telecommunications network equipment.................................... 13,513 12,925
Telecommunications outside plant........................................ 13,802 13,148
Cable distribution systems.............................................. 2,787 2,640
Cellular systems........................................................ 1,124 897
General purpose computers and other..................................... 4,137 4,414
Construction in progress................................................ 1,096 1,010
--------- ---------
39,223 37,756
Less accumulated depreciation........................................... 20,643 19,475
--------- ---------
Property, plant and equipment--net...................................... $ 18,580 $ 18,281
--------- ---------
--------- ---------
</TABLE>

Property, plant and equipment balances at December 31, 1997 include the
results of a comprehensive appraisal conducted on the Continental properties. As
compared with estimated amounts recorded at December 31, 1996, cable
distribution systems decreased approximately $630.

In 1997, U S WEST Communications sold certain rural telephone exchanges with
a cost basis of $160. Consideration received for the sales was $237, including
$67 in cash. In 1996 and 1995, U S WEST Communications sold certain rural
telephone exchanges with a cost basis of $243 and $258, respectively, and
received consideration of $306 (including $174 in cash) during 1996, and $388
(including $214 in cash) during 1995.

Effective January 1, 1996, U S WEST adopted SFAS No. 121. SFAS No. 121
requires that long-lived assets and associated intangibles be written down to
fair value whenever an impairment review indicates that the carrying value
cannot be recovered on an undiscounted cash flow basis. SFAS No. 121 also
requires that a company no longer record depreciation expense on assets held for
sale. Adoption of SFAS No. 121 resulted in income of $34 (net of income tax
expense of $22) in 1996 from the cumulative effect of reversing depreciation
expense recorded in prior years related to rural telephone exchanges held for
sale.

F-24
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Depreciation expense was reversed from the date U S WEST formally committed to a
plan to dispose of the rural telephone exchange assets to January 1, 1996. The
income was recorded as a cumulative effect of change in accounting principle in
accordance with SFAS No. 121. As a result of adopting SFAS No. 121, depreciation
expense for 1996 was reduced by $24.

NOTE 9: INTANGIBLE ASSETS

The composition of intangible assets follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Identified intangibles, primarily franchise value....................... $ 9,263 $ 8,388
Goodwill................................................................ 4,159 4,465
--------- ---------
13,422 12,853
Less accumulated amortization........................................... 748 258
--------- ---------
Total intangible assets--net............................................ $ 12,674 $ 12,595
--------- ---------
--------- ---------
</TABLE>

Intangible balances at December 31, 1997 include the results of a
comprehensive appraisal conducted on the Continental cable properties. As
compared with estimated amounts recorded at December 31, 1996, franchise value
increased approximately $770 and goodwill decreased approximately $300.
Amortization expense for 1997, 1996 and 1995 was $530, $133 and $76,
respectively.

NOTE 10: DEBT

SHORT-TERM DEBT

The components of short-term debt follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Notes payable:
Commercial paper......................................................... $ 812 $ 842
Bank loan................................................................ 17 --
Other.................................................................... -- 55
Current portion of long-term debt.......................................... 701 300
Allocated to the capital assets segment--net............................... (100) (146)
--------- ---------
Total...................................................................... $ 1,430 $ 1,051
--------- ---------
--------- ---------
</TABLE>

The weighted-average interest rate on commercial paper was 6.15 percent and
5.73 percent at December 31, 1997 and 1996, respectively.

The bank loan at December 31, 1997 is a floating-rate loan denominated in
Czech Koruna. Other notes payable at December 31, 1996 included $50 associated
with U S WEST's increase in ownership of Cable Plus. This note was repaid in
January 1997.

In January 1997, U S WEST paid the cash portion of the Continental
Acquisition consideration totaling $1,150. This payment was financed with
commercial paper.

F-25
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)

In 1995, U S WEST issued $130 of Debt Exchangeable for Common Stock
("DECS"), due December 15, 1998, in the principal amount of $24.00 per note. The
notes bear annual interest at 7.625 percent. Upon maturity, each DECS will be
redeemed by U S WEST for shares of Enhance Financial Services Group, Inc.
("Enhance") held by U S WEST or the cash equivalent, at U S WEST's option. The
number of shares to be delivered at maturity varies based on the per share
market price of Enhance. If the market price is $24.00 per share or less, one
share of Enhance will be delivered for each note; if the market price is between
$24.00 and $28.32 per share, a fractional share equal to $24.00 is delivered; if
the market price is greater than $28.32 per share, .8475 of a share is delivered
for each note. At December 31, 1997, the Enhance shares had a market price of
$59.50 per share. The capital assets segment currently owns 29.2 percent of the
outstanding Enhance common stock.

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. U S WEST is permitted to borrow up to approximately $4.5 billion under
lines of credit, all of which were available at December 31, 1997.

LONG-TERM DEBT

On November 15, 1996, U S WEST assumed Continental debt totaling $6,525 (at
market value) in conjunction with the Acquisition. Concurrently, U S WEST
refinanced $3,657 of the assumed debt with 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 net proceeds were used to
refinance outstanding commercial paper. At December 31, 1996, such commercial
paper was classified as long-term debt in the accompanying Consolidated Balance
Sheets and the following table.

The components of long-term debt follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Senior unsecured notes, debentures, medium-term notes and refinanced
commercial paper...................................................... $ 12,246 $ 12,536
Zero coupon subordinated notes, 7.3 percent yield to maturity
convertible at any time into equal shares of Communications Stock and
Media Stock........................................................... -- 1,529
Senior subordinated debt................................................ 300 400
Debt exchangeable for common stock...................................... 254 384
Insurance company notes................................................. 36 68
Leveraged employee stock ownership plans (LESOP)........................ -- 53
Capital lease obligations............................................... 88 140
Other................................................................... 169 134
Unamortized discount--net............................................... (132) (1,118)
Unamortized premium--net................................................ 287 335
Allocated to the capital assets segment--net............................ -- (161)
--------- ---------
Total................................................................... $ 13,248 $ 14,300
--------- ---------
--------- ---------
</TABLE>

Senior unsecured notes and debentures and senior subordinated debt totaling
$2.3 billion as of December 31, 1997 were assumed by U S WEST in connection with
the Continental Acquisition and are not guaranteed by U S WEST. These notes and
debentures limit MediaOne Delaware's ability to, among

F-26
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)

other things, pay dividends, create liens, incur additional debt, dispose of
property, investments and leases, and require certain minimum ratios of cash
flow to debt and cash flow to related fixed charges.

During 1997, U S WEST redeemed its zero coupon subordinated notes due June
25, 2011. Upon redemption, the notes had a recorded value of $571. The debt
extinguishment resulted in a loss of $6 (net of income tax benefits of $4)
primarily related to the write-off of deferred debt issuance costs. Also during
1997, MediaOne Delaware redeemed a 10 5/8 percent senior subordinated note with
a recorded value of $110, including a premium of $10. The debt extinguishment
resulted in a gain of $3 (net of income tax expenses of $2). The net loss on the
redemptions is reflected as an extraordinary charge in the accompanying
Consolidated Statements of Operations. U S WEST financed the redemptions with
floating-rate commercial paper.

On May 13, 1996, U S WEST issued $254 of DECS due May 15, 1999, in the
principal amount of $26.63 per note. The notes bear annual interest at 7.625
percent. Upon maturity, each DECS will be mandatorily redeemed by U S WEST for
shares of Financial Security Assurance Holdings Ltd. ("FSA") held by U S WEST or
the cash equivalent, at U S WEST's option. The number of shares to be delivered
at maturity varies based on the per share market price of FSA. If the market
price is $26.63 per share or less, one share of FSA will be delivered for each
note; if the market price is between $26.63 and $32.48 per share, a fractional
share is delivered so that the value at maturity is equal to $26.63; if the
market price is greater than $32.48 per share, .8197 of a share is delivered for
each note. At December 31, 1997, the FSA shares had a market price of $48.25 per
share. The capital assets segment currently owns approximately 42.1 percent of
the outstanding FSA common stock.

Interest rates and maturities of long-term debt at December 31 follow:

<TABLE>
<CAPTION>
MATURITIES
------------------------------------------------------- TOTAL TOTAL
INTEREST RATES 1999 2000 2001 2002 THEREAFTER 1997 1996
- ---------------------------------------------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Up to 5%...................................... $ -- $ 90 $ -- $ 100 $ 50 $ 240 $ 275
Above 5% to 6%................................ -- -- 50 -- 221 271 701
Above 6% to 7%................................ 380 304 170 1,012 2,877 4,743 4,728
Above 7% to 8%................................ -- -- -- 10 4,375 4,385 5,876
Above 8% to 9%................................ 2 -- 240 -- 1,725 1,967 2,018
Above 9% to 10%............................... 15 200 10 -- 525 750 750
Above 10%..................................... 35 -- -- -- 290 325 467
Variable-rate debt indexed to two- and
ten-year constant maturity U. S. Treasury
rates....................................... 155 -- -- -- -- 155 155
--------- --------- --------- --------- ----------- --------- ---------
$ 587 $ 594 $ 470 $ 1,122 $ 10,063 12,836 14,970
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Capital lease obligations and other........... 257 274
Unamortized discount--net..................... (132) (1,118)
Unamortized premium--net...................... 287 335
Allocated to the capital assets
segment--net................................ -- (161)
--------- ---------
Total......................................... $ 13,248 $ 14,300
--------- ---------
--------- ---------
</TABLE>

F-27
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)

Interest payments, net of amounts capitalized, were $946, $658 and $518 for
1997, 1996 and 1995, respectively, of which $47, $59 and $87, respectively,
related to the capital assets segment.

Total debt at December 31, 1997 was approximately $14.6 billion. In
addition, Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Company-guaranteed debentures ("Preferred
Securities") totaled approximately $1.1 billion at December 31, 1997. The total
debt and Preferred Securities of approximately $15.7 billion include $5.5
billion of U S WEST Communications debt, $2.7 billion of MediaOne Delaware debt
and $7.5 billion of debt issued or guaranteed by U S WEST (the "U S WEST
Indebtedness").

In connection with the Separation, New U S WEST and MediaOne will seek to
refinance the U S WEST Indebtedness through a combination of tender offers,
prepayments, defeasance, consent solicitations and/or exchange offers (the
"Refinancing"). As of February 20, 1998, the estimated cost of Refinancing is
$346 ($231 after tax). 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.

INTEREST RATE RISK MANAGEMENT

Under an interest rate swap, U S WEST agrees with another party to exchange
interest payments at specified intervals over a defined term. Interest payments
are calculated by reference to the notional amount based on the fixed- and
variable-rate terms of the swap agreements.

U S WEST Communications entered into currency swaps to convert Swiss
franc-denominated debt to U. S. dollar-denominated debt. This allowed U S WEST
Communications to achieve interest savings over issuing fixed-rate,
dollar-denominated debt. The currency swap and foreign currency debt are
combined and accounted for as if fixed-rate, dollar-denominated debt were issued
directly.

The following table summarizes terms of swaps and interest rate contracts.
Variable rates are indexed to two- and ten-year constant maturity U. S. Treasury
and 30-day commercial paper rates.

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------------ ------------------------------------------------
WEIGHTED- AVERAGE RATE WEIGHTED- AVERAGE RATE
NOTIONAL ---------------------- NOTIONAL ----------------------
AMOUNT MATURITIES RECEIVE PAY AMOUNT MATURITIES RECEIVE PAY
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable to fixed............... $ 700 1998-2004 5.68 6.93 $ 1,235 1997-2004 5.70 6.89
Currency........................ 204 1999-2001 -- 6.55 204 1999-2001 -- 6.55
</TABLE>

During fourth-quarter 1996, U S WEST purchased $1.5 billion notional of put
options on U. S. Treasury Bonds to protect against an increase in interest rates
in conjunction with the 1997 debt refinancing. The contracts closed in January
1997 and a deferred gain of $5 was recognized. U S WEST Communications executed
forward U. S. Treasury Bond contracts to lock in the U. S. Treasury rate
component of future debt issues. At December 31, 1997, deferred gains of $8 and
deferred losses of $50 on the closed forward contracts are included as part of
the carrying value of the underlying debt. The deferred gains and losses are
being recognized as yield adjustments over the life of the related debt, which
mature at various dates through 2043.

F-28
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)

The counterparties to swaps or other interest rate contracts are major
financial institutions. U S WEST is exposed to credit loss in the event of
nonperformance by these counterparties. U S WEST manages this exposure by
monitoring the credit standing of the counterparty and establishing dollar and
term limitations which correspond to the respective credit rating of each
counterparty. U S WEST does not have significant exposure to an individual
counterparty and does not anticipate nonperformance by any counterparty.

NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair values of cash equivalents, other current amounts receivable and
payable, and short-term debt approximate carrying values due to their short-term
nature.

The carrying values of mandatorily redeemable preferred stock and long-term
receivables approximate the fair values based on quoted market prices or
discounting future cash flows. The carrying value of foreign exchange contracts
approximate the carrying values based on estimated amounts U S WEST would
receive or pay to terminate such agreements. It is not practicable to estimate
the fair value of financial guarantees because there are no quoted market prices
for similar transactions.

The fair values of interest rate swaps are based on estimated amounts U S
WEST would receive or pay to terminate such agreements taking into account
current interest rates and creditworthiness of the counterparties.

The fair values of long-term debt, including debt associated with the
capital assets segment, Preferred Securities and Series D Preferred Stock, are
based on quoted market prices where available or, if not available, are based on
discounting future cash flows using current interest rates.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Debt (includes short-term portion).................................... $ 15,050 $ 15,770 $ 15,832 $ 15,850
Interest rate swap agreements--assets................................. -- -- -- (22)
Interest rate swap agreements--liabilities............................ -- 47 17 47
--------- --------- --------- ---------
Debt--net............................................................. $ 15,050 $ 15,817 $ 15,849 $ 15,875
--------- --------- --------- ---------
--------- --------- --------- ---------
Preferred Securities.................................................. $ 1,080 $ 1,110 $ 1,080 $ 1,074
Series D preferred stock.............................................. 923 1,234 920 960
</TABLE>

Investments in debt and equity securities are classified as available for
sale and are carried at market value. The debt securities have various maturity
dates through the year 2002. The market value of these securities is based on
quoted market prices where available or, if not available, is based on
discounting future cash flows using current interest rates.

F-29
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The amortized cost and estimated market value of debt and equity securities
follow:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------------------------------- ---------------------------------------
GROSS GROSS GROSS GROSS
UNREALIZED UNREALIZED FAIR UNREALIZED UNREALIZED
SECURITIES COST GAINS LOSSES VALUE COST GAINS LOSSES
- ---------------------------------- --- ------------- ------------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity securities................. $ 21 $ 19 $ -- $ 40 $ 713 $ 2 $ --
Debt securities................... 18 -- -- 18 20 -- --
Securitized loan.................. 55 -- (3) 52 55 -- (6)
-- --
--- --- --------- --------- ---
Total............................. $ 94 $ 19 $ (3) $ 110 $ 788 $ 2 $ (6)
-- --
-- --
--- --- --------- --------- ---
--- --- --------- --------- ---

FAIR
SECURITIES VALUE
- ---------------------------------- ---------
<S> <C>
Equity securities................. $ 715
Debt securities................... 20
Securitized loan.................. 49

---------
Total............................. $ 784

---------
---------
</TABLE>

During 1997, U S WEST received proceeds of $898 from the sales of Teleport
Communications Group ("TCG") and Time Warner shares and realized pretax gains
totaling $206. Net unrealized gains and losses on marketable securities are
included in equity. The 1997 net unrealized gains were $13 (net of deferred
taxes of $6). The 1996 net unrealized gains were $1 (net of deferred taxes).

NOTE 12: LEASING ARRANGEMENTS

U S WEST has entered into operating leases for office facilities, equipment
and real estate. Rent expense under operating leases was $304, $245 and $263 in
1997, 1996 and 1995, respectively. Future minimum lease payments as of December
31, 1997, under noncancelable operating leases, follow:

<TABLE>
<CAPTION>
YEAR
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 194
1999................................................................................. 187
2000................................................................................. 157
2001................................................................................. 149
2002................................................................................. 108
Thereafter........................................................................... 777
---------
Total................................................................................ $ 1,572
---------
---------
</TABLE>

Minimum rentals to be received under noncancelable subleases total $52. The
minimum future lease payments have not been reduced by the minimum sublease
rentals.

NOTE 13:COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY COMPANY-GUARANTEED DEBENTURES

On October 29, 1996, U S WEST Financing II, a wholly owned subsidiary of U S
WEST ("Financing II") issued $480 of 8.25 percent Preferred Securities and $15
of common securities. U S WEST holds all of the outstanding common securities of
Financing II. Financing II used the proceeds from such issuance to purchase from
U S WEST Capital Funding, Inc., a wholly owned subsidiary of U S WEST ("Capital
Funding"), $495 principal amount of Capital Funding's 8.25 percent Subordinated
Deferrable Interest Notes due 2036 (the "Subordinated Debt Securities"), the
obligations under which are fully and unconditionally guaranteed by U S WEST
(the "Debt Guarantee"). The sole assets of Financing II are and will be the
Subordinated Debt Securities and the Debt Guarantee.

On September 11, 1995, U S WEST Financing I, a wholly owned subsidiary of U
S WEST ("Financing I"), issued $600 of 7.96 percent Preferred Securities and $19
of common securities. U S WEST

F-30
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13:COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY COMPANY-GUARANTEED DEBENTURES
(CONTINUED)

holds all of the outstanding common securities of Financing I. Financing I used
the proceeds from such issuance to purchase from Capital Funding $619 principal
amount of Capital Funding's 7.96 percent Subordinated Debt Securities due 2025,
the obligations under which are fully and unconditionally guaranteed by U S
WEST. The sole assets of Financing I are and will be the Subordinated Debt
Securities and the Debt Guarantee.

U S WEST has guaranteed the payment of interest and redemption amounts to
holders of Preferred Securities when Financing I and II have funds available for
such payments (the "Payment Guarantee") as well as Capital Funding's undertaking
to pay all of Financing I and II's costs, expenses and other obligations (the
"Expense Undertaking"). The Payment Guarantee and the Expense Undertaking,
including U S WEST's guarantee with respect thereto, considered together with
Capital Funding's obligations under the indenture and Subordinated Debt
Securities and U S WEST's obligations under the indenture, declaration and Debt
Guarantee, constitute a full and unconditional guarantee by U S WEST of
Financing I and II's obligations under the Preferred Securities. The interest
and other payment dates on the Subordinated Debt Securities correspond to the
distribution and other payment dates on the Preferred Securities. Under certain
circumstances, the Subordinated Debt Securities may be distributed to the
holders of Preferred Securities and common securities in liquidation of
Financing I and II.

The 7.96 percent Subordinated Debt Securities are redeemable in whole or in
part by Capital Funding at any time on or after September 11, 2000, at a
redemption price of $25.00 per Subordinated Debt Security plus accrued and
unpaid interest. If Capital Funding redeems the Subordinated Debt Securities,
Financing I is required to redeem the Preferred Securities concurrently at
$25.00 per share plus accrued and unpaid distributions. As of December 31, 1997
and 1996, 24,000,000 shares of the 7.96 percent Preferred Securities were
outstanding.

The 8.25 percent Subordinated Debt Securities are redeemable in whole or in
part by Capital Funding at any time on or after October 29, 2001, at a
redemption price of $25.00 per Subordinated Debt Security plus accrued and
unpaid interest. If Capital Funding redeems the Subordinated Debt Securities,
Financing II is required to redeem the Preferred Securities concurrently at
$25.00 per share plus accrued and unpaid distributions. As of December 31, 1997
and 1996, 19,200,000 shares of the 8.25 percent Preferred Securities were
outstanding.

In connection with the Separation, MediaOne will seek to refinance the
Preferred Securities. See Note 10--Debt--to the Consolidated Financial
Statements.

NOTE 14: PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION

On June 30, 1997, U S WEST acquired cable systems serving approximately
40,000 subscribers in Michigan for cash of $25 and the issuance of 994,082
shares of U S WEST nonvoting Series E Convertible Preferred Stock (the "Series E
Preferred Stock"). Dividends are payable quarterly at the annual rate of 6.34
percent. The Series E Preferred Stock is recorded at fair value of $50.00 per
share at June 30, 1997, which is equal to its liquidation value. Upon
redemption, the preferred stockholders may elect to receive cash or convert
their Series E Preferred Stock into Media Stock. Cash redemption is equal to the
Series E Preferred Stock's liquidation value of $50.00 per share, plus accrued
dividends. The number of shares of Media Stock to be received upon conversion is
$47.50 per share divided by the then current market price of Media Stock. The
conversion rate is subject to adjustment by U S WEST under certain
circumstances.

F-31
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14: PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION (CONTINUED)

The Series E Preferred Stock is redeemable as follows: (a) U S WEST may call
for redemption all or any part of the Series E Preferred Stock beginning on June
30, 2002; (b) on a yearly basis beginning August 1, 2007, and continuing through
August 1, 2016, U S WEST will redeem 49,704 shares of Series E Preferred Stock,
and on June 30, 2017, all of the remaining outstanding shares of Series E
Preferred Stock; or (c) all of the outstanding Series E Preferred Stock shall be
redeemed upon the occurrence of certain events, including the dissolution or
sale of all or substantially all of Media Group.

On September 2, 1994, U S WEST issued to Fund American Enterprises Holdings
Inc. ("FFC") 50,000 shares of a class of 7 percent Series C Cumulative
Redeemable Preferred Stock (the "Series C Preferred Stock") for a total of $50.
See Note 22--Net Investment in Assets Held for Sale--to the Consolidated
Financial Statements. The preferred stock was recorded at the fair market value
of $51 at the issue date. Media Group has the right commencing September 2,
1999, to redeem the shares for one thousand dollars per share plus unpaid
dividends and a redemption premium. The shares are mandatorily redeemable in
2004 at face value plus unpaid dividends. At the option of FFC, the preferred
stock also can be redeemed for common shares of FSA. The market value of the
option was $71 and $35 (based on the Black-Scholes Model) at December 31, 1997
and 1996, respectively, with no carrying value.

The Series E and Series C Preferred Stocks rank senior to all classes of U S
WEST common stock, are subordinated to any senior debt and the Preferred
Securities, and rank equally with the Series D Preferred Stock.

F-32
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: SHAREOWNERS' EQUITY

<TABLE>
<CAPTION>
MEDIA COMMON RETAINED
COMMUNICATIONS STOCK U S WEST STOCK PREFERRED EARNINGS
STOCK SHARES SHARES SHARES AMOUNT STOCK AMOUNT (DEFICIT)
----------------- --------- ----------- ----------- ------------- -----------
SHARES IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994............ 469,343 $ 8,056 $ (458)
Issuance of common stock........... 2,791 117
Benefit trust contribution
(OPEB)........................... 1,500 61
Purchase of treasury stock......... (1,705) (63)
Other.............................. 3
November 1, 1995.....................
Recapitalization Plan.............. 471,929 471,922 (471,929)
Recapitalization Plan
dissenters(1).................... (6)
Issuance of Communications Stock... 1,712 52
Issuance of Media Stock............ 392 7
Net income......................... 1,317
Common dividends declared ($2.14
per Communications share)........ (1,010)
Preferred dividends................ (3)
Market value adjustment for debt
securities....................... 36
Foreign currency translation.......
Other.............................. (5) 3
------- --------- ----------- ----------- ----- -----------
Balance December 31, 1995............ 473,635 472,314 -- 8,228 (115)
Issuance of Communications Stock... 6,822 216
Issuance of Media Stock for
Continental Acquisition.......... 150,615 2,590
Other issuances of Media Stock..... 1,853 38
Issuance of Series D Preferred
Stock............................ $ 920
Purchase of treasury stock......... (15,919) (297)
Net income......................... 1,178
Common dividends declared ($2.14
per Communications share)........ (1,024)
Preferred dividends................ (9)
Market value adjustment for debt
and equity securities............ (6)
Foreign currency translation.......
Other.............................. (34) (6)
------- --------- ----------- ----------- ----- -----------
Balance December 31, 1996............ 480,457 608,863 -- 10,741 920 18
Issuance of Communications Stock... 4,058 138
Issuance of Media Stock............ 1,783 40
Purchase of treasury stock......... (2,838) (53)
Net income......................... 697
Common dividends declared ($2.14
per Communications share)........ (1,034)
Preferred dividends................ (52)
Market value adjustment for debt
and equity securities............ 35
Foreign currency translation.......
Other.............................. 10 3 2
------- --------- ----------- ----------- ----- -----------
Balance December 31, 1997............ 484,515 607,808 -- $ 10,876 $ 923 $ (334)
------- --------- ----------- ----------- ----- -----------
------- --------- ----------- ----------- ----- -----------

<CAPTION>
FOREIGN
CURRENCY LESOP
TRANSLATION GUARANTEE
--------------- -------------

<S> <C> <C>
Balance December 31, 1994............ $ (29) $ (187)
Issuance of common stock...........
Benefit trust contribution
(OPEB)...........................
Purchase of treasury stock.........
Other..............................
November 1, 1995.....................
Recapitalization Plan..............
Recapitalization Plan
dissenters(1)....................
Issuance of Communications Stock...
Issuance of Media Stock............
Net income.........................
Common dividends declared ($2.14
per Communications share)........
Preferred dividends................
Market value adjustment for debt
securities.......................
Foreign currency translation....... (9)
Other.............................. 60
--- -----
Balance December 31, 1995............ (38) (127)
Issuance of Communications Stock...
Issuance of Media Stock for
Continental Acquisition..........
Other issuances of Media Stock.....
Issuance of Series D Preferred
Stock............................
Purchase of treasury stock.........
Net income.........................
Common dividends declared ($2.14
per Communications share)........
Preferred dividends................
Market value adjustment for debt
and equity securities............
Foreign currency translation....... (1)
Other.............................. 36
--- -----
Balance December 31, 1996............ (39) (91)
Issuance of Communications Stock...
Issuance of Media Stock............
Purchase of treasury stock.........
Net income.........................
Common dividends declared ($2.14
per Communications share)........
Preferred dividends................
Market value adjustment for debt
and equity securities............
Foreign currency translation....... (56)
Other.............................. 45
--- -----
Balance December 31, 1997............ $ (95) $ (46)
--- -----
--- -----
</TABLE>

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

(1) Under the Recapitalization Plan, Media Stock was not issued to shareowners
who elected to receive cash rather than Communications Stock and Media
Stock. Dissenting shareowners were paid $47.9375 per U S WEST share on
December 15, 1995.

F-33
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: SHAREOWNERS' EQUITY (CONTINUED)

SERIES D PREFERRED STOCK. On November 15, 1996, U S WEST issued 19,999,478
shares of 4.5 percent, 20 year, Series D Convertible Preferred Stock (the
"Series D Preferred Stock") to Continental shareowners. Dividends are payable
quarterly on the nonvoting Series D Preferred Stock as and when declared by the
Board of Directors out of funds legally available. The Series D Preferred Stock
has a liquidation value of $50 per share and was recorded at the November 15,
1996 fair value of $46 per share. The Series D Preferred Stock is convertible,
at the option of the holder, into shares of Media Stock at $26.25 per share.
Between November 15, 1999 and November 15, 2001, the Series D Preferred Stock is
redeemable at par, at the option of U S WEST, into shares of Media Stock if the
Media common shares have closed at $35.44 per share for at least 20 of the 30
consecutive trading days prior to the notice of redemption. After November 15,
2001, the Series D Preferred Stock is redeemable at par, at the option of U S
WEST, in cash, Media Stock, or any combination of cash and stock. If Media Stock
is elected, the number of shares to be issued will be determined based on the
average market price for the ten consecutive trading days ending on the third
business day prior to redemption, reduced by five percent. On November 15, 2016,
U S WEST is required to redeem the Series D Preferred Stock, at its election,
for cash, Media Stock, or any combination of cash and stock. Upon certain
events, including the disposition of all or substantially all of the properties
and assets attributed to the Media Group, the Series D Preferred Stock becomes
mandatorily redeemable. The Series D Preferred Stock ranks senior to all classes
of U S WEST common stock, is subordinated to any senior debt and the Preferred
Securities, and ranks equally with the Series E and C Preferred Stocks.

COMMON STOCK. In connection with the November 15, 1996, Continental
Acquisition, U S WEST issued 150,615,000 shares of Media Stock to Continental
shareowners, valued at $2,590.

SHARE REPURCHASE. During 1997 and 1996, U S WEST purchased and placed into
treasury 2,838,000 and 15,919,000 shares of Media Stock, at an average price per
share of $18.71 and $18.66, and a cost basis of $53 and $297, respectively.
Under the Recapitalization Plan, shares of U S WEST stock held in treasury were
canceled.

FOREIGN CURRENCY TRANSLATION. Included in U S WEST's cumulative foreign
currency translation adjustment are cumulative tax benefits of $61, $24 and $24
at December 31, 1997, 1996 and 1995, respectively.

LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN ("LESOP"). U S WEST maintains a
defined contribution savings plan for substantially all management and
occupational employees of the Company, except for employees of the Atlanta cable
systems and foreign national employees. U S WEST matches a percentage of
eligible employee contributions with shares of Communications Stock and/or Media
Stock in accordance with participant elections. Participants may also elect to
reallocate past Company contributions between Communications Stock and Media
Stock. In 1989, U S WEST established two LESOPs to provide Company stock for
matching contributions to the savings plan. Shares in the LESOP are released as
principal and interest are paid on the debt. At December 31, 1997, 11,966,157
shares of Communications Stock and 12,100,791 shares of Media Stock had been
allocated from the LESOP to participants' accounts, while 918,494 and 1,050,657
shares of Communications Stock and Media Stock, respectively, remained
unallocated.

The borrowings associated with the LESOP, which are unconditionally
guaranteed by U S WEST, are included in the accompanying Consolidated Balance
Sheets and corresponding amounts have been recorded as reductions to
shareowners' equity. Contributions from U S WEST as well as dividends on
unallocated shares held by the LESOP ($3, $5 and $8 in 1997, 1996 and 1995,
respectively) are used for

F-34
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: SHAREOWNERS' EQUITY (CONTINUED)

debt service. Beginning with the dividend paid in fourth-quarter 1995, dividends
on allocated shares are being paid annually to participants. Previously,
dividends on allocated shares were used for debt service with participants
receiving additional shares from the LESOP in lieu of dividends.

U S WEST recognizes expense based on the cash payments method. Total Company
contributions to the plan (excluding dividends) were $89, $77 and $86 in 1997,
1996 and 1995, respectively, of which $7, $10 and $15, respectively, have been
classified as interest expense.

SHAREHOLDER RIGHTS PLAN. The Board has adopted a shareholder rights plan
which, in the event of a takeover attempt, would entitle existing shareowners to
certain preferential rights. The rights expire on April 6, 1999, and are
redeemable by the Company at any time prior to the date they would become
effective.

NOTE 16: EARNINGS PER SHARE

In 1997, the Company adopted SFAS No. 128 which specifies new computation,
presentation and disclosure requirements for earnings per share to be applied
retroactively. Among other things, SFAS No. 128 requires presentation of basic
and diluted earnings per common share on the face of the income statement. The
following reflects the computation of diluted earnings (loss) per share for
Communications Stock and Media Stock. Income and earnings per share are before
extraordinary items and the cumulative effect of change in accounting principle.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
SHARES IN THOUSANDS
<S> <C> <C> <C>
COMMUNICATIONS GROUP
Income used for basic earnings per share......................................... $ 1,180 $ 1,215 $ 1,184
Interest on convertible zero coupon subordinated notes, net of tax............... 9 13 12
--------- --------- ---------
Income used for diluted earnings per share....................................... $ 1,189 $ 1,228 $ 1,196
--------- --------- ---------
--------- --------- ---------

Weighted average number of shares used for basic earnings per share.............. 482,751 477,549 470,716
Effect of dilutive securities:
Stock options.................................................................. 2,386 1,536 1,459
Convertible zero coupon subordinated notes..................................... 6,095 9,506 9,758
--------- --------- ---------
Weighted average number of shares used for diluted earnings per share............ 491,232 488,591 481,933
--------- --------- ---------
--------- --------- ---------
Communications Group basic earnings per share.................................... $ 2.44 $ 2.55 $ 2.52
Communications Group diluted earnings per share.................................. $ 2.42 $ 2.51 $ 2.48
</TABLE>

The Communications Group dilutive securities represent the incremental
weighted average shares from the assumed exercise of Communications Group stock
options and the assumed conversion of the

F-35
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: EARNINGS PER SHARE (CONTINUED)

zero coupon subordinated notes for the period they were outstanding. The zero
coupon subordinated notes were redeemed in August 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
SHARES IN THOUSANDS
<S> <C> <C> <C>
MEDIA GROUP
Income (loss).................................................................... $ (480) $ (71) $ 145
Dividends on preferred stock..................................................... (52) (9) (3)
--------- --------- ---------
Income (loss) available to common shareowners used for basic and diluted earnings
per share...................................................................... $ (532) $ (80) $ 142
--------- --------- ---------
--------- --------- ---------

Weighted average number of shares used for basic earnings per share.............. 606,749 491,924 470,549
Effect of dilutive securities:
Stock options.................................................................. -- -- 1,063
--------- --------- ---------
Weighted average number of shares used for diluted earnings per share............ 606,749 491,924 471,612
--------- --------- ---------
--------- --------- ---------
Media Group basic and diluted earnings (loss) per share.......................... $ (0.88) $ (0.16) $ 0.30
</TABLE>

Media Group diluted loss per share for 1997 and 1996 does not include
potential share issuances associated with stock options, convertible zero coupon
subordinated notes and the convertible Series D Preferred Stock due to their
antidilutive effects. In 1995, convertible zero coupon subordinated notes are
not included in Media Group's diluted earnings per share due to their
antidilutive effects. The zero coupon subordinated notes were redeemed in August
1997.

NOTE 17: STOCK INCENTIVE PLANS

U S WEST maintains stock incentive plans for executives and other employees
and nonemployees, primarily members of the Board. The Amended 1994 Stock Plan
(the "Plan") was approved by shareowners on October 31, 1995, in connection with
the Recapitalization Plan. The Plan is a successor plan to the U S WEST Stock
Incentive Plan and the U S WEST 1991 Stock Incentive Plan (the "Predecessor
Plans"). No further grants of options or restricted stock may be made under the
Predecessor Plans. The Plan is administered by the Human Resources Committee of
the Board of Directors with respect to officers, executive officers and outside
directors and by a special committee with respect to all other eligible
employees and eligible nonemployees.

Effective November 1, 1995, each outstanding U S WEST stock option was
converted into one Communications Group and one Media Group stock option.
Subsequent to November 1, 1995, each Group grants options primarily to its own
employees.

The maximum aggregate number of shares of Communications Stock and Media
Stock that may be granted in any calendar year for all purposes under the Plan
is nine-tenths of one percent (0.90 percent) and three-quarters of one percent
(0.75 percent), respectively, of the shares of such class outstanding (excluding
shares held in U S WEST's treasury) on the first day of such calendar year. In
the event that fewer than the full aggregate number of shares of either class
available for issuance in any calendar year are issued in any such year, the
shares not issued shall be added to the shares of such class available for
issuance in any subsequent year or years. Options granted vest over periods up
to three years and may be exercised no later than 10 years after the grant date.

F-36
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17: STOCK INCENTIVE PLANS (CONTINUED)

During 1995, U S WEST modified the Plan to allow employees who terminate and
are eligible for a full service pension, or who terminate under the long-term
disability plan, to exercise their existing stock options according to their
original terms. Additionally, U S WEST allows employees who separate under a
management separation plan to retain unvested stock options. The compensation
cost that has been included in income in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees," was $1, $3 and $7 in 1997, 1996 and
1995, respectively, all of which related to the Plan modifications.

U S WEST has adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation," but continues to account for the Plan under APB
Opinion No. 25. Had compensation cost for the Plan been determined consistent
with the fair value based accounting method under SFAS No. 123, the pro forma
net income and earnings per share for U S WEST and both the Communications and
Media Groups would have been the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995
----------------------------------- ----------------------------------- ------------------------
EARNINGS (LOSS) EARNINGS (LOSS) EARNINGS
PER SHARE PER SHARE PER SHARE
NET INCOME ---------------------- NET INCOME ---------------------- -----------
(LOSS) BASIC DILUTED (LOSS) BASIC DILUTED NET INCOME BASIC
----------- --------- ----------- ----------- --------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMUNICATIONS GROUP:
As reported................... $ 1,177 $ 2.43 $ 2.41 $ 1,249 $ 2.62 $ 2.58 $ 1,176 $ 2.50
Pro forma..................... 1,164 2.41 2.40 1,247 2.61 2.58 1,178 2.50
MEDIA GROUP:
As reported................... (480) (0.88) (0.88) (71) (0.16) (0.16) 141 0.29
Pro forma..................... (501) (0.91) (0.91) (82) (0.18) (0.18) 140 0.29

DILUTED
-----------
<S> <C>
COMMUNICATIONS GROUP:
As reported................... $ 2.46
Pro forma..................... 2.48
MEDIA GROUP:
As reported................... 0.29
Pro forma..................... 0.29
</TABLE>

The fair value based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the option's vesting period and has not been applied to options granted
prior to January 1, 1995. Accordingly, the resulting pro forma compensation cost
is not representative of what compensation cost will be in future years.

Following are the weighted-average assumptions used in connection with the
Black-Scholes option-pricing model to estimate the fair value of options granted
during 1997, 1996 and 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
COMMUNICATIONS GROUP:
Risk-free interest rate.................................................... 6.40% 6.50% 6.00%
Expected dividend yield.................................................... 5.80% 6.70% 6.70%
Expected life.............................................................. 4.0 years 4.5 years 4.5 years
Expected volatility........................................................ 25.0% 19.6% 19.6%
MEDIA GROUP:
Risk-free interest rate.................................................... 6.40% 6.30% 6.00%
Expected life.............................................................. 5.0 years 5.0 years 5.0 years
Expected volatility........................................................ 30.0% 28.5% 28.5%
</TABLE>

F-37
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17: STOCK INCENTIVE PLANS (CONTINUED)

Data for outstanding options under the Plan is summarized as follows:

<TABLE>
<CAPTION>
COMMUNICATIONS GROUP MEDIA GROUP U S WEST, INC.
------------------------- ------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES* PRICE
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding January 1, 1995.......... 7,386,037 $ 38.66
----------- -----------
Granted(1)......................... 4,814,856 41.12
Exercised.......................... (430,631) 34.03
Canceled or expired(1)............. (1,927,083) 37.02
----------- -----------
Outstanding October 31, 1995......... 9,843,179 $ 40.39
----------- -----------
Recapitalization Plan................ 9,843,179 $ 24.11 9,843,179 $ 16.28 (9,843,179) $ (40.39)
------------ ----------- ------------ ----------- ----------- -----------
----------- -----------
Granted............................ 138,309 32.16 71,580 18.51
Exercised.......................... (543,037) 21.23 (191,243) 14.71
Canceled or expired................ (15,350) 24.91 (15,350) 16.82
------------ ----------- ------------ -----------
Outstanding December 31, 1995........ 9,423,101 $ 24.39 9,708,166 $ 16.33
------------ ----------- ------------ -----------
Granted............................ 3,624,602 30.97 5,523,728 19.36
Exercised.......................... (1,205,730) 22.37 (507,329) 14.93
Canceled or expired................ (429,058) 25.01 (610,471) 17.86
------------ ----------- ------------ -----------
Outstanding December 31, 1996........ 11,412,915 $ 26.67 14,114,094 $ 17.49
------------ ----------- ------------ -----------
Granted............................ 9,491,642 34.87 8,733,782 20.33
Exercised.......................... (2,648,569) 25.41 (1,371,529) 16.30
Canceled or expired................ (637,411) 27.54 (1,027,388) 18.35
------------ ----------- ------------ -----------
Outstanding December 31, 1997........ 17,618,577 $ 31.23 20,448,959 $ 18.74
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>

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

* Includes options granted in tandem with stock appreciation rights.

(1) Amounts have been restated to include modified options which, under the
provisions of SFAS No. 123, are treated as an exchange of the original award
(i.e., canceled) for a new award (i.e., stock grant).

The number of exercisable options under the Plan and the weighted-average
exercise prices follow:

<TABLE>
<CAPTION>
COMMUNICATIONS GROUP MEDIA GROUP
----------------------- -----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
EXERCISABLE OPTIONS AT: SHARES PRICE SHARES PRICE
- ----------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1995................................................ 2,672,666 $ 22.22 3,021,166 $ 14.89
December 31, 1996................................................ 3,881,100 25.71 4,867,207 16.74
December 31, 1997................................................ 5,299,955 25.72 7,235,685 16.54
</TABLE>

F-38
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17: STOCK INCENTIVE PLANS (CONTINUED)

The following table summarizes the status of outstanding and exercisable
options under the Plan at December 31, 1997:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------------ EXERCISABLE OPTIONS
WEIGHTED- -----------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- --------------------------------------------------- ------------ --------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
COMMUNICATIONS GROUP
$16.08 - $26.11.................................... 4,449,954 6.63 $ 23.71 3,518,013 $ 23.12
$26.34 - $33.13.................................... 4,238,914 7.99 31.03 1,577,356 30.30
$33.25........................................... 4,637,013 9.31 33.25 6,375 33.25
$33.63 - $46.13.................................... 4,292,696 9.19 37.02 198,211 35.36
------------ --- ----------- ---------- -----------
Total............................................ 17,618,577 8.28 $ 31.23 5,299,955 $ 25.72
------------ --- ----------- ---------- -----------
------------ --- ----------- ---------- -----------
MEDIA GROUP
$10.86 - $16.13.................................... 4,632,940 5.88 $ 14.92 3,994,271 $ 14.73
$16.17 - $18.50.................................... 6,009,898 8.46 18.06 1,627,574 17.59
$18.54 - $20.50.................................... 4,276,400 8.00 19.56 1,477,907 19.89
$20.56 - $22.13.................................... 4,241,765 8.69 21.32 135,933 20.65
$22.31 - $28.88.................................... 1,287,956 9.80 24.47 -- --
------------ --- ----------- ---------- -----------
Total............................................ 20,448,959 7.91 $ 18.74 7,235,685 $ 16.54
------------ --- ----------- ---------- -----------
------------ --- ----------- ---------- -----------
</TABLE>

A total of 9,491,642, 3,624,602 and 4,953,165 Communications Group options
and 8,733,782, 5,523,728 and 4,886,436 Media Group options were granted in 1997,
1996 and 1995, respectively. Included in the total grants were 198,027 and
1,751,936 of modified Communications Group options and 249,827 and 1,751,936 of
modified Media Group options revalued as new grants during 1996 and 1995,
respectively. The modified Communications Group or Media Group options were not
significant during 1997. The weighted-average grant date fair value of
Communications Group and Media Group options granted during the year, inclusive
of modified options, using the Black-Scholes option-pricing model was $3.87 and
$7.10, respectively, for 1996, and $3.19 and $6.07, respectively, for 1995.
Excluding the modifications, the weighted-average grant date fair value was
$5.70 and $7.81, respectively, for 1997, $3.67 and $7.23, respectively, for
1996, and $2.92 and $6.45, respectively, for 1995. The exercise price of
Communications Group and Media Group stock options, excluding modified options,
equals the market price on the grant date. The exercise prices of modified stock
options may be greater or less than the market price on the revaluation date.

Approximately 3,100,000 and 2,950,000 shares of Communications Stock and
2,700,000 and 2,200,000 of Media Stock were available for grant under the plans
in effect at December 31, 1997 and 1996, respectively. Approximately 20,720,000
shares of Communications Stock and 23,150,000 shares of Media Stock were
reserved for issuance under the Plan at December 31, 1997.

F-39
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: EMPLOYEE BENEFITS

PENSION PLAN

U S WEST sponsors a defined benefit pension plan covering substantially all
management and occupational employees of the Company, except for foreign
national employees. Effective January 1, 1997, Continental's defined benefit
pension plan was merged into the U S WEST plan. On April 1, 1997, employees of
the cable systems in Atlanta, Georgia joined the U S WEST plan. Management
benefits are based on a final pay formula while occupational benefits are based
on a flat benefit formula. U S WEST uses the projected unit credit method for
the determination of pension cost for financial reporting purposes and the
aggregate cost method for funding purposes. U S WEST's policy is to fund amounts
required under the Employee Retirement Income Security Act of 1974 ("ERISA") and
no funding was required in 1997, 1996 and 1995.

The composition of the net pension cost (credit) and the actuarial
assumptions of the plan follow:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Details of pension cost:
Service cost--benefits earned during the period.............................. $ 189 $ 203 $ 173
Interest cost on projected benefit obligation................................ 612 575 558
Actual return on plan assets................................................. (1,996) (1,509) (1,918)
Net amortization and deferral................................................ 1,159 726 1,185
--------- --------- ---------
Net pension credit $ (36) $ (5) $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The expected long-term rate of return on plan assets used in determining net
pension cost was 8.50 percent for 1997, 1996 and 1995.

The funded status of the U S WEST plan follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $7,404 and $6,544,
respectively.............................................................................. $ 8,278 $ 7,446
--------- ---------
--------- ---------
Plan assets at fair value, primarily stocks and bonds(1).................................... $ 12,260 $ 10,958
Less: Projected benefit obligation.......................................................... 9,167 8,310
--------- ---------
Plan assets in excess of projected benefit obligation....................................... 3,093 2,648
Unrecognized net (gain)..................................................................... (1,966) (1,502)
Prior service cost not yet recognized in net periodic pension cost.......................... 6 31
Balance of unrecognized net asset at January 1, 1987........................................ (546) (626)
--------- ---------
Prepaid pension cost........................................................................ $ 587 $ 551
--------- ---------
--------- ---------
</TABLE>

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

(1) Pension plan assets include Communications Stock and Media Stock of $12 and
$8, respectively, in 1997, and $8 and $7, respectively, in 1996.

F-40
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: EMPLOYEE BENEFITS (CONTINUED)

The actuarial assumptions used to calculate the projected benefit obligation
follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Discount rate.................................................................................. 7.00% 7.50%
Weighted-average rate of compensation increase................................................. 5.50% 5.50%
</TABLE>

Anticipated future benefit changes have been reflected in the above
calculations.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

U S WEST and most of its subsidiaries provide certain health care and life
insurance benefits to retired employees. In conjunction with SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," U S
WEST immediately recognized the accumulated postretirement benefit obligation
for current and future retirees. However, the FCC and certain state
jurisdictions permit amortization of the transition obligation over the average
remaining service period of active employees for regulatory accounting purposes
with most jurisdictions requiring funding as a stipulation for rate recovery.

U S WEST uses the projected unit credit method for the determination of
postretirement medical and life costs for financial reporting purposes. The
composition of net medical and life postretirement benefit costs and actuarial
assumptions underlying plan benefits follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period........................................... $ 66 $ 70 $ 65
Interest on accumulated benefit obligation................................................ 296 259 267
Actual return on plan assets.............................................................. (394) (231) (415)
Net amortization and deferral............................................................. 211 68 286
--------- --------- ---------
Net postretirement benefit costs.......................................................... $ 179 $ 166 $ 203
--------- --------- ---------
--------- --------- ---------
</TABLE>

The expected long-term rate of return on plan assets used in determining
postretirement benefit costs was 8.50 percent for 1997, 1996 and 1995.

F-41
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: EMPLOYEE BENEFITS (CONTINUED)

The funded status of the plans follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation attributable to:
Retirees................................................................................... $ 2,403 $ 2,255
Fully eligible plan participants........................................................... 820 347
Other active plan participants............................................................. 1,183 1,289
--------- ---------
Total accumulated postretirement benefit obligation.......................................... 4,406 3,891
Unrecognized net gain........................................................................ 631 534
Unamortized prior service cost............................................................... (160) 32
Fair value of plan assets, primarily stocks, bonds and life insurance(1)..................... (2,413) (2,063)
--------- ---------
Accrued postretirement benefit obligation.................................................... $ 2,464 $ 2,394
--------- ---------
--------- ---------
</TABLE>

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

(1) Medical plan assets include Communications Stock and Media Stock of $155 and
$94, respectively, in 1996.

The actuarial assumptions used to calculate the accumulated postretirement
benefit obligation follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Discount rate..................................... 7.00% 7.50%
Medical cost trend rate*.......................... 8.00% 8.00%
</TABLE>

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

* Medical cost trend rate gradually declines to an ultimate rate of 5.5
percent in 2011.

A one-percent increase in the assumed health care cost trend rate for each
future year would have increased the aggregate of the service and interest cost
components of 1997 net postretirement benefit cost by approximately $11 and
increased the 1997 accumulated postretirement benefit obligation by
approximately $394.

For U S WEST, the annual funding amount is based on its cash requirements,
with the funding at U S WEST Communications based on regulatory accounting
requirements.

Anticipated future benefit changes have been reflected in these
postretirement benefit calculations.

F-42
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: INCOME TAXES

The components of the provision for income taxes follow:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
FEDERAL:
Current......................................... $587 $601 $481
Deferred........................................ (147) 5 225
Investment tax credits--net..................... (15) (28) (38)
---- ---- ----
425 578 668
---- ---- ----
STATE AND LOCAL:
Current......................................... 100 75 64
Deferred........................................ (16) 11 54
---- ---- ----
84 86 118
---- ---- ----
FOREIGN:
Current......................................... (1) 2 6
Deferred........................................ 14 30 33
---- ---- ----
13 32 39
---- ---- ----
Provision for income taxes........................ $522 $696 $825
---- ---- ----
---- ---- ----
</TABLE>

U S WEST paid $636, $693 and $566 for income taxes in 1997, 1996 and 1995,
respectively, inclusive of the capital assets segment.

The effective tax rate differs from the statutory tax rate as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1997 1996 1995
----- ----- -----
(IN PERCENT)
<S> <C> <C> <C>
Federal statutory tax rate........................ 35.0 35.0 35.0
State income taxes--net of federal effect......... 4.4 3.0 3.5
Foreign taxes--net of federal effect.............. 0.7 1.1 1.2
Goodwill amortization............................. 4.6 0.8 0.4
Investment tax credit amortization................ (0.8) (0.9) (1.2)
Other............................................. (1.2) (1.2) (0.6)
----- ----- -----
Effective tax rate................................ 42.7 37.8 38.3
----- ----- -----
----- ----- -----
</TABLE>

F-43
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: INCOME TAXES (CONTINUED)

The components of the net deferred tax liability follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Intangible assets................................. $2,605 $2,414
Property, plant and equipment..................... 1,862 1,891
State deferred taxes--net of federal effect....... 871 1,141
Leases............................................ 591 679
Investments....................................... -- 373
Other............................................. 345 126
------ ------
Deferred tax liabilities........................ 6,274 6,624
------ ------
Postemployment benefits, including pension........ 768 698
State deferred taxes--net of federal effect....... 221 223
Restructuring, assets held for sale and other..... 209 301
Investments....................................... 203 --
Net operating loss and tax credit carryforwards... 155 466
Unamortized investment tax credit................. 59 61
Valuation allowance............................... (320) (387)
Other............................................. 615 455
------ ------
Deferred tax assets............................. 1,910 1,817
------ ------
Net deferred tax liability........................ $4,364 $4,807
------ ------
------ ------
</TABLE>

In connection with the Continental Acquisition, U S WEST has net operating
loss carryforwards of approximately $300 for federal income tax purposes,
expiring in various years through 2011. U S WEST also acquired investment tax
credit carryforwards of approximately $50, expiring in various years through
2005. A valuation allowance of $320 has been established for the carryforwards
and a deferred tax asset associated with an investment due to potential
limitations on utilization which may exist for U S WEST. If in future periods
the realization of the carryforwards or deferred tax asset becomes more likely
than not, any reduction in the valuation allowance will be allocated to reduce
goodwill and acquired intangible assets.

The current portion of the deferred tax asset was $373 and $213 at December
31, 1997 and 1996, respectively, resulting primarily from restructuring charges
and compensation-related items. The net deferred tax liability includes $669 and
$671 in 1997 and 1996, respectively, related to the capital assets segment.
Foreign operations contributed pretax losses of $604, $362, and $35 during 1997,
1996 and 1995, respectively.

NOTE 20: COMMITMENTS AND CONTINGENCIES

COMMUNICATIONS GROUP CONTINGENCIES

At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.

F-44
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: COMMITMENTS AND CONTINGENCIES (CONTINUED)

WASHINGTON. In 1996, the Washington State Utilities and Transportation
Commission ("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.

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.

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 interexchange carriers 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.

F-45
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: COMMITMENTS AND CONTINGENCIES (CONTINUED)

MEDIA GROUP CONTINGENCIES

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
a multi-phased joint venture with AirTouch Communications, Inc. ("AirTouch").
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.

U S WEST GUARANTEES

U S WEST commitments and debt guarantees associated with Media Group
international and domestic investments totaled approximately $650 and $175
respectively, at December 31, 1997. In addition, a Media Group subsidiary
guarantees debt, non-recourse to U S WEST, associated with its international
investment in the principal amount of approximately $600.

NOTE 21: SUBSEQUENT EVENT

SALE OF DOMESTIC WIRELESS BUSINESSES

On January 29, 1998, U S WEST entered into an Agreement and Plan of Merger
(the "AirTouch Merger Agreement") pursuant to which U S WEST agreed to sell its
domestic wireless business to AirTouch in a tax-efficient transaction (the
"AirTouch Transaction"). The domestic wireless business includes cellular
communication services provided to 2.6 million customers in 12 western and
midwestern states and a 25 percent interest in PrimeCo Personal Communications,
L.P., a provider of PCS services. Pursuant to the AirTouch Merger Agreement,
AirTouch will acquire these cellular and PCS interests. Consideration under the
AirTouch Transaction totals approximately $5.7 billion (subject to certain
closing adjustments) and consists of (i) debt reduction of approximately $1.4
billion, (ii) the issuance to U S WEST of $1.6 billion in liquidation preference
of dividend bearing AirTouch preferred stock (fair value of approximately $1.45
billion), and (iii) approximately $2.7 billion in value of AirTouch common
stock. The number of shares of AirTouch common stock to be received by U S WEST
will depend on the volume-weighted average trading price of the AirTouch common
stock during a 30-day period ending on the fifth trading day prior to the
closing of the transaction (the "AirTouch Determination Price"). If the AirTouch
Determination Price is greater than or equal to $45, U S WEST will receive 60.8
million shares of AirTouch common stock. If the AirTouch Determination Price is
$40 or lower, U S WEST will receive 67.1 million shares of AirTouch common
stock. If the AirTouch Determination Price is between $40 and $45, the number of
shares of AirTouch common stock to be received will decrease from 67.1 million
to 60.8 million on a proportionate basis.

U S WEST expects to consummate the AirTouch Transaction in the second
quarter of 1998, subject to the receipt of certain regulatory and other third
party approvals. The approval of U S WEST's stockholders is not required to
consummate the AirTouch transaction. Consummation of the transaction will result

F-46
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21: SUBSEQUENT EVENT (CONTINUED)

in the disposition of Media Group's domestic wireless businesses. If the terms
of the AirTouch Determination Price were applied as of February 20, 1998, this
transaction would result in a gain of approximately $2.2 billion, net of
deferred taxes of $1.6 billion.

In connection with this transaction, U S WEST and AirTouch will enter into
an investment agreement, pursuant to which AirTouch will agree to provide to U S
WEST registration rights with respect to the shares of AirTouch preferred stock
and AirTouch common stock which U S WEST receives in the AirTouch Transaction.

U S WEST and AirTouch are currently parties to a multi-phased joint venture
pursuant to which they have agreed to combine their domestic cellular
businesses. The AirTouch Transaction has been entered into in lieu of such joint
venture.

NOTE 22: NET INVESTMENT IN ASSETS HELD FOR SALE

The Consolidated Financial Statements include the discontinued operations of
the capital assets segment. In 1993, the U S WEST Board approved a plan to
dispose of the capital assets segment through the sale of segment assets and
businesses. The capital assets segment includes activities related to financial
services and financial guarantee insurance operations. Also included in the
segment is U S WEST Real Estate, Inc., for which disposition was announced in
1991.

Effective January 1, 1995, the capital assets segment has been accounted for
in accordance with Staff Accounting Bulletin No. 93, issued by the Securities
and Exchange Commission, which requires discontinued operations not disposed of
within one year of the measurement date to be accounted for prospectively in
continuing operations as a "net investment in assets held for sale." The net
realizable value of the assets is evaluated on an ongoing basis with adjustments
to the existing reserve, if any, charged to continuing operations. No such
adjustment was required in 1997, 1996 or 1995.

In second-quarter 1996, U S WEST received proceeds of $98 from the sale of
3,750,000 shares of FSA common stock. This sale reduced U S WEST's ownership in
FSA to approximately 40 percent. Also in second-quarter 1996, U S WEST issued
DECS due May 15, 1999. The shares of FSA to be delivered upon maturity of the
DECS, combined with the exercise of outstanding options held by Fund American
Enterprises Holdings, Inc. to purchase FSA shares would, if consummated,
substantially dispose of U S WEST's ownership in FSA. See Note 10--Debt and Note
14--Preferred Stock Subject to Mandatory Redemption--to the Consolidated
Financial Statements.

In fourth-quarter 1995, U S WEST issued DECS to reduce its investment in
Enhance by December 1998. During 1997, in order to monetize unrealized gains
associated with its investment in Enhance, U S WEST sold options for the
purchase of 828,000 residual shares of Enhance common stock at the DECS
maturity. At December 31, 1997, an unrecognized loss of $10 (net of income tax
benefits of $7) was included in equity related to these contracts. The shares of
Enhance to be delivered upon maturity of the DECS combined with the option
would, if consummated, result in a complete disposition of U S WEST's ownership
in Enhance. See Note 10--Debt--to the Consolidated Financial Statements.

U S WEST Real Estate, Inc. has sold various assets for proceeds of $88, $156
and $120 in each of the three years ended December 31, 1997, respectively. The
sales proceeds were in line with estimates. Proceeds from sales were primarily
used to repay related debt. U S WEST expects to substantially

F-47
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22: NET INVESTMENT IN ASSETS HELD FOR SALE (CONTINUED)

complete the liquidation of this portfolio by the end of 1998. The balance of
real estate and related assets subject to sale is approximately $213, net of
reserves, as of December 31, 1997.

Building sales and operating revenues of the capital assets segment were
$116, $223 and $237 in 1997, 1996 and 1995, respectively. Income or losses from
the capital assets segment are being deferred and are included within the
reserve for assets held for sale.

The assets and liabilities of the capital assets segment have been
separately classified on the Consolidated Balance Sheets as net investment in
assets held for sale.

The components of net investment in assets held for sale follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 54 $ 21
Finance receivables--net.......................... 777 869
Investment in real estate--net of valuation
allowance....................................... 156 182
Bonds, at market value............................ 119 146
Investment in FSA................................. 365 326
Other assets...................................... 197 165
------ ------
Total assets...................................... $1,668 $1,709
------ ------
------ ------

LIABILITIES
Debt.............................................. $ 372 $ 481
Deferred income taxes............................. 669 671
Accounts payable, accrued liabilities and other... 197 137
Minority interests................................ 11 11
------ ------
Total liabilities................................. 1,249 1,300
------ ------
Net investment in assets held for sale............ $ 419 $ 409
------ ------
------ ------
</TABLE>

Finance receivables primarily consist of contractual obligations under
long-term leases that U S WEST intends to run off. These long-term leases
consist mostly of leveraged leases related to aircraft and power plants. For
leveraged leases, the cost of the assets leased is financed primarily through
nonrecourse debt which is netted against the related lease receivable.

F-48
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22: NET INVESTMENT IN ASSETS HELD FOR SALE (CONTINUED)

The components of finance receivables follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Receivables....................................... $ 719 $ 821
Unguaranteed estimated residual values............ 431 444
------ ------
1,150 1,265
Less: Unearned income............................. 355 380
Credit loss and other allowances.................. 18 16
------ ------
Finance receivables--net.......................... $ 777 $ 869
------ ------
------ ------
</TABLE>

Investments in debt securities are classified as available for sale and are
carried at market value. Any resulting unrealized holding gains or losses, net
of applicable deferred income taxes, are reflected as a component of equity.

The amortized cost of $117 and $147 at December 31, 1997 and 1996,
respectively, of investments in debt securities approximates market value. Total
net unrealized gains in 1997 of $22 (net of deferred taxes of $16) and 1996 net
unrealized losses of $7 (net of deferred taxes of $5) are included in equity.

DEBT

Interest rates and maturities of debt associated with the capital assets
segment at December 31 follow:

<TABLE>
<CAPTION>
MATURITIES
--------------------------------------------------------------------------
THERE- TOTAL TOTAL
INTEREST RATES 1998 1999 2000 2001 2002 AFTER 1997 1996
- ---------------------------------- ----- --------- ----- ----- ----- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Above 6% to 7%.................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 15
Above 7% to 8%.................... 12 12 -- -- 1 148 173 --
Above 8% to 9%.................... -- 95 4 -- -- -- 99 154
Above 9% to 10%................... -- -- -- -- -- -- -- 5
--- --------- --- --- --- ----- --------- ---------
$ 12 $ 107 $ 4 $ -- $ 1 $ 148 272 174
--- --------- --- --- --- -----
--- --------- --- --- --- -----
Allocated to the capital assets
segment--net.................... 100 307
--------- ---------
Total............................. $ 372 $ 481
--------- ---------
--------- ---------
</TABLE>

F-49
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22: NET INVESTMENT IN ASSETS HELD FOR SALE (CONTINUED)

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK--FINANCIAL GUARANTEES

U S WEST retained certain risks in asset-backed obligations related to the
commercial real estate portfolio. The principal amounts insured on the
asset-backed obligations follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
TERMS OF MATURITY 1997 1996
- ------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
0 to 5 Years.................................................................. $ 449 $ 416
5 to 10 Years................................................................. 266 436
10 to 15 Years................................................................ -- 8
--------- ---------
Total......................................................................... $ 715 $ 860
--------- ---------
--------- ---------
</TABLE>

Concentrations of collateral associated with insured asset--backed
obligations follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
TYPE OF COLLATERAL 1997 1996
- ------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
Commercial mortgages:
Commercial real estate...................................................... $ 319 $ 341
Corporate secured........................................................... 396 519
--------- ---------
Total......................................................................... $ 715 $ 860
--------- ---------
--------- ---------
</TABLE>

ADDITIONAL FINANCIAL INFORMATION

Information for U S WEST Financial Services, Inc. ("USWFS"), a member of the
capital assets segment, follows:

<TABLE>
<CAPTION>
YEAR ENDED OR AS OF DECEMBER
31,
-------------------------------
SUMMARIZED FINANCIAL INFORMATION 1997 1996 1995
- ----------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Revenue.......................................................... $ 23 $ 26 $ 44
Net finance receivables.......................................... 824 859 931
Total assets..................................................... 1,208 1,058 1,085
Total debt....................................................... 363 236 274
Total liabilities................................................ 1,121 998 1,024
Equity........................................................... 87 60 61
</TABLE>

In September 1997, USWFS pledged certain finance receivables as collateral
for a nonrecourse loan totaling $173. The loan bears interest at an annual rate
of 7.2 percent and matures in the year 2009.

F-50
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS

The Supplemental Combined Statements of the Communications Group and the
Media Group (collectively the "Groups") comprise all of the accounts included in
the corresponding Consolidated Financial Statements of U S WEST. Investments in
less than majority-owned ventures are generally accounted for using the equity
method. The separate Supplemental Group Combined Statements have been prepared
on a basis that management believes to be reasonable and appropriate and
include: (i) the combined historical balance sheets, results of operations and
cash flows of the businesses that comprise each of the Groups, with all
significant intra-group amounts and transactions eliminated; (ii) in the case of
the Communications Group Supplemental Combined Statements, certain corporate
assets and liabilities of U S WEST and related transactions identified with the
Communications Group; (iii) in the case of the Media Group Supplemental Combined
Statements, all other corporate assets and liabilities and related transactions
of U S WEST; and (iv) an allocated portion of the corporate expense of U S WEST.
Transactions between the Communications Group and the Media Group have not been
eliminated.

Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and shareowners' equity between the Communications Group
and the Media Group for the purpose of preparing the respective supplemental
statements of such Group, owners of Communications Stock and Media Stock are
subject to risks associated with an investment in a single company and all of U
S WEST's businesses, assets and liabilities. Financial effects arising from
either Group that affect U S WEST's results of operations or financial condition
could, if significant, affect the results of operations or financial position of
the other Group or the market price of the class of common stock relating to the
other Group. Any net losses of the Communications Group or the Media Group, and
dividends or distributions on, or repurchases of Communications Stock, Media
Stock or preferred stock, will reduce the funds of U S WEST legally available
for payment of dividends on both the Communications Stock and Media Stock.
Accordingly, each of the Group's Supplemental Combined Statements should be read
in conjunction with U S WEST's Consolidated Financial Statements and the other
Group's Supplemental Combined Statements.

F-51
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF INCOME 1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Operating revenues:
Local service................................................................... $ 5,016 $ 4,770 $ 4,344
Interstate access service....................................................... 2,666 2,507 2,378
Intrastate access service....................................................... 761 770 747
Long-distance network services.................................................. 885 1,100 1,189
Other services.................................................................. 991 932 826
--------- --------- ---------
Total operating revenues...................................................... 10,319 10,079 9,484

Operating expenses:
Employee-related expenses....................................................... 3,697 3,594 3,341
Other operating expenses........................................................ 1,870 1,634 1,543
Taxes other than income taxes................................................... 416 389 380
Depreciation and amortization................................................... 2,126 2,122 2,042
--------- --------- ---------
Total operating expenses...................................................... 8,109 7,739 7,306
--------- --------- ---------

Operating income.................................................................. 2,210 2,340 2,178

Interest expense.................................................................. (403) (445) (427)
Gains on sales of rural telephone exchanges....................................... 77 59 136
Gain on sale of investment in Bellcore............................................ 53 -- --
Other expense--net................................................................ (73) (41) (41)
--------- --------- ---------
Income before income taxes, extraordinary items and cumulative effect of change in
accounting principle............................................................ 1,864 1,913 1,846
Provision for income taxes........................................................ (684) (698) (662)
--------- --------- ---------
Income before extraordinary items and cumulative effect of change in accounting
principle....................................................................... 1,180 1,215 1,184
Extraordinary items--early extinguishment of debt--net of tax..................... (3) -- (8)
--------- --------- ---------
Income before cumulative effect of change in accounting principle................. 1,177 1,215 1,176
Cumulative effect of change in accounting principle--net of tax................... -- 34 --
--------- --------- ---------
NET INCOME........................................................................ $ 1,177 $ 1,249 $ 1,176
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-52
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
U S WEST COMMUNICATIONS GROUP COMBINED BALANCE SHEETS 1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
ASSETS

Gross property, plant and equipment......................................................... 33,408 32,645
Less accumulated depreciation............................................................... 19,176 18,639
--------- ---------
Property, plant and equipment--net.......................................................... 14,232 14,006

Other assets................................................................................ 832 827
--------- ---------
Total assets................................................................................ $ 17,246 $ 16,915
--------- ---------
--------- ---------

LIABILITIES AND EQUITY

Current liabilities:
Short-term debt........................................................................... $ 626 $ 834
Accounts payable.......................................................................... 1,325 897
Employee compensation..................................................................... 375 342
Dividends payable......................................................................... 259 257
Advanced billings and customer deposits................................................... 292 250
Current portion state regulatory liability................................................ 225 --
Accrued property taxes.................................................................... 205 193
Payable to Media Group.................................................................... 90 92
Other..................................................................................... 603 602
--------- ---------
Total current liabilities................................................................... 4,000 3,467

Long-term debt.............................................................................. 5,020 5,664
Postretirement and other postemployment benefit obligations................................. 2,468 2,387
Deferred income taxes....................................................................... 805 749
Unamortized investment tax credits.......................................................... 168 173
Deferred credits and other.................................................................. 586 558

Contingencies

Communications Group equity................................................................. 4,199 3,917
--------- ---------
Total liabilities and equity................................................................ $ 17,246 $ 16,915
--------- ---------
--------- ---------
</TABLE>

F-53
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF CASH FLOWS 1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 1,177 $ 1,249 $ 1,176
Adjustments to net income:
Depreciation and amortization................................................. 2,126 2,122 2,042
Gains on sales of rural telephone exchanges................................... (77) (59) (136)
Gain on sale of investment in Bellcore........................................ (53) -- --
Cumulative effect of change in accounting principle........................... -- (34) --
Deferred income taxes and amortization of investment tax
credits..................................................................... (18) 91 172
Changes in operating assets and liabilities:
Restructuring payments........................................................ (66) (226) (315)
Postretirement medical and life costs, net of cash fundings................... 80 28 (90)
Accounts receivable........................................................... (46) (5) (117)
Inventories, supplies and other current assets................................ (45) 27 (51)
Accounts payable and accrued liabilities...................................... 564 98 7
Other--net...................................................................... 206 15 31
--------- --------- ---------
Cash provided by operating activities............................................. 3,848 3,306 2,719
--------- --------- ---------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment.................................. (2,139) (2,419) (2,462)
Purchase of PCS wireless licenses............................................... (73) -- --
Proceeds from sales of rural telephone exchanges................................ 67 174 214
Proceeds from sale of investment in Bellcore.................................... 65 -- --
Proceeds from (payments on) disposals of property, plant and equipment.......... 22 15 (18)
Other--net...................................................................... -- -- (2)
--------- --------- ---------
Cash (used for) investing activities............................................ (2,058) (2,230) (2,268)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt............................... (510) 96 (832)
Proceeds from issuance of long-term debt........................................ 29 23 1,647
Repayments of long-term debt.................................................... (445) (482) (334)
Dividends paid on common stock.................................................. (992) (939) (926)
Proceeds from issuance of common stock.......................................... 75 134 50
--------- --------- ---------
Cash (used for) financing activities............................................ (1,843) (1,168) (395)
--------- --------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease)............................................................. (53) (92) 56
Beginning balance............................................................... 80 172 116
--------- --------- ---------
Ending balance.................................................................. $ 27 $ 80 $ 172
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-54
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
U S WEST MEDIA GROUP COMBINED STATEMENTS OF OPERATIONS 1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
Sales and other revenues:
Cable and broadband................................................................ $ 2,341 $ 494 $ 215
Wireless communications............................................................ 1,428 1,183 941
Directory and information services................................................. 1,245 1,259 1,180
Other.............................................................................. 29 19 38
--------- --------- ---------
Total sales and other revenues................................................... 5,043 2,955 2,374
--------- --------- ---------
Operating expenses:
Cost of sales and other revenues................................................... 1,666 966 772
Selling, general and administrative expenses....................................... 1,487 1,052 886
Depreciation and amortization...................................................... 1,294 422 249
--------- --------- ---------
Total operating expenses......................................................... 4,447 2,440 1,907
--------- --------- ---------

Operating income..................................................................... 596 515 467

Interest expense..................................................................... (680) (168) (100)
Equity losses in unconsolidated ventures............................................. (909) (346) (207)
Gains on sales of investments........................................................ 421 -- --
Gain on merger of joint venture interest............................................. -- -- 157
Guaranteed minority interest expense................................................. (87) (55) (14)
Other income (expense)--net.......................................................... 17 (19) 5
--------- --------- ---------
Income (loss) before income taxes and extraordinary item............................. (642) (73) 308
(Provision) benefit for income taxes................................................. 162 2 (163)
--------- --------- ---------
Income (loss) before extraordinary item.............................................. (480) (71) 145
Extraordinary item--early extinguishment of debt--net of tax......................... -- -- (4)
--------- --------- ---------
NET INCOME (LOSS).................................................................... $ (480) $ (71) $ 141
--------- --------- ---------
--------- --------- ---------
Dividends on preferred stock......................................................... (52) (9) (3)
--------- --------- ---------
EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK........................................... $ (532) $ (80) $ 138
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-55
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
U S WEST MEDIA GROUP COMBINED BALANCE SHEETS 1997 1996
--------- ---------
DOLLARS IN MILLIONS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 184 $ 121
Accounts and notes receivable, less allowance for credit
losses of $82 and $85, respectively..................................................... 589 508
Deferred directory costs.................................................................. 257 259
Receivable from Communications Group...................................................... 90 92
Marketable securities..................................................................... -- 58
Deferred tax asset........................................................................ 126 43
Other..................................................................................... 82 58
--------- ---------
Total current assets.................................................................... 1,328 1,139

Property, plant and equipment--net........................................................ 4,348 4,275
Investment in Time Warner Entertainment................................................... 2,486 2,477
Net investment in international ventures.................................................. 475 1,548
Net investment in assets held for sale.................................................... 419 409
Intangible assets--net.................................................................... 12,597 12,595
Other assets.............................................................................. 961 1,618
--------- ---------
Total assets............................................................................ $ 22,614 $ 24,061
--------- ---------
--------- ---------

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt........................................................................... $ 804 $ 217
Due to Continental Cablevision shareholders............................................... -- 1,150
Accounts payable.......................................................................... 432 425
Accrued interest payable.................................................................. 212 84
Deferred revenue and customer deposits.................................................... 152 129
Employee compensation..................................................................... 146 128
Other..................................................................................... 680 583
--------- ---------
Total current liabilities............................................................... 2,426 2,716

Long-term debt............................................................................ 8,228 8,636
Deferred income taxes..................................................................... 3,262 3,600
Deferred credits and other................................................................ 393 346

Commitments and contingencies

Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding
solely Company-guaranteed debentures.................................................... 1,080 1,080
Preferred stock subject to mandatory redemption........................................... 100 51

Media Group equity........................................................................ 7,171 7,723
Company LESOP guarantee................................................................... (46) (91)
--------- ---------
Total equity.............................................................................. 7,125 7,632
--------- ---------
Total liabilities and equity............................................................ $ 22,614 $ 24,061
--------- ---------
--------- ---------
</TABLE>

F-56
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23:SUPPLEMENTAL COMMUNICATIONS GROUP AND MEDIA GROUP COMBINED STATEMENTS
(CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
U S WEST MEDIA GROUP COMBINED STATEMENTS OF CASH FLOWS 1997 1996 1995
--------- --------- ---------
DOLLARS IN MILLIONS
<S> <C> <C> <C>

OPERATING ACTIVITIES
Net income (loss)............................................................... $ (480) $ (71) $ 141
Adjustments to net income (loss):
Depreciation and amortization................................................. 1,294 422 249
Equity losses in unconsolidated ventures...................................... 909 346 207
Gains on sales of investments................................................. (421) -- --
Gain on merger of joint venture interest...................................... -- -- (157)
Deferred income taxes......................................................... (146) (73) 102
Provision for uncollectibles.................................................. 95 65 55
Changes in operating assets and liabilities:
Restructuring payments........................................................ (4) (16) (19)
Accounts and notes receivable................................................. (189) (101) (103)
Deferred directory costs, prepaid and other................................... (60) 4 (28)
Accounts payable and accrued liabilities...................................... 218 112 36
Other adjustments--net.......................................................... 102 36 157
--------- --------- ---------
Cash provided by operating activities........................................... 1,318 724 640
--------- --------- ---------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment.................................. (1,551) (652) (363)
Payment to Continental Cablevision shareowners.................................. (1,150) -- --
Investments in international ventures........................................... (325) (243) (681)
Investment in PCS............................................................... (213) (132) (286)
Proceeds from sales of investments.............................................. 1,827 28 127
Cash from net investment in assets held for sale................................ 231 213 --
Other--net...................................................................... (61) (32) (35)
--------- --------- ---------
Cash (used for) investing activities............................................ (1,242) (818) (1,238)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt............................... (3,685) 3,891 (449)
Proceeds from issuance of long-term debt........................................ 4,123 360 1,085
Repayments of long-term debt.................................................... (379) (4,217) (724)
Proceeds from issuance of Preferred Securities--net............................. -- 465 581
Proceeds from issuance of common stock.......................................... 31 2 57
Purchase of treasury stock...................................................... (53) (297) --
Dividends paid on preferred stock............................................... (50) (9) (3)
Other--net...................................................................... -- -- (22)
--------- --------- ---------
Cash (used for) provided by financing activities................................ (13) 195 525
--------- --------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease)............................................................. 63 101 (73)
Beginning balance............................................................... 121 20 93
--------- --------- ---------
Ending balance.................................................................. $ 184 $ 121 $ 20
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-57
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 24: QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997
Sales and other revenues................................................... $ 3,766 $ 3,787 $ 3,918 $ 3,764
Income before income taxes and extraordinary item.......................... 400 415 333 74
Income before extraordinary item........................................... 230 235 198 37
Net income................................................................. 230 238 192 37
COMMUNICATIONS GROUP:
Basic earnings per common share before extraordinary item................ 0.70 0.69 0.70 0.35
Basic earnings per common share.......................................... 0.70 0.69 0.69 0.35
Diluted earnings per common share before extraordinary item.............. 0.70 0.68 0.69 0.35
Diluted earnings per common share........................................ 0.70 0.68 0.69 0.35
MEDIA GROUP:
Basic and diluted loss per common share before extraordinary item........ (0.20) (0.17) (0.26) (0.24)
Basic and diluted loss per common share.................................. (0.20) (0.17) (0.26) (0.24)

1996
Sales and other revenues................................................... $ 3,050 $ 3,124 $ 3,179 $ 3,558
Income before income taxes and cumulative effect of change in accounting
principle................................................................ 489 519 494 338
Income before cumulative effect of change in accounting principle.......... 297 313 304 230
Net income................................................................. 331 313 304 230
COMMUNICATIONS GROUP:
Basic earnings per common share before cumulative effect of change in
accounting principle................................................... 0.62 0.68 0.60 0.65
Basic earnings per common share.......................................... 0.69 0.68 0.60 0.65
Diluted earnings per common share before cumulative effect of change in
accounting principle................................................... 0.61 0.67 0.59 0.64
Diluted earnings per common share........................................ 0.68 0.67 0.59 0.64
MEDIA GROUP:
Basic and diluted earnings (loss) per common share....................... -- (0.03) 0.04 (0.16)
</TABLE>

1997 first-quarter net income includes a gain of $31 ($0.05 per Media share)
related to the sale of the Company's wireless interest in France and $11 ($0.02
per Communications share) from gains on the sales of certain rural telephone
exchanges. 1997 second-quarter net income includes a gain of $25 ($0.04 per
Media share) related to the sales of TCG and Time Warner shares, $18 ($0.04 per
Communications share) from gains on the sales of certain rural telephone
exchanges, and a gain of $3 (no Media share impact) on the early extinguishment
of debt. 1997 third-quarter net income includes $19 ($0.04 per Communications
share) from gains on the sales of certain rural telephone exchanges, a $6 charge
($0.01 per Communications share and no Media share impact) for the early
extinguishment of debt, and includes a gain of $7 ($0.01 per Media share)
related to sales of TCG shares. 1997 fourth-quarter net income includes a $120
($0.20 per Media share) charge related to Asian investments, and a $152
regulatory charge ($0.31 per Communications share) related primarily to the 1997
Washington State Supreme Court ruling that upheld a WUTC 1996 rate order. Also
included is a gain of $89 ($0.15 per Media share) related to the sale of TCG
shares, a gain of $80 ($0.13 per Media share) on the sale of Fintelco, a gain of
$32 ($0.07 per Communications share) from the sale of U S WEST Communications'
investment in Bellcore, and a gain of $17 ($0.03 per Media share) from the sale
of U S WEST Polska.

F-58
<PAGE>

U S WEST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 24: QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

1996 first-quarter net income includes the cumulative and current effects of
$34 ($0.07 per Communications share) and $5 ($0.01 per Communications share),
respectively, from adopting SFAS No. 121. 1996 second-quarter net income
includes $30 ($0.06 per Communications share) from gains on the sales of certain
rural telephone exchanges, a charge of $19 ($0.04 per Media share) related to
the sale of the Company's cable television interests in Norway, Sweden and
Hungary and the current effects of $5 ($0.01 per Communications share) from
adopting SFAS No. 121. 1996 third-quarter net income includes $1 (no share
impact) from gains on the sales of certain rural telephone exchanges and the
current effects of $3 ($0.01 per Communications share) from adopting SFAS No.
121. 1996 fourth-quarter net income includes $5 ($0.01 per Communications share)
from gains on the sales of certain rural telephone exchanges, losses of $71 and
losses available for common stock of $77 ($0.15 per Media share) related to the
Continental Acquisition and the current effects of $2 ($0.01 per Communications
share) from adopting SFAS No. 121.

<TABLE>
<CAPTION>
MARKET PRICE
----------------------------------
PER SHARE MARKET AND DIVIDEND DATA HIGH LOW CLOSE DIVIDENDS
- ------------------------------------------------------------------ ---------- ---------- ---------- -----------
(WHOLE DOLLARS)
<S> <C> <C> <C> <C>
1997
COMMUNICATIONS STOCK
First quarter................................................... $ 37.2500 $ 31.7500 $ 33.8750 $ 0.5350
Second quarter.................................................. 38.5000 31.1250 37.6875 0.5350
Third quarter................................................... 39.4375 35.6250 38.5000 0.5350
Fourth quarter.................................................. 46.9375 36.8750 45.1250 0.5350
MEDIA STOCK
First quarter................................................... $ 20.6250 $ 17.6250 $ 18.5000 $ --
Second quarter.................................................. 22.3750 16.0000 20.2500 --
Third quarter................................................... 24.2500 19.8125 22.3125 --
Fourth quarter.................................................. 29.1250 22.3125 28.8750 --

1996
COMMUNICATIONS STOCK
First quarter................................................... $ 37.5000 $ 30.2500 $ 32.3750 $ 0.5350
Second quarter.................................................. 34.6250 31.1250 32.0000 0.5350
Third quarter................................................... 32.2500 27.2500 29.8750 0.5350
Fourth quarter.................................................. 33.6250 29.2500 32.2500 0.5350
MEDIA STOCK
First quarter................................................... $ 23.0000 $ 18.8750 $ 20.6250 $ --
Second quarter.................................................. 21.0000 16.8750 18.2500 --
Third quarter................................................... 18.8750 14.3750 16.8750 --
Fourth quarter.................................................. 19.8750 15.3750 18.3750 --
</TABLE>

F-59
<PAGE>

U S WEST, INC.

SUPPLEMENTARY SELECTED PROPORTIONATE RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)

U S WEST believes that proportionate financial data facilitates the
understanding and assessment of its Consolidated Financial Statements. The
following proportionate accounting table reflects the relative weight of U S
WEST's ownership interest in its domestic and international investments in cable
and broadband, wireless communications and directory and information services
operations. The financial information included below departs materially from
GAAP because it aggregates the revenues and operating income of entities not
controlled by U S WEST with those of the consolidated operations of U S WEST.
This table is not intended to replace the Consolidated Financial Statements
prepared in accordance with GAAP. U S WEST considers earnings before interest,
taxes, depreciation, amortization and other ("EBITDA") an important indicator of
the operating performance of its businesses. This calculation of EBITDA may not
be comparable to other similarly titled measures of other companies. EBITDA,
however, should not be considered as an alternative to operating or net income
as an indicator of performance, or as an alternative to cash flows from
operating activities as a measure of liquidity, in each case determined in
accordance with GAAP.

<TABLE>
<CAPTION>
COMMUNICATIONS MEDIA
GROUP GROUP ELIMINATIONS TOTAL
--------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
1997
Sales and other revenues.................................... $ 10,319 $ 9,107 $ (127) $ 19,299
Operating expenses.......................................... 5,983 6,486 (127) 12,342
------- --------- ----- ---------
EBITDA...................................................... 4,336 2,621 -- 6,957
Depreciation and amortization............................... 2,126 2,136 -- 4,262
------- --------- ----- ---------
Operating income............................................ 2,210 485 -- 2,695
Income (loss) before extraordinary items.................... 1,180 (480) -- 700
Net income (loss)........................................... 1,177 (480) -- 697
- --------------------------------------------------------------------------------------------------------------------
1996
Sales and other revenues.................................... $ 10,079 $ 6,367 $ (123) $ 16,323
Operating expenses.......................................... 5,617 4,894 (123) 10,388
------- --------- ----- ---------
EBITDA...................................................... 4,462 1,473 -- 5,935
Depreciation and amortization............................... 2,122 1,014 -- 3,136
------- --------- ----- ---------
Operating income............................................ 2,340 459 -- 2,799
Income (loss) before cumulative effect of change in
accounting principle...................................... 1,215 (71) -- 1,144
Net income (loss)........................................... 1,249 (71) -- 1,178
- --------------------------------------------------------------------------------------------------------------------
1995 (UNAUDITED)
Sales and other revenues.................................... $ 9,484 $ 5,115 $ (112) $ 14,487
Operating expenses.......................................... 5,264 3,966 (112) 9,118
------- --------- ----- ---------
EBITDA...................................................... 4,220 1,149 -- 5,369
Depreciation and amortization............................... 2,042 673 -- 2,715
------- --------- ----- ---------
Operating income............................................ 2,178 476 -- 2,654
Income before extraordinary item............................ 1,184 145 -- 1,329
Net income.................................................. 1,176 141 -- 1,317
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

F-60
<PAGE>

ANNEX G

NEW U S WEST
COMBINED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Reports of Independent Public Accountants............................................ G-2
Combined Statements of Income........................................................ G-4
Combined Balance Sheets.............................................................. G-5
Combined Statements of Cash Flows.................................................... G-6
Notes to Combined Financial Statements............................................... G-7
Reports of Independent Public Accountants............................................ G-30
Schedule II--Valuation and Qualifying Accounts....................................... G-31
</TABLE>

G-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of U S WEST, Inc.:

We have audited the accompanying Combined Balance Sheets of New U S WEST (as
described in Note 1 to the combined financial statements) as of December 31,
1997 and 1996, and the related Combined Statements of Income and Cash Flows for
the years then ended. These combined financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of New U S WEST as of
December 31, 1997 and 1996, and the combined results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Denver, Colorado,

February 12, 1998.

G-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowners of U S WEST, Inc.:

We have audited the accompanying Combined Statements of Income and Cash
Flows of New U S WEST (as described in Note 1 to the Combined Financial
Statements) for the year ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations of New U S WEST and
its cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Denver, Colorado
February 6, 1998

G-3
<PAGE>

NEW U S WEST
COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
DOLLARS IN MILLIONS
Operating revenues:
Local service.................................................................. $ 5,016 $ 4,770 $ 4,344
Interstate access service...................................................... 2,666 2,507 2,378
Intrastate access service...................................................... 761 770 747
Long-distance network services................................................. 885 1,100 1,189
Directory services............................................................. 1,197 1,120 1,058
Other services................................................................. 954 901 792
--------- --------- ---------
Total operating revenues..................................................... 11,479 11,168 10,508
Operating expenses:
Employee-related expenses...................................................... 3,953 3,893 3,623
Other operating expenses....................................................... 2,159 1,901 1,848
Taxes other than income taxes.................................................. 428 404 393
Depreciation and amortization.................................................. 2,163 2,158 2,067
--------- --------- ---------
Total operating expenses..................................................... 8,703 8,356 7,931
--------- --------- ---------
Operating income................................................................. 2,776 2,812 2,577

Interest expense................................................................. 405 448 429
Gains on sales of rural telephone exchanges...................................... 77 59 136
Gain on sale of investment in Bellcore........................................... 53 -- --
Other expense--net............................................................... 72 46 36
--------- --------- ---------
Income before income taxes, extraordinary items and cumulative effect of change
in accounting principle........................................................ 2,429 2,377 2,248
Provision for income taxes....................................................... 902 876 817
--------- --------- ---------
Income before extraordinary items and cumulative effect of change in accounting
principle...................................................................... 1,527 1,501 1,431
Extraordinary items--early extinguishment of debt--net of tax.................... (3) -- (8)
--------- --------- ---------
Income before cumulative effect of change in accounting principle................ 1,524 1,501 1,423
Cumulative effect of change in accounting principle--net of tax.................. -- 34 --
--------- --------- ---------
NET INCOME....................................................................... $ 1,524 $ 1,535 $ 1,423
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the Combined Financial
Statements.

G-4
<PAGE>

NEW U S WEST
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
DOLLARS IN MILLIONS
ASSETS

Current assets:
Cash and cash equivalents................................................................. $ 27 $ 80
Accounts and notes receivable, less allowance for credit
losses of $72 and $60, respectively..................................................... 1,717 1,644
Inventories and supplies.................................................................. 150 144
Deferred directory costs.................................................................. 257 242
Deferred tax asset........................................................................ 271 185
Prepaid and other......................................................................... 82 67
--------- ---------
Total current assets........................................................................ 2,504 2,362
Gross property, plant and equipment......................................................... 33,651 32,858
Less accumulated depreciation............................................................... 19,343 18,769
--------- ---------
Property, plant and equipment--net.......................................................... 14,308 14,089
Other assets................................................................................ 855 828
--------- ---------
Total assets................................................................................ $ 17,667 $ 17,279
--------- ---------
--------- ---------

LIABILITIES AND EQUITY

Current liabilities:
Short-term debt........................................................................... $ 497 $ 835
U S WEST debt............................................................................. 198 45
Accounts payable.......................................................................... 1,377 945
Employee compensation..................................................................... 412 357
Dividends payable......................................................................... 259 257
Advanced billings and customer deposits................................................... 336 294
Current portion of state regulatory liability............................................. 225 --
Accrued property taxes.................................................................... 207 197
Other..................................................................................... 688 691
--------- ---------
Total current liabilities................................................................... 4,199 3,621

Long-term debt.............................................................................. 5,020 5,665
Postretirement and other postemployment benefit obligations................................. 2,534 2,449
Deferred income taxes....................................................................... 791 722
Unamortized investment tax credits.......................................................... 168 173
Deferred credits and other.................................................................. 588 564

Contingencies

New U S WEST equity......................................................................... 4,367 4,085
--------- ---------
Total liabilities and equity................................................................ $ 17,667 $ 17,279
--------- ---------
--------- ---------
</TABLE>

The accompanying notes are an integral part of the Combined Financial
Statements.

G-5
<PAGE>

NEW U S WEST
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
DOLLARS IN MILLIONS
OPERATING ACTIVITIES
Net income...................................................................... $ 1,524 $ 1,535 $ 1,423
Adjustments to net income:
Depreciation and amortization................................................. 2,163 2,158 2,067
Gains on sales of rural telephone exchanges................................... (77) (59) (136)
Gain on sale of investment in Bellcore........................................ (53) -- --
Cumulative effect of change in accounting principle........................... -- (34) --
Deferred income taxes and amortization of investment tax credits.............. (15) 87 180
Changes in operating assets and liabilities:
Restructuring payments........................................................ (70) (242) (334)
Postretirement medical and life costs, net of cash fundings................... 85 35 (89)
Accounts receivable........................................................... (60) 1 (116)
Inventories, supplies and other current assets................................ (63) 18 (67)
Accounts payable and accrued liabilities...................................... 556 98 17
Other--net...................................................................... 201 17 25
--------- --------- ---------
Cash provided by operating activities........................................... 4,191 3,614 2,970
--------- --------- ---------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment.................................. (2,168) (2,444) (2,494)
Purchase of PCS wireless licenses............................................... (73) -- --
Proceeds from sales of rural telephone exchanges................................ 67 174 214
Proceeds from sale of investment in Bellcore.................................... 65 -- --
Proceeds from (payments on) disposals of property, plant and equipment.......... 22 15 (18)
Other--net...................................................................... -- -- 16
--------- --------- ---------
Cash (used for) investing activities............................................ (2,087) (2,255) (2,282)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt............................... (640) 159 (776)
Net proceeds from (repayments of) short-term U S WEST debt...................... 153 (42) (53)
Proceeds from issuance of long-term debt........................................ 29 23 1,649
Repayments of long-term debt.................................................... (446) (483) (334)
Proceeds from issuance of common stock.......................................... 75 134 50
Dividends paid on common stock.................................................. (992) (939) (926)
Dividends paid to U S WEST...................................................... (336) (303) (241)
--------- --------- ---------
Cash (used for) financing activities............................................ (2,157) (1,451) (631)
--------- --------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease)............................................................. (53) (92) 57
Beginning balance............................................................... 80 172 115
--------- --------- ---------
Ending balance.................................................................. $ 27 $ 80 $ 172
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the Combined Financial
Statements.

G-6
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)

NOTE 1: U S WEST SEPARATION

THE RECAPITALIZATION

In 1995, U S WEST, Inc. ("U S WEST") divided its businesses into two groups:
U S WEST Communications Group (the "Communications Group") and U S WEST Media
Group (the "Media Group") and created two separate classes of common stock under
a recapitalization plan (the "Recapitalization Plan"). One class of stock, U S
WEST Communications Group Common Stock (the "Communications Stock"), reflects
the performance of the communications businesses comprising the Communications
Group, and the other class of stock, U S WEST Media Group Common Stock (the
"Media Stock"), reflects the performance of the multimedia businesses comprising
the Media Group. Effective November 1, 1995, each share of common stock of U S
WEST was converted into one share each of Communications Stock and Media Stock.

THE SEPARATION

On October 25, 1997, the Board of Directors of U S WEST (the "Board")
adopted a proposal to separate U S WEST into two independent companies (the
"Separation"). As a result of the Separation, the Communications Group will
become an independent public company and will be renamed "U S WEST, Inc." ("New
U S WEST"). In addition, the Media Group's directory business known as U S WEST
Dex, Inc. ("Dex") will be aligned with New U S WEST (the "Dex Alignment"). The
assets of New U S WEST will be accounted for at the historical values at which
they were carried by U S WEST prior to the Separation. Following the Separation,
U S WEST will continue as an independent public company comprised of the current
businesses of Media Group other than Dex and will be renamed "MediaOne Group,
Inc." ("MediaOne").

In connection with the Dex Alignment, (i) U S WEST will distribute, as a
dividend, an aggregate of $850 in value of New U S WEST Common Stock to holders
of Media Stock and (ii) $3.9 billion of U S WEST debt, currently allocated to
Media Group, will be refinanced by New U S WEST (the "Dex Indebtedness").

The transaction is subject to a number of approvals, including approvals by
regulators and both shareowner groups, and receipt of a favorable ruling from
the Internal Revenue Service. The Separation is expected to be complete sometime
after mid-1998.

Certain of the terms of the Separation Agreement and the Dex Alignment,
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, the transfer to New U S WEST
of certain assets and liabilities of U S WEST and the allocation of certain
costs and expenses of the Separation, are not reflected in the accompanying New
U S WEST Combined Financial Statements. The full financial effects of the
Separation and Dex Alignment, which are significant to New U S WEST, will be
reflected in the financial statements in conjunction with the

G-7
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: U S WEST SEPARATION (CONTINUED)

Separation's effective date (the "Separation Date"). These Combined Financial
Statements should be read in conjunction with the New U S WEST Unaudited Pro
Forma Condensed Combined Financial Statements. See "Chapter 6: Information About
New U S WEST--New U S WEST Unaudited Pro Forma Condensed Combined Financial
Statements."

In connection with the Separation, U S WEST's existing employee benefit and
incentive compensation plans will be amended and adjusted. In addition, New U S
WEST and MediaOne will enter into a series of agreements governing the
allocation of tax and certain other liabilities and obligations arising from
periods prior to the Separation. The effects of such items are not reflected in
the accompanying New U S WEST Combined Financial Statements, but will be
included in the financial statements upon effectiveness of the Separation.
Following is a summary of the more significant items:

- STOCK INCENTIVE 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 in the
form of stock options, stock appreciation rights and restricted stock, as
well as substitute stock options and restricted 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. Each New U S WEST Common Stock option will have
the same terms and conditions, exercise price, vesting and restrictions as
the Communications Stock awards which it replaces.

- PENSION PLAN. Effective immediately prior to the Separation, 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 has approximately $12 billion of assets. Subject to final
adjustments, it is anticipated that the MediaOne Pension Plan will receive
between approximately $190 and $240 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 after the
Separation will be materially the same as the benefit expense and required
cash contributions of the Communications Group to the U S WEST Pension
Plan prior to the Separation.

G-8
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: U S WEST SEPARATION (CONTINUED)

independent actuaries using the accumulated postretirement benefit
obligations basis. It is anticipated that approximately $5 and $3,
respectively, will be transferred by the U S WEST trusts to the MediaOne
trusts out of the total assets of $225 and $600, respectively, of the U S
WEST trusts.

NEW U S WEST

New U S WEST is comprised of U S WEST Communications, Inc. ("U S WEST
Communications"), U S WEST Dex, Inc., U S WEST Communications Services, Inc., U
S WEST Federal Services, Inc., U S WEST Advanced Technologies, Inc., U S WEST
Business Resources, Inc., U S WEST Long Distance, Inc. and U S WEST Information
Technologies, Inc. Primary services provided include telecommunications services
for more than 25 million residential and business customers in U S WEST
Communications' 14 state region (the "Region"). The Region includes the states
of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico,
North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. Primary
telecommunications services offered include local telephone services, exchange
access services (which connect customers to the facilities of carriers,
including long-distance providers and wireless operators), and long-distance
services within Local Access and Transport Areas ("LATAs") in the Region. Other
products and services include wireless personal communications services ("PCS"),
high-speed data and Internet access services, and certain other communications
equipment sales and services for business customers and governmental agencies.
Directory services are provided through Dex.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. The New U S WEST Combined Financial Statements
include the combined historical balance sheets, results of operations and cash
flows of the businesses that comprise the Communications Group and Dex. All
significant intercompany amounts and transactions have been eliminated.

ALLOCATION OF SERVICES PROVIDED BY U S WEST. Certain costs relating to U S
WEST's general and administrative services, including executive management,
legal, tax, accounting and auditing, treasury, strategic planning and public
policy services have been directly assigned to New U S WEST based on actual
utilization or are allocated based on New U S WEST's operating expenses, number
of employees, external revenues, average capital and/or average equity. U S WEST
charges for such services at fully distributed cost. These direct and indirect
allocations were $85, $92 and $126 in 1997, 1996 and 1995, respectively. In
1997, the direct allocations comprised approximately 68 percent of the total
shared corporate services allocated to New U S WEST. Management believes that
such cost allocation methods are reasonable.

G-9
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOCATION OF INCOME TAXES. Federal, state and local income taxes, which
are determined on a consolidated or combined basis, have been allocated to New U
S WEST in accordance with tax sharing agreements between U S WEST and the
entities comprising New U S WEST. The allocations have generally reflected New U
S WEST's contribution to consolidated taxable income and consolidated tax
credits.

FINANCING. Financing activities for the nonregulated New U S WEST
businesses, including the issuance, repayment and repurchase of short-term and
long-term debt, have been managed by U S WEST on a centralized basis. U S WEST
Communications conducts its own borrowing activities. Debt incurred and
investments made by U S WEST and its subsidiaries on behalf of the nonregulated
New U S WEST businesses have been specifically allocated to and reflected in the
financial statements of New U S WEST. Debt incurred by U S WEST or a subsidiary
on behalf of New U S WEST has been charged to New U S WEST at the borrowing rate
of U S WEST or such subsidiary.

DIVIDENDS. Dividends on the Communications Stock have been paid at the
discretion of the Board based primarily upon U S WEST's financial condition,
results of operations and business requirements. Management anticipates that New
U S WEST will pay dividends on New U S WEST Common Stock initially at the
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 of Directors (the "New U
S WEST Board") is not expected to change this dividend policy, it has the right
to do so at any time.

Prior to the Separation, New U S WEST paid dividends monthly to U S WEST
based on Dex's net income adjusted for the amortization of intangibles.

INDUSTRY SEGMENTS. New U S WEST operates in two industry segments
(communications and related services and directory services) as defined in
Statement of Financial Accounting Standards ("SFAS") No. 14, "Financial
Reporting for Segments of a Business Enterprise."

INVENTORIES AND SUPPLIES. New and reusable materials of U S WEST
Communications are carried at average cost, except for significant individual
items that are valued based on specific costs. Nonreusable material is carried
at its estimated salvage value. Inventories of New U S WEST's nonregulated
businesses are carried at the lower of cost or market on a first-in, first-out
basis.

U S WEST Communications provides for depreciation of property, plant and
equipment using various straight-line group methods and remaining useful
(economic) lives based on industry-wide studies. When the depreciable property,
plant and equipment of U S WEST Communications is retired or sold, the original
cost less the net salvage value is generally charged to accumulated
depreciation. The nonregulated

G-10
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

businesses of New U S WEST provide for depreciation using the straight-line
method. When such depreciable property, plant and equipment is retired or sold,
the resulting gain or loss is included in income. The average depreciable lives
used for the major categories of telephone property, plant and equipment follow:

<TABLE>
<CAPTION>
AVERAGE
CATEGORY LIFE (YEARS)
- --------------------------------------------------------------------------------- -------------
<S> <C>
General purpose computers........................................................ 6
Digital switching and circuit equipment.......................................... 10
Aerial and underground copper cable.............................................. 15
Buried copper and fiber cable.................................................... 20
Buildings........................................................................ 27-49
</TABLE>

Interest related to qualifying construction projects is capitalized and
reflected as a reduction of interest expense. Amounts capitalized were $20, $31
and $39 in 1997, 1996 and 1995, respectively.

COMPUTER SOFTWARE. The cost of computer software, whether purchased or
developed internally, is charged to expense with two exceptions. Initial
operating systems software is capitalized and amortized over the life of the
related hardware, and initial network applications software is capitalized and
amortized over three years. Subsequent upgrades to capitalized software are
charged to expense.

Capitalized computer software costs of $133 and $196 at December 31, 1997
and 1996, respectively, are recorded in property, plant and equipment.
Amortization of capitalized computer software costs totaled $78, $82 and $69 in
1997, 1996 and 1995, respectively.

FINANCIAL INSTRUMENTS. Synthetic instrument accounting is used for interest
rate and foreign currency swaps if the index, maturity and amount of the
instrument match the terms of the underlying debt. Net interest accrued is
recognized over the life of the instruments as an adjustment to interest expense
and is a component of cash provided by operating activities. Any gain or loss on
the termination of an instrument that qualifies for synthetic instrument
accounting would be deferred and amortized over the remaining life of the
original instrument.

Hedge accounting is used for forward contracts which qualify as hedges of
future debt issues. To qualify for hedge accounting, the contracts must have a
high inverse correlation to the exposure being hedged, and reduce the risk or
volatility associated with changes in interest rates. Qualified contracts are
carried at market value with gains and losses recorded with the related debt and
amortized as yield adjustments. Any gain or loss on the termination of a
contract that qualifies for hedge accounting would be deferred and accounted for
with the underlying transaction being hedged. New U S WEST does not use
derivative financial instruments for trading purposes.

Gains and losses incurred on executed forward U. S. Treasury Bond contracts,
used to lock in the U. S. Treasury rate component of future debt issues, are
deferred and recognized as an adjustment to interest expense over the life of
the underlying debt. At December 31, 1997, deferred gains of $8 and deferred
losses of $50 on the closed forward contracts are included as part of the
carrying value of the underlying debt. The deferred gains and losses are being
recognized as yield adjustments over the life of the related debt, which matures
at various dates through 2043.

G-11
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Currency swaps entered into to convert foreign debt to U. S.
dollar-denominated debt are combined with the foreign currency debt and
accounted for as if fixed-rate, dollar-denominated debt were issued directly.

STOCK OPTIONS. New U S WEST accounts for its stock incentive plans in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." Effective January 1, 1996, New U S WEST adopted
the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." See Note 9--Stock Incentive Plans--to the Combined Financial
Statements.

REVENUE RECOGNITION AND DEFERRED DIRECTORY COSTS. Local telephone and
wireless services are generally billed monthly in advance, and revenues are
recognized the following month when services are provided. Revenues derived from
exchange access, long-distance network services and wireless airtime usage are
billed and recognized monthly as services are provided.

Directory advertising revenues and related directory costs of selling,
composition, printing and distribution are generally deferred and recognized
over the period directories are used, normally 12 months.

ADVERTISING COSTS. Costs related to advertising are expensed as incurred.
Advertising expense was $214, $117 and $88 in 1997, 1996 and 1995, respectively.

EARNINGS PER COMMON SHARE. 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 share on the face of the income
statement.

Historical earnings per share is not presented as it is not meaningful until
the financial effects of the Separation and the Dex Alignment, which are
significant, are reflected in the historical financial statements of New U S
WEST. These financial effects will be included in historical results upon
effectiveness of the Separation Agreement. See "Chapter 6: Information About New
U S WEST--New U S WEST Unaudited Pro Forma Condensed Combined Financial
Statements."

NEW ACCOUNTING STANDARDS. 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.

G-12
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

NOTE 3: INDUSTRY SEGMENTS

New U S WEST operates in two industry segments: communications and related
services, and directory services.

The communications and related services segment provides telecommunications
services to more than 25 million residential and business customers in the
Region. Approximately 97 percent of the revenues of the communications and
related services segment 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 directory services segment publishes approximately 320 White and Yellow
Pages telephone directories in the Region and provides electronic directory and
other information services.

Industry segment financial information follows:

<TABLE>
<CAPTION>
INTERSEGMENT
COMMUNICATIONS ELIMINATIONS
AND RELATED DIRECTORY AND OTHER
SERVICES SERVICES ADJUSTMENTS COMBINED
--------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
1997
Operating revenues......................................... $ 10,319 $ 1,196 $ (36) $ 11,479
Operating income........................................... 2,210 566 -- 2,776
Identifiable assets........................................ 17,246 516 (95) 17,667
Depreciation and amortization.............................. 2,126 37 -- 2,163
Capital expenditures....................................... 2,643 29 -- 2,672
1996
Operating revenues......................................... 10,079 1,120 (31) 11,168
Operating income........................................... 2,340 472 -- 2,812
Identifiable assets........................................ 16,915 493 (129) 17,279
Depreciation and amortization.............................. 2,122 36 -- 2,158
Capital expenditures....................................... 2,806 25 -- 2,831
1995
Operating revenues......................................... 9,484 1,058 (34) 10,508
Operating income........................................... 2,178 399 -- 2,577
Identifiable assets........................................ 16,585 450 (75) 16,960
Depreciation and amortization.............................. 2,042 25 -- 2,067
Capital expenditures....................................... 2,739 31 -- 2,770
</TABLE>

Operating income represents operating revenues less operating expenses, and
excludes interest expense, other expense and income taxes. Identifiable assets
are those assets used in each segment's operations.

Certain costs relating to U S WEST's general and administrative services,
including executive management, legal, tax, accounting and auditing, treasury,
strategic planning and public policy services, have been directly assigned by U
S WEST to the communications and related services and the directory services
segments based on actual utilization or are allocated based on operating
expense, number of employees, external revenues, average capital and/or average
equity.

G-13
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: INDUSTRY SEGMENTS (CONTINUED)

INTERSEGMENT ELIMINATIONS. U S WEST Communications sells customer lists,
billing and collection services and other services to Dex at market price. In
addition, U S WEST Business Resources, Inc. provides commercial property
management services to Dex at market price.

SIGNIFICANT CONCENTRATIONS. The largest volume of the communications and
related services are provided to AT&T Corp. ("AT&T"). During 1997, 1996 and
1995, revenues from services provided to AT&T were $1,049, $1,046 and $1,085,
respectively. Related accounts receivable at December 31, 1997 and 1996, totaled
$80 and $89, respectively. As of December 31, 1997, New U S WEST is not aware of
any other significant concentration of business transacted with a particular
customer or supplier that could, if suddenly eliminated, severely impact
operations.

At December 31, 1997, 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 69 percent of the communications and related services segment
employees and 65 percent of the directory services segment employees are
represented by unions. New U S WEST's principle collective bargaining agreements
expire in May, August and October 1998. Negotiations with respect to future
collective bargaining agreements are underway.

NOTE 4: PROPERTY, PLANT AND EQUIPMENT

The composition of property, plant and equipment follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Land and buildings................................................................ $ 2,443 $ 2,433
Telecommunications network equipment.............................................. 13,513 12,925
Telecommunications outside plant.................................................. 13,802 13,148
General purpose computers and other............................................... 3,280 3,753
Construction in progress.......................................................... 613 599
--------- ---------
33,651 32,858
--------- ---------
Less accumulated depreciation
Buildings....................................................................... 690 709
Telecommunications network equipment............................................ 8,223 7,756
Telecommunications outside plant................................................ 8,657 8,221
General purpose computers and other............................................. 1,773 2,083
--------- ---------
19,343 18,769
--------- ---------
Property, plant and equipment--net................................................ $ 14,308 $ 14,089
--------- ---------
--------- ---------
</TABLE>

Effective January 1, 1996, New 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 requires that long-lived assets and associated intangibles be written
down to fair value whenever an impairment review indicates that the

G-14
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

carrying value cannot be recovered on an undiscounted cash flow basis. SFAS No.
121 also requires that a company no longer record depreciation expense on assets
held for sale. Adoption of SFAS No. 121 resulted in income of $34 (net of income
tax expense of $22) in 1996 from the cumulative effect of reversing depreciation
expense recorded in prior years related to rural telephone exchanges held for
sale. Depreciation expense was reversed from the date New U S WEST formally
committed to a plan to dispose of the rural telephone exchange assets to January
1, 1996. The income was recorded as a cumulative effect of change in accounting
principle in accordance with SFAS No. 121. As a result of adopting SFAS No. 121,
depreciation expense for 1996 was reduced by $24.

NOTE 5: DEBT

SHORT-TERM DEBT

The components of short-term debt follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Commercial paper.............................................................. $ 62 $ 701
Allocated from U S WEST....................................................... 198 45
Current portion of long-term debt............................................. 435 134
--------- ---------
Total......................................................................... $ 695 $ 880
--------- ---------
--------- ---------
</TABLE>

The weighted-average interest rate on commercial paper was 6.11 percent and
5.57 percent at December 31, 1997 and 1996, respectively. The weighted average
interest rate on the allocated U S WEST debt was 7.45 percent and 7.50 percent
at December 31, 1997 and 1996, respectively.

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, which conducts
its own borrowing activities, is permitted to borrow up to $500 under short-term
lines of 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. 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.

G-15
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: DEBT (CONTINUED)

LONG-TERM DEBT

Interest rates and maturities of long-term debt at December 31 follow:

<TABLE>
<CAPTION>
MATURITIES
------------------------------------------------------- TOTAL TOTAL
INTEREST RATES 1999 2000 2001 2002 THEREAFTER 1997 1996
- --------------------------------------------------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Up to 5%........................................... $ -- $ 90 $ -- $ 100 $ 50 $ 240 $ 275
Above 5% to 6%..................................... -- -- 50 -- 211 261 561
Above 6% to 7%..................................... 71 257 133 250 1,533 2,244 2,244
Above 7% to 8%..................................... -- -- -- -- 1,646 1,646 2,457
Above 8% to 9%..................................... -- -- -- -- 250 250 250
Above 9% to 10%.................................... -- 175 -- -- -- 175 175
Above 10%.......................................... -- -- -- -- -- -- 1
Variable-rate debt indexed to two- and ten-year
constant maturity U. S. Treasury rates........... 155 -- -- -- -- 155 155
--------- --------- --------- --------- ----------- --------- ---------
$ 226 $ 522 $ 183 $ 350 $ 3,690 4,971 6,118
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Capital lease obligations and other................ 173 194
Unamortized discount--net.......................... (124) (647)
--------- ---------
Total.............................................. $ 5,020 $ 5,665
--------- ---------
--------- ---------
</TABLE>

Long-term debt consists principally of debentures, medium-term notes and
zero coupon subordinated notes, convertible at any time into equal shares of
Communications Stock and Media Stock, due June 25, 2011. The zero coupon
subordinated notes had a yield to maturity of approximately 7.3 percent and were
recorded at a discounted value of $289 at December 31, 1996. During 1997, U S
WEST redeemed the zero coupon subordinated notes. Upon redemption, the recorded
value of the notes attributed to New U S WEST was $303. The debt extinguishment
resulted in an extraordinary charge to income of $3, net of income tax benefits
of $2, primarily related to the write-off of deferred debt issuance costs.
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.
Expenses associated with the refinancing of long-term debt resulted in an
extraordinary charge to income of $8, net of income tax benefits of $5.

Interest paid by New U S WEST, net of amounts capitalized, was $394, $430
and $383 in 1997, 1996 and 1995, respectively.

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 interest rate swaps, which adjust the ratio of fixed- to
variable-rate debt.

Under an interest rate swap, U S WEST Communications agrees with another
party to exchange interest payments at specified intervals over a defined term.
Interest payments are calculated by reference to the notional amount based on
the fixed- and variable-rate terms of the swap agreements.

G-16
<PAGE>

NEW U S WEST
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: DEBT (CONTINUED)

The following table summarizes terms of swaps pertaining to U S WEST
Communications at December 31, 1997 and 1996. Variable rates are indexed to two-
and ten-year constant maturity U. S. Treasury and 30-day commercial paper rates.

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------------ ------------------------------------------------
WEIGHTED- AVERAGE RATE WEIGHTED- AVERAGE RATE
NOTIONAL ---------------------- NOTIONAL ----------------------
AMOUNT MATURITIES RECEIVE PAY AMOUNT MATURITIES RECEIVE PAY
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable to fixed............... $ 155 1999 5.46 6.24 $ 180 1997-1999 5.51 5.91
Currency........................ 204 1999-2001 -- 6.55 204 1999-2001 -- 6.55
</TABLE>

The counterparties to swaps or other interest rate contracts are major
financial institutions. U S WEST Communications is exposed to credit loss in the
event of nonperformance by these counterparties. New U S WEST manages this
exposure by monitoring the credit standing of the counterparty and establishing
dollar and term limitations which correspond to the respective credit rating of
each counterparty. U S WEST Communications does not have significant exposure to
an individual counterparty and does not anticipate nonperformance by any
counterparty.

NOTE 6: FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair values of cash equivalents, other current amounts receivable and
payable, and short-term debt approximate carrying values due to their short-term
nature.

The fair values of interest rate swaps are based on estimated amounts U S
WEST Communications would receive or pay to terminate such agreements taking
into account current interest rates and creditworthiness of the counterparties.

The fair values of long-term debt are based on quoted market prices where
available or, if not available, are based on discounting future cash flows using
current interest rates.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1997 1996
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Debt (includes short-term portion)....................................... $ 5,715 $ 5,860 $ 6,545 $ 6,500
Interest rate swap agreements--assets.................................... -- -- -- (17)
Interest rate swap agreements--liabilities............................... -- 28 -- 10
----------- --------- ----------- ---------
Debt--net................................................................ $ 5,715 $ 5,888 $ 6,545 $ 6,493
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>

G-17
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 7: LEASING ARRANGEMENTS

New U S WEST has entered into operating leases for office facilities,
equipment and real estate. Rent expense under operating leases was $235, $208
and $229 in 1997, 1996 and 1995, respectively. Future minimum lease payments as
of December 31, 1997, under noncancelable operating leases, follow:

<TABLE>
<CAPTION>
YEAR
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 143
1999................................................................................. 144
2000................................................................................. 126
2001................................................................................. 128
2002................................................................................. 94
Thereafter........................................................................... 743
---------
Total................................................................................ $ 1,378
---------
---------
</TABLE>

Minimum rentals to be received under noncancelable subleases total $52. The
minimum future lease payments have not been reduced by minimum sublease rentals.

NOTE 8: NEW U S WEST EQUITY

Following is a reconciliation of New U S WEST equity:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period.......................................... $ 4,085 $ 3,657 $ 3,357
Net income.............................................................. 1,524 1,535 1,423
Dividends declared on Communications Stock.............................. (1,034) (1,024) (1,010)
Dividends declared to U S WEST.......................................... (347) (286) (247)
Communications Stock issuances.......................................... 138 216 52
Equity issuances prior to Recapitalization Plan......................... -- -- 79
Equity (returned to) provided from U S WEST............................. -- (21) 3
Other................................................................... 1 8 --
--------- --------- ---------
Balance at end of period................................................ $ 4,367 $ 4,085 $ 3,657
--------- --------- ---------
--------- --------- ---------
</TABLE>

U S WEST issued 4.1 million, 6.8 million and 1.7 million shares of
Communications Stock during 1997, 1996 and 1995, respectively, since the
Recapitalization Plan. 1997 share issuances were primarily related to the
exercise of stock options and the dividend reinvestment plan. At December 31,
1997 and 1996, there were 484,515,415 and 480,457,336 shares of Communications
Stock outstanding, respectively. The shares outstanding do not include the
issuance of $850 of New U S WEST Common Stock to occur upon execution of the
Separation Agreement.

U S WEST declared dividends $2.14 per share of Communications Stock during
1997, 1996 and 1995, respectively. New U S WEST paid dividends monthly to U S
WEST based on Dex's net income adjusted for the amortization of intangibles.

LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN ("LESOP"). New U S WEST
participates in the defined contribution savings plan sponsored by U S WEST.
Substantially all employees of New U S WEST are

G-18
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: NEW U S WEST EQUITY (CONTINUED)

covered by the plan. U S WEST matches a percentage of eligible employee
contributions with shares of Communications Stock and/or Media Stock in
accordance with participant elections. Participants may also elect to reallocate
past U S WEST contributions between Communications Stock and Media Stock. In
1989, U S WEST established two LESOPs to provide U S WEST stock for matching
contributions to the savings plan. Shares in the LESOP are released as principal
and interest are paid on the debt. At December 31, 1997, 11,966,157 shares of
Communications Stock and 12,100,791 shares of Media Stock had been allocated
from the LESOP to participants' accounts while 918,494 and 1,050,657 shares of
Communications Stock and Media Stock, respectively, remained unallocated.

The debt associated with the LESOP, which is unconditionally guaranteed by U
S WEST, is reflected in the U S WEST, Inc. Consolidated Financial Statements.
Contributions, as well as New U S WEST dividends on unallocated shares held by
the LESOP ($3, $5 and $8 in 1997, 1996 and 1995, respectively), are used for
debt service. Beginning with the dividend paid in fourth-quarter 1995, dividends
on allocated shares are being paid annually to participants. Previously,
dividends on allocated shares were used for debt service with participants
receiving additional shares from the LESOP in lieu of dividends. Tax benefits
related to dividend payments on eligible shares in the savings plan have been
allocated to New U S WEST, which paid the dividends.

New U S WEST recognizes expense based on the cash payments method.
Contributions to the plan related to New U S WEST, excluding dividends, were
$80, $67 and $72 in 1997, 1996 and 1995, respectively, of which $6, $8 and $12,
respectively, have been classified as interest expense.

NOTE 9: STOCK INCENTIVE PLANS

New U S WEST participates in the stock incentive plans maintained by U S
WEST for executives and other employees and nonemployees, primarily members of
the Board. The Amended 1994 Stock Plan (the "Plan") was approved by shareowners
on October 31, 1995, in connection with the Recapitalization Plan. The Plan is a
successor plan to the U S WEST Stock Incentive Plan and the U S WEST 1991 Stock
Incentive Plan (the "Predecessor Plans"). No further grants of options or
restricted stock may be made under the Predecessor Plans. The Plan is
administered by the Human Resources Committee of the Board with respect to
officers, executive officers and outside directors and by a special committee
with respect to all other eligible employees and eligible nonemployees.

The maximum aggregate number of shares of Communications Stock that may be
granted in any calendar year for all purposes under the Plan is nine-tenths of
one percent (0.90 percent) of the shares of such class outstanding (excluding
shares held in U S WEST's treasury) on the first day of such year. In the event
that fewer than the full aggregate number of shares of either class available
for issuance in any calendar year are issued in any such year, the shares not
issued shall be added to the shares of such class available for issuance in any
subsequent year or years. Options granted vest over periods up to three years
and may be exercised no later than 10 years after the grant date.

G-19
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: STOCK INCENTIVE PLANS (CONTINUED)

management separation plan to retain unvested stock options. The compensation
cost that has been included in income in accordance with APB Opinion No. 25 was
$1, $3 and $4 in 1997, 1996 and 1995, respectively, all of which related to the
Plan modifications.

New U S WEST has adopted the disclosure provisions of SFAS No. 123, but
continues to account for the Plan under APB Opinion No. 25. Had compensation
cost for the Plan been determined consistent with the fair value based
accounting method under SFAS No. 123, the pro forma net income for New U S WEST
would have been $1,511, $1,533 and $1,425 during 1997, 1996 and 1995,
respectively, as compared to reported net income of $1,524, $1,535 and $1,423,
respectively.

The fair value based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the options' vesting period and has not been applied to options granted
prior to January 1, 1995. Accordingly, the resulting pro forma compensation cost
is not representative of what compensation cost will be in future years.

Following are the weighted-average assumptions used in connection with the
Black-Scholes option-pricing model to estimate the fair value of options granted
during 1997, 1996 and 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Risk-free interest rate........................... 6.40% 6.50% 6.00%
Expected dividend yield........................... 5.80% 6.70% 6.70%
Expected life..................................... 4.0 years 4.5 years 4.5 years
Expected volatility............................... 25.0 % 19.6 % 19.6 %
</TABLE>

G-20
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: STOCK INCENTIVE PLANS (CONTINUED)

Data for outstanding options under the Plan is summarized as follows:

<TABLE>
<CAPTION>
COMMUNICATIONS GROUP U S WEST, INC.
--------------------------- --------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES* PRICE
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Outstanding January 1, 1995............................ 7,386,037 $ 38.66
----------- -------------
Granted(1)........................................... 4,814,856 41.12
Exercised............................................ (430,631) 34.03
Canceled or expired(1)............................... (1,927,083) 37.02
----------- -------------
Outstanding October 31, 1995........................... 9,843,179 $ 40.39
----------- -------------
Recapitalization Plan.................................. 9,843,179 $ 24.11 (9,843,179) $ (40.39)
------------ ------ ----------- -------------
----------- -------------
Granted.............................................. 138,309 32.16
Exercised............................................ (543,037) 21.23
Canceled or expired.................................. (15,350) 24.91
------------ ------
Outstanding December 31, 1995.......................... 9,423,101 $ 24.39
------------ ------
Granted.............................................. 3,624,602 30.97
Exercised............................................ (1,205,730) 22.37
Canceled or expired.................................. (429,058) 25.01
------------ ------
Outstanding December 31, 1996.......................... 11,412,915 $ 26.67
------------ ------
Granted.............................................. 9,491,642 34.87
Exercised............................................ (2,648,569) 25.41
Canceled or expired.................................. (637,411) 27.54
------------ ------
Outstanding December 31, 1997.......................... 17,618,577 $ 31.23
------------ ------
------------ ------
</TABLE>

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

* Includes options granted in tandem with stock appreciation rights.

Options to purchase 5,299,955, 3,881,100 and 2,672,666 shares of
Communications Stock at weighted-average exercise prices of $25.72, $25.71 and
$22.22 were exercisable at December 31, 1997, 1996 and 1995, respectively.

G-21
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: STOCK INCENTIVE PLANS (CONTINUED)

The following table summarizes the status of outstanding and exercisable
options under the Plan at December 31, 1997.

A total of 9,491,642, 3,624,602 and 4,953,165 Communications Group options
were granted in 1997, 1996 and 1995, respectively. Included in the total grants
were 198,027 and 1,751,936 of modified options revalued as new grants during
1996 and 1995, respectively. The modified Communications Group options were not
significant during 1997. The weighted-average grant date fair value of
Communications Group options granted during the year, inclusive of modified
options, using the Black-Scholes option-pricing model was $5.70, $3.87 and $3.19
for 1997, 1996 and 1995, respectively. Excluding the modifications, the
weighted-average grant date fair value was $5.70, $3.67 and $2.92 for 1997, 1996
and 1995, respectively. The exercise price of Communications Group stock
options, excluding modified options, equals the market price on the grant date.
The exercise prices of modified stock options may be greater or less than the
market price on the revaluation date.

Approximately 3,100,000 and 2,950,000 shares of Communications Stock were
available for grant under the plans in effect at December 31, 1997 and 1996,
respectively. Approximately 20,720,000 shares of Communications Stock were
reserved for issuance under the Plan at December 31, 1997.

NOTE 10: EMPLOYEE BENEFITS

PENSION PLAN

New U S WEST participated in the defined benefit pension plan sponsored by U
S WEST (the "U S WEST Pension Plan"). Substantially all management and
occupational employees of New U S WEST are covered by the plan. Since plan
assets were not historically segregated into separate accounts or restricted to
providing benefits to employees of New U S WEST, assets of the plan were used to
provide benefits to employees of both New U S WEST and MediaOne.

Management benefits were based on a final pay formula while occupational
benefits were based on a flat benefit formula. U S WEST used the projected unit
credit method for the determination of pension cost for financial reporting
purposes and the aggregate cost method for funding purposes. U S WEST's policy
was to fund amounts required under the Employee Retirement Income Security Act
of 1974 ("ERISA") and no funding was required in 1997, 1996 and 1995.

G-22
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: EMPLOYEE BENEFITS (CONTINUED)

The composition of the U S WEST net pension cost (credit) and the actuarial
assumptions of the plan follow:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Details of pension cost:
Service cost--benefits earned during the period................................. $ 189 $ 203 $ 173
Interest cost on projected benefit obligation................................... 612 575 558
Actual return on plan assets.................................................... (1,996) (1,509) (1,918)
Net amortization and deferral................................................... 1,159 726 1,185
--------- --------- ---------
Net pension credit................................................................ $ (36) $ (5) $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The expected long-term rate of return on plan assets used in determining net
pension cost was 8.50 percent for 1997, 1996 and 1995.

The following table represents the funded status of the U S WEST plan. Upon
the execution of the Separation Agreement, the U S WEST plan assets and benefit
obligation will be apportioned between New U S WEST and MediaOne. See Note 1--U
S WEST Separation--to the New U S WEST Combined Financial Statements.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $7,404 and $6,544,
respectively............................................................................... $ 8,278 $ 7,446
--------- ---------
--------- ---------
Plan assets at fair value, primarily stocks and bonds(1).................................... $ 12,260 $ 10,958
Less: Projected benefit obligation.......................................................... 9,167 8,310
--------- ---------
Plan assets in excess of projected benefit obligation....................................... 3,093 2,648
Unrecognized net (gain)..................................................................... (1,966) (1,502)
Prior service cost not yet recognized in net periodic pension cost.......................... 6 31
Balance of unrecognized net asset at January 1, 1987........................................ (546) (626)
--------- ---------
Prepaid pension cost........................................................................ $ 587 $ 551
--------- ---------
--------- ---------
</TABLE>

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

(1) Pension plan assets include Communications Stock and Media Stock of $12 and
$8, respectively, in 1997, and $8 and $7, respectively, in 1996.

The actuarial assumptions used to calculate the projected benefit obligation
follow:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Discount rate........................................................................ 7.00% 7.50%
Weighted average rate of compensation increase....................................... 5.50% 5.50%
</TABLE>

Anticipated future benefit changes have been reflected in the above
calculations.

G-23
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: EMPLOYEE BENEFITS (CONTINUED)

ALLOCATION OF PENSION COSTS. U S WEST's policy was to: 1) offset U S WEST's
service cost, interest cost and amortization by the return on plan assets and 2)
allocate the remaining net pension cost (credit) to New U S WEST based on the
ratio of actuarially determined service cost of New U S WEST to total service
cost of plan participants. U S WEST believed allocating net pension cost based
on service cost was reasonable since service cost is a primary factor in
determining pension cost. Net pension credits allocated to New U S WEST were
$(33), $(5) and $(2) in 1997, 1996 and 1995, respectively. The service and
interest costs attributed to New U S WEST were $176 and $569 in 1997, $189 and
$535 in 1996 and $161 and $519 in 1995, respectively. The projected benefit
obligation attributed to New U S WEST was $8,406 and $7,728 at December 31, 1997
and 1996, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

New U S WEST participated in plans sponsored by U S WEST which provided
certain health care and life insurance benefits to retired employees. In
conjunction with SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," U S WEST immediately recognized the accumulated
postretirement benefit obligation for current and future retirees. However, the
Federal Communications Commission and certain state jurisdictions permit
amortization of the transition obligation over the average remaining service
period of active employees for regulatory accounting purposes, with most
jurisdictions requiring funding as a stipulation for rate recovery.

U S WEST used the projected unit credit method for the determination of
postretirement medical and life costs for financial reporting purposes. The
composition of net medical and life postretirement benefit costs and actuarial
assumptions underlying plan benefits follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period......................................... $ 66 $ 70 $ 65
Interest on accumulated benefit obligation.............................................. 296 259 267
Actual return on plan assets............................................................ (394) (231) (415)
Net amortization and deferral........................................................... 211 68 286
--------- --------- ---------
Net postretirement benefit costs........................................................ $ 179 $ 166 $ 203
--------- --------- ---------
--------- --------- ---------
</TABLE>

The expected long-term rate of return on plan assets used in determining
postretirement benefit costs was 8.50 percent for 1997, 1996 and 1995.

The following table represents the funded status of the plans. Upon
execution of the Separation Agreement, the U S WEST postretirement benefit
obligation and plan assets will be apportioned between

G-24
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: EMPLOYEE BENEFITS (CONTINUED)

New U S WEST and MediaOne. See Note 1--U S WEST Separation--to the New U S WEST
Combined Financial Statements.

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

(1) Medical plan assets include Communications Stock and Media Stock of $155 and
$94, respectively, in 1996.

The actuarial assumptions used to calculate the accumulated postretirement
benefit obligation follow:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Discount rate.......................................................................... 7.00% 7.50%
Medical trend*......................................................................... 8.00% 8.00%
</TABLE>

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

* Medical cost trend rate gradually declines to an ultimate rate of 5.5
percent in 2011.

Anticipated future benefit changes have been reflected in these
postretirement benefit calculations.

PLAN ASSETS. Assets of the postretirement medical and life plans may be
used to provide benefits to employees of both New U S WEST and MediaOne since
plan assets are not legally restricted to providing benefits to either entity.
For purposes of determining benefit costs, U S WEST allocated the assets based
on historical contributions for postretirement medical costs, and on the ratio
of New U S WEST to total salaries for life plan participants.

POSTRETIREMENT MEDICAL AND LIFE COSTS. The service and interest components
of net postretirement medical benefit costs were calculated for New U S WEST
based on its population characteristics. Since funding of postretirement medical
costs was voluntary, return on assets was attributed to New U S WEST based on
historical funding. New U S WEST's annual funding amount was based on its cash
requirements with the funding at U S WEST Communications based on regulatory
accounting requirements.

Net postretirement life costs and funding requirements, if any, have been
allocated to New U S WEST in the same manner as pension costs. U S WEST
generally funded the amount allowed for tax purposes.

G-25
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: EMPLOYEE BENEFITS (CONTINUED)

No funding of postretirement life insurance occurred in 1997, 1996 and 1995. U S
WEST believes its method of allocating postretirement life costs was reasonable.

Net postretirement medical benefit and life costs recognized by New U S WEST
for 1997, 1996 and 1995 were $175, $164 and $201, respectively. The percentage
of postretirement medical assets attributed to New U S WEST at December 31, 1997
and 1996, based on historical voluntary contributions was 99 percent. The
aggregate accumulated postretirement medical and life benefit obligation
attributable to New U S WEST was $4,330 and $3,789 at December 31, 1997 and
1996, respectively.

NOTE 11: INCOME TAXES

The components of the provision for income taxes follow:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
FEDERAL:
Current............................................................. $ 798 $ 697 $ 559
Deferred............................................................ (10) 93 184
Investment tax credits--net......................................... (16) (28) (38)
--------- --------- ---------
772 762 705
--------- --------- ---------
STATE AND LOCAL:
Current............................................................. 119 92 78
Deferred............................................................ 11 22 34
--------- --------- ---------
130 114 112
--------- --------- ---------
Provision for income taxes............................................ $ 902 $ 876 $ 817
--------- --------- ---------
--------- --------- ---------
</TABLE>

New U S WEST paid U S WEST $906, $814 and $658 for income taxes in 1997,
1996 and 1995, respectively.

The effective tax rate differs from the statutory tax rate as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN PERCENT)
<S> <C> <C> <C>
Federal statutory tax rate.............................................. 35.0 35.0 35.0
Investment tax credit amortization...................................... (0.4) (0.7) (1.1)
State income taxes--net of federal effect............................... 3.5 3.1 3.2
Other................................................................... (1.0) (0.5) (0.8)
--- --- ---
Effective tax rate...................................................... 37.1 36.9 36.3
--- --- ---
--- --- ---
</TABLE>

G-26
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: INCOME TAXES (CONTINUED)

The components of the net deferred tax liability follow:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Property, plant and equipment........................................................ $ 1,592 $ 1,508
State deferred taxes--net of federal effect.......................................... 195 185
Other................................................................................ 107 78
--------- ---------
Deferred tax liabilities........................................................... 1,894 1,771
--------- ---------
Postemployment benefits, including pension........................................... 745 674
Restructuring and other.............................................................. 152 181
Unamortized investment tax credit.................................................... 59 61
State deferred taxes--net of federal effect.......................................... 138 126
Other................................................................................ 280 192
--------- ---------
Deferred tax assets................................................................ 1,374 1,234
--------- ---------
Net deferred tax liability........................................................... $ 520 $ 537
--------- ---------
--------- ---------
</TABLE>

The current portion of the deferred tax asset was $271 and $185 at December
31, 1997 and 1996, respectively, resulting primarily from restructuring charges
and compensation-related items.

NOTE 12: RELATED PARTY TRANSACTIONS

BELL COMMUNICATIONS RESEARCH, INC. ("BELLCORE"). Charges relating to
research, development and maintenance of existing technologies performed by
Bellcore, of which U S WEST Communications had a one-seventh ownership interest,
were $118, $97 and $95 in 1997, 1996 and 1995, respectively.

In November 1997, U S WEST Communications and the other Regional Bell
Operating Companies sold their interests in Bellcore. As a result of the sale, U
S WEST Communications received cash proceeds of $65 and recorded an after-tax
gain of $32. Bellcore and other third parties will continue to provide research
and development and other services to New U S WEST on a contract basis.

NOTE 13: CONTINGENCIES

At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.

G-27
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: CONTINGENCIES (CONTINUED)

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.

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 interexchange carriers 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.

G-28
<PAGE>

NEW U S WEST

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14: QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997
Operating revenues....................................................... $ 2,867 $ 2,830 $ 2,960 $ 2,822
Income before income taxes and extraordinary item........................ 670 667 674 418
Income before extraordinary item......................................... 420 416 423 268
Net income............................................................... 420 416 420 268
1996
Operating revenues....................................................... $ 2,729 $ 2,771 $ 2,783 $ 2,885
Income before income taxes and cumulative effect of change in accounting
principle.............................................................. 583 635 557 602
Income before cumulative effect of change in accounting principle........ 363 396 348 394
Net income............................................................... 397 396 348 394
</TABLE>

1997 first-quarter net income includes $11 from gains on the sales of
certain rural telephone exchanges. 1997 second-quarter net income includes $18
from gains on the sales of certain rural telephone exchanges. 1997 third-quarter
net income includes $19 from gains on the sales of certain rural telephone
exchanges and an extraordinary charge of $3 for the early extinguishment of
debt. 1997 fourth-quarter net income includes a $152 regulatory charge related
primarily to the 1997 Washington State Supreme Court ruling that upheld a WUTC
1996 rate order and a $32 gain on the sale of U S WEST Communications'
investment in Bellcore.

1996 first-quarter net income includes the cumulative and current effects of
$34 and $5, respectively, from adopting SFAS No. 121. 1996 second-quarter net
income includes $30 from gains on the sales of certain rural telephone exchanges
and current effects of $5 from adopting SFAS No. 121. 1996 third-quarter net
income includes a charge of $15 related to the reorganization and headcount
reduction of the directory publishing operations, a gain of $1 on the sales of
certain rural telephone exchanges and current effects of $3 from adopting SFAS
No. 121. 1996 fourth-quarter net income includes $5 from gains on the sales of
certain rural telephone exchanges and current effects of $2 from adopting SFAS
No. 121.

G-29
<PAGE>

REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of U S WEST, Inc.:

We have audited in accordance with generally accepted auditing standards,
the combined financial statements of New U S WEST (as described in Note 1 to the
combined financial statements) included in this Registration Statement on Form
S-4 of USW-C, Inc. and Proxy Statement of U S WEST, Inc., and have issued our
report thereon dated February 12, 1998 appearing on page G-2. Our audits were
made for the purpose of forming an opinion on those statements taken as a whole.
The schedule appearing on page G-31 in this Registration Statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The information, for the years 1997 and 1996 on
this schedule, has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP
Denver, Colorado,
February 12, 1998.

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

Our report on the combined financial statements of New U S WEST, Inc. (as
described in Note 1 to the combined financial statements) is included on page
G-3 of this Registration Statement on Form S-4 of USW-C, Inc. and Proxy
Statement of U S WEST, Inc. (the "Registration Statement"). In connection with
our audit of such combined financial statements, we have also audited the
related combined financial statement schedule listed in the index on page G-31
of this Registration Statement for the year ended December 31, 1995.

In our opinion, the combined financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

COOPERS & LYBRAND L.L.P.

Denver, Colorado
February 6, 1998

G-30
<PAGE>

NEW U S WEST

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF CHARGED TO OTHER BALANCE AT
PERIOD EXPENSE ACCOUNTS DEDUCTIONS END OF PERIOD
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
1997.............................................. $ 60 $ 126 $ -- $ 114(b) $ 72
1996.............................................. 50 116(a) (3) 103(b) 60
1995.............................................. 41 88(a) -- 79(b) 50

RESERVES RELATED TO 1993 BUSINESS RESTRUCTURING,
INCLUDING FORCE REDUCTIONS AND FACILITY CONSOLIDATION
1997.............................................. 126 -- -- 70 56
1996.............................................. 368 -- -- 242 126
1995.............................................. 702 -- -- 334 368
</TABLE>

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

(a) Does not include amounts charged directly to expense. These amounts were $8,
$7 and $6 for 1997, 1996 and 1995, respectively.

(b) Represents credit losses written off during the period, less collection of
amounts previously written off.

G-31
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law (the "DGCL") permits the
Registrant's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed action, suit or proceeding in which such person is made a
party by reason of his being or having been a director, officer, employee or
agent of the Registrant, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.

The Registrant's Restated Certificate of Incorporation and Bylaws provides
for indemnification of its directors and officers to the fullest extent
permitted by law.

As permitted by sections 102 and 145 of the DGCL, the Registrant's Restated
Certificate of Incorporation eliminates a person's liability to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director, including without limitation for serving on a committee of the
Registrant's board of directors; provided, however, that the foregoing does not
eliminate or limit liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.

The directors and officers of the Registrant are covered by insurance
policies indemnifying against certain liabilities, including certain liabilities
arising under the Securities Act which might be incurred by them in such
capacities and against which they cannot be indemnified by the Registrant.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

Exhibits identified in parentheses below are on file with the Securities and
Exchange Commission and are incorporated herein by reference to such previous
filings. All other exhibits are provided as part of this electonic transmission.

<TABLE>
<S> <C> <C>
2-A -- Form of Separation Agreement between U S WEST, Inc. (to be renamed "MediaOne
Group, Inc.") and USW-C, Inc. (to be renamed "U S WEST, Inc.")

2-B -- Form of Employee Matters Agreement between U S WEST, Inc. (to be renamed
"MediaOne Group, Inc.") and USW-C, Inc. (to be renamed "U S WEST, Inc.")

2-C -- Form of Tax Sharing Agreement between U S WEST, Inc. (to be renamed
"MediaOne Group, Inc.") and USW-C, Inc. (to be renamed "U S WEST, Inc.")

3-A -- Form of Restated Certificate of Incorporation of U S WEST, Inc.

3-B -- Form of Amended and Restated Bylaws of U S WEST, Inc.

*4-A -- Form of Rights Agreement between USW-C, Inc. (to be renamed "U S WEST,
Inc.") and State Street Bank and Trust Company, as Rights Agent

5 -- Opinion of Weil, Gotshal & Manges LLP regarding the legality of the
securities being registered
</TABLE>

II-1
<PAGE>

<TABLE>
<S> <C> <C>
10-A -- 1998 U S WEST Stock Plan (Annex C to the Proxy Statement/Prospectus included
in this Registration Statement)

(10-B) -- Form of Non-Qualified Stock Option Agreement (Exhibit 10u to Form 10-K of U
S WEST, Inc. for the year ended December 31, 1988, File No. 1-8611)

(10-C) -- Form of Restricted Stock Agreement (Exhibit 10v to Form 10-K of U S WEST,
Inc. for the year ended December 31, 1988, File No. 1-8611)

10-D -- U S WEST Long-Term Incentive Plan (Annex D to the Proxy Statement/Prospectus
included in this Registration Statement)

10-E -- U S WEST Executive Short-Term Incentive Plan (Annex E to the Proxy
Statement/ Prospectus included in this Registration Statement)

(10-F) -- U S WEST Executive Financial Counseling Plan (Exhibit 10j to the Form 10-K
of U S WEST, Inc. for the year ended December 31, 1996, File No. 1-8611)

(10-G) -- U S WEST Deferred Compensation Plan for Non-Employee Directors (Exhibit
10-ff to Registration Statement No. 2-87861 of U S WEST, Inc.)

(10-H) -- Description of U S WEST Insurance Plan of Non-Employee Directors' Travel and
Accident Insurance (Exhibit 10-gg to Registration Statement No. 2-87861 of U
S WEST, Inc.)

(10-I) -- Extract from the U S WEST Management Pension Plan Regarding Limitations on
the payments of pension amounts which exceed the limitations contained in
the Employee Retirement Income Security Act (Exhibit 10-hh to Registration
Statement No. 2-87861 of U S WEST, Inc.)

(10-J) -- U S WEST Executive Non-Qualified Pension Plan (Exhibit 10o to Form 10-K of U
S WEST, Inc. for the year ended December 31, 1988, File No. 1-8611)

(10-K) -- U S WEST Deferred Compensation Plan (Annex X to Registration Statement No.
33-59315 of U S WEST, Inc.)

(10-L) -- Description of U S WEST Directors' Retirement Benefit Plan (Exhibit 10p to
Form SE of U S WEST, Inc. filed March 5, 1992, File No. 1-8611)

(10-M) -- U S WEST Senior Management Long Term Disability and Survivor Protection Plan
(Exhibit 10-dd to Registration Statement No. 2-87861 of U S WEST, Inc.)

(10-N) -- U S WEST Mid-Career Pension Plan (Exhibit 10u to Form 10-K of U S WEST, Inc.
for the year ended December 31, 1988, File No. 1-8611)

21 -- Subsidiaries of USW-C, Inc. (to be renamed "U S WEST, Inc.")

23-A -- Consent of Coopers & Lybrand L.L.P.

23-B -- Consent of Arthur Andersen LLP

**23-C -- Consent of Lazard Freres & Co. LLC

**23-D -- Consent of SBC Warburg Dillon Read Inc.

23-E -- Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as
Exhibit 5)

**24 -- Power of Attorney

27 -- Financial Data Schedule

*99-A -- Consents of persons to be named as directors
</TABLE>

(b) Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts (included in Annex G)

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

* To be filed by amendment.

** Previously filed.

II-2
<PAGE>
ITEM 22. UNDERTAKINGS.

The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement;

(iii) to include any material information with respect to the Plan of
Distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;

provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's Annual Report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(7) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes

II-3
<PAGE>
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.

(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted against
the Registrant by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, USW-C, Inc. (to
be renamed "U S WEST, Inc.") certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and has duly caused
this Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on the 18th day of March, 1998.

USW-C, Inc.

By /s/ STEPHEN E. BRILZ

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

Stephen E. Brilz

Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<C> <S>
PRINCIPAL EXECUTIVE OFFICER:

/s/ SOLOMON D. TRUJILLO*
- ------------------------------------------- President and Chief Executive Officer
Solomon D. Trujillo

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:

/s/ ALLAN R. SPIES*
- ------------------------------------------- Executive Vice President and Chief Financial
Allan R. Spies* Officer

DIRECTORS:

/s/ SOLOMON D. TRUJILLO*
- -------------------------------------------
Solomon D. Trujillo*

*By /s/ STEPHEN E. BRILZ
--------------------------------------
Stephen E. Brilz
Assistant Secretary
</TABLE>

Dated: March 18, 1998

II-5

<PAGE>

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

SEPARATION AGREEMENT

between

U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)

and

USW-C, INC.
(to be renamed U S WEST, INC.)

Dated as of _________ __, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE I

DEFINITIONS
<S> <C>
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Terms Defined Elsewhere in the Agreement. . . . . . . . . 15
1.3 Other Definitional Provisions . . . . . . . . . . . . . . 17
1.4 References to Time. . . . . . . . . . . . . . . . . . . . 17

ARTICLE II

CERTAIN PRE-SEPARATION TRANSACTIONS

2.1 Certificates of Incorporation; Bylaws; Name
Changes . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Stockholders' Meeting . . . . . . . . . . . . . . . . . . 18
2.3 Registration and Listing. . . . . . . . . . . . . . . . . 18
2.4 Boards of Directors . . . . . . . . . . . . . . . . . . . 19
2.5 Rights Agreements . . . . . . . . . . . . . . . . . . . . 20
2.6 The Transaction Documents . . . . . . . . . . . . . . . . 20
2.7 U S WEST Approval of Certain New U S WEST
Actions . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE III

REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS

3.1 Reorganization. . . . . . . . . . . . . . . . . . . . . . 21
3.2 Refinancing of Indebtedness . . . . . . . . . . . . . . . 23
3.3 Contribution. . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Discharge of Liabilities. . . . . . . . . . . . . . . . . 32
3.5 Closing; Delivery; Methods of Transfer and
Assumption . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE IV

THE SEPARATION

4.1 The Separation. . . . . . . . . . . . . . . . . . . . . . 35
4.2 Separation Time . . . . . . . . . . . . . . . . . . . . . 35
4.3 Certain Determinations. . . . . . . . . . . . . . . . . . 36
</TABLE>
i

<PAGE>
<TABLE>
<S> <C>
4.4 New U S WEST SIP Accounts; Certificates;
Distribution Procedures . . . . . . . . . . . . . . . . . 36
4.5 Conditions to the Separation. . . . . . . . . . . . . . . 41

ARTICLE V

POST-SEPARATION INTERCOMPANY
BUSINESS RELATIONSHIPS

5.1 Pending Litigation. . . . . . . . . . . . . . . . . . . . 43
5.2 Settlements for Cash Collections and
Disbursements After the Separation Time . . . . . . . . . 44
5.3 Transition Services . . . . . . . . . . . . . . . . . . . 45
5.4 U S WEST Name . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . 47
5.6 Intellectual Property . . . . . . . . . . . . . . . . . . 47

ARTICLE VI

EMPLOYEE MATTERS

6.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Employee Benefit Plans and Employee
Arrangements. . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Internal Revenue Service Forms. . . . . . . . . . . . . . 49

ARTICLE VII

INSURANCE MATTERS

7.1 Policies and Rights Included Within AssetS. . . . . . . . 49
7.2 Administration; Other Matters . . . . . . . . . . . . . . 50
7.3 Cooperation; Disagreements. . . . . . . . . . . . . . . . 51

ARTICLE VIII

INDEMNIFICATION

8.1 New U S WEST's Agreement to Indemnify . . . . . . . . . . 52
8.2 U S WEST's Agreement to Indemnify . . . . . . . . . . . . 53
8.3 Procedure for Indemnification . . . . . . . . . . . . . . 54
8.4 Miscellaneous Indemnification Provisions. . . . . . . . . 58
8.5 Contribution. . . . . . . . . . . . . . . . . . . . . . . 59
8.6 Tax Matters; Construction of Agreements . . . . . . . . . 60
8.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . 60
</TABLE>
ii

ARTICLE IX

CERTAIN ADDITIONAL COVENANTS

9.1 Licenses and Permits. . . . . . . . . . . . . . . . . . . 60
9.2 Intercompany Agreements . . . . . . . . . . . . . . . . . 61
9.3 Guarantee Obligations . . . . . . . . . . . . . . . . . . 61
9.4 Further Assurances. . . . . . . . . . . . . . . . . . . . 62
9.5 National Contracts. . . . . . . . . . . . . . . . . . . . 64
9.6 Non-Solicitation of Employees . . . . . . . . . . . . . . 65
9.7 Lock Boxes. . . . . . . . . . . . . . . . . . . . . . . . 65
9.8 Agreements with Respect to Common Stock
Received by Savings Plan/ESOPs. . . . . . . . . . . . . . 66
9.9 AirTouch Transaction. . . . . . . . . . . . . . . . . . . 66

ARTICLE X

ACCESS TO INFORMATION

10.1 Provision of Corporate Records. . . . . . . . . . . . . . 67
10.2 Access to Information . . . . . . . . . . . . . . . . . . 68
10.3 Production of Witnesses . . . . . . . . . . . . . . . . . 70
10.4 Retention of Records. . . . . . . . . . . . . . . . . . . 70
10.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . 71
10.6 Cooperation with Respect to Government
Reports and Filings . . . . . . . . . . . . . . . . . . . 71
10.7 Certain Limitations with Respect to
Information . . . . . . . . . . . . . . . . . . . . . . . 71
10.8 Protective Arrangements . . . . . . . . . . . . . . . . . 72

ARTICLE XI

MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES

11.1 Mutual Release . . . . . . . . . . . . . . . . . . . . . 73
11.2 No Representations or Warranties . . . . . . . . . . . . 74

ARTICLE XII

GENERAL PROVISIONS

12.1 Merger or Consolidation . . . . . . . . . . . . . . . . . 75
12.2 Separation Committee; Dispute Resolution. . . . . . . . . 75
12.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 77
12.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
iii

<PAGE>
<TABLE>
<S> <C>
12.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . 78
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 79
12.8 Headings; References. . . . . . . . . . . . . . . . . . . 79
12.9 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 79
12.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . 79
12.11 Parties in Interest; Assignment;
Successors. . . . . . . . . . . . . . . . . . . . . . . 79
12.12 Severability; Enforcement . . . . . . . . . . . . . . . 80
12.13 Amendment . . . . . . . . . . . . . . . . . . . . . . . 80
12.14 Termination . . . . . . . . . . . . . . . . . . . . . . 80

EXHIBITS

Exhibit A - Employee Matters Agreement
Exhibit B - Tax Sharing Agreement
</TABLE>
iv

<PAGE>

SEPARATION AGREEMENT

SEPARATION AGREEMENT, dated as of _______ __, 1998, between
U S WEST, INC., a Delaware corporation ("U S WEST"), to be renamed "MEDIAONE
GROUP, INC.," and USW-C, INC., a Delaware corporation and indirect wholly
owned subsidiary of U S WEST ("NEW U S WEST"), to be renamed "U S WEST, INC."

W I T N E S S E T H:

WHEREAS, pursuant to the Restated Certificate of Incorporation of
U S WEST (the "RESTATED CERTIFICATE"), U S WEST's assets, liabilities and
businesses are divided between the Communications Group (as defined in the
Restated Certificate) and the Media Group (as defined in the Restated
Certificate);

WHEREAS, pursuant to the Restated Certificate, the domestic
directories business of U S WEST (the "DIRECTORIES BUSINESS") conducted by
U S WEST Dex, Inc., a Colorado corporation ("DEX"), is currently attributed to
the Media Group;

WHEREAS, the Board of Directors of U S WEST has determined that it
is in the best interests of U S WEST and its stockholders to (i) align the
Directories Business with the Communications Group and (ii) separate the
Communications Group and the Media Group into two separately traded public
companies;

WHEREAS, in furtherance of the foregoing, the Board of Directors of
U S WEST and New U S WEST have approved this Agreement, pursuant to which,
among other things, (a) U S WEST shall effect a restructuring of certain of
its assets, liabilities and businesses, as a result of which New U S WEST
shall own the Directories Business and the businesses currently attributed to
the Communications Group and (b) U S WEST shall distribute all of the
outstanding capital stock of New U S WEST to its stockholders, all on the
terms and subject to the conditions described herein;

WHEREAS, it is the intention of the parties hereto that the
transactions contemplated by this Agreement shall be tax-free transactions
under Sections 332, 368(a) and 355 of the Internal Revenue Code of 1986, as
amended (the

<PAGE>

"CODE"), and the rules and regulations promulgated thereunder; and

WHEREAS, the parties hereto desire to make certain covenants and
agreements and to allocate certain assets, liabilities and obligations in
connection with the transactions contemplated hereby and to prescribe various
conditions to the transactions contemplated hereby.

NOW, THEREFORE, in furtherance of the foregoing and in
consideration of the mutual promises and undertakings contained herein and in
any other document executed in connection with this Agreement, the parties
agree as follows:

ARTICLE I

DEFINITIONS

1.1 GENERAL. For the purposes of this Agreement, the following
terms shall have the meanings set forth below:

"ACTION" shall mean any action, claim (whether or not filed), suit,
arbitration, inquiry, demand proceeding or investigation.

"AFFILIATE" shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by, or under
common control with, such specified Person; PROVIDED, HOWEVER, that for
purposes of this Agreement, no member of either Group shall, after giving
effect to the Separation, be deemed to be an Affiliate of any member of the
other Group.

"AGREEMENT" shall mean this Separation Agreement, together with all
exhibits and schedules hereto, as the same may be amended from time to time
in accordance with the terms hereof.

"AIRTOUCH" shall mean AirTouch Communications, Inc., a Delaware
corporation.

"AIRTOUCH FUNDS" shall mean the portion of the funds received in
the AirTouch Transaction which is not used to repay outstanding indebtedness.

<PAGE>

"AIRTOUCH MERGER AGREEMENT" shall mean Agreement and Plan of
Merger, dated as of January 29, 1998, among U S WEST, MGI, NewVector, PCS
Holdings and AirTouch.

"AIRTOUCH STOCK" shall mean all of the shares of common stock and
preferred stock of AirTouch which MGI receives in connection with the
AirTouch Transaction.

"AIRTOUCH TRANSACTION" shall mean the merger of NewVector and PCS
Holdings with and into AirTouch pursuant to the terms of the AirTouch Merger
Agreement.

"APPLICABLE LAW" shall mean, with respect to any Person, all
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Authority applicable to such Person and its business, properties and assets.

"ASSET" shall mean any and all right, title and interest in and to
all of the rights, properties, assets, claims, Contracts and businesses of
every kind, character and description, whether real, personal or mixed,
whether accrued, contingent or otherwise, and wherever located, including,
without limitation, the following: (i) all Cash Equivalents, notes, prepaid
expenses and accounts receivable (whether current or non-current); (ii) all
capital stock, partnership interests and other equity or ownership interests
or rights, directly or indirectly, in any entity; (iii) debentures, evidences
of indebtedness, certificates of interest or participation, collateral trust
certificates, preorganization certificates or subscriptions, investment
contracts, foreign currency and interest rate contracts (including, without
limitation, forward, option, cap and swap contracts), trust certificates,
puts, calls, straddles, options and other securities or hedging arrangements
of any kind; (iv) all registered and unregistered trademarks, service marks,
service names, trade styles and trade names (including, without limitation,
trade dress and other names, marks and slogans) and all associated goodwill;
all statutory, common law and registered copyrights; all patents; all
applications for any of the foregoing together with all rights to use all of
the foregoing and all other rights in, to and under the foregoing; and all
know-how, inventions, discoveries, improvements, processes, formulae (secret
or otherwise), specifications, trade secrets (whether patentable or not),
licenses and other similar agreements, confidential information, and all
drawings, records, books or other indicia, however evidenced, of the
foregoing; (v) all Contracts and rights existing thereunder

<PAGE>

and under all other business arrangements; (vi) all real estate and all
plants, buildings and other improvements thereon; (vii) all leasehold
improvements and all machinery, tools, dies, equipment (including all
transportation and office equipment), fixtures, trade fixtures and furniture;
(viii) all ingredients, supplies, spare parts, other miscellaneous supplies
and other tangible property of any kind; (ix) all raw materials,
work-in-process, finished goods, consigned goods and other inventories; (x)
all computer hardware, software, computer programs, systems and codes and
documentation relating thereto and all databases and reference and resource
materials; (xi) all prepayments of prepaid expenses; (xii) all claims, causes
of action, choses in action, rights under express or implied warranties,
rights of recovery and rights of set-off of any kind; (xiii) the right to
receive mail, accounts receivable payments and other communications; (xiv)
all customer lists and records pertaining to customers and accounts,
personnel records, all lists and records pertaining to suppliers and agents,
and all books, ledgers, files and business records of every kind; (xv) all
advertising materials and all other printed or written materials; (xvi) all
permits, licenses, approvals and authorizations issued by any Governmental
Authority or third party; (xvii) all goodwill as a going concern and all
other intangible properties; and (xviii) all employee Contracts, including,
without limitation, the right thereunder to restrict the employee from
competing in certain respects.

"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or
other day on which banks located in New York City are authorized or required
by law to close.

"CAPITAL FUNDING" shall mean U S WEST Capital Funding, Inc., a
Colorado corporation.

"CAPITAL FUNDING INDEBTEDNESS" shall mean the Capital Funding
Private Indebtedness, the Capital Funding Public Indebtedness and the Capital
Funding Trust Indebtedness.

"CAPITAL FUNDING PRIVATE INDEBTEDNESS" shall mean all of the
indebtedness owed by Capital Funding to third parties immediately prior to
the Separation Time other than the Capital Funding Public Indebtedness and
the Capital Funding Trust Indebtedness.

<PAGE>

"CAPITAL FUNDING PUBLIC INDEBTEDNESS" shall mean all of the
indebtedness of Capital Funding listed in Section 1.1(a) of the Separation
Disclosure Schedule.

"CAPITAL FUNDING TRUST INDEBTEDNESS" shall mean all of the
indebtedness owed by Capital Funding to the Trusts (other than a portion of
such indebtedness equal to the liquidation value of the common securities of
the Trusts).

"CASH EQUIVALENTS" shall mean cash on hand, all other cash in any
bank, savings or similar accounts at any financial institution, and checks,
drafts and similar instruments and any bonds or similar marketable
securities, certificates of deposit, commercial paper, eurodollar deposits
and any other cash equivalents, held in the name of or for the account of U S
WEST or any of its Subsidiaries.

"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. SECTION SECTION 9601 ET SEQ.).

"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.

"COMMUNICATIONS EMPLOYEES" shall have the meaning ascribed to such
term in the Employee Matters Agreement.

"COMMUNICATIONS EMPLOYEE ARRANGEMENTS" shall have the meaning
ascribed to such term in the Employee Matters Agreement.

"COMMUNICATIONS EMPLOYEE BENEFIT PLANS" shall have the meaning
ascribed to such term in the Employee Matters Agreement.

"COMMUNICATIONS STOCK" shall mean the U S WEST Communications Group
Common Stock, par value $.01 per share, of U S WEST.

"CONTRACT" shall mean any contract, agreement, lease, license,
sales order, purchase order, instrument or other commitment, written or oral,
that is binding on any Person or any part of its property under Applicable
Law.

<PAGE>

"COVERED EMPLOYEE" shall mean an employee of the U S WEST Group or
the New U S WEST Group at the grade 5 manager level or above.

"EMPLOYEE ARRANGEMENTS" shall mean all employment or consulting
agreements, and all bonus or other incentive compensation, deferred
compensation, disability, severance, stock award, stock option or stock
purchase agreements, policies or arrangements with respect to the employment
and termination of employment of any employee, officer, director or other
Person employed at any time by U S WEST or any of its Subsidiaries.

"EMPLOYEE BENEFIT PLAN" shall mean (i) each employee benefit plan,
as defined in Section 3(3) of the Employment Retirement Income Security Act
of 1974, as amended ("ERISA"), together with the regulations promulgated
thereunder, and (ii) each international employee benefit plan, whether or not
each plan in (i) and (ii) is covered by ERISA, which U S WEST or any of its
Subsidiaries maintains or to which U S WEST or any of its Subsidiaries has an
obligation to make contributions.

"EMPLOYEE MATTERS AGREEMENT" shall mean the Employee Matters
Agreement, substantially in the form of EXHIBIT A to this Agreement.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.

"FINANCIAL SERVICES" shall mean U S WEST Financial Services, Inc.,
a Colorado corporation.

"FINANCIAL SERVICES INDEBTEDNESS" shall mean all of the
indebtedness of Financial Services listed in Section 1.1(b) of the Separation
Disclosure Schedule.

"GOVERNMENTAL AUTHORITY" shall mean any foreign, federal, state or
local government, court, agency or commission or other governmental or
regulatory body or authority.

"GROUP" shall mean either the New U S WEST Group or the U S WEST
Group and "GROUPS" shall mean the New U S WEST Group and the U S WEST Group,
collectively.

<PAGE>

"INDEMNIFIABLE LOSSES" shall mean, with respect to any claim by an
Indemnified Party for indemnification under this Agreement, any and all
damages, losses, deficiencies, Liabilities, obligations, penalties,
judgments, settlements, claims, payments, fines, interest, costs and expenses
(including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements and compromises
relating thereto and the reasonable costs and expenses of attorneys',
accountants', consultants' and other professionals' fees and expenses
incurred in the investigation or defense thereof or the enforcement of rights
thereunder), including direct, consequential, exemplary, special and punitive
damages and lost profits.

"INDEMNIFIED PARTY" shall mean any Person that is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.

"INDEMNIFYING PARTY" shall mean any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
this Agreement.

"INFORMATION" shall mean all records, books, Contracts,
instruments, computer data and other data and information.

"INSURANCE ADMINISTRATION" shall mean, with respect to each Joint
Insurance Arrangement, (i) the accounting for premiums, retrospectively rated
premiums, defense costs, indemnity payments, deductibles and retentions, as
appropriate under the terms and conditions of each of the Joint Insurance
Arrangements, (ii) the reporting to Insurers of any losses or claims that may
cause the per-occurrence, per claim or aggregate limits of any Joint
Insurance Arrangement to be exceeded and (iii) the processing of claims made
under the Joint Insurance Arrangements, including, without limitation, the
reporting of claims to the Insurers' management and defense of claims and
providing for appropriate releases upon settlement of claims.

"INSURANCE ARRANGEMENT" shall mean insurance policies and insurance
contracts of any kind (other than insurance policies and insurance contracts
which are Employee Benefit Plans), including, without limitation, primary and
excess policies, commercial general liability policies, automobile policies,
product liability policies, directors' and officers' liability policies,
fiduciary

<PAGE>

liability policies, workers' compensation policies, and self-insurance
programs and captive insurance company arrangements, together with the
rights, benefits and privileges thereunder.

"INSURANCE PROCEEDS" shall mean those monies received by an insured
from an Insurer or paid by an Insurer on behalf of an insured, in either case
net of any applicable premium adjustment, retrospectively rated premium,
deductible, retention or cost of reserve paid or held by or for the benefit
of such insured.

"INSURED CLAIMS" shall mean those Liabilities which, individually
or in the aggregate, are covered within the terms and conditions of any of
the Joint Insurance Arrangements, whether or not subject to deductibles,
co-insurance, uncollectibility or retrospectively rated premium adjustments.

"INSURER" shall mean a third party insurance carrier.

"INTERCOMPANY INDEBTEDNESS" shall mean, with respect to any
Subsidiary of U S WEST, the aggregate principal amount of indebtedness owed
by such Subsidiary to Capital Funding immediately prior to the Reorganization.

"JOINT INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
that are owned or maintained by or on behalf of U S WEST or any of its
predecessors (other than Insurance Arrangements of Western Range) and that
relate to both (a) the MediaOne Business and/or the MediaOne Liabilities and
(b) the New U S WEST Business and/or the New U S WEST Liabilities.

"JOINT OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property of U S WEST and its Subsidiaries that is not either
MediaOne Other Intellectual Property or New U S WEST Other Intellectual
Property, and shall include Other Intellectual Property licensed to or
acquired by U S WEST and its Subsidiaries for use by both the New U S WEST
Business and the MediaOne Business, or which is created by or for both the
New U S WEST Business and the MediaOne Business prior to the Separation Time
(including all Other Intellectual Property which is created by or for U S
WEST prior to the Separation Time).

<PAGE>

"JOINT PATENTS" shall mean the U.S. patents (and any non-U.S.
patents corresponding thereto) listed in Section 1.1(c) of the Separation
Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part (but only to the extent claims are supported by the
specification of the patents listed in Section 1.1(c) of the Separation
Disclosure Schedule), re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.

"LESOP NOTES" shall mean the indebtedness of the U S WEST Savings
Plan/ESOP, all of which is guaranteed by U S WEST.

"LIABILITY" shall mean, with respect to any Person, except as
otherwise expressly provided herein, any direct or indirect liability
(whether absolute, accrued or unaccrued, contingent, liquidated or
unliquidated, matured or unmatured or known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by
such Person (including, without limitation, those arising under any
Applicable Law or Action or under any award of any court, tribunal or
arbitrator of any kind, and those arising under any Contract or undertaking).

"LITIGATION MATTERS" shall mean actual, threatened or future
Actions that have been or may be asserted against, or otherwise adversely
affect, any member of either Group.

"MARKET VALUE" on any Trading Day shall mean the average of the
high and low reported sales prices regular way of a share of Communications
Stock as reported on the NYSE Composite Tape; PROVIDED, HOWEVER, that, for
purposes of determining the market value of a share of Communications Stock
for any period, the high and low sales prices of a share of Communications
Stock on any day prior to any "ex-dividend" date occurring during such period
for any dividend paid or to be paid with respect to the Communications Stock
shall be reduced by the amount of such dividend.

"MEDIA EMPLOYEES" shall have the meaning ascribed to such term in
the Employee Matters Agreement.

"MEDIA EMPLOYEE ARRANGEMENTS" shall have the meaning ascribed to
such term in the Employee Matters Agreement.

<PAGE>

"MEDIA EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to
such term in the Employee Matters Agreements.

"MEDIAONE BUSINESS" shall mean the businesses of U S WEST currently
attributed to the Media Group pursuant to the Restated Certificate other than
the Directories Business (including the domestic wireless business attributed
to the Media Group being transferred to AirTouch pursuant to the AirTouch
Transaction).

"MEDIAONE INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the MediaOne Business and/or the
MediaOne Liabilities (other than Shared Liabilities), including, without
limitation, the Insurance Arrangements provided by Western Range (other than
the Western Range Transferred Insurance Arrangements).

"MEDIAONE PATENTS" shall mean the U.S. patents (and any non-U.S.
patents corresponding thereto) listed in Section 1.1(d) of the Separation
Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.

"MEDIAONE OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property licensed to or acquired by U S WEST and its
Subsidiaries for use only by the MediaOne Business or which is created by or
for only the MediaOne Business prior to the Separation Time.

"MEDIAONE TRADEMARKS" shall mean the Trademarks listed in Section
1.1(e) of the Separation Disclosure Schedule.

"MEDIA SAVINGS PLAN/ESOP" shall have the meaning ascribed to such
term in the Employee Matters Agreement.

"MEDIA STOCK" shall mean the U S WEST Media Group Common Stock, par
value $.01 per share, of U S WEST.

"MGI" shall mean U S WEST Media Group, Inc., a Delaware corporation.

<PAGE>

"NEW TRUST" shall mean a newly formed Delaware statutory business
trust, all of the common securities of which shall be owned by U S WEST.

"NEW U S WEST" shall have the meaning set forth in the preamble to
this Agreement.

"NEW U S WEST BUSINESS" shall mean (i) all of the businesses of U S
WEST currently attributed to the Communications Group pursuant to the
Restated Certificate and (ii) the Directories Business.

"NEW U S WEST GROUP" shall mean, at and after the Separation Time,
New U S WEST and all of its Subsidiaries.

"NEW U S WEST INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the New U S WEST Business and/or the
New U S WEST Liabilities (other than Shared Liabilities) including, without
limitation, the Western Range Transferred Insurance Arrangements.

"NEW U S WEST OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property licensed to or acquired by U S WEST and its
Subsidiaries for use only by the New U S WEST Business or which is created by
or for only the New U S WEST Business prior to the Separation Time.

"NEW U S WEST PATENTS" shall mean the U.S. patents (and any
non-U.S. patents corresponding thereto) listed in Section 1.1(f) of the
Separation Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.

"NEW U S WEST TRADEMARKS" shall mean the Trademarks listed in
Section 1.1(g) of the Separation Disclosure Schedule.

"NEWVECTOR" shall mean U S WEST NewVector Group, Inc., a Colorado
corporation.

"OTHER INTELLECTUAL PROPERTY" shall mean all registered and
unregistered copyrights, all know-how, discoveries, inventions, improvements,
processes, formulae, specifications, trade secrets (whether patentable or
not),

<PAGE>

business plans, marketing data, software, tools and documentation and all
drawings, records, books or other indicia, however evidenced, of the
foregoing, but excluding patents, patent applications and Trademarks.

"PERSON" or "PERSON" shall mean and include any individual,
partnership, joint venture, corporation, association, joint stock company,
limited liability company, trust, unincorporated organization or similar
entity.

"PCS HOLDINGS" shall mean U S WEST PCS Holdings, Inc., a Delaware
corporation.

"PRIVILEGED INFORMATION" shall mean, with respect to either Group,
Information regarding a member of such Group, or any of its operations,
Assets or Liabilities (whether in documents or stored in any other form or
known to its employees or agents) that is or may be protected from disclosure
pursuant to the attorney-client privilege, the work-product doctrine or other
applicable privileges.

"REPRESENTATIVE" shall mean, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.

"SEC" shall mean the United States Securities and Exchange
Commission.

"SEC FILINGS" shall mean the Proxy Statement, the Form S-4, the
Form 8-A and the Form 8-B/A (and all documents incorporated therein by
reference).

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

"SEPARATION DISCLOSURE SCHEDULE" shall mean the Separation
Disclosure Schedule, dated as of the date hereof, as the same may be amended
or supplemented pursuant to this Agreement.

"SHARED CONTINGENT GAIN" shall mean any right of U S WEST and its
Subsidiaries against any Person to the extent such right (i) does not relate
primarily to the New U S WEST Business or the MediaOne Business or (ii)
relates primarily to both the New U S WEST Business and the MediaOne

<PAGE>

Business, including, without limitation, the rights listed in Section 1.1(h)
of the Separation Disclosure Schedule.

"SHARED LIABILITY" shall mean any Liability of U S WEST or any of
its Subsidiaries (whether arising prior to, at or following the Separation
Time) which (i) arises out of or is in connection with or otherwise relates
to the management or conduct prior to the Separation Time of the businesses
of U S WEST and its Subsidiaries and is not otherwise included in the
definition of "New U S WEST Liabilities" or "MediaOne Liabilities" or
allocated to one of the Groups pursuant to this Agreement or the Tax Sharing
Agreement or (ii) arises out of any Transaction Suit, including, without
limitation, the Liabilities listed in Section 1.1(i) of the Separation
Disclosure Schedule, but excluding Transaction Costs.

"SUBSIDIARY" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership in which such Person or another Subsidiary of such Person is the
general partner or otherwise controls such partnership.

"TAX" or "TAXES" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, customs duties, fees, assessments
and charges of any kind whatsoever, together with any interest and any
penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any transferee
liability in respect of Taxes.

"TAX SHARING AGREEMENT" shall mean the Tax Sharing Agreement,
substantially in the form of EXHIBIT B to this Agreement.

<PAGE>

"TERMINATED COMMUNICATIONS EMPLOYEES" shall have the meaning
ascribed to such term in the Employee Matters Agreement.

"TERMINATED MEDIA EMPLOYEES" shall have the meaning ascribed to
such term in the Employee Matters Agreement.

"TRADEMARKS" shall mean all registered and unregistered trademarks,
service marks, service names, trade styles and trade names (including,
without limitation, trade dress and other names, marks and slogans) and all
associated goodwill and all applications for any of the foregoing, together
with all rights to use any of the foregoing.

"TRADING DAY" shall mean each weekday other than any day on which
the Communications Stock is not traded on the NYSE.

"TRANSACTION COSTS" shall mean the costs and expenses associated
with the transactions contemplated by this Agreement listed in Section 1.1(j)
of the Separation Disclosure Schedule.

"TRANSACTION DOCUMENTS" shall mean this Agreement, the Employee
Matters Agreement and the Tax Sharing Agreement and documents, schedules,
exhibits and annexes attached hereto or thereto or delivered pursuant hereto
or thereto, including, without limitation, the deeds, lease assignments and
assumptions, leases, subleases and sub-subleases, and the supplemental and
other agreements and instruments relative thereto.

"TRANSACTION SUIT" shall mean any Action that (i) is commenced
against any member of the U S WEST Group or any member of the New U S WEST
Group or any of their respective directors, officers or employees challenging
this Agreement or any other Transaction Document or any of the transactions
contemplated hereby or thereby or any of the terms thereof or (ii) arises out
of any untrue statement or alleged untrue statement of a material fact
contained in any of the SEC Filings, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading (but only with respect to information relating to
transactions contemplated by this Agreement or any other Transaction Document
contained in or omitted from the SEC

<PAGE>

Filings); PROVIDED, HOWEVER, that any Action arising out of or relating to
the transfer of Assets between employee benefits trusts sponsored by the
Groups shall not be a "Transaction Suit" and shall be governed by the
provisions of the Employee Matters Agreement.

"TRUSTS" shall mean U S WEST Financing I, a Delaware statutory
business trust, and U S WEST Financing II, a Delaware statutory business
trust.

"TRUST SECURITIES" shall mean the 7.96% Trust Originated Preferred
Securities of U S WEST Financing I, a Delaware statutory business trust, and
the 8 1/4% Trust Originated Preferred Securities of U S WEST Financing II, a
Delaware statutory business trust.

"U S WEST" shall have the meaning set forth in the
preamble to this Agreement.

"U S WEST GROUP" shall mean, at and after the Separation Time, U S
WEST and all of its Subsidiaries (other than New U S WEST and its
Subsidiaries).

"U S WEST SAVINGS PLAN/ESOP" shall have the meaning ascribed to
such term in the Employee Matters Agreement.

1.2 TERMS DEFINED ELSEWHERE IN THE AGREEMENT. For the purposes of
this Agreement, the following terms have the meanings set forth in the
Sections indicated:

<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
AAA Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Asserted Liability. . . . . . . . . . . . . . . . . . . . . . . . .8.3(a)
AT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(c)
Beneficial Holder . . . . . . . . . . . . . . . . . . . . . . . . .9.4(c)
Borrower Subsidiaries . . . . . . . . . . . . . . . . . . . . . . .3.2(k)
Charter Amendments. . . . . . . . . . . . . . . . . . . . . . . . .2.1(b)
Claim Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . .8.3(a)
CGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(g)
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Communications. . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(c)
Communications Certificates . . . . . . . . . . . . . . . . . . . .4.4(b)
Communications Group. . . . . . . . . . . . . . . . . . . . . . .recitals
Communications Redemption . . . . . . . . . . . . . . . . . . . . .4.1(a)
Communications Rights . . . . . . . . . . . . . . . . . . . . . 2.6(b)(i)
Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
</TABLE>
15

<PAGE>

<TABLE>
<S> <C>
Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Dex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Directories Business. . . . . . . . . . . . . . . . . . . . . . .recitals
Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Distribution Agent. . . . . . . . . . . . . . . . . . . . . . . . .4.4(c)
Dividend Number . . . . . . . . . . . . . . . . . . . . . . . . . .4.3(b)
Domestic Cable. . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(c)
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(l)
Exchange Offers . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Federal Relations . . . . . . . . . . . . . . . . . . . . . . . . .3.2(f)
FinanceCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(a)
Financially Reasonable Terms. . . . . . . . . . . . . . . . . .8.3(c)(i)
Form 8-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)(i)
Form 8-B/A. . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)(ii)
Form S-4. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(a)(ii)
International . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Interactive Services. . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Media Certificates. . . . . . . . . . . . . . . . . . . . . . . . .4.4(b)
Media Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . .4.1(b)
Media Group . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Media Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(b)(i)
MediaOne Assets . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(b)
MediaOne Common Stock . . . . . . . . . . . . . . . . . . . . . . .4.1(c)
MediaOne Delaware . . . . . . . . . . . . . . . . . . . . . . . . .3.1(d)
MediaOne Exchange Securities. . . . . . . . . . . . . . . . . . . .3.2(j)
MediaOne Georgia. . . . . . . . . . . . . . . . . . . . . . . . . .3.1(a)
MediaOne Liabilities. . . . . . . . . . . . . . . . . . . . . . . .3.4(b)
MediaOne New Indebtedness . . . . . . . . . . . . . . . . . . . . .3.2(a)
Multimedia. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(b)
National Contract . . . . . . . . . . . . . . . . . . . . . . . . .9.4(e)
New U S WEST . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
New U S WEST Action . . . . . . . . . . . . . . . . . . . . . . . .5.1(a)
New U S WEST Assets . . . . . . . . . . . . . . . . . . . . . . . .3.3(a)
New U S WEST Common Stock . . . . . . . . . . . . . . . . . . . . .2.1(a)
New U S WEST DRS System . . . . . . . . . . . . . . . . . . . . . .4.4(d)
New U S WEST Exchange Securities. . . . . . . . . . . . . . . . . .3.2(j)
New U S WEST Indemnified Parties. . . . . . . . . . . . . . . . 8.2(a)
New U S WEST Liabilities. . . . . . . . . . . . . . . . . . . . . .3.4(a)
New U S WEST New Indebtedness . . . . . . . . . . . . . . . . . . .3.2(h)
New U S WEST Right. . . . . . . . . . . . . . . . . . . . . . . . .2.6(a)
New U S WEST Rights Agreement . . . . . . . . . . . . . . . . . . .2.6(a)
New U S WEST SIP. . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
New U S WEST SIP Account. . . . . . . . . . . . . . . . . . . . . .4.4(a)
Non-Managing Party. . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Non-Receiving Party . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a)
NYSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)
Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
</TABLE>
16

<PAGE>

<TABLE>
<S> <C>
Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Pre-Separation Adjustment . . . . . . . . . . . . . . . . . . . . .3.3(d)
Provider. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 5.3
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)(i)
PSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Receiving Party . . . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)(i)
Record Holder . . . . . . . . . . . . . . . . . . . . . . . . . . .9.4(c)
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)(iii)
Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Restated Certificate. . . . . . . . . . . . . . . . . . . . . . .recitals
Separation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Separation Committee. . . . . . . . . . . . . . . . . . . . . . . . .12.2
Separation Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Shared Asserted Liability . . . . . . . . . . . . . . . . . . . . .8.3(b)
Shared Claim Notice . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Shared Liability Insurance Proceeds . . . . . . . . . . . . . . . .7.2(c)
SIP Participant . . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Tender Offers . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Trust Exchange Securities . . . . . . . . . . . . . . . . . . . . .3.2(j)
U S WEST. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
U S WEST Action . . . . . . . . . . . . . . . . . . . . . . . . . .5.1(b)
U S WEST Indemnified Parties. . . . . . . . . . . . . . . . . . . .8.1(a)
U S WEST Rights Agreement . . . . . . . . . . . . . . . . . . . . .2.6(b)
U S WEST SIP. . . . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
U S WEST SIP Account. . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
Western Range . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b)(i)
Western Range Transferred Insurance Arrangements. . . . . . . . . .7.1(a)
</TABLE>

1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof",
"herein", and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.

(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.

1.4 REFERENCES TO TIME. All references in this Agreement to times
of the day shall be to Mountain time.

<PAGE>

ARTICLE II

CERTAIN PRE-SEPARATION TRANSACTIONS

2.1 CERTIFICATES OF INCORPORATION; BYLAWS; NAME CHANGES. (a)
Prior to the Separation Time, U S WEST shall cause New U S WEST to take all
actions necessary to amend its Certificate of Incorporation and Bylaws in the
manner specified by U S WEST. The Certificate of Incorporation of New U S
WEST shall, among other things, authorize (i) 2,000,000,000 shares of Common
Stock, par value $.01 per share ("NEW U S WEST COMMON STOCK"), of New U S
WEST and (ii) 200,000,000 shares of Preferred Stock, par value $.01 per
share, of New U S WEST.

(b) Prior to the Separation Time, U S WEST shall take all actions
necessary in accordance with Applicable Law and the Restated Certificate to
amend the Restated Certificate (the "CHARTER AMENDMENTS") as specified by U S
WEST to, among other things, (i) permit the redemption of the Communications
Stock in exchange for shares of New U S WEST Common Stock pursuant to Section
4.1 and (ii) following such redemption, delete all references to the
Communications Stock and amend certain terms of the Media Stock set forth
therein.

(c) Prior to the Separation Time, the parties hereto shall take
all actions necessary so that, immediately after the Separation Time, (i) New
U S WEST's name shall be changed to "U S WEST, Inc." and (ii) U S WEST's name
shall be changed to "MediaOne Group, Inc."

2.2 STOCKHOLDERS' MEETING. U S WEST shall take all actions
necessary in accordance with Applicable Law, the Restated Certificate and U S
WEST's Bylaws to call, give notice of, convene and hold a meeting of its
stockholders (the "STOCKHOLDERS' MEETING") as soon as practicable for the
purpose of obtaining (i) the adoption of the Charter Amendments by the
stockholders of U S WEST and (ii) such other approvals as may be determined
by the Board of Directors of U S WEST.

2.3 REGISTRATION AND LISTING. (a) Prior to the Separation Time,
(i) U S WEST shall prepare and file with the SEC a proxy statement under the
Exchange Act relating to the Stockholders' Meeting (the "PROXY STATEMENT")
and (ii) New U S WEST shall prepare and file with the SEC a

<PAGE>

registration statement on Form S-4 registering under the Securities Act the
shares of New U S WEST Common Stock to be issued to stockholders of U S WEST
pursuant to Section 4.1, in which the Proxy Statement shall be included as a
prospectus (the "FORM S-4"). The parties hereto shall use their reasonable
best efforts to have the Form S-4 declared effective under the Securities Act
as promptly as practicable after the filing thereof. U S WEST shall cause
the Proxy Statement to be mailed to U S WEST's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities
Act. New U S WEST shall use its reasonable best efforts to take all such
actions as may be necessary or appropriate under state securities and "blue
sky" laws in connection with the Separation.

(b) Prior to the Separation Time, (i) New U S WEST shall prepare
and file with the SEC a registration statement on Form 8-A registering under
the Exchange Act the New U S WEST Common Stock (the "FORM 8-A") and (ii) U S
WEST shall prepare and file with the SEC an amendment to U S WEST's existing
registration statement on Form 8-B amending the terms of the Media Stock to
reflect the changes set forth in the Charter Amendments (the "FORM 8-B/A").
New U S WEST shall prepare, file and seek to make effective an application
for the listing of the New U S WEST Common Stock on The New York Stock
Exchange ("NYSE") and the Pacific Stock Exchange (the "PSE"), subject to
official notice of issuance. U S WEST shall prepare, file and seek to make
effective amendments to U S WEST's listing applications with the NYSE and the
PSE to provide for the delisting of the Communications Stock and the
amendment of the terms of the Media Stock to reflect the changes set forth in
the Charter Amendments.

(c) The parties hereto shall cooperate in preparing and filing
with the SEC and causing to be declared effective any registration statements
or amendments thereto that are necessary or appropriate in order to reflect
the establishment of, or amendments to, any employee benefit plans
contemplated by this Agreement or any other Transaction Document requiring
registration under the Securities Act.

2.4 BOARDS OF DIRECTORS. Prior to the Separation Time, the
parties hereto shall take all actions necessary so that, effective
immediately after the Separation Time, the Boards of Directors of U S WEST
and New U S WEST shall be

<PAGE>

comprised of the individuals so named in the Proxy Statement.

2.5 RIGHTS AGREEMENTS. (a) Prior to the Separation Time, New U S
WEST shall enter into a Rights Agreement (the "NEW U S WEST RIGHTS
AGREEMENT") on terms specified by U S WEST pursuant to which one Preferred
Stock Purchase Right of New U S WEST (a "NEW U S WEST RIGHT") will be
attached to each share of New U S WEST Common Stock issued to U S WEST
pursuant to Section 4.1. All references in this Agreement to New U S WEST
Common Stock shall be deemed to include such New U S WEST Rights.

(b) Prior to the Separation Time, the Amended and Restated Rights
Agreement, dated as of October 31, 1995 (the "U S WEST RIGHTS AGREEMENT"),
between U S WEST and State Street Bank and Trust Company, as rights agent,
shall be amended to provide (i) that the U S WEST Communications Group Rights
(as defined in the U S WEST Rights Agreement) (the "COMMUNICATIONS RIGHTS")
and the U S WEST Media Group Rights (as defined in the U S WEST Rights
Agreement) (the "MEDIA RIGHTS") shall 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; and (iii) for
certain amendments to the terms of the Media Rights.

2.6 THE TRANSACTION DOCUMENTS. Prior to the Separation Time, each
of U S WEST and New U S WEST shall enter into, or cause the appropriate
members of the Group of which it is a member to enter into, the Transaction
Documents.

2.7 U S WEST APPROVAL OF CERTAIN NEW U S WEST ACTIONS. Prior to
the Separation Time, U S WEST shall take and/or ratify all actions necessary
under Applicable Law, as the sole stockholder of New U S WEST, to effectuate
the transactions contemplated by this Agreement, including, without
limitation, adopting and implementing appropriate plans, agreements and
arrangements for New U S WEST Employees.

<PAGE>

ARTICLE III

REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS

3.1 REORGANIZATION. Subject to the terms and conditions of this
Agreement, at such time as determined by U S WEST in its sole discretion, U S
WEST shall cause the following transactions to occur in the order set forth
below (collectively, the "REORGANIZATION"):

(a) MediaOne, Inc., a Georgia corporation ("MEDIAONE GEORGIA"),
shall cause:

(i) MediaOne Business Services, Inc., a Colorado corporation, to be
merged with and into MediaOne Georgia;

(ii) MediaOne of Clayton County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

(iii) MediaOne of Cobb County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

(iv) MediaOne of Conyers Rockdale, Inc., a Georgia corporation, to
be merged with and into MediaOne Georgia;

(v) MediaOne of Fayette County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

(vi) MediaOne of Fulton County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

(vii) MediaOne of Georgia, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

(viii) MediaOne of Henry County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;

<PAGE>

(ix) Peachtree SMATV Corporation, a Georgia corporation, to be
merged with and into MediaOne Georgia; and

(x) Atlanta Home Network, Inc., a Georgia corporation, to be merged
with and into MediaOne Georgia.

(b) U S WEST Multimedia Communications, Inc., a Colorado
corporation ("MULTIMEDIA"), shall cause MediaOne Georgia to be merged with
and into Multimedia.

(c) MGI shall assume from U S WEST Domestic Cable, Inc., a
Delaware corporation ("DOMESTIC CABLE"), all of the Intercompany Indebtedness
of Domestic Cable, in repayment of a corresponding amount of the indebtedness
owed by MGI to Domestic Cable.

(d) MediaOne of Delaware, Inc., a Delaware corporation ("MEDIAONE
DELAWARE"), shall assume from MGI all of the indebtedness owed by MGI to
Domestic Cable (after giving effect to the repayment contemplated by Section
3.1(c)).

(e) MediaOne Delaware shall assume from MGI a portion of the
Intercompany Indebtedness of MGI equal to the difference between (A) the
total amount of Intercompany Indebtedness of MGI (after giving effect to the
assumption contemplated by Section 3.2(c)) and (B) the sum of (1) the
difference between (x) $3.9 billion and (y) the Intercompany Indebtedness of
Dex plus (2) the principal amount of the indebtedness owed by Capital Funding
to U S WEST.

(f) MGI shall contribute as a capital contribution to Multimedia:

(i) all of the issued and outstanding shares of capital stock of:
(A) U S WEST Capital Corporation, a Colorado corporation; (B) U S WEST
Interactive Services, Inc., a Colorado corporation ("INTERACTIVE
SERVICES"); (C) U S WEST International Holdings, Inc., a Delaware
corporation ("INTERNATIONAL"); (D) U S WEST Investments, Inc., a
Colorado corporation; (E) MediaOne Delaware; (F) if the AirTouch
Transaction has not been consummated, NewVector; (G) if the AirTouch
Transaction has not been consummated, PCS Holdings; (H) Far East
Investment Company, a Colorado corporation; (I) Domestic Cable; (J) U S
WEST Cellular Holdings, Inc., a

<PAGE>

Delaware corporation; and (K) U S WEST PCS Services, Inc., a Delaware
corporation;

(ii) if the AirTouch Transaction has not been consummated, a note,
payable by NewVector to MGI in the aggregate principal amount of
$900,000,000; and

(iii) if the AirTouch Transaction has been consummated, all of the
AirTouch Stock.

(g) MGI shall distribute as a dividend all of the issued and
outstanding capital stock of Multimedia to U S WEST.

(h) U S WEST shall merge U S WEST Communications Group, Inc., a
Colorado corporation ("CGI"), with and into New U S WEST, with New U S WEST
continuing as the surviving corporation. Pursuant to such merger, the issued
and outstanding capital stock of CGI shall be converted into 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 in
connection with the Separation pursuant to Section 4.1. Each share of New U
S WEST Common Stock so issued to U S WEST shall be fully paid, nonassessable
and free of preemptive rights.

3.2 REFINANCING OF INDEBTEDNESS. Following consummation of the
Reorganization, U S WEST shall cause the following actions to be taken with
respect to certain indebtedness of U S WEST and its Subsidiaries (as used in
this Section 3.2, all references to "amounts" or "aggregate principal
amounts" of any indebtedness shall refer to the face amount of such
indebtedness):

(a) A newly formed direct or indirect Subsidiary of U S WEST
("FINANCECO") shall incur an aggregate principal amount of indebtedness equal
to the difference between (i) the sum of (A) the total aggregate principal
amount of the Capital Funding Indebtedness attributed to the Media Group plus
(B) the total aggregate principal amount of the Financial Services
Indebtedness plus (C) an aggregate principal amount of indebtedness
sufficient to fund the costs and expenses payable by the U S WEST Group in
connection with the Separation, as well as any negative Pre-Separation
Adjustment and (ii) the sum of (A) $3.9 billion

<PAGE>

plus (B) if the AirTouch Transaction is consummated, the amount of the
AirTouch Funds (the "MEDIAONE NEW INDEBTEDNESS"). All of the indebtedness
incurred by FinanceCo shall be guaranteed by U S WEST.

(b) FinanceCo shall lend to Financial Services an amount of funds
equal to the total aggregate principal amount of the Financial Services
Indebtedness.

(c) FinanceCo shall lend to each of (i) PCS Holdings, (ii)
Interactive Services, (iii) Financial Services and (iv) U S WEST Real Estate,
Inc., a Colorado corporation ("REAL ESTATE"), an amount of funds equal to the
Intercompany Indebtedness of such entity. Each such entity shall, in turn,
use the funds so borrowed from FinanceCo to repay its Intercompany
Indebtedness.

(d) FinanceCo shall lend to International an amount of funds equal
to the difference between (i) the Intercompany Indebtedness of International
and (ii) the indebtedness owed by Capital Funding to International.
International shall, in turn, use the funds so borrowed from FinanceCo to
repay a corresponding aggregate principal amount of its Intercompany
Indebtedness. International shall transfer to Capital Funding the
indebtedness owed by Capital Funding to International, thereby cancelling the
remaining Intercompany Indebtedness of International.

(e) FinanceCo shall lend to MediaOne Delaware an amount of funds
equal to the sum of the Intercompany Indebtedness of Multimedia and MediaOne
Delaware (after giving effect to the assumption made pursuant to Section
3.1(c)). MediaOne Delaware shall, in turn, use a portion of the funds so
borrowed from FinanceCo to repay its Intercompany Indebtedness and shall
distribute as a dividend to Multimedia the balance of the funds so borrowed
from FinanceCo. Multimedia shall, in turn, use such balance of funds to
repay its Intercompany Indebtedness.

(f) Capital Funding shall repay a portion of the indebtedness owed
by Capital Funding to U S WEST equal to the aggregate principal amount of the
Intercompany Indebtedness of U S WEST Federal Relations, Inc., a Delaware
corporation ("FEDERAL RELATIONS"), by distributing to U S WEST the
Intercompany Indebtedness of Federal Relations. U S WEST will, in turn,
contribute as a capital contribution to Federal Relations such Intercompany
Indebtedness and

<PAGE>

Federal Relations shall transfer such capital contribution to Capital Funding
to repay such Intercompany Indebtedness.

(g) U S WEST shall contribute as a capital contribution to MGI all
of the indebtedness owed by Capital Funding to U S WEST. MGI shall use such
indebtedness to repay a corresponding aggregate principal amount of its
Intercompany Indebtedness.

(h) Capital Funding shall incur an aggregate principal amount of
new indebtedness equal to the sum of (i) the total aggregate principal amount
of Capital Funding Indebtedness attributed to the Communications Group plus
(ii) $3.9 billion plus (iii) an aggregate principal amount of new
indebtedness sufficient to fund the costs and expenses payable by the New U S
WEST Group in connection with the Separation, as well as any positive
Pre-Separation Adjustment (the "NEW U S WEST NEW INDEBTEDNESS"). All of the
new indebtedness incurred by Capital Funding shall be guaranteed by New U S
WEST.

(i) FinanceCo shall loan to U S WEST all of the proceeds of the
indebtedness incurred by FinanceCo to fund the costs and expenses payable by
the U S WEST Group in connection with the Separation, as well as any negative
Pre-Separation Adjustment, and U S WEST shall use such funds to pay or cause
to be paid such costs and expenses and/or such negative Pre-Separation
Adjustment. Capital Funding shall loan to New U S WEST all of the proceeds
of the indebtedness incurred by Capital Funding to fund the costs and
expenses payable by the New U S WEST Group in connection with the Separation,
as well as any Positive Pre-Separation Adjustment, and New U S WEST shall use
such funds to pay or cause to be paid such costs and expenses and/or such
positive Pre-Separation Adjustment.

(j) U S WEST shall take all actions necessary to cause the Capital
Funding Public Indebtedness, the Capital Funding Private Indebtedness, the
Trust Securities and the Financial Services Indebtedness to be refinanced
(collectively, the "REFINANCING") through one or more of: (i) offers to
purchase the Capital Funding Public Indebtedness, the Financial Services
Indebtedness and the Trust Securities (the "TENDER OFFERS"); (ii) offers to
exchange (the "EXCHANGE OFFERS") (A) the Capital Funding Public Indebtedness
for new debt securities of Capital Funding guaranteed by New U S WEST (the
"NEW U S WEST EXCHANGE SECURITIES") or new debt securities of FinanceCo

<PAGE>

guaranteed by U S WEST (the "MEDIAONE EXCHANGE SECURITIES") and (B) the Trust
Securities for new trust securities of New Trusts (the "TRUST EXCHANGE
SECURITIES"); (iii) repayments of the Capital Funding Private Indebtedness;
and (iv) defeasance of the Capital Funding Public Indebtedness, Financial
Services Indebtedness and the Capital Funding Trust Indebtedness.

(k) Capital Funding shall use a portion of the proceeds of the New
U S WEST New Indebtedness, together with the AirTouch Funds, if any, and the
funds it receives from PCS Holdings, Interactive Services, Financial
Services, Real Estate, International, MediaOne Delaware and Multimedia
(collectively, the "BORROWER SUBSIDIARIES") pursuant to Sections 3.2 (d), (e)
and (f) to (i) repay all of the Capital Funding Private Indebtedness, (ii)
repay all of the Capital Funding Public Indebtedness tendered pursuant to the
Tender Offers, (iii) repurchase all of the Trust Securities tendered in the
Tender Offers and the Exchange Offers and (iv) defease all of the Capital
Funding Public Indebtedness and Capital Funding Trust Indebtedness to be
defeased pursuant to the Refinancing. Capital Funding shall use the Trust
Securities which it repurchases pursuant to the Tender Offers to satisfy its
obligations under a corresponding aggregate principal amount of Capital
Funding Trust Indebtedness. Financial Services shall use the funds it
receives from FinanceCo pursuant to Section 3.2(b) to repay all of the
Financial Services Indebtedness tendered pursuant to the Tender Offers.

(l) In the event that holders of Capital Funding Public
Indebtedness offer to exchange such indebtedness for New U S WEST Exchange
Securities pursuant to the Exchange Offers, the amount of New U S WEST New
Indebtedness shall be reduced by an amount equal to the aggregate principal
amount of the New U S WEST Exchange Securities issued. In no event shall New
U S WEST Exchange Securities be issued in an aggregate principal amount which
exceeds the aggregate principal amount of the New U S WEST New Indebtedness.
In the event that holders of Capital Funding Public Indebtedness offer to
exchange such indebtedness for MediaOne Exchange Securities pursuant to the
Exchange Offers, (i) FinanceCo shall distribute to U S WEST such MediaOne
Exchange Securities, U S WEST shall contribute such MediaOne Exchange
Securities to Capital Funding and Capital Funding shall issue such MediaOne
Exchange Securities in exchange for the Capital Funding Public Indebtedness
offered for exchange, (ii) the amount of MediaOne New Indebtedness

<PAGE>

shall be reduced by an amount equal to the aggregate principal amount of the
MediaOne Exchange Securities issued and (iii) Capital Funding shall transfer
to U S WEST all of its rights under an amount of Intercompany Indebtedness of
the Borrower Subsidiaries equal to the aggregate principal amount of such
MediaOne Exchange Securities and U S WEST may, in turn, transfer such
Intercompany Indebtedness to FinanceCo (in which event the transactions
contemplated by Sections 3.2(d), (e) and (f) shall not be effected with
respect to an amount equal to the amount of such Intercompany Indebtedness).
In the event that holders of Trust Securities offer to exchange such
securities for Trust Exchange Securities pursuant to the Exchange Offers, (i)
Capital Funding shall repurchase such Trust Securities as described in
Section 3.2(l), (ii) the exchange agent for the Exchange Offers (the
"EXCHANGE AGENT") shall use the funds which Capital Funding would otherwise
pay to such holders to purchase, on behalf of such holders, Trust Exchange
Securities from one or more New Trusts with an aggregate liquidation amount
corresponding to the aggregate liquidation amount of the Trust Securities
repurchased by Capital Funding and shall deliver such Trust Exchange
Securities to such holders, (iii) each New Trust shall loan to FinanceCo the
funds received upon issuance of such Trust Exchange Securities and FinanceCo
shall use such funds to repay a portion of the MediaOne New Indebtedness and
(iv) Capital Funding shall use the Trust Securities which it so repurchases
to satisfy its obligations under a corresponding aggregate principal amount
of Capital Funding Trust Indebtedness. In no event shall MediaOne Exchange
Securities and Trust Exchange Securities be issued in an aggregate principal
amount which exceeds the aggregate principal amount of the MediaOne New
Indebtedness.

(m) In the event that less than all of the Capital Funding Public
Indebtedness, Trust Securities and Financial Services Indebtedness are
tendered or exchanged pursuant to the Refinancing and U S WEST does not elect
to defease such indebtedness (or, in the case of the Trust Securities, the
related Capital Funding Trust Indebtedness), (i) U S WEST shall assume (A)
from Capital Funding all of the Capital Funding Public Indebtedness not
tendered or exchanged and an amount of Capital Funding Trust Indebtedness
equal to the liquidation amount of the Trust Securities not tendered or
exchanged and (B) from Financial Services all of the Financial Services
Indebtedness not tendered, (ii) the amount of the MediaOne New Indebtedness
shall be reduced by an amount equal to the principal amount

<PAGE>

of the indebtedness assumed by U S WEST from Capital Funding and Financial
Services, (iii) to the extent U S WEST assumes a portion of the Capital
Funding Public Indebtedness or Capital Funding Trust Indebtedness, Capital
Funding shall transfer to U S WEST all of its rights under an amount of the
Intercompany Indebtedness of the Borrower Subsidiaries equal to the aggregate
principal amount of the Capital Funding Public Indebtedness and the Capital
Funding Trust Indebtedness assumed by U S WEST and U S WEST may, in turn,
transfer such Intercompany Indebtedness to FinanceCo (in which event the
transactions contemplated by Sections 3.2(d), (e) and (f) shall not be
effected with respect to an amount equal to the amount of such Intercompany
Indebtedness) and (iv) to the extent that U S WEST assumes a portion of the
Financial Services Indebtedness, FinanceCo shall not make the loans
contemplated by Section 3.2(b) with respect to an amount equal to such amount
of Financial Services Indebtedness.

(n) U S WEST shall cause the U S WEST Savings Plan/ESOP to repay
all LESOP Notes outstanding immediately prior to the Separation Time.

3.3 CONTRIBUTION. Subject to the terms and conditions of this
Agreement, following consummation of the Reorganization and the transactions
contemplated by Section 3.2, U S WEST and New U S WEST shall cause the
following transactions to occur in the order set forth below (collectively,
the "Contribution"):

(a) U S WEST shall, as a capital contribution to New U S WEST,
convey, transfer, assign and deliver to New U S WEST all of U S WEST's
right, title and interest in and to all of the following Assets (together
with all of the Assets of New U S WEST and its Subsidiaries prior to such
transfer, the "NEW U S WEST ASSETS"):

(i) all of the issued and outstanding capital stock, together with
all the Assets, of: (A) MGI; (B) Capital Funding; (C) Federal Relations;
(D) U S WEST Investment Management Company, a Colorado corporation; (E)
U S WEST Educational Foundation, a Washington corporation; (F) U S WEST
Foundation, a Colorado corporation; (G) U S WEST SPF Co., a Colorado
corporation; and (H) U S WEST IP Holdings, Inc., a Delaware corporation;

<PAGE>

(ii) except as set forth in Section 3.3(c), all of the Assets
included on the combined balance sheet of the Communications Group as of
March 31, 1998 and any Assets acquired by U S WEST or any of its
Subsidiaries relating primarily to the businesses attributed to the
Communications Group from April 1, 1998 to the Separation Time
(including, in each case, the proceeds received upon disposition of any
such Assets);

(iii) all of the Assets included on the consolidated balance sheet
of Dex, as of March 31, 1998 and any Assets acquired by U S WEST or any
of its Subsidiaries relating primarily to the Directories Business from
April 1, 1998 to the Separation Time (including, in each case, the
proceeds received upon disposition of any such Assets);

(iv) subject to Section 5.6 and except as otherwise agreed to by
U S WEST and New U S WEST, all of the New U S WEST Trademarks, New U S
WEST Patents and New U S WEST Other Intellectual Property and an equal
and undivided interest in the Joint Patents and the Joint Other
Intellectual Property;

(v) all of the New U S WEST Insurance Arrangements, an equal and
undivided interest in the Joint Insurance Arrangements and all of the
other rights granted, and Assets contemplated to be transferred, to New
U S WEST pursuant to Article VII;

(vi) all of the rights granted, and Assets contemplated to be
transferred, to New U S WEST and the Communications Employee Benefit
Plans and Communications Employee Arrangements pursuant to the Employee
Matters Agreement;

(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(a)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the New U S WEST Business;

(viii) 50% of all Shared Contingent Gains;

(ix) all of the leasehold interests listed in Section 3.3(a)(ix) of
the Separation Disclosure Schedule; and

<PAGE>

(x) all of the Assets listed in Section 3.3(a)(x) of the Separation
Disclosure Schedule.

(b) U S WEST shall retain and shall not contribute to New U S
WEST, and the New U S WEST Assets shall not include, all of U S WEST's right,
title and interest in all of the Assets of U S WEST other than the New U S
WEST Assets (together with any Assets transferred to U S WEST or any member
of the U S WEST Group pursuant to Section 3.3(c) or the Employee Matters
Agreement, the "MEDIAONE ASSETS"), including, without limitation, the
following Assets:

(i) all of the issued and outstanding capital stock, together with
all of the assets, of (A) Multimedia; (B) MediaOne of Michigan, Inc., a
Michigan corporation; (C) Western Range Insurance Co, a Vermont
corporation ("Western Range"); and (D) if FinanceCo is a Subsidiary of
U S WEST, FinanceCo;

(ii) all of the Assets included on the combined balance sheet of
the Media Group as of March 31, 1998 (other than the Assets of Dex and
its Subsidiaries) and any Assets acquired by U S WEST or any of its
Subsidiaries relating primarily to the MediaOne Business from April 1,
1998 to the Separation Time (including, in each case, the proceeds
received upon disposition of any such Assets);

(iii) all of the shares of Media Stock held as treasury stock by
U S WEST;

(iv) all of the common securities of the Trusts, any New Trusts
and U S WEST Financing III, a Delaware statutory business trust;

(v) subject to Section 5.6 and except as otherwise agreed to by U S
WEST and New U S WEST, all of the MediaOne Trademarks, MediaOne Patents
and MediaOne Other Intellectual Property, and an equal and undivided
interest in the Joint Patents and the Joint Other Intellectual Property;

(vi) all of the MediaOne Insurance Arrangements, an equal and
undivided interest in the Joint Insurance Arrangements and all of the
rights granted to, and Assets contemplated to be retained by, U S WEST
pursuant to Article VII;

<PAGE>

(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(b)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the MediaOne Business;

(viii) 50% of all Shared Contingent Gains;

(ix) all of the leasehold interests listed in Section 3.3(b)(ix) of
the Separation Disclosure Schedule; and

(x) all of the Assets listed in Section 3.3(b)(x) of the Separation
Disclosure Schedule.

(i) U S WEST Advanced Technologies, Inc., a Colorado corporation
which will be a Subsidiary of New U S WEST upon consummation of the
Reorganization ("AT"), shall convey, transfer, assign and deliver to U S
WEST all of AT's right, title and interest in and to the Assets of AT
listed in Section 3.3(c) of the Separation Disclosure Schedule.

(ii) U S WEST Communications, Inc., a Colorado corporation which
will be a Subsidiary of New U S WEST upon consummation of the
Reorganization ("COMMUNICATIONS") shall convey, transfer, assign and
deliver to U S WEST all of Communications' right, title and interest in
and to the Assets of Communications listed in Section 3.3(c) of the
Separation Disclosure Schedule.

(iii) Federal Relations shall convey, transfer, assign and deliver
to U S WEST all of Federal Relation's right, title and interest in and
to the Assets of Federal Relations listed in Section 3.3(c) of the
Separation Disclosure Schedule.

(d) Prior to the Separation Time, the Chief Financial Officer of
the Communications Group and the Chief Financial Officer of the Media Group
shall agree in writing as to the amount of the Pre-Separation Adjustment (as
determined below). If the Pre-Separation Adjustment is positive, New U S
WEST shall declare as a dividend to U S

<PAGE>

WEST an amount in cash equal to the Pre-Separation Adjustment. If the
Pre-Separation Adjustment is negative, U S WEST shall contribute as a capital
contribution to New U S WEST an amount in cash equal to the Pre-Separation
Adjustment. The "Pre-Separation Adjustment" shall be determined in the
manner set forth in Section 3.3(d) of the Separation Disclosure Schedule.

3.4 DISCHARGE OF LIABILITIES. (a) From and after the Separation
Time, New U S WEST agrees to (or to cause a member of the New U S WEST Group
to) discharge or perform when due all of the following Liabilities (the "NEW
U S WEST LIABILITIES"):

(i) all Liabilities of U S WEST arising out of or relating
primarily to the New U S WEST Assets or the operation of the New U S
WEST Business, whether arising before or after the Separation Time;

(ii) all of the Liabilities included on the combined balance sheet
of the Communications Group as of March 31, 1998 and any Liabilities
incurred by U S WEST or any of its Subsidiaries relating primarily to
the businesses attributed to the Communications Group from April 1, 1998
to the Separation Time;

(iii) all of the Liabilities included on the consolidated balance
sheet of Dex as of March 31, 1998 and any Liabilities incurred by U S
WEST or any of its Subsidiaries relating primarily to the Directories
Business from April 1, 1998 to the Separation Time;

(iv) all indebtedness incurred by Capital Funding pursuant to
Section 3.2 and all of the indebtedness of U S WEST Communications,
Inc., a Colorado corporation;

(v) all Liabilities identified in Section 2(a) of the Employee
Matters Agreement and all other Liabilities identified in the Employee
Matters Agreement as Liabilities of the New U S WEST Group;

(vi) subject to Section 3.3(d), the Transaction Costs identified in
Section 1.1(j) of the Separation Disclosure Schedule as the
responsibility of New U S WEST;

(vii) for each category of Shared Liabilities listed in Section
1.1(i) of the Separation Disclosure

<PAGE>

Schedule, the percentage of such category of Shared Liabilities
indicated in such section as the responsibility of New U S WEST;

(viii) the Actions and Liabilities listed in Section 3.4(a)(viii)
of the Separation Disclosure Schedule

(ix) the Liabilities listed in Section 3.4(a)(ix) of the Separation
Disclosure Schedule; and

(x) all Liabilities that are expressly contemplated by any of the
Transaction Documents as Liabilities of any member of the New U S WEST
Group.

(b) U S WEST shall retain and discharge or perform when due, and
New U S WEST shall have no liability with respect to, all Liabilities of U S
WEST other than the New U S WEST Liabilities (the "MEDIAONE LIABILITIES"),
including, without limitation, the following:

(i) all Liabilities arising out of or relating primarily to the
MediaOne Assets or the operation of the MediaOne Business, whether
arising before or after the Separation Time;

(ii) all of the Liabilities included on the combined balance sheet
of the Media Group as of March 31, 1998 (other than (A) the Liabilities
of Dex and its Subsidiaries and (B) $3.9 billion of indebtedness (net of
any indebtedness of Dex and its Subsidiaries)) and any Liabilities
incurred by U S WEST or any of its Subsidiaries relating primarily to
the MediaOne Business from April 1, 1998 to the Separation Time;

(iii) all indebtedness incurred by FinanceCo or assumed by U S
WEST from Capital Funding or Financial Services pursuant to Section 3.2
and all indebtedness of MediaOne Delaware;

(iv) all Liabilities identified in Section 2(b) of the Employee
Matters Agreement and all other Liabilities contemplated by the Employee
Matters Agreement as Liabilities of the U S WEST Group;

(v) subject to Section 3.3(d), the Transaction Costs identified in
Section 1.1(j) of the Separation Disclosure Schedule as the
responsibility of U S WEST;

<PAGE>

(vi) for each category of Shared Liabilities listed in Section
1.1(i) of the Separation Disclosure Schedule, the percentage of such
category of Shared Liabilities indicated in such section as the
responsibility of U S WEST;

(vii) the Actions and Liabilities listed in Section 3.4(b)(vii) of
the Separation Disclosure Schedule;

(viii) the Liabilities listed in Section 3.4(b)(viii) of the
Separation Disclosure Schedule; and

(ix) all Liabilities that are expressly contemplated by any of the
Transaction Documents as Liabilities of any member of the U S WEST Group.

3.5 CLOSING; DELIVERY; METHODS OF TRANSFER AND ASSUMPTION. (a)
Unless otherwise provided in this Agreement, or in any other Transaction
Document, the closing of the Reorganization, the Refinancing and the
Contribution shall occur immediately prior to the Separation Time at the
offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153.

(b) In connection with the Reorganization and the Contribution,
(i) U S WEST shall execute and deliver and shall cause its Subsidiaries to
execute and deliver, such deeds, bills of sale, stock powers, certificates of
title, assignments of leases and contracts, assumption agreements and other
instruments of contribution, grant, conveyance, assignment, transfer,
delivery and assumption necessary to evidence the Reorganization and the
Refinancing and (ii) U S WEST and New U S WEST shall (and shall cause their
Subsidiaries, as applicable, to) execute and deliver such deeds, bills of
sale, stock powers, certificates of title, assignments of leases and
contracts, assumption agreements and other instruments of contribution,
grant, conveyance, assignment, transfer, delivery and assumption necessary to
evidence the Contribution and the transactions contemplated by Section 3.4.
All such instruments shall be deemed to have been delivered as of the
Separation Time.

<PAGE>

ARTICLE IV

THE SEPARATION

4.1 THE SEPARATION. Subject to the terms and conditions of this
Agreement, at the Separation Time, U S WEST shall cause the following
transactions to occur (collectively, the "SEPARATION"):

(a) U S WEST shall, in accordance with the terms of Section 2.4.3
of Article V of the Restated Certificate (as amended by the Charter
Amendments), redeem each share of Communications Stock issued and outstanding
immediately prior to the Separation Time for one share of New U S WEST Common
Stock (the "COMMUNICATIONS REDEMPTION"). Each share of Communications Stock
held as treasury stock by U S WEST shall be cancelled.

(b) U S WEST shall distribute as a dividend (the "MEDIA DIVIDEND")
on each share of Media Stock outstanding as of the close of trading on the
Record Date (other than shares of Media Stock held as treasury stock by U S
WEST) a number of shares of New U S WEST Common Stock equal to the Dividend
Number (as determined in accordance with Section 4.3(b)).

(c) From and after the Separation Time, each outstanding share of
Media Stock shall remain outstanding and shall thereafter represent a share
of common stock, par value $.01 per share, of U S WEST, with the terms set
forth in the Restated Certificate (as amended by the Charter Amendments). As
used herein, such common stock is referred to as "MEDIAONE COMMON STOCK".

(d) From and after the Separation Time, each outstanding share of
Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share, of
U S WEST; Series D Convertible Preferred Stock, par value $1.00 per share, of
U S WEST; and Series E Convertible Preferred Stock, par value $1.00 per
share, of U S WEST, shall remain outstanding.

4.2 SEPARATION TIME. The Board of Directors shall determine the
time at which the Separation shall become effective (the "SEPARATION TIME"),
which time shall be following the satisfaction or waiver of all of the
conditions set forth in Section 4.5 as determined by the Board of Directors
of U S WEST.

<PAGE>

4.3 CERTAIN DETERMINATIONS. (a) Prior to the Separation Time,
the Board of Directors of U S WEST shall (i) fix the record date for
determining the holders of Media Stock entitled to receive the Media Dividend
(the "RECORD DATE"), (ii) declare the Media Dividend, (iii) fix the date on
which the Communications Stock shall be redeemed pursuant to the
Communications Redemption (the "REDEMPTION DATE") and (iv) give notice to
holders of Communications Stock of the Communications Redemption. The
Redemption Date and the Record Date shall be the date on which the Separation
Time shall occur.

(b) The "DIVIDEND NUMBER" shall equal the quotient of (i)
$850,000,000 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 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 date of the Separation Time, rounded to
the nearest one-hundred thousandth (or if there shall not be a nearest
one-hundred thousandth, to the next highest one-hundred thousandth).

4.4 NEW U S WEST SIP ACCOUNTS; CERTIFICATES; DISTRIBUTION
PROCEDURES. (a) Prior to the Separation Time, New U S WEST shall establish
a Shareowner Investment Plan (the "NEW U S WEST SIP"). As of the Separation
Time, New U S WEST shall establish an account (a "NEW U S WEST SIP ACCOUNT")
under the New U S WEST SIP for each stockholder of U S WEST (each, a "SIP
PARTICIPANT") which, immediately prior to the Separation Time, maintained an
account (a "U S WEST SIP ACCOUNT") under the U S WEST Shareowner Investment
Plan (the "U S WEST SIP"). As of the Separation Time, the New U S WEST SIP
Account of each SIP Participant shall, without any action on the part of the
SIP Participants, be credited by New U S WEST with that number of shares of
New U S WEST Common Stock that such SIP Participant has the right to receive
pursuant to the provisions of Section 4.1 and all shares of Communications
Stock held in the U S WEST SIP Account of such SIP Participant shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist. SIP Participants shall be mailed the cash in lieu of
fractional shares of New U S WEST Common Stock to which they are entitled
pursuant to Section 4.4(h).

(b) As of the Separation Time, all shares or fractions of a share
of Communications Stock redeemed

<PAGE>

pursuant to the Communications Redemption shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist. As of
the Separation Time, each certificate that immediately prior to the
Separation Time evidenced shares of Communication Stock ("COMMUNICATIONS
CERTIFICATES") shall be deemed at any time after the Separation Time to
represent only the right to receive the shares of New U S WEST Common Stock
issuable in respect thereof pursuant to Section 4.1 and the unpaid dividends
and distributions payable with respect to such shares pursuant to this
Article IV. As of the Separation Time, each certificate that as of the
Record Date evidenced shares of Media Stock ("MEDIA CERTIFICATES") shall
after the Separation Time represent a corresponding number of shares of
MediaOne Common Stock, the right to receive the shares of New U S WEST Common
Stock issuable in respect thereof pursuant to Section 4.1 and the unpaid
dividends and distributions payable with respect to such shares pursuant to
this Article IV.

(c) Prior to the Separation Time, New U S WEST shall establish a
Direct Registration System which shall enable holders of New U S WEST Common
Stock to hold such shares in uncertificated book-entry form (the "NEW U S
WEST DRS SYSTEM"). As of the Separation Time, U S WEST shall deposit with
Boston Equiserve, as Distribution Agent ("DISTRIBUTION AGENT"), (a) for the
benefit of holders of Communications Certificates, the shares of New U S WEST
Common Stock to which such holders are entitled pursuant to Section 4.1, (b)
for the benefit of holders of Media Certificates, the shares of New U S WEST
Common Stock and certificates evidencing the shares of MediaOne Common Stock
to which such holders are entitled pursuant to Section 4.1 and (c) for the
benefit of SIP Participants, certificates evidencing the shares of MediaOne
Common Stock to which such holders are entitled pursuant to Section 4.1. New
U S WEST shall provide to the Distribution Agent the funds necessary to pay
any cash payable in lieu of fractional shares of New U S WEST Common Stock
pursuant to Section 4.4(h) and the funds or other property necessary to pay
or make any dividends or distributions with respect to shares of New U S WEST
Common Stock pursuant to Section 4.4(g).

(d) As soon as reasonably practicable after the Separation Time,
the Distribution Agent shall mail to each holder of record of Communications
Certificates (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Communications

<PAGE>

Certificates shall pass, only upon proper delivery of the Communications
Certificates to the Distribution Agent and shall be in such form and have
such other provisions as U S WEST reasonably may specify), (ii) an affidavit
of loss for use by holders whose Communications Certificates are lost,
mutilated or destroyed and (iii) instructions for use in effecting the
surrender of the Communications Certificates or completing such affidavit of
loss. Upon surrender of a Communications Certificate for cancellation to
the Distribution Agent or such affidavit of loss together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Communications
Certificate shall be entitled to receive in exchange therefor that number of
shares of New U S WEST Common Stock that such holder has the right to receive
pursuant to Section 4.1 in respect thereof in uncertificated book-entry form
through the New U S WEST DRS System and any cash payable in lieu of
fractional shares of New U S WEST Common Stock to which such holder is
entitled pursuant to Section 4.4(h) and dividends or other distributions to
which such holder is entitled pursuant to Section 4.4(g) and the
Communications Certificate (if any) so surrendered shall forthwith be
canceled. Notwithstanding the foregoing, a holder of a Communications
Certificate shall have the right to elect to receive a certificate
representing that number of shares of New U S WEST Common Stock that such
holder has the right to receive pursuant to Section 4.1 in respect thereof in
lieu of receiving such shares in uncertificated book-entry form through the
New U S WEST DRS System.

(e) As soon as reasonably practicable after the Separation Time,
the Distribution Agent shall mail to each holder of record of Media
Certificates (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Media Certificates shall
pass, only upon proper delivery of the Media Certificates to the Distribution
Agent and shall be in such form and have such other provisions as U S WEST
reasonably may specify), (ii) an affidavit of loss for use by holders whose
Media Certificates are lost, mutilated or destroyed and (iii) instructions
for use in effecting the surrender of the Media Certificates or completing
such affidavit of loss. Upon surrender of a Media Certificate for
cancellation to the Distribution Agent or such affidavit of loss together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such

<PAGE>

Media Certificate shall be entitled to receive in exchange therefor (x) a new
certificate representing that number of shares of MediaOne Common Stock
represented by such Media Certificate and (y) that number of shares of New
U S WEST Common Stock that such holder has the right to receive pursuant to
Section 4.1 in respect thereof in uncertificated book-entry form through the
New U S WEST DRS System, and any cash payable in lieu of fractional shares of
New U S WEST Common Stock to which such holder is entitled pursuant to
Section 4.4(h) and dividends or other distributions to which such holder is
entitled pursuant to Section 4.4(g) and the Media Certificate (if any) so
surrendered shall forthwith be canceled. Notwithstanding the foregoing, a
holder of a Media Certificate shall have the right to elect to receive a
certificate representing that number of shares of New U S WEST Common Stock
that such holder has the right to receive pursuant to Section 4.1 in respect
thereof in lieu of receiving such shares in uncertificated book-entry form
through the New U S WEST DRS System. As soon as reasonably practicable after
the Separation Time, the Distribution Agent shall mail to each SIP
Participant a certificate representing a number of shares of MediaOne Common
Stock equal to the number of shares of Media Stock held in such SIP
Participant's U S WEST SIP Account. Following such mailing to SIP
Participants, the U S WEST SIP shall be terminated.

(f) In the event of a transfer of ownership of shares of
Communications Stock or Media Stock that is not registered in the transfer
records of U S WEST, certificates evidencing the proper number of shares of
New U S WEST Common Stock and MediaOne Common Stock may be issued in
accordance with this Section 4.4 to a transferee if the Communications
Certificate or Media Certificate evidencing such shares of Communications
Stock or Media Stock is presented to the Distribution Agent, accompanied by
all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid.

(g) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Separation Time shall be
paid with respect to any shares of New U S WEST Common Stock represented by a
Communications Certificate or a Media Certificate until such Communications
Certificate or Media Certificate or an affidavit of loss is surrendered for
exchange as provided herein. Subject to the effect of Applicable Laws,
following

<PAGE>

surrender of any such Communications Certificate or Media Certificate or
affidavit of loss, there shall be paid to the holder of the shares of New U S
WEST Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Separation Time theretofore payable with respect to
such shares of New U S WEST Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Separation Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of New U S WEST
Common Stock, less the amount of any withholding taxes which may be required
thereon.

(h) No certificates or scrip representing fractional shares of New
U S WEST Common Stock shall be issued pursuant to the Media Dividend and such
fractional share interests will not entitle the holder thereof to vote or to
any rights of a stockholder of New U S WEST. Notwithstanding any provision of
this Agreement, each Person who immediately prior to the Separation Time was
a holder of shares of Media Stock who would otherwise have been entitled to
receive a fraction of a share of New U S WEST Common Stock (after taking into
account all of the shares of Media Stock owned by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of New U S WEST Common Stock multiplied by the
average Market Value of the Communications Stock over the period of 20
Trading Days ending on the fifth Trading Day prior to the date of the
Separation Time, rounded to the nearest cent (or if there shall not be a
nearest cent, to the next highest cent).

(i) None of U S WEST, New U S WEST or the Distribution Agent shall
be liable to any holder of shares of Communications Stock or Media Stock for
shares of New U S WEST Common Stock, cash in lieu of fractional shares of New
U S WEST Common Stock or dividends or distributions with respect to shares of
New U S WEST Common Stock that have been delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

(j) U S WEST shall be entitled to, or shall be entitled to cause
the Distribution Agent to, deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Communication

<PAGE>

Stock or Media Stock such amounts as are required to be deducted and withheld
with respect to the making of such payment under the Code, or any provision
of state, local or foreign Tax law. To the extent that amounts are so
withheld by U S WEST or the Distribution Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Communications Stock or Media Stock in respect of
which such deduction and withholding was made by U S WEST or the Distribution
Agent.

(k) If any Communications Certificates or Media Certificates shall
not have been surrendered prior to seven years after the Separation Time (or
immediately prior to such earlier date on which any shares of New U S WEST
Common Stock, cash in lieu of fractional shares of New U S WEST Common Stock
or unpaid dividends or distributions with respect to shares of New U S WEST
Common Stock in respect of such Communications Certificates or Media
Certificates would otherwise escheat to or become the property of any
Governmental Authority), any undistributed shares of New U S WEST Common
Stock in respect of Communications Certificates or unpaid dividends or
distributions in respect of such shares shall, to the extent permitted by
Applicable Laws, become the property of New U S WEST and any undistributed
shares of New U S WEST Common Stock in respect of Media Certificates or cash
in lieu of fractional shares or unpaid dividends or distributions in respect
of such shares shall, to the extent permitted by Applicable Laws, become the
property of U S WEST.

(l) Notwithstanding any other provision of this Article IV,
stockholders who are entitled to receive shares of New U S WEST Common Stock
pursuant to Section 4.1 with an aggregate value greater than or equal to $15
million will not receive such shares until such stockholders make all
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 shall be held in escrow by the
Distribution Agent until such time as New U S WEST receives evidence from
such stockholders that such filings have been made.

4.5 CONDITIONS TO THE SEPARATION. (a) The undertaking of U S
WEST to effect the Separation is subject to the satisfaction of each of the
following conditions, unless waived by the Board of Directors of U S WEST in
its sole and absolute discretion:

<PAGE>

(i) All of the transactions contemplated by this Agreement to be
performed on or prior to the consummation of the Separation shall have
been consummated.

(ii) The Form S-4, the Form 8-A and the Form 8-B/A shall each have
been declared effective by the SEC, and no stop order with respect
thereto shall be in effect.

(iii) The Charter Amendments shall have been approved and adopted
by the stockholders of U S WEST.

(iv) The Charter Amendments shall have been executed, acknowledged
and filed with the Secretary of State of the State of Delaware in
accordance with Section 242 of the Delaware General Corporation Law.

(v) The Board of Directors of U S WEST shall have set the
Redemption Date and given notice of the Communications Redemption to the
holders of Communications Stock.

(vi) The Board of Directors of U S WEST shall have fixed the
Record Date and declared the Media Dividend.

(vii) The New U S WEST Common Stock shall have been approved for
listing on the NYSE and the PSE, subject to official notice of issuance.

(viii) No order, injunction or decree shall have been issued by
any Governmental Authority and remain in effect preventing the
consummation of the Separation.

(ix) All consents of, approvals of, notices to and filings with
any Governmental Authority or any other Person necessary to consummate
the Reorganization, the Contribution or the Separation shall have been
obtained and be in full force and effect.

(x) U S WEST shall have provided the NYSE and the PSE with the
prior written notice of the Redemption Date and the Record Date as
required by Rule 10b-17 of the Exchange Act and the rules and
regulations of the NYSE.

<PAGE>

(xi) U S WEST shall have obtained an advance letter ruling from
the Internal Revenue Service that certain aspects of the Reorganization,
the Contribution and the Separation will qualify as tax-free
transactions within the meaning of Sections 332, 368(a)(1)(D) and 355 of
the Code, and such ruling shall be in full force and effect at the
Separation Time.

(xii) On or prior to the Separation Time, each of U S WEST and New
U S WEST shall have entered into, or caused the appropriate members of
the Group of which it is a member to enter into, each of the Transaction
Documents.

(b) Any determination made by the Board of Directors of U S WEST
on behalf of any of the parties hereto prior to the Separation Time
concerning the satisfaction or waiver of any or all of the conditions set
forth in this Section 4.5 shall be conclusive.

ARTICLE V

POST-SEPARATION INTERCOMPANY
BUSINESS RELATIONSHIPS

5.1 PENDING LITIGATION. Following the Separation Time, subject to
the provisions of Section 8.3, (a) New U S WEST shall have exclusive
authority and control over the investigation, prosecution, defense and appeal
of all pending Actions relating to the New U S WEST Liabilities, including,
but not limited to, the pending Actions listed in Section 3.4(a) of the
Separation Disclosure Schedule (each, a "NEW U S WEST ACTION"), and may
settle or compromise, or consent to the entry of any judgment with respect
to, any such New U S WEST Action without the consent of U S WEST and (b) U S
WEST shall have exclusive authority and control over the investigation,
prosecution, defense and appeal of all pending Actions relating to the
MediaOne Liabilities, including, but not limited to, the pending Actions
listed in Section 3.4(b) of the Separation Disclosure Schedule (each, a "U S
WEST ACTION"), and may settle or compromise, or consent to the entry of any
judgment with respect to, any such U S WEST Action without the consent of New
U S WEST; PROVIDED, HOWEVER, that if any member of the New U S WEST Group or
any of their respective

<PAGE>

directors, officers or employees is named as a party to a U S WEST Action or
any member of the U S WEST Group or any of their respective directors,
officers or employees is named as a party to a New U S WEST Action, neither
U S WEST nor New U S WEST, as the case may be, may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action without
the prior written consent of such other named party (which consent may not be
unreasonably withheld), unless such settlement (i) includes a complete
release of such other named party and such party's directors, officers or
employees (to the extent such directors, officers or employees are named in
such Action) and (ii) does not require such other named party or such party's
directors, officers or employees (to the extent such directors, officers or
employees are named in such Action) to make or forego any payment or forego
or take any action. Each of U S WEST and New U S WEST shall cooperate fully
with the other and its counsel in the investigation, defense and settlement
of any U S WEST Action or New U S WEST Action.

5.2 SETTLEMENTS FOR CASH COLLECTIONS AND DISBURSEMENTS AFTER THE
SEPARATION TIME. (a) For each calendar month commencing with the month in
which the Separation Time occurs and, unless sooner terminated by agreement
of the parties, continuing for a period of two years thereafter, (i) within
30 Business Days of the end of the month in question, New U S WEST shall
prepare and deliver to U S WEST, and U S WEST shall fully cooperate in
preparing, a statement of transactions that shall reflect a complete analysis
of any cash collections and cash disbursements by the New U S WEST Group on
behalf of the U S WEST Group during the relevant month or for any prior month
that should have been (but was not) included in a prior statement and (ii)
within 30 Business Days of the end of the month in question, U S WEST shall
prepare and deliver to New U S WEST, and New U S WEST shall fully cooperate
in preparing, a statement of transactions that shall reflect a complete
analysis of any cash collections and cash disbursements by the U S WEST Group
on behalf of the New U S WEST Group during the relevant month or for any
prior month that should have been (but was not) included in a prior
statement; PROVIDED, HOWEVER, in each case that, with respect to the first
such monthly period, such statement shall not reflect any cash collections or
disbursements occurring prior to the Separation Time.

(b) Not later than five Business Days (unless otherwise
specifically provided in the relevant Transaction Document) following
delivery of each such monthly statement, New U S WEST shall pay to U S WEST
or U S WEST shall pay to

<PAGE>

New U S WEST, as the case may be, in cash an amount necessary to eliminate
the account balance as reflected in each such statement (which amounts may be
set off against each other as appropriate). Any disputes relating to such
amounts payable shall be submitted to the Separation Committee for resolution
in accordance with the procedures set forth in Section 12.2.

(c) Following the end of the two-year period referred to in
Section 5.2(a) (or such earlier period as the parties hereto may agree), U S
WEST and New U S WEST shall continue to deliver the statement of transactions
referred to in Section 5.2(a) and pay the amounts necessary to eliminate the
account balance as reflected in such statement in accordance with Section
5.2(b), at such intervals as the parties may agree. Any disputes relating to
such amounts payable shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.

(d) Each of U S WEST and New U S WEST hereby grants the other a
limited irrevocable power-of-attorney to endorse, deposit and negotiate any
check, draft or other form of payment made in respect of any invoice
representing a receivable payable to one of them but which is sent by the
payor to a lock box maintained by the other or is made payable to either of
them or any of their subsidiaries but which is the payment of a receivable
that is a receivable of the other.

5.3 TRANSITION SERVICES. (a) From and after the Separation Time,
each party will provide, or cause one or more of the members of its Group to
provide, to the other Group such services on such terms as may be agreed upon
between U S WEST and New U S WEST from time to time in writing. The party
that is to provide the services (the "PROVIDER") will use its commercially
reasonable efforts to provide such services to the other party (the
"RECIPIENT") in a satisfactory and timely manner and as further specified in
writing by the parties.

(b) All employees and representatives of the Provider providing
services to the Recipient pursuant to this Section 5.3 shall be deemed for
purposes of all compensation and employee benefits matters to be employees or
representatives of the Provider and not employees or representatives of the
Recipient. In performing such services, such employees and representatives
will be under

<PAGE>

the direction, control and supervision of the Provider (and not the
Recipient) and the Provider will have the sole right to exercise all
authority with respect to the employment (including, without limitation,
termination of employment), assignment and compensation of such employees and
representatives. Any disputes relating to the provision of services under
this Section 5.3 shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.

5.4 U S WEST NAME. (a) U S WEST acknowledges that the name "U S
WEST", whether alone or in combination with one or more words, is an asset
being transferred to New U S WEST pursuant to the Contribution. Promptly
after the Separation Time, U S WEST shall cause each member of the U S WEST
Group whose corporate name includes the name "U S WEST" to change its name to
delete any reference therein to "U S WEST" (for example, without limiting the
generality of the foregoing, the word "U S WEST" shall be removed from the
name of "U S WEST International Holdings, Inc."). Promptly after the
Separation Time, U S WEST shall, and shall cause each member of the U S WEST
Group to, subject to the requirements of Section 7.8 of the AirTouch Merger
Agreement, (i) assign, and does hereby assign, to New U S WEST any license to
use the name U S WEST (including any appurtenant rights and obligations such
as quality control) with all agents, franchisees and licensees of the U S
WEST Group and the MediaOne Business (to the extent permitted by the terms of
such license), including any license granted pursuant to Section 7.8 of the
AirTouch Merger Agreement, (ii) to the extent assignment is not permitted,
terminate any license to use the name U S WEST with all agents, franchisees
and licensees of the U S WEST Group and the MediaOne Business (to the extent
permitted by the terms of such license) and (iii) if neither assignment or
termination is permitted, the U S WEST Group shall cooperate with New U S
WEST, and if appropriate enter into necessary agreements, to preserve New U S
WEST's ownership rights in the U S WEST name. U S WEST further agrees not to
use the name "U S WEST" in connection with the operations of the U S WEST
Group or the MediaOne Business; PROVIDED, HOWEVER, that for a period of six
months after the Separation Time, the U S WEST Group may continue to use the
"U S WEST" name for internal purposes on business forms, business cards (with
the company name manually corrected) and stationery. Nothing herein shall
require U S WEST or any member of the U S WEST Group to retrieve from
customers telephones, accessories or other equipment or materials labeled
with the

<PAGE>

"U S WEST" name and remove such name from such telephones, accessories or
other equipment or materials.

(b) For a period of two years following the Separation Time, New
U S WEST shall not, and shall cause each member of the New U S WEST Group not
to, use the names "U S WEST Media Group," "U S WEST Media," "U S WEST
Interactive Services," "U S WEST International" or "U S WEST NewVector" in
the operations of the New U S WEST Business; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, the New U S WEST Group shall be permitted to
use the words "Media Group," "Media," "Interactive Services," and
"International" as long as such words do not immediately follow the name "U S
WEST" as referenced above. By way of example, New U S WEST may use as
"taglines" references to "the Media Group of U S WEST," the "International
Division of U S WEST" or similar references in the operation of the New U S
WEST Business. Promptly after the Separation Time, New U S WEST shall cause
MGI to change its corporate name to delete any reference therein to the words
"Media Group".

5.5 TRANSFER TAXES. New U S WEST and U S WEST agree to cooperate
to determine the amount of sales, transfer or other similar taxes or fees
(including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement. U S WEST and New U S WEST agree
to file promptly and timely returns for such taxes and fees with the
appropriate taxing authorities. The amounts payable with respect to such
taxes and fees shall be borne equally by U S WEST and New U S WEST. Any
disputes relating to such amounts payable shall be submitted to the
Separation Committee for resolution in accordance with the procedures set
forth in Section 12.2.

5.6 INTELLECTUAL PROPERTY. (a) At the Separation Time, subject to
Section 5.6(b), (i) the U S WEST Group shall become the sole and exclusive
owner of all right, title and interest in the MediaOne Patents, the MediaOne
Trademarks and the MediaOne Other Intellectual Property, (ii) the New U S
WEST Group shall become the sole and exclusive owner of all right, title and
interest in the New U S WEST Patents, the New U S WEST Trademarks and the New
U S WEST Other Intellectual Property and (iii) the U S WEST Group and the New
U S WEST Group shall each have, as joint owners, an equal and undivided
interest in and to all right, title and interest in both the Joint Patents
and the Joint Other Intellectual Property. The parties agree to file

<PAGE>

appropriate assignment documents with the U.S. Patent and Trademark Office
(or other appropriate agencies) in order to effect and record the ownership
of the MediaOne Patents, the MediaOne Trademarks, the New U S WEST Patents,
the New U S WEST Trademarks and the Joint Patents as provided under this
Section 5.6(a).

(b) From and after the Separation Time, subject to the protection
of Information required by Section 10.5, (i) the New U S WEST Group shall
have the non-exclusive right to use all MediaOne Other Intellectual Property
and New U S WEST Other Intellectual Property which is in the possession of,
and is used by or for which there are good faith plans for use by, the New U
S WEST Business as of the Separation Time and (ii) the U S WEST Group shall
have the non-exclusive right to use all New U S WEST Other Intellectual
Property and MediaOne Intellectual Property which is in the possession of,
and is used by or for which there are good faith plans for use by, the
MediaOne Business as of the Separation Time.

(c) It is understood that the right of each party to use both the
MediaOne Other Intellectual Property and the New U S WEST Other Intellectual
Property under Section 5.6(b) shall include (but only to the extent necessary
for such use) rights under MediaOne Patents and New U S WEST Patents.

ARTICLE VI

EMPLOYEE MATTERS

6.1 EMPLOYEES. Effective as of the Separation Time, except as
otherwise provided in the Employee Matters Agreement, (a) those Media
Employees who are employed by U S WEST or any of its Subsidiaries immediately
prior to the Separation Time shall remain or become employees of U S WEST or
any Subsidiary thereof and (b) those Communications Employees who are
employed by U S WEST or any of its Subsidiaries immediately prior to the
Separation Time shall become employees of New U S WEST or any Subsidiary
thereof.

6.2 EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS. U S WEST
and New U S WEST shall take all

<PAGE>

actions necessary to effect the transfer to New U S WEST and the assumption
by New U S WEST of the Employee Benefit Plans and Employee Arrangements and
the Assets and Liabilities thereunder as described in the Employee Matters
Agreement.

6.3 INTERNAL REVENUE SERVICE FORMS. U S WEST and New U S WEST
agree that pursuant to the "Alternative Procedure" provided in Section 5 of
Revenue Procedure 96-60, 1996-53, I.R.B. 24, with respect to preparing,
filing and furnishing the Internal Revenue Service Forms W-2, W-3, 941 and
W-5, (i) U S WEST and New U S WEST shall report on a "predecessor-successor"
basis as set forth therein, (ii) U S WEST shall be relieved from furnishing
Forms W-2 to the New U S WEST Employees and (iii) New U S WEST shall assume
the obligations of U S WEST to furnish such forms to the New U S WEST
Employees for the full 1998 calendar year.

ARTICLE VII

INSURANCE MATTERS

7.1 POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. (a) Immediately
prior to the Separation Time, U S WEST shall cause Western Range to transfer
to an Insurer or to a member of the New U S WEST Group all of the Insurance
Arrangements provided by Western Range (as well as the liabilities and
corresponding reserves) which relate to members of the New U S WEST Group or
the New U S WEST Business or New U S WEST Liabilities (the "WESTERN RANGE
TRANSFERRED INSURANCE ARRANGEMENTS").

(b) The MediaOne Assets shall include (i) all MediaOne Insurance
Arrangements and (ii) subject to the provisions of this Article VII, an equal
and undivided interest in the Joint Insurance Arrangements. The New U S WEST
Assets shall include (i) all New U S WEST Insurance Arrangements (including
the Western Range Transferred Insurance Arrangements) and (ii) subject to the
provisions of this Article VII, an equal and undivided interest in the Joint
Insurance Arrangements.

(c) As of the Separation Time, all of the Joint Insurance
Arrangements shall be discontinued and each of the Groups shall be
responsible for arranging separate Insurance

<PAGE>

Arrangements with respect to injuries, losses, liabilities, damages and
expenses arising after the Separation Time with respect to such Group and its
businesses. At the Separation Time, all prepaid and unused premiums with
respect to each Joint Insurance Arrangement shall be distributed to U S WEST
and New U S WEST in the same ratio in which such premiums were allocated by
U S WEST to the MediaOne Business and the New U S WEST Business prior to the
Separation Time. Following the Separation Time, any refunds received by U S
WEST or New U S WEST with respect to a Joint Insurance Arrangement shall be
distributed to U S WEST and New U S WEST in the same ratio in which premiums
payable with respect to such Joint Insurance Arrangement were allocated by
U S WEST to the MediaOne Business and the New U S WEST Business prior to the
Separation Time. To the extent U S WEST or New U S WEST receives any such
refund, the party receiving such refund shall promptly transfer to the other
party the portion of such refund to which such other party is entitled.

7.2 ADMINISTRATION; OTHER MATTERS. (a) From and after the
Separation Time, except as set forth in Section 7.2(c), U S WEST shall be
responsible for Insurance Administration under the Joint Insurance
Arrangements with respect to MediaOne Liabilities and New U S WEST shall be
responsible for Insurance Administration under the Joint Insurance
Arrangements with respect to New U S WEST Liabilities. The disbursements,
out-of-pocket expenses and costs of employees or agents of U S WEST or New
U S WEST relating to Insurance Administration contemplated by this Section
7.2(a) shall be borne by the party incurring such expenses or costs.
Insurance Proceeds with respect to claims, costs and expenses under the Joint
Insurance Arrangements shall be paid by the Insurer to the party making the
Insured Claim thereunder. In the event U S WEST or New U S WEST makes an
Insured Claim under a Joint Insurance Arrangement, such party shall deliver
notice to the other party of such Insured Claim and shall keep the other
party periodically updated as to the status of such Insured Claim.

(b) From and after the Separation Time, subject to Section 7.2(c),
each of U S WEST and New U S WEST shall have the right to claim coverage for
Insured Claims under each Joint Insurance Arrangement with respect to any
claim covered by such Joint Insurance Arrangement as and to the extent that
such insurance is available up to the full extent of the applicable limits of
liability, if any, of

<PAGE>

such Joint Insurance Arrangement (and may receive any Insurance Proceeds with
respect thereto); PROVIDED, HOWEVER, that, prior to making any Insured Claim
under a Joint Insurance Arrangement, U S WEST or New U S WEST, as the case
may be, shall be required to have retained a portion of the Liability
underlying such Insured Claim equal to the amount of the self-insured
retention or deductible, if any, of such party with respect to such
Liability. In the event that the total Insurance Proceeds payable to the U S
WEST Group and the New U S WEST Group under a Joint Insurance Arrangement
shall have exhausted the limits of liability, if any, under such Joint
Insurance Arrangement, payment of any future claims which are not reimbursed
under such Joint Insurance Arrangement as a result of such exhaustion of the
limits of liability shall be the sole responsibility of the party having
liability for such claim under Section 3.4. Each of the parties agrees to
use commercially reasonable efforts to maximize available coverage under
those Joint Insurance Arrangements applicable to it, and to take all
commercially reasonable steps to recover from all other responsible parties
in respect of an Insured Claim.

(c) With respect to any Insured Claim in respect of a Shared
Liability, U S WEST and New U S WEST shall share any Insurance Proceeds
received in respect of such Insured Claim in the same proportions in which
such Shared Liability is shared by U S WEST and New U S WEST. In the event
of any such Insured Claim, U S WEST and New U S WEST shall jointly determine
which party shall be responsible for Insurance Administration under the Joint
Insurance Arrangements in respect of such Insured Claim. The disbursements,
out-of-pocket expenses and costs relating to Insurance Administration
contemplated by this Section 7.2(c) shall be borne by the parties in the same
proportions in which the Shared Liability underlying such Insured Claim is
shared by U S WEST and New U S WEST.

7.3 COOPERATION; DISAGREEMENTS. The parties shall use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated

<PAGE>

by this Agreement. Any disagreements between U S WEST and New U S WEST under
this Article VII shall be submitted to the Separation Committee in accordance
with the procedures set forth in Section 12.2.

ARTICLE VIII

INDEMNIFICATION

8.1 NEW U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as
otherwise specifically provided in the other Transaction Documents, subject
to the terms and conditions set forth in this Agreement, from and after the
Separation Time, New U S WEST shall indemnify, defend and hold harmless U S
WEST and its directors, officers, employees, representatives, advisors,
agents and Affiliates (collectively, the "U S WEST INDEMNIFIED PARTIES")
from, against and in respect of any and all Indemnifiable Losses of the U S
WEST Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly:

(i) any and all New U S WEST Liabilities (including any New U S
WEST Liability which could be covered by the terms of the
indemnification provisions contained in the Bylaws of U S WEST prior to
the Separation Time);

(ii) New U S WEST's failure to observe from and after the
Separation Time its obligations under this Agreement or any of the other
Transaction Documents; and

(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Filings, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (but, in each
case, only with respect to information relating to the New U S WEST
Business contained in or omitted from the SEC Filings).

(b) Notwithstanding New U S WEST's obligations to indemnify U S
WEST Indemnified Parties pursuant to Section 8.1(a), U S WEST hereby waives,
releases and agrees not to make any claim or bring any contribution, cost
recovery or other action against any member of the New U S WEST Group,

<PAGE>

and, if applicable, their respective directors, officers, employees,
representatives, agents and Affiliates and their heirs, successors and
assigns, under CERCLA or any similar federal, state or local environmental
law or regulation now existing or hereafter enacted that seeks to allocate
liabilities between U S WEST and New U S WEST in a different manner than as
expressly set forth in this Agreement.

8.2 U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as otherwise
specifically provided in the other Transaction Documents, subject to the
terms and conditions set forth in this Agreement, from and after the
Separation Time, U S WEST shall indemnify, defend and hold harmless New U S
WEST and each of its directors, officers, employees, representatives,
advisors, agents and Affiliates (collectively, the "NEW U S WEST INDEMNIFIED
PARTIES") from, against and in respect of any and all Indemnifiable Losses of
the New U S WEST Indemnified Parties arising out of, relating to or resulting
from, directly or indirectly:

(i) any and all MediaOne Liabilities;

(ii) U S WEST's failure to observe from and after the Separation
Time its obligations under this Agreement or any of the other
Transaction Documents; and

(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Filings, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (but, in each
case, only with respect to information relating to the MediaOne Business
contained in or omitted from the SEC Filings).

(b) Notwithstanding U S WEST's obligations to indemnify New U S
WEST Indemnified Parties pursuant to Section 8.2(a), New U S WEST hereby
waives, releases and agrees not to make any claim or bring any contribution,
cost recovery or other action against any member of the U S WEST Group, and,
if applicable, their respective directors, officers, employees,
representatives, agents and Affiliates and their heirs, successors and
assigns, under CERCLA or any similar federal, state or local environmental
law or regulation now existing or hereafter enacted that seeks to allocate
liabilities between New U S WEST and U S WEST in a

<PAGE>

different manner than as expressly set forth in this Agreement.

8.3 PROCEDURE FOR INDEMNIFICATION. Except as set forth in the
Employee Matters Agreement, all claims for indemnification under this Article
VIII shall be asserted and resolved as follows:

(a) THIRD PARTY CLAIMS (OTHER THAN WITH RESPECT TO SHARED
LIABILITIES). In the event that any claim or demand for which an
Indemnifying Party may be liable to an Indemnified Party hereunder (other
than with respect to Shared Liabilities) is asserted against or sought to be
collected by a third party from an Indemnified Party (an "ASSERTED
LIABILITY"), the Indemnified Party shall as soon as possible notify the
Indemnifying Party in writing of such Asserted Liability, specifying the
nature of such Asserted Liability (the "CLAIM NOTICE"); provided that no
delay on the part of the Indemnified Party in giving any such Claim Notice
shall relieve the Indemnifying Party of any indemnification obligation
hereunder except to the extent that the Indemnifying Party is materially
prejudiced by such delay. The Indemnifying Party shall have 60 days (or less
if the nature of the Asserted Liability requires) from its receipt of the
Claim Notice to notify the Indemnified Party whether or not the Indemnifying
Party desires, at the Indemnifying Party's sole cost and expense and by
counsel of its own choosing, to defend against such Asserted Liability;
PROVIDED, HOWEVER, that if, under applicable standards of professional
conduct a conflict on any significant issue between the Indemnifying Party
and any Indemnified Party exists in respect of such Asserted Liability, then
the Indemnifying Party shall reimburse the Indemnified Party for the
reasonable fees and expenses of one additional counsel (who shall be
reasonably acceptable to the Indemnifying Party).

The Indemnified Party shall have the right to control, pay or
settle any Asserted Liability which the Indemnifying Party shall have
undertaken to defend so long as the Indemnified Party shall also (at the time
it exercises such right to control, pay or settle such Asserted Liability)
waive any right to indemnification therefor by the Indemnifying Party. If
the Indemnifying Party undertakes to defend against such Asserted Liability,
the Indemnified Party shall cooperate fully with the Indemnifying Party and
its counsel in the investigation, defense and settlement thereof, but the
Indemnifying Party

<PAGE>

shall control the investigation, defense and settlement thereof. If the
Indemnified Party desires to participate in any such defense, it may do so at
its sole cost and expense. If the Indemnifying Party elects not to defend
against such Asserted Liability, then the Indemnifying Party shall have the
right to participate in any such defense at its sole cost and expense, but
the Indemnified Party shall control the investigation, defense and settlement
thereof at the reasonable cost and expense of the Indemnifying Party. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), consent
to any settlement unless such settlement (i) includes a complete release of
the Indemnified Party and (ii) does not require the Indemnified Party to make
or forego any payment or forego or take any action. The Indemnifying Party
shall not be liable for any settlement of any Asserted Liability effected
without its prior written consent (which consent shall not be unreasonably
withheld). In the event a dispute arises as to which party has
responsibility under this Agreement for an Asserted Liability, the
Indemnified Party shall have the right to defend such Asserted Liability
until such dispute is resolved in accordance with the procedures set forth in
Section 12.2; PROVIDED, HOWEVER, that in such circumstances (i) the
Indemnified Party shall not have the right to settle such Asserted Liability
unless the Indemnified Party shall also (at the time it exercises such right
to settle such Asserted Liability) waive any right to indemnification
therefor by the Indemnifying Party and (ii) if it is subsequently determined
pursuant to Section 12.2 that such Asserted Liability is the responsibility
of the Indemnifying Party, the Indemnifying Party shall thereafter have the
right to defend against such Asserted Liability in accordance with this
Section 8.3(a). Any disputes between the Indemnifying Party and the
Indemnified Party under this Section 8.3(a) shall be submitted to the
Separation Committee in accordance with the procedures set forth in Section
12.2.

(b) THIRD PARTY CLAIMS WITH RESPECT TO SHARED LIABILITIES. In the
event that any claim or demand with respect to a Shared Liability is asserted
against or sought to be collected by a third party (a "SHARED ASSERTED
LIABILITY"), the Indemnifying Party receiving notice of such claim (the
"RECEIVING PARTY") shall as soon as practicable notify the other Indemnifying
Party (the "NON-RECEIVING PARTY") in writing of such Shared Asserted
Liability, specifying the nature of such Shared Asserted Liability (the

<PAGE>

"SHARED CLAIM NOTICE"); PROVIDED, HOWEVER, that no delay on the part of the
Receiving Party in giving any such Shared Claim Notice shall relieve the
Non-Receiving Party of any indemnification obligation hereunder except to the
extent that the Non-Receiving Party is materially prejudiced by such delay.
If one of the Indemnifying Parties has responsibility for greater than 50% of
such Shared Asserted Liability as set forth in Section 1.1(i) of the
Separation Disclosure Schedule, such Indemnifying Party shall have management
and administrative responsibility in respect of such Shared Asserted
Liability (the "MANAGING PARTY"), including responsibility for the defense of
such Shared Asserted Liability, negotiation with claimants and potential
claimants (subject to the limitations in the following paragraph) and other
activities related thereto. If one of the Indemnifying Parties does not have
responsibility for greater than 50% of such Shared Asserted Liability as set
forth in Section 1.1(i) of the Separation Disclosure Schedule, New U S WEST
shall be the Managing Party.

The Managing Party shall assume the defense of the Shared Asserted
Liability with counsel selected by the Managing Party and shall control the
defense of such Shared Asserted Liability, although the Indemnifying Party
that is not the Managing Party (the "NON-MANAGING PARTY") shall have the
right at its own cost to participate in such defense and to employ counsel
separate from the counsel employed by the Managing Party. The Non-Managing
Party shall cooperate with the Managing Party in the defense or prosecution
of such Shared Asserted Liability. In the event a dispute arises as to
whether the Non-Receiving Party has any responsibility under this Agreement
for the Shared Asserted Liability, the Receiving Party shall have the right
to defend such Shared Asserted Liability until such dispute is resolved in
accordance with the procedures set forth in Section 12.2; PROVIDED, HOWEVER,
that in such circumstances (i) the Receiving Party shall not have the right
to settle such Shared Asserted Liability unless the Indemnified Party shall
also (at the time it exercises such right to settle such Shared Asserted
Liability) waive any right to indemnification therefor by the Non-Receiving
Party and (ii) if the Non-Receiving Party becomes the Managing Party, the
Managing Party shall thereafter defend against such Shared Asserted Liability
in accordance with this Section 8.3(b).

In no event will the Managing Party admit any liability with
respect to, or settle, compromise or discharge, any such Shared Asserted
Liability without the

<PAGE>

prior written consent of the Non-Managing Party; PROVIDED, HOWEVER, that the
Managing Party shall have the right to settle, compromise or discharge, any
such Shared Asserted Liability without the consent of the Non-Managing Party
if the aggregate amount payable by the Indemnifying Parties in respect of
such settlement, compromise or discharge does not exceed $5,000,000 and such
settlement, compromise or discharge does not require the Non-Managing Party
to take any action other than the payment of damages; PROVIDED, FURTHER, that
the Managing Party shall have the right to settle, compromise or discharge
such Shared Asserted Liability without the consent of the Non-Managing Party
if the Managing Party releases in writing the Non-Managing Party from its
indemnification obligation hereunder with respect to such Shared Asserted
Liability and such settlement, compromise or discharge would not otherwise
adversely affect the Non-Managing Party; and PROVIDED, FURTHER, that if the
Managing Party recommends a settlement, compromise or discharge of such
Shared Asserted Liability to the Non-Managing Party that does not require the
Non-Managing Party to take any action other than the payment of damages and
the Non-Managing Party does not consent to such settlement, compromise or
discharge, then the Non-Managing Party shall be required to indemnify the
Managing Party for any amount that the Managing Party may be required to pay
in the future in connection with such Shared Asserted Liability which is in
excess of the amount that would have been paid by or on behalf of the
Managing Party pursuant to such settlement, compromise or discharge. All
amounts payable by the Indemnifying Parties in connection with a Shared
Asserted Liability, including all reasonable legal and other expenses
incurred in connection with such Shared Asserted Liability (including
reasonable legal expenses of the Non-Managing Party), shall be shared by the
parties in the same proportions in which the related Shared Liability is
shared. Any disputes between the parties under this Section 8.3(b) shall be
submitted to the Separation Committee in accordance with the procedures set
forth in Section 12.2.

(C) NON-THIRD PARTY CLAIMS. In the event that an Indemnified
Party should have a claim against the Indemnifying Party hereunder that does
not involve a claim or demand being asserted against or sought to be
collected from it by a third party, the Indemnified Party shall send a notice
with respect to such claim to the Indemnifying Party. The Indemnifying Party
shall have 60 days from the date such notice is delivered during which to
notify the Indemnified Party in writing of any good faith objections it has
to the

<PAGE>

Indemnified Party's notice or claims for indemnification, setting forth in
reasonable detail each of the Indemnifying Party's objections thereto. If
the Indemnifying party does not deliver such written notice of objection
within such 60-day period, the Indemnifying Party shall be deemed to not have
any objections to such claim. If the Indemnifying Party does deliver such
written notice of objection within such 60-day period, the Indemnifying Party
and the Indemnified Party shall attempt in good faith to resolve any such
dispute within 60 days of the delivery by the Indemnifying Party of such
written notice of objection. If the Indemnifying Party and the Indemnified
Party are unable to resolve any such dispute within such 60-day period, such
dispute shall be submitted to the Separation Committee in accordance with the
procedures set forth in Section 12.2.

8.4 MISCELLANEOUS INDEMNIFICATION PROVISIONS.

(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the
same terms and conditions as the Indemnified Party is indemnified by the
Indemnifying Party under this Article VIII.

(b) The amount that an Indemnifying Party is required to pay to
any Indemnified Party pursuant to this Article VIII shall be reduced
(retroactively or prospectively) by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnified Party in respect of
the related Indemnifiable Loss (including any Insurance Proceeds in respect
of a Shared Liability recovered by or on behalf of such Indemnified Party in
respect of the related Indemnifiable Loss). If an Indemnified Party shall
have received the payment required by this Article VIII in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds
or other amounts in respect of such Indemnifiable Loss, then such Indemnified
Party shall pay to such Indemnifying Party a sum equal to the amount of such
Insurance Proceeds or other amounts actually received, up to the aggregate
amount of any payments received from such Indemnifying Party pursuant to this
Article VIII in respect of such Indemnifiable Loss.

(c) In determining the amount of any indemnity payable under this
Article VIII, such amount shall be reduced by any related Tax benefits if and
when actually realized or received (but only after taking into account any

<PAGE>

Tax benefits (including, without limitation, any net operating losses or
other deductions) to which the Indemnified Party would be entitled without
regard to such item), except to the extent such Tax benefit has already been
taken into account in determining the amount of any indemnity payable under
this Article VIII in respect of the related Indemnifiable Loss. Any such Tax
benefit shall be promptly repaid by the Indemnified Party to the Indemnifying
Party following the time at which such recovery is realized or received
pursuant to the previous sentence, minus all reasonably allocable costs,
charges and expenses incurred by the Indemnified Party in obtaining such Tax
benefit. Notwithstanding the foregoing, if (x) the amount of Indemnifiable
Losses for which the Indemnifying Party is obligated to indemnify the
Indemnified Party is reduced by any Tax benefit in accordance with the
provisions of the previous sentence and (y) the Indemnified Party
subsequently is required to repay the amount of any such Tax benefit or such
Tax benefit is disallowed, then the obligation of the Indemnifying Party to
indemnify with respect to such amounts shall be reinstated immediately and
such amounts shall be paid promptly to the Indemnified Party in accordance
with the provisions of this Agreement.

(d) No Indemnifying Party shall be liable to an Indemnified Party
under this Article VIII in respect of consequential, exemplary, special or
punitive damages, or lost profits, except to the extent such consequential,
exemplary, special or punitive damages, or lost profits are actually paid to
a third party.

8.5 CONTRIBUTION. (a) If the indemnification provided for in
this Article VIII is not permitted under Applicable Law, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such Indemnifiable Losses (i) any amount that such Indemnified
Party would be entitled to pursuant to Article VIII of this Agreement or the
relevant indemnity provisions of any other Transaction Document or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relevant
benefits of the indemnity provisions described in clause (i) above, but also
the relative ownership of the Assets or responsibility for the Liabilities
associated with such Indemnifiable Losses.

<PAGE>

(b) The amounts paid or payable by an Indemnified Party as a
result of Indemnifiable Losses referred to in Section 8.5(a) above shall be
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.

8.6 TAX MATTERS; CONSTRUCTION OF AGREEMENTS.

(a) Except as set forth in the Tax Sharing Agreement, all
indemnification relating to Taxes shall be governed by the Tax Sharing
Agreement.

(b) Notwithstanding any other provision in this Agreement to the
contrary, except as set forth in Section 8.6(a), in the event and to the
extent that there shall be a conflict between the provisions of this Article
VIII and the provisions of any other part of this Agreement or any exhibit or
schedule hereto, the provisions of this Article VIII shall control, and in
the event and to the extent that there shall be a conflict between the
provisions of this Agreement (including, without limitation, the provisions
of this Article VIII) and the provisions of any other Transaction Document,
the provisions of such other Transaction Document shall control.

8.7 REMEDIES CUMULATIVE. The remedies provided in this Article
VIII shall be cumulative and, subject to the provisions of Section 12.2,
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.

ARTICLE IX

CERTAIN ADDITIONAL COVENANTS

9.1 LICENSES AND PERMITS. Each party hereto shall cause the
appropriate members of its Group to prepare and file with the appropriate
licensing and permitting authorities applications for the transfer or
issuance, as may be necessary or advisable in connection with the Separation,
to its Group of all material governmental licenses and permits required for
the members of its Group to operate its business after the Separation. The
members of the New U S WEST Group and the members of the U S WEST Group shall
cooperate and use all reasonable best efforts to

<PAGE>

secure the transfer or issuance of such licenses and permits.

9.2 INTERCOMPANY AGREEMENTS. All contracts, licenses, agreements,
commitments or other arrangements, formal or informal, between any member of
the U S WEST Group, on the one hand, and any member of the New U S WEST
Group, on the other, in existence as of the Separation Time, pursuant to
which any member of either Group provides services to any member of the other
Group (including, without limitation, management, administrative, financial,
accounting, data processing, insurance or technical support), or the use of
any Assets of any member of the other Group, or the secondment of any
employee, or pursuant to which rights, privileges or benefits are afforded to
members of either Group or Affiliates of the other Group, shall terminate as
of the close of business on the day prior to the Separation Time, except (i)
as specifically provided herein or in the Transaction Documents or as
otherwise agreed to by the parties, (ii) for the agreements listed in Section
9.2 of the Separation Disclosure Schedule, which will remain in effect
following the Separation Time and (iii) to the extent required by the terms
of the AirTouch Merger Agreement, for any agreements between a member of the
New U S WEST Group, on the one hand, and NewVector or any of its Subsidiaries
or investments or PCS Holdings, on the other hand. From and after the
Separation Time, no member of either Group shall have any rights under any
contract, license, agreement, commitment or arrangement so terminated.

9.3 GUARANTEE OBLIGATIONS. (a) U S WEST and New U S WEST shall
cooperate, and shall cause their respective Groups to cooperate, to
terminate, or to cause a member of the New U S WEST Group to be substituted
in all respects for any member of the U S WEST Group in respect of, all
obligations of any member of the U S WEST Group under any loan, letter of
credit, financing, lease, contract or other obligation in existence as of the
Separation Time pertaining to the New U S WEST Business for which such member
of the U S WEST Group may be liable, as guarantor, original tenant, primary
obligor or otherwise. If such a termination or substitution is not effected
by the Separation Time, (i) New U S WEST shall indemnify and hold harmless
the U S WEST Indemnified Parties for any Indemnifiable Loss arising from or
relating to any such loan, letter of credit, financing, lease, contract or
other obligation and (ii) without the prior written consent of U S WEST, from
and after the Separation Time, New U S WEST shall not, and shall not

<PAGE>

permit any member of the New U S WEST Group or any of its Affiliates to,
renew or extend the term of, increase its obligations under, transfer to a
third party, or amend in any manner adverse to the U S WEST Group, any such
loan, letter of credit, financing, lease, contract or other obligation unless
all obligations of the U S WEST Group with respect thereto are thereupon
terminated by documentation reasonably satisfactory in form and substance to
U S WEST.

(b) U S WEST and New U S WEST shall cooperate, and shall cause
their respective Groups to cooperate, to terminate, or to cause a member of
the U S WEST Group to be substituted in all respects for any member of the
New U S WEST Group in respect of, all obligations of any member of the New U
S WEST Group under any loan, financing, letter of credit, lease, contract, or
other obligation in existence as of the Separation Time pertaining to the U S
WEST Business for which such member of the New U S WEST Group may be liable,
as guarantor, original tenant, primary obligor or otherwise. If such a
termination or substitution is not effected by the Separation Time, (i) U S
WEST shall indemnify and hold harmless the New U S WEST Indemnified Parties
for any Indemnifiable Loss arising from or relating to any such loan, letter
of credit, financing, lease, contract or other obligation, and (ii) without
the prior written consent of New U S WEST, from and after the Separation
Time, U S WEST shall not, and shall not permit any member of the U S WEST
Group or any of its Affiliates to, renew or extend the term of, increase its
obligations under, transfer to a third party, or amend in any manner adverse
to the New U S WEST Group, any such loan, letter of credit, financing, lease,
contract or other obligation unless all obligations of the New U S WEST Group
with respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to New U S WEST.

9.4 FURTHER ASSURANCES. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under Applicable Laws, regulations and agreements to
consummate and make effective the transactions contemplated by this
Agreement. Without limiting the foregoing, each party hereto shall cooperate
with the other party, and execute and deliver, or use reasonable best efforts
to cause to be executed and delivered, all instruments, including instruments
of conveyance, assignment

<PAGE>

and transfer, and to make all filings with, and to obtain all consents,
approvals or authorizations of, any governmental or regulatory authority or
any other Person under any permit, license, agreement, indenture or other
instrument, and take all such other actions as such party may reasonably be
requested to take by the other party hereto from time to time, consistent
with the terms of this Agreement and the Transaction Documents, in order to
effectuate the provisions and purposes of this Agreement and the transfers of
Assets and Liabilities and the other transactions contemplated hereby.

(b) If any such transfer of Assets or Liabilities is not
consummated prior to or at the Separation Time, then the party hereto
retaining such Asset or Liability shall continue to take the actions required
by Section 9.4(a) to consummate and make effective such transfer as soon as
practicable after the Separation Time and, in the case of Assets, shall use
its reasonable best efforts to preserve the value of such Assets until the
time of transfer. If and when any such Asset or Liability becomes
transferable, such transfer shall be effected forthwith. The parties hereto
agree that, as of the Separation Time, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership to all of the Assets,
together with all rights, powers and privileges incident thereto, and shall
be deemed to have assumed in accordance with the terms of this Agreement and
the Transaction Documents all of the Liabilities, and all duties, obligations
and responsibilities incident thereto, that such party is entitled to acquire
or required to assume pursuant to the terms of this Agreement.

(c) Each of the parties hereto agrees to use its respective
reasonable best efforts, at such party's expense, to obtain any consents
required to transfer and assign to (i) New U S WEST all Contracts, licenses
and other rights of any nature whatsoever included in the New U S WEST Assets
and (ii) U S WEST all Contracts, licenses and other rights of any nature
whatsoever included in the MediaOne Assets. In the event and to the extent
that either party hereto is unable to obtain any such required consents, (i)
such party shall continue to be bound thereby (such party in such capacity,
the "RECORD HOLDER") and (ii) the party to which such Asset would otherwise
be transferred pursuant to this Agreement (the "BENEFICIAL HOLDER") shall
pay, perform and discharge fully all of the obligations of the Record Holder
thereunder from and after the Separation Time and indemnify

<PAGE>

such Record Holder for all losses arising out of such performance by such
Record Holder. The Record Holder shall, without further consideration
therefor, pay, assign and remit to the Beneficial Holder promptly all monies,
rights and other consideration received in respect of such performance. The
Record Holder shall exercise or exploit its rights and options under all such
Contracts, licenses and other rights and commitments referred to in this
Section 9.5(c) only as reasonably directed by the Beneficial Holder and at
the Beneficial Holder's expense. If and when any such consent shall be
obtained or any such Contract, license or other right shall otherwise become
assignable, the Record Holder shall promptly assign all of its rights and
obligations thereunder to the Beneficial Holder without payment of further
consideration and the Beneficial Holder shall, without the payment of any
further consideration therefor, assume such rights and obligations.

(d) In the event that, subsequent to the Separation Time, U S WEST
shall either (i) receive written notice from New U S WEST that certain
specified Assets which properly constitute New U S WEST Assets were not
transferred to it on or prior to the Separation Time or (ii) determine that
certain Assets of U S WEST which constitute New U S WEST Assets were not
transferred to New U S WEST on or prior to the Separation Time, then, as
promptly as practicable thereafter, U S WEST shall use its reasonable best
efforts to transfer and deliver any and all of such Assets to New U S WEST
without the payment by New U S WEST of any consideration therefor. In the
event that, subsequent to the Separation Time, New U S WEST shall either (i)
receive written notice from U S WEST that certain specified Assets were
transferred to New U S WEST which properly constitute MediaOne Assets, or
(ii) determine that certain Assets of New U S WEST which constitute MediaOne
Assets were transferred to New U S WEST, then as promptly as practicable
thereafter, New U S WEST shall use its reasonable best efforts to transfer
and deliver any and all of such Assets to U S WEST without the payment by U S
WEST of any consideration therefor.

9.5 NATIONAL CONTRACTS. Each of the parties hereto agrees to use
its respective reasonable best efforts to permit the other party hereto to
obtain the benefits of certain Contracts with nationally-based vendors and
suppliers existing as of the Separation Time and listed on Section 9.5 of the
Separation Disclosure Schedule (such Contracts, each individually a "NATIONAL
CONTRACT" and

<PAGE>

collectively the "NATIONAL CONTRACTS"). Each of U S WEST and New U S WEST
hereby agrees to cooperate with respect to obtaining favorable prices under
such National Contracts by combining or consolidating orders made under such
National Contracts. Each of U S WEST and New U S WEST hereby agrees that New
U S WEST or a member of the New U S WEST Group shall administer these
National Contracts and that U S WEST shall be responsible for the portions
attributable to U S WEST of any order or delivery of goods and services
received under each National Contract (including costs of administration).
The arrangements of U S WEST and New U S WEST with respect to National
Contracts relating to employee matters shall be governed by the terms of the
Employee Matters Agreement.

9.6 NON-SOLICITATION OF EMPLOYEES. Each of U S WEST and New U S
WEST shall not, and shall cause the other members of the Group of which it is
a member not to, until the first anniversary of the Separation Time, directly
or indirectly, (i) recruit any Covered Employee of the other Group or (ii)
solicit any Covered Employee of the other Group to leave the employment of
the other Group; PROVIDED, HOWEVER, that nothing contained herein shall (A)
prohibit any advertisement or general solicitation (or employment as a result
thereof) by any member of the U S WEST Group or the New U S WEST Group that
is not specifically targeted at employees of the other Group or (B) prohibit
any employee of one Group from initiating employment discussion with the
other Group without any recruitment or solicitation from such other Group.
In the event U S WEST or New U S WEST breaches the provisions of this Section
9.5, the breaching party shall be required to pay to the non-breaching party
as liquidated damages an amount equal to the product of (x) 1.5 multiplied by
(y) the total salary and bonus under the non-breaching party's short-term
compensation plan received by the Covered Employee recruited or solicited
during the most recent 12-month period.

9.7 LOCK BOXES. U S WEST shall take all such actions as may be
necessary or required to deliver to New U S WEST full authority as of the
Separation Time with respect to all lock boxes or similar deposit
arrangements maintained by U S WEST prior to the Separation Time and which
are utilized exclusively by the New U S WEST Business. Effective as of the
Separation Time, U S WEST shall terminate any arrangement whereby funds
directed to such lock boxes or similar arrangements are consolidated with
other funds of U S WEST or otherwise made available to U S

<PAGE>

WEST. U S WEST shall, effective as of the Separation Time, take all
necessary steps to remove all Persons who are not New U S WEST Employees but
who are signatories or holders of powers-of-attorney with respect to such
lock boxes or other arrangements from the list of such signatories and
holders and otherwise extinguish their signing authority with respect thereto.

9.8 AGREEMENTS WITH RESPECT TO COMMON STOCK RECEIVED BY SAVINGS
PLAN/ESOPS. (a) U S WEST and the U S WEST Savings Plan/ESOP and New U S WEST
and the MediaOne Savings Plan/ESOP shall cooperate with each other in
supplying such information as may be necessary for any of such parties to
complete and file any information reporting forms presently or hereafter
required by the SEC or any commissioner or other authority administering the
"blue sky" or securities laws of any applicable jurisdiction which would be
required to be filed as a condition to the availability of an exemption from
registration or qualification of an offer or sale of the shares of the
MediaOne Common Stock owned by the U S WEST Savings Plan/ESOP after the
Separation (the "New U S WEST Savings Plan Shares") and the shares of the New
U S WEST Common Stock received by the MediaOne Savings Plan/ESOP in the
Separation (the "MediaOne Savings Plan Shares") under the Securities Act, or
any such "blue sky" or securities laws.

(b) To the extent required by Applicable Law, (i) until the sale
by the New U S WEST Savings Plan of the New U S WEST Savings Plan Shares, U S
WEST shall file in a timely manner all reports contemplated by Rule 144(c)(1)
under the Securities Act as satisfying the condition that adequate public
information with respect to U S WEST is available and (ii) until the sale by
the MediaOne Savings Plan of the MediaOne Savings Plan Shares, New U S WEST
shall file in a timely manner all reports contemplated by Rule 144(c)(1)
under the Securities Act as satisfying the condition that adequate public
information with respect to New U S WEST is available.

9.9 AIRTOUCH TRANSACTION. (a) Except as set forth in this
Section 9.9 or as otherwise agreed to by the parties, all rights and
obligations of U S WEST and its Subsidiaries under the AirTouch Merger
Agreement shall be retained by U S WEST in connection with the Separation.

(b) At the Separation Time (whether or not the AirTouch
Transaction shall have been consummated), U S WEST

<PAGE>

shall assign to New U S WEST and the New U S WEST Group, pursuant to the
instrument of assignment attached as Exhibit K-2 to the AirTouch Merger
Agreement, the following rights (and related obligations):

(i) all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Section 7.8 of the AirTouch Merger Agreement
(relating to use of the "U S WEST" name by AirTouch and its
Subsidiaries), subject to the limitations set forth therein; and

(ii) an equal and undivided interest (together with the U S WEST
Group) in all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Sections 7.9(b) and 7.9(c) of the AirTouch Merger
Agreement (relating to Intellectual Property), subject to the
limitations set forth therein; and

(iii) an equal and undivided interest (together with the U S WEST
Group) in all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Section 7.11 of the AirTouch Merger Agreement
(relating to Third Party Rights), subject to the limitations set forth
therein.

(c) New U S WEST acknowledges the right of AirTouch pursuant to
Section 7.10 of the AirTouch Merger Agreement to make claims (directly or
through U S WEST) under the Joint Insurance Arrangments and agrees that, for
purposes of Article VII hereof, any such claim shall be deemed to have been
made by the U S WEST Group.

(d) New U S WEST acknowledges the right of AirTouch pursuant to
Section 7.12(c) of the AirTouch Merger Agreement to terminate any
contract, license or other arrangement between NewVector or any of its
Subsidiaries or investments or PCS Holdings, on the one hand, and a
member of the New U S WEST Group, on the other hand, on 30 Business
Days' prior written notice.

ARTICLE X

ACCESS TO INFORMATION

10.1 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as
practicable after the Separation Time, U S WEST shall deliver to New U S WEST
all corporate books and

<PAGE>

records of the New U S WEST Group in its possession and copies of the
relevant portions of all corporate books and records of the U S WEST Group
relating directly and primarily to the New U S WEST Group, the New U S WEST
Assets, the New U S WEST Business, the New U S WEST Liabilities and the New U
S WEST Employees, including, without limitation, original corporate minute
books, stock ledgers and certificates and the corporate seal of each
corporation the capital stock of which is included in the New U S WEST
Assets, copies of portions of the minute books of U S WEST and other members
of the U S WEST Group that are directly and primarily related to the New U S
WEST Business and documentation relating to the New U S WEST Liabilities,
including, in each case, all active agreements, active litigation files and
government filings. From and after the Separation Time, all such books,
records and copies shall be the property of New U S WEST. Prior to or as
promptly as practicable after the Separation Time, New U S WEST shall deliver
to U S WEST all corporate books and records of the U S WEST Group in its
possession and copies of the relevant portions of all corporate books and
records of the New U S WEST Group relating directly and primarily to the U S
WEST Group, the MediaOne Assets, the Media Business, the U S WEST Liabilities
and the MediaOne Employees, including, without limitation, original corporate
minute books, stock ledgers and certificates and the corporate seal of each
corporation the capital stock of which is included in the MediaOne Assets,
copies of portions of the minute books of members of the New U S WEST Group
that are directly and primarily related to the MediaOne Business and
documentation relating to the U S WEST Liabilities, including, in each case,
all active agreements, active litigation files and government filings. From
and after the Separation Time, all such books, records and copies shall be
the property of U S WEST.

10.2 ACCESS TO INFORMATION. From and after the Separation Time,
each of U S WEST and New U S WEST shall afford to the other and to the
other's Representatives reasonable access and duplicating rights, during
normal business hours and upon reasonable advance notice, to all Information
within the possession or control of such party's Group relating to the other
party's Group's pre-Separation business, Assets or Liabilities or relating to
or arising in connection with the relationship between the Groups on or prior
to the Separation Time, insofar as such access is reasonably required for a
reasonable purpose, subject to the provisions below regarding Privileged
Information. Without limiting the foregoing and except as otherwise provided
in

<PAGE>

the Transaction Documents, Information may be requested under this Section
10.2 for audit, accounting, claims, litigation and Tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations.

In furtherance of the foregoing:

(a) Each party hereto acknowledges that: (i) Each of U S WEST and
New U S WEST (and the members of the U S WEST Group and the New U S WEST
Group, respectively) has or may obtain Privileged Information; (ii) there are
a number of Litigation Matters affecting each or both of U S WEST and New U S
WEST; (iii) both U S WEST and New U S WEST have a common legal interest in
Litigation Matters, in the Privileged Information, and in the preservation of
the confidential status of the Privileged Information, in each case relating
to pre-Separation business of the U S WEST Group or the New U S WEST Group or
relating to or arising in connection with the relationship between the Groups
on or prior to the Separation Time; and (iv) both U S WEST and New U S WEST
intend that the transactions contemplated hereby and by the other Transaction
Documents and any transfer of Privileged Information in connection therewith
shall not operate as a waiver of any applicable privilege.

(b) Each of U S WEST and New U S WEST agrees, on behalf of itself
and each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information
relating to pre-Separation business of the New U S WEST Group or the U S WEST
Group, respectively, or relating to or arising in connection with the
relationship between the Groups on or prior to the Separation Time, without
providing prompt written notice to and obtaining the prior written consent of
the other, which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that U S WEST and New U S WEST may make such disclosure or waiver
with respect to Privileged Information if such Privileged Information relates
solely to the pre-Separation business of the U S WEST Group, in the case of
U S WEST, or the New U S WEST Group, in the case of New U S WEST. Any
disagreement between any member of the U S WEST Group and any member of the
New U S WEST Group concerning the reasonableness of withholding such consent
shall be submitted to the Separation Committee in accordance with the
procedures set forth in Section 12.2 and no disclosure shall be made prior to
a resolution of such disagreement.

<PAGE>

(c) Upon any member of the U S WEST Group or any member of the New
U S WEST Group receiving any subpoena or other compulsory disclosure notice
from a court, other governmental agency or otherwise that requests disclosure
of Privileged Information, in each case relating to pre-Separation business
of the New U S WEST Group or the U S WEST Group, respectively, or relating to
or arising in connection with the relationship between the Groups on or prior
to the Separation Time, in the event the recipient of such the notice intends
to disclose such Privileged Information, such recipient shall promptly
provide to the other Group (following the notice provisions set forth herein)
a copy of such notice, the intended response, and all materials or
information relating to the other Group that might be disclosed. In the
event of a disagreement as to the intended response or disclosure, unless and
until the disagreement is resolved as provided in subsection (b), the parties
shall cooperate to assert all defenses to disclosure claimed by either
party's Group, and shall not disclose any disputed documents or information
until all legal defenses and claims of privilege have been finally determined.

10.3 PRODUCTION OF WITNESSES. Subject to Section 10.2, after the
Separation Time, each of U S WEST and New U S WEST shall, and shall cause
each member of the U S WEST Group and the New U S WEST Group, respectively,
to, make available to U S WEST or New U S WEST or any member of the U S WEST
Group or of the New U S WEST Group, as the case may be, upon written request
of the other, such Group's directors, officers, employees and agents as
witnesses to the extent that any such Person may reasonably be required in
connection with any Litigation Matters, administrative or other proceedings
in which the requesting party may from time to time be involved and relating
to the pre-Separation business of the U S WEST Group or the New U S WEST
Group or relating to or in connection with the relationship between the
Groups on or prior to the Separation Time; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, neither the U S WEST Group nor the New U S
WEST Group shall be required to make available such Group's directors,
officers, employees or witnesses in response to a subpoena received by any
member of the other Group from a third party.

10.4 RETENTION OF RECORDS. Except as otherwise agreed in writing,
or as otherwise provided in the Transaction Documents, each of U S WEST and
New U S WEST shall, and shall cause the members of the Group of which it is a
member to, comply with the current records retention

<PAGE>

policy of U S WEST included in Section 10.4 of the Separation Disclosure
Schedule with respect to all Information in such party's Group's possession
or under its control relating directly and primarily to the pre-Separation
business, Assets or Liabilities of the other party's Group.

10.5 CONFIDENTIALITY. Subject to Section 10.2, which shall govern
Privileged Information, from and after the Separation Time, each of New U S
WEST and U S WEST shall, and shall use reasonable best efforts to cause the
members of its Group and Representatives to, preserve the confidentiality of
all Information concerning the other party's Group obtained by it prior to
the Separation Time or furnished to it by such other party's Group pursuant
to this Agreement or the other Transaction Documents with the same degree of
care as it takes to preserve confidentiality for its own similar Information.

10.6 COOPERATION WITH RESPECT TO GOVERNMENT REPORTS AND FILINGS.
U S WEST, on behalf of itself and each member of the U S WEST Group, agrees to
provide any member of the New U S WEST Group, and New U S WEST, on behalf of
itself and each member of the New U S WEST Group, agrees to provide any
member of the U S WEST Group, with such cooperation and Information as may be
reasonably requested by the other in connection with the preparation or
filing of any government report or other government filing contemplated by
this Agreement or the other Transaction Documents or in conducting any other
government proceeding relating to pre-Separation business of the U S WEST
Group or the New U S WEST Group, Assets or Liabilities of either Group or
relating to or in connection with the relationship between the Groups on or
prior to the Separation Time. Such cooperation and Information shall
include, without limitation, promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any
Governmental Authority which relate to the U S WEST Group, in the case of the
New U S WEST Group, or the New U S WEST Group, in the case of the U S WEST
Group. Each party shall make its employees and facilities available during
normal business hours and on reasonable prior notice to provide explanation
of any documents or Information provided hereunder.

10.7 CERTAIN LIMITATIONS WITH RESPECT TO INFORMATION. (a) Any
Information owned by one Group that is provided to a requesting party
pursuant to this Agreement

<PAGE>

or any other Transaction Document shall be deemed to remain the property of
the providing party. Unless specifically set forth herein, nothing contained
in this Agreement shall be construed as granting or conferring rights of
license or otherwise in any such Information.

(b) A party providing Information hereunder or under any other
Transaction Document shall be entitled to receive from the requesting party
the reasonable costs, if any, of creating, gathering and copying such
Information, to the extent that such costs are incurred for the benefit of
the requesting party. Except as may be otherwise specifically provided
elsewhere in this Agreement or in any of the Transaction Documents, such
costs shall be computed solely in accordance with the providing party's
standard methodology and procedures.

(c) No party shall have any liability to any other party in the
event that any Information exchanged or provided pursuant to this Article X
hereof which is an estimate or forecast, or which is based on an estimate or
forecast, is found to be inaccurate, in the absence of willful misconduct by
the party providing such Information. No party shall have any liability to
any other party if any Information is destroyed after reasonable best efforts
by such party to comply with the provisions of Section 10.4.

(d) The rights and obligations granted under this Article X are
subject to any specific limitations, qualifications or additional provisions
on the sharing, exchange or confidential treatment of Information set forth
in any other Transaction Document.

10.8 PROTECTIVE ARRANGEMENTS. In the event that any party or any
member of its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives
any demand under lawful process or from any Governmental Authority to
disclose or provide Information concerning any other party (or any member of
any other party's Group) that is subject to the confidentiality provisions
hereof, such party shall notify the other party prior to disclosing or
providing such Information and shall cooperate at the expense of the
requesting party in seeking any reasonable protective arrangements requested
by such other party. Subject to the foregoing, the Person that received such
request may thereafter disclose or provide Information to

<PAGE>

the extent required by such law (as so advised by counsel) or by lawful
process or such Governmental Authority.

ARTICLE XI

MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES

11.1 MUTUAL RELEASE. (a) Effective as of the Separation Time and
except as specifically set forth in this Agreement or any of the other
Transaction Documents, each of New U S WEST, on the one hand, and U S WEST,
on the other hand, on its own behalf and on behalf of each member of its
respective Group, releases and forever discharges the other and the members
of its Group, and its and their respective officers, directors, agents,
Affiliates, record and beneficial security holders (including, without
limitation, trustees and beneficiaries of trusts holding such securities),
advisors and Representatives (in their respective capacities as such) and
their respective heirs, executors, administrators, successors and assigns, of
and from all debts, demands, Actions, causes of action, suits, accounts,
covenants, contracts, agreements, damages, claims and Liabilities whatsoever
of every name and nature, both in law and in equity, which the releasing
party has or ever had, which arise out of or relate to, in whole or in part,
events, circumstances or actions, whether known or unknown, taken by such
other party occurring or failing to occur or any conditions existing on or
prior to the Separation Time; PROVIDED, HOWEVER, that the foregoing general
release shall not apply to (i) any Liabilities assumed, transferred,
assigned, allocated or arising under this Agreement or any of the other
Transaction Documents and shall not affect any party's rights to enforce this
Agreement (including the provisions of Article VIII) or any of the other
Transaction Documents in accordance with their terms; (ii) any Liability
arising under any agreement listed in Section 9.2 of the Separation
Disclosure Schedule (each of which shall remain in effect following the
Separation Time); and (iii) any Liability the release of which would result
in the release of any Person other than a Person released pursuant to this
Section 11.1 (provided that the parties agree not to bring suit or permit any
members of their Group to bring suit against any Person with respect to any
Liability to the extent such Person would be released with respect to such
Liabilities by this Section 11.1 but for this clause (iii)). U S WEST and New
U S WEST acknowledge that the foregoing

<PAGE>

general release shall not apply to any Liabilities assigned by members of the
U S WEST Group or members of the New U S WEST Group to third parties prior to
the Separation Time.

(b) The parties acknowledge that members of the U S WEST Law
Department and U S WEST's outside counsel currently represent members of both
the U S WEST Group and the New U S WEST Group. Effective as of the
Separation Time, each of New U S WEST, on the one hand, and U S WEST, on the
other hand, on its own behalf and on behalf of each member of its respective
Group, waives any conflict with respect to such common representation before,
at or after the Separation Time (other than, in the case of such common
representation by U S WEST's outside counsel, with respect to any dispute or
Action between a member of the U S WEST Group and a member of the New U S
WEST Group).

11.2 NO REPRESENTATIONS OR WARRANTIES. New U S WEST understands
and agrees that neither U S WEST nor any other member of the U S WEST Group
is, and U S WEST understands and agrees that neither New U S WEST nor any
other member of the New U S WEST Group is, in this Agreement or in any other
agreement or document, representing or warranting to the other in any way as
to such Group's Assets, business or Liabilities or as to any consents or
approvals required in connection with the consummation of the transactions
contemplated by this Agreement, it being agreed and understood that each
member of the Group shall take all of the Assets "AS IS, WHERE IS". Except
as set forth in this Agreement and the other Transaction Documents, both
parties shall bear the economic and legal risk of the Reorganization,
Contribution and Separation that (a) any conveyance of such Group's Assets
shall prove to be insufficient, (b) the title of any member of the New U S
WEST Group or the U S WEST Group to any of their respective Assets shall be
other than good and marketable and free from encumbrances, (c) the title of
any member of the New U S WEST Group or the U S WEST Group to the shares of
any Subsidiary of such Group shall be other than good and marketable and free
from encumbrances or (d) any member of the other Group shall fail to obtain
any consents or approvals relating to its business required in connection
with the consummation of the transactions contemplated by this Agreement.

<PAGE>

ARTICLE XII

GENERAL PROVISIONS

12.1 MERGER OR CONSOLIDATION. Neither New U S WEST nor U S WEST
(in either case, the "TRANSACTION PARTY") shall (a) consolidate with or merge
into any Person or permit any Person to consolidate with or merge into the
Transaction Party (other than a merger or consolidation in which the
Transaction Party is the surviving or continuing corporation) or (b) sell,
assign, transfer, lease or otherwise dispose of, in one transaction or a
series of related transactions, all or substantially all of the assets of the
Transaction Party, unless the resulting, surviving or transferee Person shall
expressly assume, by instrument in form and substance reasonably satisfactory
to the other party, all of the obligations of the Transaction Party under
this Agreement and each of the other Transaction Documents.

12.2 SEPARATION COMMITTEE; DISPUTE RESOLUTION.

(a) As of the Separation Time, New U S WEST and U S WEST shall
form a committee (the "SEPARATION COMMITTEE") comprised of one representative
designated from time to time by the General Counsel of New U S WEST in his
sole discretion and one representative designated from time to time by the
General Counsel of U S WEST in his sole discretion. Until the tenth
anniversary of the Separation Time, the Separation Committee shall be
responsible for resolving any and all disputes between any member of the U S
WEST Group and any member of the New U S WEST Group arising with respect to
any matter, whether based in contract, tort, statute or otherwise
(collectively, "DISPUTES"), including any dispute as to (i) whether any
Action or other Liability is a New U S WEST Liability, a MediaOne Liability
or a Shared Liability, (ii) whether any Asset is a New U S WEST Asset or a
MediaOne Asset, (iii) the interpretation of any provision of this Agreement
or any other Transaction Document and (iv) such other matters as are
contemplated by this Agreement or any other Transaction Document to be
resolved by the Separation Committee. In the event of any such Dispute, each
of New U S WEST and U S WEST shall have the right to refer in writing such
Dispute to the Separation Committee for resolution. The Separation Committee
shall be required to render a written decision with respect to any Dispute
within 30 days of its receipt of the referral. The decision of the
Separation Committee with respect to any Dispute shall be binding on the New
U S WEST Group and the U

<PAGE>

S WEST Group and their respective successors and assigns. In the event that
the Separation Committee is unable to reach a unanimous determination as to
any Dispute to which it is referred within 30 days of such referral, each of
New U S WEST and U S WEST shall have the right to submit such Dispute to
arbitration in accordance with the procedures set forth in Section 12.2(b).
All out-of-pocket expenses and costs incurred by New U S WEST or U S WEST in
connection with the procedures set forth in this Section 12.2(a) shall be
borne by the party incurring such expenses and costs.

(b) In the event that the Separation Committee is unable to reach
a unanimous determination as to any Dispute pursuant to Section 12.2(a), each
of New U S WEST and U S WEST shall have the right to submit such Dispute to
arbitration in accordance with the procedures set forth in this Section
12.2(b). Until the tenth anniversary of the Separation Time, resolution of
any and all such Disputes, including, but not limited to, disputes over
arbitrability, shall be exclusively governed by and settled in accordance
with the provisions of this Section 12.2(b); PROVIDED, HOWEVER, that nothing
contained herein shall preclude either party from seeking or obtaining
injunctive relief or equitable or other judicial relief to enforce this
Section 12.2(b).

U S WEST or New U S WEST (each a "PARTY") may commence proceedings
hereunder by delivering a written notice (the "DEMAND") to the other Party
providing a reasonable description of the Dispute to the other, and expressly
requesting arbitration hereunder. The parties hereby agree to submit all
Disputes to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the parties, their successors and assigns.
The arbitration shall be conducted in Denver, Colorado by three arbitrators
acting by majority vote (the "PANEL"). Of the three arbitrators comprising
the Panel, one arbitrator shall be selected by U S WEST, one arbitrator shall
be selected by New U S WEST and one arbitrator shall be jointly selected by
the arbitrators selected by U S WEST and New U S WEST. If either U S WEST or
New U S WEST fail to select an arbitrator within 15 days after delivery of
the Demand, the arbitrator which is to be selected by such Party shall be
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA RULES"). If
an arbitrator so selected or appointed becomes unable to serve, his or her
successors shall be similarly selected or appointed. Notwithstanding

<PAGE>

the foregoing, at the agreement of the Parties, the Panel shall consist of
one arbitrator selected by agreement of the Parties for appropriate Disputes.

The arbitration shall be conducted pursuant to the Federal
Arbitration Act and such procedures as the Parties may agree, or, in the
absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing, the Panel, taking into consideration the
desires of the Parties for expedited resolution of the Dispute, shall have
discretion to order discovery, including, in appropriate circumstances,
depositions. All hearings shall be conducted on an expedited schedule, and
all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof, which shall then be shared with the other
Party. Hearings with respect to a Dispute shall commence not later than 60
days after selection or appointment of the Panel, and shall no be more than
30 days in length. The Panel shall be required to make a final award within
30 days of the conclusion of the hearings. The award shall be in writing and
shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees
and expenses, fees and expenses of experts and reasonable attorneys fees,
between the prevailing and non-prevailing Party as the Panel deems fair and
reasonable. The Parties agree that monetary damages may be inadequate and
that either Party shall be entitled to seek, and that the Panel shall be
empowered to enter, equitable and injunctive relief, including preliminary
and temporary injunctive relief, in addition to any other appropriate relief
or remedy. The Parties consent to the jurisdiction of the Panel to award
such relief and to the binding nature of any such relief awarded by the
Panel. In no event may the Panel award consequential, exemplary, special or
punitive damages, or lost profits, except to the extent such consequential,
exemplary, special or punitive damages, or lost profits are actually paid by
a Party or a member of that Party's Group to a third party. Any arbitration
award shall be binding and enforceable against the Parties and each member of
their respective Groups and judgment may be entered thereon in any court of
competent jurisdiction.

12.3 SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such
party

<PAGE>

or by any entity that is contemplated to be a Subsidiary of such party on or
after the Separation Time.

12.4 EXPENSES. Except as set forth in Sections 3.4(a) and 3.4(b)
of the Separation Disclosure Schedule, all out-of-pocket costs with respect
to the transfer of the New U S WEST Assets and the transactions contemplated
hereby and by the other Transaction Documents shall be borne equally by U S
WEST and New U S WEST.

12.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado, without reference to
choice of law principles, including matters of construction, validity and
performance.

12.6 NOTICES. Notices, requests, permissions, waivers, referrals
and all other communications hereunder shall be in writing and shall be
deemed to have been duly given if signed by the respective persons giving
them (in the case of any corporation the signature shall be by an officer
thereof) and delivered by hand or by telecopy or on the date of receipt
indicated on the return receipt if mailed (registered or certified, return
receipt requested, properly addressed and postage prepaid):

If to U S WEST, to:

U S WEST, INC.
(to be renamed "MEDIAONE GROUP, INC.")
188 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel
Telephone: (303) 858-5800

If to New U S WEST, to:

USW-C, INC.
(to be renamed "U S WEST, INC.")
1801 California Street
Englewood, Colorado 80202
Attention: General Counsel
Telephone: (303) 896-2020

Such names and addresses may be changed by notice given in accordance with
this Section 12.6. Copies of all notices, requests, permissions, waivers,
referrals and all other communications hereunder shall be given to:

<PAGE>

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
Telephone: (212) 310-8000
Telecopy: (212) 310-8007

12.7 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents, together with all schedules, exhibits, annexes, certificates,
instruments and agreements delivered pursuant hereto and thereto, contain the
entire understanding of the parties hereto and thereto with respect to the
subject matter contained herein and therein, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting such subject
matter.

12.8 HEADINGS; REFERENCES. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Articles", "Sections" or "Exhibits" shall be deemed
to be references to Articles or Sections hereof or Exhibits hereto unless
otherwise indicated. All references herein to "Sections" of the Separation
Disclosure Schedule shall be deemed to be references to the Separation
Disclosure Schedule unless otherwise indicated.

12.9 SCHEDULES. The Separation Disclosure Schedule referenced in
this Agreement and attached hereto is incorporated into this Agreement by
reference and made a part hereof.

12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all
of which shall constitute one and the same original.

12.11 PARTIES IN INTEREST; ASSIGNMENT; SUCCESSORS. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall
inure to the benefit of and be binding upon U S WEST and New U S WEST and
their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies under or by reason of this Agreement.

<PAGE>

12.12 SEVERABILITY; ENFORCEMENT. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too
broad to permit enforcement of such restriction to its fullest extent, each
party agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.

12.13 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto.

12.14 TERMINATION. This Agreement may be terminated and the
Separation abandoned at any time prior to the Separation Time by and in the
sole discretion of the Board of Directors of U S WEST without the approval of
any other party hereto or of U S WEST's stockholders. In the event of such
termination, no party hereto or to any other Transaction Document shall have
any Liability to any Person by reason of this Agreement or any other
Transaction Document, except as otherwise expressly provided herein or
therein.

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Separation
Agreement to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.

U S WEST, INC.

By:
---------------------------------------------
Name:
Title:

USW-C, INC.

By:
---------------------------------------------
Name:
Title:

<PAGE>

EMPLOYEE MATTERS AGREEMENT

TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. GENERAL PRINCIPLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) New U S WEST Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) MediaOne Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Shared Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Class Action Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Appeal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Funded Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(g) Control of litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Election to Assume Liability . . . . . . . . . . . . . . . . . . . . . . 10

3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE
ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

4. EMPLOYEE SAVINGS PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES. . . . . . . . . . . 17

6. OTHER TAX-QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 25

7. WELFARE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Communications Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Media Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Joint Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Continuing Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Continuance of Elections . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Co-Payments and Maximum Benefits . . . . . . . . . . . . . . . . . . . . 28
(g) Pre-existing conditions. . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Long-Term Disability . . . . . . . . . . . . . . . . . . . . . . . . . . 30

8. VEBA's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

9. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) LTIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) ESTIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) Phantom Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

10. OTHER BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Top-hat plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(b) Employment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(c) Split-dollar contracts . . . . . . . . . . . . . . . . . . . . . . . . . 41
(d) Ex-Pat Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Vail Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

<PAGE>

(f) Leaves of Absence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(g) Non-Employee Director Plans. . . . . . . . . . . . . . . . . . . . . . . 43
(h) Non-Employee State Executive Board Plan. . . . . . . . . . . . . . . . . 43

11. PORTABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

12. FURTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

13. COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES . . . . . . . . . 46

15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Payment of 1998 Administrative Costs and Expenses. . . . . . . . . . . . 47
(b) Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(1) Information Provided. . . . . . . . . . . . . . . . . . . . . . . . 48
(2) Vendor Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 48
(c) Beneficiary Designations . . . . . . . . . . . . . . . . . . . . . . . . 49
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Effect If Separation Does Not Occur . . . . . . . . . . . . . . . . . . . . . 49
(e) Provisions of Separation Agreement . . . . . . . . . . . . . . . . . . . 49
</TABLE>

<PAGE>

EMPLOYEE MATTERS AGREEMENT

TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS

1. DEFINITIONS.

(a) All capitalized terms used in this EM Agreement shall have the
meanings set forth below or, if not set forth below, the meaning
given in the Separation Agreement.

"AirTouch Transfers" shall mean Terminated Employees whose employment
is transferred to AirTouch Communications, Inc. or any of its
affiliates prior to the Separation Time as a result of the merger
agreement among Existing U S WEST, certain subsidiaries thereof and
AirTouch Communications, Inc. and who either: (i) are eligible for
retiree medical coverage or retiree life insurance as of the date of
transfer of employment; or (ii) have an account balance in the Media
Savings Plan/ESOP immediately after the Separation Time.

"Average Value" shall mean the average Market Value of the
Communications Stock or Media Stock, as applicable, over the period of
20 Trading Days ending on the fifth Trading Day prior to the date of
the Separation Time, rounded to the nearest one-hundred thousandth (or
if there shall not be a nearest one-hundred thousandth, to the next
highest one-hundred thousandth).

"Cable Companies" shall mean MediaOne of Delaware, Inc. (f/k/a
Continental Cablevision, Inc.), MediaOne, Inc. and/or MediaOne of
Michigan, Inc. (f/k/a Booth Communications), or their predecessors.

"COBRA" shall mean the continuation coverage requirements for group
health plans under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and as codified in Code
Section 4980B and ERISA Sections 601 through 608.

"Communications Employees" shall mean all persons who are Employees of
the New U S WEST Group at the Separation Time, including without
limitation (1) Employees who worked for Existing U S WEST prior to the
Separation Time that are designated as Communications Employees by
Existing U S WEST as of the Separation Time, (2) Employees who, prior
to the Separation Time, worked for an entity that is a

<PAGE>

member of the MediaOne Group that are designated as Communications
Employees as of the Separation Time, and (3) Employees who, prior to
the Separation Time, worked for Dex that are designated as
Communications Employees as of the Separation Time.

"Communications Employee Arrangements" shall mean all Employee
Arrangements sponsored by members of the New U S WEST Group after the
Separation Time.

"Communications Employee Benefit Plans" shall mean all Employee
Benefit Plans sponsored by members of the New U S WEST Group after the
Separation Time.

"Deferred Benefits" shall mean the entitlement of a Terminated
Employee, based solely on the records of the Existing U S WEST Group
at the Separation Time, to future benefits under one or more of the
Deferred Plans. Except as provided in the definition of Terminated
Media Employee and Terminated Inc. Employee, a Terminated Employee
who, according to such records, is not entitled to any benefits under
the Deferred Plans or who has already received all of such benefits
prior to the Separation Time does not have any Deferred Benefits.

"Deferred Plans" shall mean the U S WEST Employee Savings Plan/ESOP
(except accounts attributable to AirTouch Transfers); the U S WEST
Pension Plan (including the disability pensions provided thereunder);
retiree medical benefits under any medical plan maintained by the
Existing U S WEST Group (but excluding COBRA); and long-term
disability benefits under a long-term disability plan maintained by
the Existing U S WEST Group.

"EBC" shall mean the Employee Benefits Committee of Existing U S WEST
as constituted prior to the Separation Time.

"EM Agreement" shall mean this Employee Matters Agreement, which is
Exhibit A to the Separation Agreement.

"Employee" means a person who is an employee of the Existing U S WEST
Group at the Separation Time, including an employee who is not
actively performing services because such employee is on an approved
leave of absence, short-term disability, illness or other similar
reasons. Employee shall include: (i) a person who is a former
employee of the Existing U S WEST Group; and/or (ii) a person who has
been transferred to Time Warner Communications pursuant to

<PAGE>

the agreement of Existing U S WEST and Time Warner Communications;
and/or (iii) a person who is an employee of Time Warner Communications
at the Separation Time, including an employee who is not actively
performing services because such employee is on an approved leave of
absence, short-term disability, illness or other similar reasons. In
addition, an individual who is described in either of the preceding
sentences (whether he works for the Existing U S WEST Group or Time
Warner Communications) immediately prior to the Separation Time who
does not report for work to the New U S WEST Group, MediaOne Group or
Time Warner Communications (depending upon his applicable assignment)
immediately after the Separation Time shall be considered an Employee
(for purposes of this EM Agreement only) unless (1) prior to the
Separation Time, he notifies the Existing U S WEST Group or Time
Warner Communications, as applicable, that he is terminating,
effective on or before the Separation Time or (2) prior to the
Separation Time, the Existing U S WEST Group or Time Warner
Communications, as applicable, notifies him that he is terminated,
effective on or before the Separation Time. All Employees shall be
either Communications Employees or Media Employees. A former employee
who is on lay-off is a Terminated Employee, not an Employee.

"Employment Related Liabilities" shall mean all Liabilities, including
litigation costs, which relate to an Employee, a Terminated Employee
or their respective dependents and beneficiaries, in each case
relating to, arising out of or resulting from employment by the
Existing U S WEST Group or predecessor prior to the Separation Time,
including Liabilities under Employee Benefit Plans and Employee
Arrangements. Notwithstanding the preceding sentence, the following
Liabilities are not Employment Related Liabilities: (1) any Liability
which is specifically addressed in a provision other than Section 2 of
this EM Agreement, (2) Liabilities arising under or relating to the
severance agreements between Existing U S WEST and members of the
Executive Group (which Liabilities are addressed in Schedules 3.4(a)
and 3.4(b) of the Separation Agreement) and (3) any other Liability
scheduled in the Separation Agreement.

"Executive Group" shall mean Richard D. McMormick, Charles P. Russ
III, Michael P. Glinsky, Robert W. Gras, and James T. Anderson.

<PAGE>

"Existing U S WEST" shall mean U S WEST, Inc., a Delaware corporation,
prior to the Separation Time.

"Existing U S WEST Group" shall mean, prior to the Separation Time,
Existing U S WEST and all of its Subsidiaries.

"Media Employees" shall mean all persons who are Employees of the
MediaOne Group at the Separation Time, including without limitation
(1) Employees who worked for Existing U S WEST prior to the Separation
Time that are designated as Media Employees by Existing U S WEST as of
the Separation Time (including, without limitation, Employees who are
employed by Time Warner Communications), (2) Employees who, prior to
the Separation Time, worked for an entity that is a member of the New
U S WEST Group that are designated as Media Employees as of the
Separation Time and (3) Employees who, prior to the Separation Time,
worked for MGI that are designated as Media Employees as of the
Separation Time.

"Media Employee Arrangements" shall mean the Employee Arrangements
sponsored by members of the MediaOne Group after the Separation Time.

"Media Employee Benefit Plans" shall mean the Employee Benefit Plans
sponsored by members of the MediaOne Group after the Separation Time.

"MediaOne" shall mean MediaOne Group, Inc., a Delaware corporation, at
and after the Separation Time. MediaOne was known as U S WEST, Inc.
prior to the Separation Time.

"MediaOne Employee Benefits Committee" shall mean, effective on and
after the Separation Time, the committee of MediaOne Group, Inc.
designated to administer various Media Employee Benefit Plans and
Media Employee Arrangements.

"MediaOne Group" shall mean, at and after the Separation Time,
MediaOne Group, Inc. and all of its Subsidiaries.

"New U S WEST Employee Benefits Committee" shall mean, effective on
and after the Separation Time, the committee of New U S WEST
designated to administer various Communications Employee Benefit Plans
and Communications Employee Arrangements.

<PAGE>

"Non-Employee Directors" shall mean those members of the Board of
Directors of the respective corporation who are or were not employees
of that entity during their term of office. "Retired Non-Employee
Directors" shall mean those Non-Employee Directors who have completed
their term on the respective Board of Directors prior to the
Separation Time.

"Non-Employee Director Plans" shall mean the U S WEST, Inc. Deferred
Compensation Plan for Non-Employee Directors and the U S WEST, Inc.
Retirement Plan for Non-Employee Directors.

"Separation Agreement" shall mean the Separation Agreement, dated as
of __________, 1998, between U S WEST, Inc. and USW-C, Inc.

"Terminated Communications Employees" shall mean all persons who are
Terminated Employees and who are not Terminated Media Employees or
Terminated Inc. Employees. Terminated Communications Employees shall
include (1) all Terminated Employees (other than AirTouch Transfers)
with Deferred Benefits (unless they were actively employed by one of
the Cable Companies on their last day of active employment with the
Existing U S WEST Group); (2) all Terminated Employees who were last
actively employed before November 1, 1995 (unless they were actively
employed by one of the Cable Companies on their last day of active
employment with the Existing U S WEST Group) and are not entitled to
Deferred Benefits at the Separation Time; and (3) all Terminated
Employees who were last actively employed (on or after November 1,
1995 and before the Separation Time) by an entity that is a member of
the New U S WEST Group (excluding MGI, but including Dex and its
subsidiaries) after the Separation Time and are not entitled to
Deferred Benefits at the Separation Time.

"Terminated Employee" means a person who formerly was actively
employed by the Existing U S WEST Group and who is not an Employee.
An individual who is employed by the Existing U S WEST Group
immediately prior to the Separation Time who does not report for work
to the New U S WEST Group or MediaOne Group (depending upon his
applicable assignment) immediately after the Separation Time shall be
considered a Terminated Employee if (1) prior to the Separation Time,
he notifies Existing U S WEST or its Subsidiaries that he is
terminating, effective on or before the Separation Time or (2) prior
to the Separation Time, Existing U S WEST or its Subsidiaries notify
him that he is terminated,

<PAGE>

effective on or before the Separation Time. All members of the
Executive Group shall be Terminated Employees. Each Terminated
Employee shall be either (a) a Terminated Communications Employee,
(b) a Terminated Inc. Employee or (c) a Terminated Media Employee,
provided that, to the extent set forth in this EM Agreement, a
Terminated Employee may be classified differently for different
purposes.

"Terminated Inc. Employees" shall mean all Terminated Employees who
were last actively employed (on or after November 1, 1995 and before
the Separation Time) by Existing U S WEST (but not its Subsidiaries)
and are not entitled to Deferred Benefits at the Separation Time. If,
after the Separation Time, it is determined by a final decision of a
court of competent jurisdiction or an agreement of MediaOne and New U
S WEST that a Terminated Inc. Employee is entitled to benefits under
one or more Deferred Plans (other than as a result of future
employment with the MediaOne Group or New U S WEST Group), such
Terminated Employee shall be considered to have Deferred Benefits
solely with respect to those Deferred Plans that owe him additional
benefits (and shall therefore be a Terminated Communications Employee
solely with respect to such Deferred Plans, provided that if the
Deferred Plan is the U S WEST Pension Plan, the individual shall also
be a Terminated Communications Employee with respect to the U S WEST
Nonqualified Pension Plan).

"Terminated Media Employees" shall mean (1) all Terminated Employees
(whether or not they have Deferred Benefits) who were actively
employed by one of the Cable Companies on their last day of active
employment with the Existing U S WEST Group; (2) all Terminated
Employees who were last actively employed (on or after November 1,
1995 and before the Separation Time) by an entity that is a member of
the MediaOne Group after the Separation Time (unless such last
employer was Existing U S WEST) and are not entitled to Deferred
Benefits at the Separation Time; (3) all Terminated Employees who were
last actively employed (on or after November 1, 1995 and before the
Separation Time) by MGI and are not entitled to Deferred Benefits at
the Separation Time; and (4) all AirTouch Transfers, regardless of
their last day of employment. Notwithstanding the foregoing, if,
after the Separation Time, it is determined by a final decision of a
court of competent jurisdiction or an agreement of MediaOne and New U
S WEST that a Terminated Media Employee described in clause (2) or (3)
above is entitled to benefits under one or more

<PAGE>

Deferred Plans (other than as a result of future employment with
the MediaOne Group or New U S WEST Group), such Terminated Employee
shall be considered to have Deferred Benefits solely with respect
to those Deferred Plans that owe him additional benefits (and shall
therefore be a Terminated Communications Employee solely with
respect to such Deferred Plans, provided that if the Deferred Plan
is the U S WEST Pension Plan, the individual shall also be a
Terminated Communications Employee with respect to the U S WEST
Nonqualified Pension Plan).

"Welfare Plan" shall mean an Employee Benefit Plan which is a health
benefit, life insurance or other employee welfare benefit plan, within
the meaning of Section 3(1) of ERISA, which is maintained by Existing
U S WEST, New U S WEST, MediaOne or a Subsidiary of any of them.

(b) All determinations under this Section 1 with respect to status as an
Employee, Terminated Employee, Media Employee, Communications
Employee, Terminated Media Employee, Terminated Inc. Employee or
Terminated Communications Employee shall be made as of the Separation
Time, unless otherwise specifically set forth in this Section 1.

(c) Notwithstanding the foregoing definitions, in the event it is unclear
as to whether a Terminated Employee is a Terminated Communications
Employee, Terminated Inc. Employee or a Terminated Media Employee, or
in the event that a Terminated Employee was last actively employed at
a time the individual was on a temporary transfer from one member of
the Existing U S WEST Group to another for less than 12 months,
MediaOne and New U S WEST shall agree on an equitable classification
of such employee or employees (and the assumption of any liability
attributable thereto).

2. GENERAL PRINCIPLES.

(a) New U S WEST Liabilities. Except as otherwise provided in this EM
Agreement, New U S WEST and its Subsidiaries hereby assume and agree
to pay, perform, fulfill and discharge:

(1) All Employment Related Liabilities (regardless of where such
Employment Related Liabilities arose or arise or were or are incurred)
to or relating to Communications Employees and Terminated
Communications Employees;

<PAGE>

(2) All Liabilities, including litigation costs, relating to, or
arising out of or resulting from the performance of services to the
New U S WEST Business (other than MGI) prior to the Separation Time by
an independent contractor, leased employee or similar individual or by
any person who alleges that he was an employee of the New U S WEST
Business (other than MGI) prior to the Separation Time or the
dependent or beneficiary of any such independent contractor or alleged
employee;

(3) All Liabilities, including litigation costs, which relate to a
Communications Employee or his dependents and beneficiaries, in each
case relating to, arising out of or resulting from employment by the
New U S WEST Group on or after the Separation Time (including
Liabilities under Communications Employee Benefit Plans and
Communications Employee Arrangements); and

(4) All Liabilities, including litigation costs, relating to, or
arising out of or resulting from the performance of services to the
New U S WEST Group on or after the Separation Time by an independent
contractor, leased employee or similar individual or by any person who
alleges that he was an employee of the New U S WEST Group on or after
the Separation Time or the dependent or beneficiary of any such
independent contractor or alleged employee.

(b) MediaOne Liabilities. Except as otherwise provided in this EM
Agreement, MediaOne and its Subsidiaries hereby assume and agree to
pay, perform, fulfill and discharge:

(1) All Employment Related Liabilities (regardless of where such
Employment Related Liabilities arose or arise or were or are incurred)
to or relating to Media Employees and Terminated Media Employees;

(2) All Liabilities, including litigation costs, relating to, or
arising out of or resulting from the performance of services to the
MediaOne Business (other than Existing U S WEST) or MGI prior to the
Separation Time by an independent contractor, leased employee or
similar individual or by any person who alleges that he was an
employee of the MediaOne Business (other than Existing U S WEST) or
MGI prior to the Separation Time or the dependent or beneficiary of
any such independent contractor or alleged employee;

<PAGE>

(3) All Liabilities, including litigation costs, which relate to a
Media Employee or his dependents and beneficiaries, in each case
relating to, arising out of or resulting from employment by the
MediaOne Group on or after the Separation Time (including Liabilities
under Media Employee Benefit Plans or Media Employee Arrangements);
and

(4) All Liabilities, including litigation costs, relating to, or
arising out of or resulting from the performance of services to the
MediaOne Group on or after the Separation Time by an independent
contractor, leased employee or similar individual or by any person who
alleges that he was an employee of the MediaOne Group on or after the
Separation Time or the dependent or beneficiary of any such
independent contractor or alleged employee.

(1) All Employment Related Liabilities (regardless of where such
Employment Related Liabilities arose or arise or were or are incurred)
to or relating to Terminated Inc. Employees; and

(2) All Liabilities, including litigation costs, relating to, or
arising out of or resulting from the performance of services to
Existing U S WEST (but not its Subsidiaries) prior to the Separation
Time by an independent contractor, leased employee or similar
individual or by any person who alleges that he was an employee of
Existing U S WEST prior to the Separation Time or the dependent or
beneficiary of any such independent contractor or alleged employee.

(d) Class Action Liabilities. For purposes of determining whether the New
U S WEST Group or Media Group is responsible for Liabilities involving
or arising out of actions relating to more than one Employee or
Terminated Employee, the portion of Employment Related Liabilities
relating to any single Employee or Terminated Employee shall be in
proportion to the total number of Employees and Terminated Employees
to which the action relates, whether or not all such Employees or
Terminated Employees submit claims.

(e) Appeal Rights. If either New U S WEST or MediaOne believes that the
result arising from the application of the foregoing provisions of
this Section 2 will result in an inequitable allocation of liability,
it may refer the matter to the Separation Committee and

9
<PAGE>

the procedures set forth in Section 12.2 of the Separation Agreement
shall apply. Any such referral must be made in writing within sixty
days after the referring party becomes aware of the Employment Related
Liability to which the referral relates.

(f) Funded Benefits. Notwithstanding the foregoing provisions of this
Section 2, neither the New U S WEST Group nor the MediaOne Group shall
be liable to the extent that any Liability is payable from a trust or
insurance contract which funds the benefits under an Employee Benefit
Plan or Employee Arrangement maintained by the New U S WEST Group or
MediaOne Group after the Separation Date.

(g) Control of litigation. Except as set forth in sub-section (h) below,
if any litigation is brought by an Employee or Terminated Employee
over Liabilities addressed in this EM Agreement, the MediaOne Group
shall control the litigation if it is responsible for the Liabilities
and the New U S WEST Group shall control the litigation if it is
responsible for the Liabilities, irrespective of which party is the
defendant, provided that if the party (or its Subsidiaries) entitled
to control the litigation is not sued, it shall not control the
litigation unless it agrees in writing that it will be responsible for
any resulting Liability. In the case of a shared liability described
in subsection (c) above or an action described in subsection (d)
above, the parties agree to cooperate to jointly control the
litigation, unless one of the parties agrees to assume all Liabilities
arising out of the litigation.

(h) Election to Assume Liability. In the event that any Employee or
Terminated Employee makes a claim or commences litigation which, if
successful, would result in Liability that is allocated under this EM
Agreement (other than under this paragraph (h)) exclusively to either
MediaOne or New U S WEST (the "Allocated Liability Party"), but which
Liability, if any, arises from alleged actions taken by an Employee or
Terminated Employee of the business of the other party (the "Other
Party"), then the Allocated Liability Party shall give written notice
of such claim or litigation (the "Claim Notice") to the Other Party
within thirty days of becoming aware that such claim or litigation
involves an Employee or Terminated Employee of the business of the
Other Party. The Other Party may then elect, by giving written notice
(the "Election Notice") to the Allocated Liability Party within thirty
days after receiving the Claim Notice, to take control of the

<PAGE>

defense of the claim and/or litigation and to assume all Liability,
including litigation costs, associated with such claim or litigation
(other than a Liability described in subsection (f) above). If the
Election Notice is given, the Allocated Liability Party shall cease to
have any Liability with respect to the claim or litigation which is
the subject of the Election Notice and all such Liability (other than
a Liability described in subsection (f) above) shall be assumed by the
Other Party.

(i) The provisions of this Section 2 are designed solely to allocate
Liabilities between the New U S WEST Group and the MediaOne Group.
Notwithstanding any provision of this EM Agreement, except to the
extent required by the preceding sentence, this EM Agreement shall not
impose any Liability relating to an Employee or Terminated Employee on
any entity or Subsidiary other than the entity or Subsidiary that
incurred the Liability. For example, if a Communications Employee
worked solely for one Subsidiary of New U S WEST, that Subsidiary (but
not New U S WEST or any other Subsidiary) shall be responsible for any
unfunded Liabilities owed to that individual.

3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE
ARRANGEMENTS.

(a) At or prior to the Separation Time, all Communications Employee
Benefit Plans and Communications Employee Arrangements that are not
already sponsored by a member of the New U S WEST Group shall be
transferred to and assumed by New U S WEST in accordance with the
terms of this EM Agreement. Each of such Communications Employee
Benefit Plans and Communications Employee Arrangements is hereby
amended (such amendments to be self-effectuating), effective as of the
Separation Time, to provide transfer of sponsorship to New U S WEST.
In addition, each Communications Employee Benefit Plan and
Communications Employee Arrangement is hereby amended (such amendments
to be self-effectuating), effective as of the Separation Time, to
provide that the Liabilities to be assumed by a corresponding Media
Employee Benefit Plan or Media Employee Arrangement shall cease to be
Liabilities under such Communications Employee Benefit Plan or
Communications Employee Arrangement. New U S WEST, MediaOne and their
Subsidiaries shall take all action reasonably appropriate prior to the
Separation Time (or as soon as practicable thereafter) to effectuate
such assumptions, including amendments of the

<PAGE>

applicable Employee Benefit Plans and Employee Arrangements where
desirable.

To the extent that any of the Communications Employee Benefit Plans or
Communications Employee Arrangements is administered by the EBC prior
to the Separation Time, such plan or arrangement shall be administered
by the New U S WEST Employee Benefits Committee on and after the
earlier of the Separation Time or the date sponsorship of the
applicable plan or arrangement is assumed by New U S WEST. In
addition, any functions or responsibilities of the Treasurer of
Existing U S WEST with respect to such plans or arrangements prior to
the Separation Time shall become duties and responsibilities of the
Treasurer of New U S WEST (or such other officer as New U S WEST shall
designate) on the date set forth in the preceding sentence.

(b) To the extent that a Media Employee Benefit Plan or Media Employee
Arrangement (or, in the case of any newly adopted Media Employee
Benefit Plan or Media Employee Arrangement, the Employee Benefit Plan
or Employee Arrangement that is replaced by such newly adopted Media
plan or arrangement) is administered by the EBC prior to the
Separation Time, such plan or arrangement shall be administered by the
MediaOne Employee Benefits Committee on and after the Separation Time.
In addition, any functions or responsibilities of the Treasurer of
Existing U S WEST with respect to such plans or arrangements prior to
the Separation Time shall become duties and responsibilities of the
Treasurer of MediaOne (or such other officer as MediaOne shall
designate) on and after the Separation Time.

4. EMPLOYEE SAVINGS PLANS.

(a) On or before the Separation Time, sponsorship of the U S WEST Savings
Plan/ESOP (consisting of the "U S WEST Savings Plan" and the "U S WEST
ESOP") shall be transferred from Existing U S WEST to New U S WEST.
Prior to the Separation Time, Multimedia shall establish a new defined
contribution plan or plans consisting of a profit-sharing plan and a
stock bonus plan which shall be an employee stock ownership plan (the
"Media Savings Plan/ESOP", consisting of the "Media Savings Plan" and
the "Media ESOP"), effective immediately after the Separation Time,
for the benefit of Media Employees and Terminated Media Employees
(excluding persons described in clauses (2) or (3) of the definition
of Terminated Media Employee) covered by the existing U S WEST Savings

<PAGE>

Plan/ESOP. The Media Savings Plan/ESOP shall initially contain terms
and conditions that are similar to those of the existing U S WEST
Savings Plan/ESOP, including without limitation (1) provisions
required by Section 411(d)(6) of the Code for account balances to be
transferred from the U S WEST Savings Plan/ESOP, and (2) provisions
granting credit for past service with the Existing U S WEST Group for
purposes of eligibility, vesting, distributions and withdrawals. Each
Media Employee and Terminated Media Employee who was a participant in
the U S WEST Savings Plan/ESOP as of the Separation Time shall become
a participant in the Media Savings Plan/ESOP as of the Separation
Time.

(b) As soon as reasonably practicable after the Separation Time, New U S
WEST shall cause to be transferred from the U S WEST Savings Plan to
the Media Savings Plan assets having a fair market value equal to the
aggregate value of the account balances in the U S WEST Savings Plan
(but not the ESOP), as of the date of the transfer, applicable to
Media Employees and Terminated Media Employees, and Multimedia shall
cause the Media Savings Plan to accept such transfers and to assume
all Savings Plan liabilities relating to Media Employees and
Terminated Media Employees (excluding persons described in clauses (2)
or (3) of the definition of Terminated Media Employee). All such
liabilities shall cease to be liabilities of the U S WEST Savings
Plan. Such transfer shall be in (i) shares of MediaOne Common Stock
and New U S WEST Common Stock to the extent such shares are allocated
in the U S WEST Savings Plan to accounts of Media Employees or
Terminated Media Employees, (ii) notes evidencing loans to Media
Employees or Terminated Media Employees, and (iii) with the balance in
cash or, to the extent that the parties mutually agree, other
securities held by the U S WEST Savings Plan.

(c) As soon as reasonably practicable after the Separation Time, New U S
WEST shall cause to be transferred from the U S WEST ESOP to the Media
ESOP assets having a fair market value equal to the aggregate value of
the account balances in the U S WEST ESOP (but not the Savings Plan),
as of the date of the transfer, applicable to Media Employees and
Terminated Media Employees, and Multimedia shall cause the Media ESOP
to accept such transfers and to assume all ESOP liabilities relating
to Media Employees and Terminated Media Employees (excluding persons
described in clauses (2) or (3) of the definition of Terminated Media
Employee). All such

<PAGE>

liabilities shall cease to be liabilities of the U S WEST ESOP.
Such transfer shall be in shares of MediaOne Common Stock and of
New U S WEST Common Stock. To the greatest extent possible and
consistent with fiduciary duties under Sections 404 and 406 of
ERISA, the shares of Common Stock shall be transferred so that,
immediately following the transfer, the U S WEST ESOP will have at
least 60% of its assets invested in New U S WEST Common Stock and
the Media ESOP will have at least 60% of its assets invested in
MediaOne Common Stock.

(d) U S WEST Savings Plan/ESOP shall transfer to the Media Savings
Plan/ESOP all qualified domestic relations orders (within the meaning
of Section 414(p) of the Code) ("QDROs") held by the U S WEST Savings
Plan/ESOP with respect to Media Employees and Terminated Media
Employees. New U S WEST shall cause to be transferred from the U S
WEST Savings Plan/ESOP assets having a fair market value equal to the
aggregate account values relating to such QDROs in accordance with
paragraphs (b) and (c) above, and the Media Savings Plan ESOP shall
assume all liabilities relating to such QDROs.

(e) The U S WEST ESOP will repay all "acquisition loans" (as defined in
the U S WEST Savings Plan/ESOP) prior to the Separation Time. If, as
of the Separation Time, the U S WEST ESOP holds shares of common stock
that have not been allocated to participants' accounts, the U S WEST
ESOP will transfer to the Media ESOP unallocated shares of stock
having a fair market value equal to (x) the total market value of all
unallocated shares held by the U S WEST ESOP as of the Separation
Time, multiplied by (y) the aggregate dollar value of the Employing
Company Contributions made under the U S WEST ESOP during the first
calendar quarter of 1998 as matched allotments to Media Employees and
Terminated Media Employees, divided by (z) the aggregate dollar value
of the Employing Company Contributions made under the U S WEST ESOP
during the first calendar quarter of 1998 as matched allotments to all
Employees and Terminated Employees. To the greatest extent possible,
the unallocated shares transferred to the Media ESOP pursuant to this
paragraph shall be shares of MediaOne Common Stock.

(f) If required by law, New U S WEST and Multimedia shall cause to be
filed with the IRS all applicable Forms 5310A and any other required
forms with the appropriate governmental agency in order for the Media
Savings Plan/ESOP to receive a transfer of

<PAGE>

assets from the U S WEST Savings Plan/ESOP on or following the
Separation Time in accordance with paragraphs (b), (c), (d) and (e)
above. Within nine months after the Separation Time, Multimedia
shall cause to be filed with the IRS a request for a determination
that the Media Savings Plan/ESOP is qualified under Section 401(a)
of the Code. Multimedia agrees to make all reasonable amendments
requested by the IRS to obtain such determination letter.

(g) Subject to paragraph (h), and in accordance with applicable law and to
the extent consistent with fiduciary duties under Sections 404 and 406
of ERISA, the U S WEST Savings Plan and the U S WEST ESOP will
maintain a MediaOne Common Stock Fund for participants who retain such
investment of their account balances after the Separation Time. No
new investments in the MediaOne Common Stock Fund of the U S WEST
Savings Plan or in the MediaOne Common Stock Fund of the U S WEST ESOP
will be permitted after the Separation Time. Subject to paragraph
(h), and in accordance with applicable law and to the extent
consistent with fiduciary duties under Sections 404 and 406 of ERISA,
the Media Savings Plan and the Media ESOP will maintain a New U S WEST
Common Stock Fund for participants who retain such investment of their
account balances after the Separation Time. No new investments in the
New U S WEST Common Stock Fund of the Media Savings Plan or in the New
U S WEST Common Stock Fund of the Media ESOP will be permitted after
the Separation Time. The U S WEST Savings Plan (but not the ESOP)
will maintain the MediaOne Common Stock Fund, and the Media Savings
Plan (but not the ESOP) will maintain the New U S WEST Common Stock
Fund, for at least five years after the Separation Time; as soon as
practicable after either plan sponsor decides to eliminate such stock
fund, it shall inform the issuer of the stock to be sold so that the
issuer may arrange a facility to exercise the right of first refusal
described below. When the trustee of the U S WEST Savings Plan
intends to sell MediaOne Common Stock because the MediaOne Common
Stock Fund will no longer be maintained or the trustee of the Media
Savings Plan intends to sell New U S WEST Common Stock because the New
U S WEST Common Stock Fund will no longer be maintained, such trustee
shall first offer such stock to the issuer prior to offering such
stock for sale on the open market. After the close of business, the
issuer shall then have the right to purchase such stock at the closing
price of the stock on that day. If the issuer does not exercise such
right to purchase, the trustee

<PAGE>

shall be free to sell the stock on the open market the next day,
provided that,subject to fiduciary duties under Sections 404 and
406 of ERISA, the trustee shall not sell in any one day more than
20% of the average daily trading volume of the relevant stock.
(For this purpose, the average daily trading volume is the
arithmetic mean of the reported daily trading volumes of the
relevant stock on the New York Stock Exchange (or, if not traded on
the New York Stock Exchange, the principal exchange on which the
stock is traded) in the two calendar months preceding any such
sale.)

(h) Within two years after the Separation Time, the U S WEST ESOP (but not
the Savings Plan) will dispose of all investment in MediaOne Common
Stock and the Media ESOP (but not the Savings Plan) will dispose of
all investment in New U S WEST Common Stock (each, a "Non-Employer
Common Stock"). Subject to fiduciary duties under Sections 404 and
406 of ERISA, the U S WEST ESOP shall exchange shares of MediaOne
Common Stock it holds for shares of New U S WEST Common Stock held by
the Media ESOP, and VICE VERSA, at the Common Stocks' relative fair
market values. To the extent such exchanges are not practicable for
some or all of the Non-Employer Common Stock held by either ESOP, the
U S WEST ESOP and the Media ESOP will sell shares of Non-Employer
Common Stock. As soon as practicable after either plan sponsor
decides to sell such Non-Employer Common Stock, it shall inform the
issuer of the stock to be sold so that the issuer may arrange a
facility to exercise the right of first refusal described below. When
the trustee of the U S WEST ESOP intends to sell MediaOne Common Stock
or the trustee of the Media ESOP intends to sell New U S WEST Common
Stock (other than because of a sale by, or distribution to, plan
participants), such trustee shall first offer such stock to the issuer
prior to offering such stock for sale on the open market. After the
close of business, the issuer shall then have the right to purchase
such stock at the closing price of the stock on that day. If the
issuer does not exercise such right to purchase, the trustee shall be
free to sell the stock on the open market the next day. Subject to
fiduciary duties under Sections 404 and 406 of ERISA, from the
Separation Time to and including the second anniversary of the
Separation Time, neither the U S WEST ESOP nor the Media ESOP will
sell in any one day more than 20% of the average daily trading volume
of the relevant Non-Employer Common Stock. (For this purpose, the
average daily trading volume is the arithmetic mean of the reported
daily trading volumes of the relevant

<PAGE>

stock on the New York Stock Exchange (or, if not traded on the New
York Stock Exchange, the principal exchange on which the stock is
traded) in the two calendar months preceding any such sale.)

(i) MediaOne and New U S WEST shall take such action as necessary to
ensure that participants in the U S WEST Savings Plan/ESOP and the
Media Savings Plan/ESOP are notified that a quiet period will occur
beginning on or about the Separation Time, during which changes in
investment direction with respect to participants' accounts generally
will not be permitted.

(j) The Media Savings Plan/ESOP and the assets and liabilities with
respect thereto shall be considered a Media Employee Benefit Plan.
The U S WEST Savings Plan/ESOP and the assets and liabilities with
respect thereto shall be considered a Communications Employee Benefit
Plan.

5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES.

(a) On or prior to the Separation Time, sponsorship of the U S WEST
Pension Plan shall be transferred from Existing U S WEST to New U S
WEST. Prior to the Separation Time, Multimedia shall establish a
defined benefit pension plan (the "Media Pension Plan"), effective
immediately after the Separation Time, for the benefit of the Media
Employees and Terminated Media Employees (excluding persons described
in clauses (2) or (3) of the definition of Terminated Media Employee)
covered by the existing U S WEST Pension Plan. The Media Pension Plan
shall contain terms and conditions that are substantially similar to
those of the existing U S WEST Pension Plan, including credit for past
service with the Existing U S WEST Group for eligibility, vesting,
early retirement, and, contingent upon the transfer of assets set
forth in paragraph (b) below, benefit accrual and compensation earned
with the Existing U S WEST Group. Notwithstanding the preceding
sentence, the Media Pension Plan shall contain two benefit structures.
In general, (1) the benefits for all Media Employees who are employed
immediately after the Separation Time and who earned benefits under
Articles V-B or V-D of such Pension Plan prior to the Separation Time
shall continue in such benefit structure and (2) all other Media
Employees, as well as all future employees of the MediaOne Group shall
participate in a benefit structure substantially similar to the
benefit structure currently contained in the Appendix I of the U S
WEST Pension Plan, provided that this EM Agreement does not obligate

<PAGE>

Multimedia to continue to maintain such benefit formulas for any
particular period of time. In addition, the U S WEST Pension Plan
currently contains two subsidies relating to service pensions: (i) the
early retirement pension under the grandfathered formula in Article
V-B (but not the DLS formula in Article V-D) is unreduced (or provides
for a lower reduction) for Participants that are service pension
eligible and (ii) if a lump sum service pension is elected, a 0%
interest rate applies prior to age 65. The Media Pension Plan shall
include, for all Media Employees described in clause (2) of the second
preceding sentence (but not any future employees of the MediaOne Group
or any Terminated Media Employees) whose combined age and service (in
each case rounded up to the next integer), as of January 1, 1999,
equals or exceeds 55, both of the foregoing subsidies with respect to
both the DLS formula set forth in Article 6, and the grandfathered
formula in Article 7, of Appendix I of the Pension Plan; such
provisions shall be referred to as the "Service Pension Amendments."

Immediately after the Separation Time, all Liabilities under the U S
WEST Pension Plan to, or relating to, Media Employees or Terminated
Media Employees (excluding persons described in clauses (2) or (3) of
the definition of Terminated Media Employee) shall be assumed by the
Media Pension Plan and shall cease to be Liabilities of the U S WEST
Pension Plans. Such Liabilities shall include all accrued benefits,
within the meaning of Section 411(d)(6) of the Code, all ancillary
benefits (such as the death benefits set forth in Article VII of the U
S WEST Pension Plan and disability benefits set forth in Appendix J
thereof) and any other benefits. The Media Pension Plan shall comply
with Section 411(d)(6) of the Code with respect to such assumed
Liabilities. Each Media Employee and Terminated Media Employee who
was a participant in the U S WEST Pension Plan as of the Separation
Time shall become a participant in the Media Pension Plan as of the
Separation Time.

Notwithstanding the foregoing, the following rules shall apply to any
Terminated Employee who is not vested in the U S WEST Pension Plan at
the Separation Time who returns to employment with either the MediaOne
Group or the New U S WEST Group after the Separation Time. To the
extent required by law, any such Terminated Employee who becomes
entitled to credit, for benefit accrual purposes, for his service with
the Old U S WEST Group prior to the Separation

<PAGE>

Time as a result of returning to employment after the Separation
Time, then (1) any benefits attributable to such prior service
shall be payable from the Media Pension Plan if the individual
returns to employment with the MediaOne Group and (2) any benefits
attributable to such prior service shall be payable from the U S
WEST Pension Plan if the individual returned to employment with the
New U S WEST Group.

(b) New U S WEST shall cause a "spin-off" transfer within the meaning of
Section 414(1) of the Code, from the U S WEST Pension Plan to the
Media Pension Plan in the manner and at the times specified in
paragraph (e) below. For purposes of this Section 5, the following
definitions shall apply:

(1) "Actuaries" refer to the enrolled actuaries for the U S WEST
Pension Plan at the Separation Time.

(2) "Contingent Amount" equals the difference between the amount that
the Final Determination provides that should have been
transferred from the U S WEST Pension Plan to the Media Pension
Plan in connection with the spinoff and the Media Asset Share.
If the difference is positive, that is, the Final Determination
provides that additional assets should have been transferred to
the Media Pension Plan, the difference shall be referred to as a
"Positive Contingent Amount." If the difference is negative,
that is, the Final Determination provides that the amount that
should have been transferred is less than the Media Asset Share,
the difference shall be referred to as a "Negative Contingent
Amount."

(3) "Final Determination" means a final nonappealable determination
by a court, or a final settlement of litigation or a dispute
among Multimedia, New U S WEST, the U S WEST Pension Plan and the
Media Pension Plan and any other parties to the litigation or
dispute, that provides that the amount of assets to be
transferred from U S WEST Pension Plan to the Media Pension Plan
in connection with the spinoff should be more than or less than
the Media Asset Share.

(4) "Media Asset Share" shall mean the product of: (i) the fair
market value of the assets of the U S WEST Pension Plan as of the
end of the month coinciding with or immediately preceding

<PAGE>

the Separation Time, and (ii) the Media Fraction; increased or
decreased by an amount to be agreed to by New U S WEST and
MediaOne to reflect the rate of return of the U S WEST Pension
Plan (or any other mutually agreeable rate) during the period, if
any, commencing immediately after the end of the month coinciding
with or immediately preceding the Separation Time and ending on
the Separation Time.

(5) "Media Economic PBO" for the U S WEST Pension Plan shall mean the
portion of the Total Economic PBO as of the Separation Time
attributable to the Media Employees and Terminated Media
Employees, as calculated by the Actuaries. For this purpose, the
U S WEST Pension Plan shall be deemed amended to include the
Service Pension Amendments.

(6) "Media Fraction" for the U S WEST Pension Plan shall mean (i) the
Media Economic PBO, divided by (ii) the Total Economic PBO.

(7) "Premium Amount" shall equal the estimated PBGC premiums
initially paid to the PBGC by the Media Pension Plan for plan
year 1998, without regard to any adjustment required as a result
of an audit.

(8) "Total Economic PBO" shall be the projected benefit obligation,
as defined in SFAS No. 87, of the U S WEST Pension Plan, as
calculated by the Actuaries as of the Separation Time using
actuarial methods and assumptions mutually agreeable to the
parties. For this purpose, the U S WEST Pension Plan shall be
deemed amended to include the Service Pension Amendments.

(9) "Transfer Amount" shall equal the Media Asset Share plus the
Premium Amount plus the Positive Contingent Amount and minus the
Negative Contingent Amount.

(c) In order to determine the Media Asset Share, Multimedia and New U S
WEST shall determine in good faith the Media Employees, Terminated
Media Employees, Communications Employees, Terminated Communications
Employees and Terminated Inc. Employees as of the Separation Time.
Such determinations shall be updated six months after the Separation
Time to take into account the

<PAGE>

reclassification of Employees as of the Separation Time as Media
Employees or Communications Employees.

(d) If required by law, Multimedia and New U S WEST shall cause to be
filed all applicable Forms 5310A and any other required IRS or PBGC
forms with the appropriate governmental agency in order for the Media
Pension Plan to receive a transfer of assets from the U S WEST Pension
Plan on or following the Separation Time, in accordance with paragraph
(e) below. Within nine months after the Separation Time, Multimedia
shall cause to be filed with the IRS a request for a determination
that the Media Pension Plan is qualified under Section 401(a) of the
Code. Multimedia agrees to make all reasonable amendments requested
by the IRS to obtain such determination letter.

(e) New U S WEST shall cause the U S WEST Pension Plan to transfer assets
in an amount equal to the Transfer Amount (plus interest to the extent
set forth below) to the Media Pension Plan and Multimedia shall cause
the Media Pension Plan to accept such assets equal to such Transfer
Amount (and interest), as follows:

(1) Immediately after the Separation Time or as soon as reasonably
practicable thereafter, an amount equal to 98% of the Media Asset
Share, as estimated by the Actuaries (immediately prior to the
Separation Time) and provided to Multimedia and New U S WEST in
writing.

(2) As soon as practicable after the value of the plan assets as of
the Separation Time is determined and the Media Asset Share is
determined by the Actuaries and provided in writing to MediaOne
and New U S WEST (but not later than 30 days after such writing
is provided), the excess of the Media Asset Share over the sum of
(i) the interim transfer effected under (1) above, and (ii) any
benefit payments paid to Terminated Media Employees or Media
Employees by the U S WEST Pension Plan after the Separation Time.
(If such amount is a negative number, such amount shall be
transferred from the Media Pension Plan to the U S WEST Pension
Plan.)

(3) In addition, if there is a Final Determination that sets forth a
Contingent Amount, New U S WEST, the U S WEST Pension Plan,
Multimedia, and the Media Pension Plan agree as follows:

<PAGE>

(A) If there is a Positive Contingent Amount, as soon as
practicable after the Final Determination, the U S WEST
Pension Plan shall transfer the assets equal to the Positive
Contingent Amount to the Media Pension Plan, and the Media
Pension Plan shall accept such transfers; and

(B) If there is a Negative Contingent Amount, as soon as
practicable after the Final Determination, the Media Pension
Plan shall transfer the assets equal to the Negative
Contingent Amount to the U S WEST Pension Plan, and the U S
WEST Pension Plan shall accept such transfers.

(4) As soon as practicable after the Premium Amount is determined and
paid by the Media Pension Plan, an amount equal to the Premium
Amount.

To the extent any of the foregoing amounts set forth in paragraphs (1)
through (4) of this subsection (e) are paid after the Separation Time,
such amount shall be increased or decreased by interest from the
Separation Time to the date of payment (to the extent not paid or
previously advanced) at a rate to be agreed to by New U S WEST and
MediaOne to reflect the rate of return of the U S WEST Pension Plan or
the Media Pension Plan, whichever is applicable (or any other mutually
agreeable rate), during the period commencing with the Separation Time
and ending with the date of payment; provided that (i) no interest
shall be paid with respect to the Contingent Amount if the Final
Determination already provides for an adjustment reflecting interest
or plan earnings and (ii) no interest shall be paid with respect to
the Premium Amount.

With respect to all of the foregoing transfers between the U S WEST
Pension Plan and the Media Pension Plan, the specific assets to be
transferred shall be agreed upon by New U S WEST and Multimedia in
good faith so as to not treat the Media Pension Plan and the U S WEST
Pension Plan unfairly in any material respect.

(f) Notwithstanding subsections (a) through (e) above, the value of assets
to be transferred to and liabilities to be assumed by the Media
Pension Plan shall be no less than that necessary to satisfy the
requirements of Section 414(1) of the Code, as

<PAGE>

determined by the Actuaries, based on the assumptions used by the PBGC
in the case of a termination of a trusteed pension plan.

(g) Multimedia, New U S WEST, the U S WEST Pension Plan and the Media
Pension Plan (collectively, the "Pension Parties") all agree that, if
there is a Final Determination that provides for a Contingent Amount,
such Final Determination shall be satisfied to the maximum extent
permitted by law by making the transfers among the U S WEST Pension
Plan and the Media Pension Plan as set forth above, as opposed to
requiring any additional contributions or payments (a "Corporate
Liability") from either MediaOne, New U S WEST or any of their
Subsidiaries. The Pension Parties agree to cooperate to the maximum
extent to ensure that no such Corporate Liability ensues as a result
of any Final Determination or claims relating to the allocation of
plan assets between the two plans. If any litigation is brought
against one of the Pension Parties claiming that the amount of assets
transferred from the U S WEST Pension Plan to the Media Pension Plan
should have been higher or lower, the other Pension Parties shall, at
the request of the Pension Party that was sued, agree to be joined in
any such litigation and to use their best efforts to ensure that any
potential Contingent Amount be satisfied by plan-to-plan transfers, as
opposed to Corporate Liability.

In addition, the Pension Parties agree that, to the extent permitted
by law, any costs of defending any claims that a Contingent Amount is
payable and any Liabilities arising out of such claims shall be borne
by the U S WEST Pension Plan and the Media Pension Plan.

The following rules shall apply if there is any Corporate Liability
for a Contingent Amount or arising out of any claims that a Contingent
Amount is payable. Any Corporate Liability that is an out-of-pocket
cost of defending any such claims (whether or not the claims result in
litigation), such as attorneys or consultant fees (but excluding any
fees for Plaintiffs' attorneys) and travel expenses, shall be borne
equally by New U S WEST and Multimedia; provided that each party shall
bear all expenses for salaries and benefits of its employees. Any
other Corporate Liability, such as the payment of a Contingent Amount,
any direct payments to claimants in lieu of a Contingent Amount or
fees for plaintiffs' attorneys, shall be borne by (1) New U S WEST, if
the claimants asserted that the amount of

<PAGE>
plan assets transferred to the Media Pension Plan should have been
greater than the amount actually transferred and (2) Multimedia, if
the claimants asserted that the amount of plan assets transferred to
the Media Pension Plan should have been less than the amount actually
transferred.

(h) The U S WEST Pension Plan shall transfer to the Media Pension Plan all
qualified domestic relations orders (within the meaning of Section
414(p) of the Code) ("QDROs") held by the U S WEST Pension Plan with
respect to Media Employees and Terminated Media Employees.

(i) Qualified transfers. This subsection (i) applies if a qualified
transfer, within the meaning of Code Section 420 (a "Qualified
Transfer"), is made within either the U S WEST Pension Plan or the
Media Pension Plan during the calendar year in which the Separation
Time occurs.

(1) If the Internal Revenue Service, a court of competent
jurisdiction or the sponsor of the plan in which the Qualified
Transfer is made determines that any Terminated Employees who
terminated employment during the period commencing twelve months
prior to the Qualified Transfer and ending on the Separation Time
are entitled to vested pension benefits solely because of the
Qualified Transfer, then, notwithstanding any other provision of
this EM Agreement, the plan in which the Qualified Transfer is
made shall provide such vested pension benefits to such
Terminated Employee.

(2) If (i) the Internal Revenue Service declines to issue a favorable
determination letter with respect to the provisions of either the
U S WEST Pension Plan or the Media Pension Plan setting forth the
terms of a Qualified Transfer unless Employees or other employees
who terminate employment after the Separation Time from the
business of the sponsor of the other pension plan are provided
vested pension benefits on account of the Qualified Transfer or
(ii) a court of competent jurisdiction determines that such
Employees or employees are entitled to such benefits on account
of the Qualified Transfer, then such other pension plan shall
provide such Employees or employees with the required vested
pension benefits.

<PAGE>

(j) The Media Pension Plan and the assets and liabilities with respect
thereto shall be considered a Media Employee Benefit Plan. The U S
WEST Pension Plan and the assets and liabilities with respect thereto
shall be considered a Communications Employee Benefit Plan.

6. OTHER TAX-QUALIFIED PLANS.

Any other plan that is qualified under Section 401 of the Code and is not
described in Section 4 or 5 above shall be retained by the entity that
sponsors it before the Separation Time.

7. WELFARE PLANS.

(a) Communications Plans. As of the Separation Time, any Welfare Plan,
including all insurance or amounts held in trust and associated
therewith to the extent attributable solely to such plan, which
exclusively covers Communications Employees, Terminated Communications
Employees and/or Terminated Inc. Employees and their eligible spouses
and dependents shall be transferred to and assumed by New U S WEST and
shall be deemed to be amended to provide for such transfer and
assumption. New U S WEST or its Subsidiaries shall assume and pay the
Liability with respect thereto (whether accrued or arising before or
after the Separation Time). All such plans shall be considered
Communications Employee Benefit Plans.

(b) Media Plans. As of the Separation Time, any Welfare Plan, including
all insurance or amounts held in trust and associated therewith to the
extent attributable solely to such plan, which exclusively covers
Media Employees and/or Terminated Media Employees and their eligible
spouses and dependents shall be retained by the MediaOne Group and, if
necessary, are hereby amended to provide for such retention (without
the need for any further action). MediaOne or its Subsidiaries shall
assume and pay the Liability with respect thereto (whether accrued or
arising before or after the Separation Time). All such plans shall be
considered Media Employee Benefit Plans.

(c) Joint Plans. This subsection (c) addresses the treatment of any
Welfare Plan (including, without limitation, any retiree medical plan
or retiree life insurance plan) which, as of the Separation Time,
covers both: (1) Communications Employees, Terminated Communications
Employees and/or Terminated Inc. Employees; and (2) Media Employees
and/or Terminated Media Employees (a "Joint Welfare Plan").

25
<PAGE>
(1) As of the Separation Time, each Joint Welfare Plan shall be
transferred to and assumed by New U S WEST or one of its
Subsidiaries. Each of such Joint Welfare Plans is hereby amended
as set forth in Section 3 of this EM Agreement. At and
immediately following the Separation Time, New U S WEST or its
Subsidiaries shall maintain as a separate plan and assume and pay
the Liabilities and expenses (whether accrued or arising before
or after the Separation Time) with respect to that portion of the
Joint Welfare Plans as relates to obligations to Communications
Employees, Terminated Communications Employees and Terminated
Inc. Employees; in addition, any such retiree medical plan shall
assume any retiree medical Liabilities or expenses of persons
described in clauses (2) or (3) of the definition of Terminated
Media Employee. This EM Agreement does not obligate New U S WEST
to continue to maintain such plans or their terms for any
particular period of time. All such plans shall be considered
Communications Employee Benefit Plans.

(2) As soon as practicable, Multimedia or its Subsidiaries shall
establish and maintain one or more separate plans corresponding
to each of the Joint Welfare Plans. Such Plans shall be
effective as of the Separation Time and shall contain such
benefits as desired by Multimedia. However, such plans shall
assume and pay the Liabilities and expenses (whether accrued or
arising before or after the Separation Time) under the Joint
Welfare Plans with respect to Media Employees and Terminated
Media Employees, provided that any new Media retiree medical plan
shall not assume any retiree medical Liabilities or expenses of
persons described in clauses (2) or (3) of the definition of
Terminated Media Employee. All Liabilities and expenses assumed
by such Media Employee Benefit Plans shall cease to be
Liabilities of the Communications Employee Benefit Plans
described in the preceding paragraph. The Liabilities of each
such Joint Welfare Plan so assumed by Multimedia or its
Subsidiaries together with each such separate plan established by
Multimedia, shall be considered a Media Employee Benefit Plan.
Unless Multimedia or its Subsidiaries adopts a plan with respect
to a Joint Welfare Plan prior to the Separation Time, Multimedia
is hereby deemed to have

<PAGE>

adopted (without the requirement of any additional action),
effective as of the Separation Time, a separate Media Welfare
Plan that is substantially identical in all respects to the
Joint Welfare Plan it replaces, provided that this EM Agreement
does not obligate Multimedia to continue to maintain such terms
for any particular period of time.

(3) MediaOne (and Multimedia) and New U S WEST shall use commercially
reasonable efforts to obtain, effective as of the Separation
Time, separate coverages or to split the coverages between
Multimedia and New U S WEST under the Joint Welfare Plans that
provided benefits through Provider Contracts prior to the
Separation Time. Such coverage shall be on substantially the
same terms and conditions as applied immediately before the
Separation Time, or such other terms and conditions as are
acceptable to Multimedia and New U S WEST. To the extent
practicable, such coverages shall be obtained by entering into a
separate contract between Multimedia and the third party. For
purposes of this paragraph, the term "Provider Contract" shall
mean a contract to provide benefits with an insurance company,
health maintenance organization, preferred provider organization
or similar provider of benefits, as well as third party
administrative services contracts. To the extent such efforts
are not successful with respect to any Provider Contract, then
New U S WEST shall administer such Provider Contract on an
equitable basis for the benefit of both Multimedia and New U S
WEST until the expiration of the applicable contract. For any
period after the Separation Time when Multimedia is participating
in any such Provider Contract administered by New U S WEST,
Multimedia shall pay an allocable share of the cost of such
contract based upon the actual experience attributable to Media
Employees and Terminated Media Employees thereunder, or if actual
experience is not readily determinable, based upon the relative
headcount of Media Employees and Terminated Media Employees to
all individuals covered by such Provider Contract. Such payments
shall include interest on any funds advanced by New U S WEST at a
rate to be agreed upon in a services agreement to be effective as
of the Separation Time.

<PAGE>

(d) Continuing Treatment. Notwithstanding the foregoing provisions of
this Section 7, all treatments which have been precertified or are
being provided as of the Separation Time shall be provided without
interruption under the appropriate Welfare Plan until such treatment
is concluded or discontinued pursuant to applicable plan rules and
limitations, but New U S WEST, in the case of a Communications
Employee or Terminated Communications Employee, or Multimedia, in the
case of a Media Employee or Terminated Media Employee, shall be
responsible for all expenses relating to, arising out of or resulting
from such on-going treatments after the Separation Time.

(e) Continuance of Elections. Multimedia and New U S WEST shall cause the
Welfare Plans which they or their Subsidiaries maintain after the
Separation Time to recognize and maintain all coverage and
contribution elections made by Employees under the Welfare Plans
maintained by the Existing U S WEST Group prior to the Separation Time
and shall apply such elections under the Welfare Plans maintained by
Multimedia and New U S WEST or their Subsidiaries, whichever is
applicable, for the remainder of the period or periods for which such
elections are by their terms applicable. Neither the transfer or
other movement of employment from one member of the Existing U S WEST
Group to another member on or before the Separation Time nor the
transfer and assignment to the New U S WEST Group or the MediaOne
Group in connection with the Reorganization, Contribution and
Separation shall constitute or be treated as a "status change" under
the Welfare Plans maintained by either Existing U S WEST, New U S
WEST, Multimedia or their Subsidiaries.

(f) Co-Payments and Maximum Benefits. Multimedia and New U S WEST shall
cause the Welfare Plans which they or their Subsidiaries maintain
after the Separation Time to recognize and give credit for:

(1) All amounts applied to deductibles, out-of-pocket maximums, and
other applicable benefit coverage limits with respect to
Employees covered by Welfare Plans maintained by the Existing U S
WEST Group prior to the Separation Time for the remainder of the
year in which the Separation Time occurs; and

(2) All benefits paid to Employees under the Welfare Plans maintained
by the Existing U S WEST Group prior to the Separation Time for
purposes of determining when such persons have

<PAGE>

reached their lifetime maximum benefits under the Welfare Plans
maintained by Multimedia and New U S WEST or their Subsidiaries,
whichever is applicable, after the Separation Time.

(g) Pre-existing conditions. After the Separation Time, any group health
plan maintained by Multimedia and New U S WEST or their Subsidiaries
shall be prohibited from making exceptions from the coverage of
individuals who were Employees or Terminated Employees prior to the
Separation Time and their eligible spouses and dependents for
pre-existing conditions except to the extent such exception is
applicable under the plan in effect immediately prior to the
Separation Time.

(h) COBRA. Notwithstanding the foregoing provisions of this Section 7:

(1) New U S WEST or its Subsidiaries shall be responsible for
providing coverage required under COBRA, including the
administration of such coverage, to (A) all Employees and
Terminated Employees (and their eligible spouses and dependents)
whose entitlement to benefits under COBRA is attributable to a
"qualifying event," as defined in COBRA, which occurred before
the Separation Time under any group health plan other than a
group health plan maintained by the Cable Companies and (B) all
Communications Employees, Terminated Communications Employees and
Terminated Inc. Employees if such individual's entitlement to
benefits under COBRA is attributable to a "qualifying event"
which occurs on or after the Separation Time.

(2) MediaOne or its Subsidiaries shall be responsible for providing
coverage required under COBRA, including the administration of
such coverage, to (A) all Employees and Terminated Employees (and
their eligible spouses and dependents) whose entitlement to
benefits under COBRA is attributable to a "qualifying event," as
defined in COBRA, which occurred before the Separation Time under
any group health plan maintained by the Cable Companies and (B)
all Media Employees and Terminated Media Employees if such
individual's entitlement to benefits under COBRA is attributable
to a "qualifying event" which occurs on or after the Separation
Time.

<PAGE>

(i) Long-Term Disability. Notwithstanding the foregoing provisions of
this Section 7, this subsection (i) applies to long-term disability
benefits provided to Terminated Employees other than through the U S
WEST Pension Plan ("LTD").

(1) New U S WEST shall be responsible for providing LTD, including
the administration of such coverage, to Terminated Communications
Employees, Terminated Inc. Employees and Terminated Media
Employees who were employed immediately prior to commencing LTD
by an employer other than one of the Cable Companies.

(2) MediaOne shall be responsible for providing LTD, including the
administration of such coverage, to Terminated Media Employees
who were employed immediately prior to commencing LTD by one of
the Cable Companies.

8. VEBA'S.

(a) As of the Separation Time, sponsorship of the U S WEST Benefit
Assurance Trust ("BAT"), the U S WEST Management Benefit Assurance
Trust ("MBAT") and U S WEST Life Insurance Welfare Trust ("Life
Insurance Trust") shall be transferred from Existing U S WEST to New U
S WEST. In addition, each of the BAT, MBAT and Life Insurance Trust
are hereby amended (such amendments to be self-effectuating),
effective as of the Separation Time, to provide that the "Company" (as
well as the sponsor, settlor and all other similar terms) under such
trusts shall be New U S WEST and that the trust shall be administered
by New U S WEST.

(b) Sponsorship of the U S WEST VEBA Trust shall be retained by MediaOne
or, at its option, transferred to Multimedia.

(c) Effective as of the Separation Time, Multimedia shall adopt one or
more new voluntary employee benefit associations or modify the U S
WEST VEBA Trust (the "Media VEBA") to assume, immediately after the
Separation Time, all Liabilities under the MBAT and Life Insurance
Trust to, or relating to, Media Employees or Terminated Media
Employees (excluding persons described in clauses (2) or (3) of the
definition of Terminated Media Employee); all such Liabilities shall
cease to be Liabilities of the MBAT and Life Insurance Trust. The
Media VEBA shall comply with Code Sections 419, 419A, 501(a) and
501(c)(9).

<PAGE>

(d) As soon as practicable after the Separation Time, New U S WEST shall
cause a transfer of assets from the MBAT and Life Insurance Trust to
the Media VEBA in the manner and at the times specified in paragraph
(f) below. For purposes of this Section, the following definitions
shall apply:

(i) "Total Economic APBO" shall be the accumulated
postretirement benefit obligation (as defined in SFAS No.
106) of the MBAT and Life Insurance Trust (excluding
liabilities for supplemental and dependent life insurance),
as calculated by the Actuaries, as of the Separation Time
using actuarial methods and assumptions mutually agreeable
to the parties.

(ii) "Actuaries" refer to the actuaries for the MBAT and Life
Insurance Trust at the Separation Time.

(iii) "Media Economic APBO" shall mean the portion of the
Total Economic APBO attributable to the Media Employees
and Terminated Media Employees, as calculated by the
Actuaries.

(iv) "Media Fraction" shall mean (1) the Media Economic APBO,
divided by (2) the Total Economic APBO.

(v) "Media Asset Share" shall mean the product of: (1) the fair
market value of the assets of the MBAT and Life Insurance
Trust as of the end of the month coinciding with or
immediately preceding the Separation Time BUT excluding
Supplemental and Dependent Life Assets, and (2) the Media
Fraction; increased or decreased by an amount to be agreed
to by New U S WEST and MediaOne to reflect the rate of
return of the MBAT and Life Insurance Trust (or any other
mutually agreeable rate) during the period, if any,
commencing immediately after the end of the month coinciding
with or immediately preceding the Separation Time and ending
on the Separation Time.

(vi) "Supplemental and Dependent Life Assets" shall mean any
assets which are

<PAGE>

segregated for the purpose of providing supplemental and
dependent life insurance.

Notwithstanding the above, the Total Economic APBO, the Media
Economic APBO and the Media Asset Share shall be determined
separately for the MBAT and the Life Insurance Trust. In
addition, in order to determine the Media Asset Share, the
provisions of Section 5(c) shall apply.

(e) Within nine months after the Separation Time, Multimedia shall cause
to be filed with the IRS a request for a determination that the Media
VEBA is tax-exempt under Section 501(c)(9) of the Code (unless the New
VEBA is the existing U S WEST VEBA Trust and New U S WEST agrees no
such filing is required). Multimedia agrees to make all reasonable
amendments requested by the IRS to obtain such letter. New U S WEST
and Multimedia agree to cooperate with each other to fulfill any
filing and/or regulatory reporting obligations with respect to such
transfers.

(f) New U S WEST shall cause the following asset transfers from the MBAT
and Life Insurance Trust to the Media VEBA and Multimedia shall cause
the Media VEBA to accept such asset transfers:

(1) Immediately after the Separation Time or as soon as reasonably
practicable thereafter, an amount equal to 98% of the Media Asset
Share, as estimated by the Actuaries in writing (immediately
prior to the Separation Time) to Multimedia and New U S WEST.

(2) Immediately after the Separation Time or as soon as reasonably
practicable thereafter, an amount equal to the Supplemental and
Dependent Life Assets multiplied by a fraction, the numerator of
which is the amount of premiums paid by Media Employees and
Terminated Media Employees for supplemental and dependent life
insurance during the last full calendar month prior to the
Separation Time and the denominator of which is the total
premiums for such coverage paid by all Employees and Terminated
Employees during that month.

(3) As soon as practicable after the value of the assets as of the
Separation Time is determined and the Media Asset Share is
determined by the

<PAGE>

Actuaries in writing to Multimedia and New U S WEST (but not
later than 30 days after such writing is provided), the excess
of the Media Asset Share over the sum of the interim transfer
under (1) above and any benefit payments to Terminated Media
Employees by the MBAT and Life Insurance Trust after the
Separation Time. (If such amount is a negative number, such
amount shall be transferred from the Media VEBA to the MBAT and
Life Insurance Trust.)

(4) In the event there is any litigation or claims that the amount
transferred from the MBAT and Life Insurance Trusts to the Media
VEBA should be larger or smaller, the amount transferred shall be
adjusted in accordance with all of the provisions set forth in
Section 5 of this EM Agreement relating to a Contingent Amount
and claims over the amount of the transfer. In addition, the
parties agree that, to the extent permitted by law, any costs of
defending any such claims and any Liabilities arising out of such
claims shall be borne by the MBAT, Life Insurance Trust and the
Media VEBA. Any such Liability for a transfer or arising out of
any claims that a transfer is payable which cannot be borne by
the MBAT, Life Insurance Trust or the Media VEBA shall be borne
by New U S WEST or Multimedia in accordance with the last
paragraph of Section 5(g) of this EM Agreement.

To the extent any of the foregoing amounts is paid after the
Separation Time, such amount shall be increased or decreased by
interest from the Separation Time to the date of payment (to the
extent not paid or previously advanced) at a rate to be agreed to by
New U S WEST and MediaOne to reflect the rate of return of the MBAT
and Life Insurance Trust or the Media VEBA, whichever is applicable
(or any other mutually agreeable rate), during the period commencing
with the Separation Time and ending with the date of payment; provided
that no interest shall be paid with respect to the amounts in clause
(4) above if the Final Determination already provides for an
adjustment reflecting interest or plan earnings.

With respect to all of the foregoing transfers and any transfer
required by subsection (g) below, the specific assets to be
transferred shall be agreed upon by New U S WEST and Multimedia in
good faith so as to not treat the MBAT, Life Insurance Trust and Media
VEBA unfairly in any material respect.

<PAGE>

(g) As soon as practicable after the Separation Time, MediaOne shall cause
a transfer of assets from the U S WEST VEBA Trust to the MBAT in an
amount equal to the balance in the U S WEST VEBA Trust immediately
prior to the Separation Time (and before any transfers described in
paragraph (f) above) multiplied by a fraction, the numerator of which
is the amount of contributions made to that trust for calendar year
1998 (up through the Separation Time) on behalf of the New U S WEST
Group and the denominator of which is the total amount of all
contributions made to that trust for 1998 (up through the Separation
Time), increased by interest on the unpaid amount due from the
Separation Time to the date of payment at the rate of (8%) per annum.
In lieu of these transfers, the parties may agree to offset the amount
to be transferred against the transfers required in subsection (f)
above.

9. INCENTIVE COMPENSATION.

(a) Stock Options. Options to purchase shares of Communications Stock
("Communications Options") and shares of Media Stock ("Media Options")
which are unexercised as of the Separation Time and which were issued
pursuant to the terms of the Amended U S WEST 1994 Stock Plan, the U S
WEST Media Group 1996 Stock Option Plan, the U S WEST Media Group 1997
Stock Option Plan and the U S WEST Communications Group 1997 Stock
Option Plan (collectively the "Option Plans") shall be treated as
follows:

(1) New U S WEST shall assume the U S WEST Communications Group 1997
Stock Option Plan and all obligations under such plan.

(2) MediaOne shall retain the U S WEST Media Group 1996 Stock Option
Plan and the U S WEST Media Group 1997 Stock Option Plan and all
obligations under such plans.

(3) MediaOne shall retain the Amended U S WEST 1994 Stock Plan and
all obligations with respect to Media Options under such plan.

(4) New U S West shall establish a new stock plan to be effective as
of the Separation Time and shall assume, under such plan, all
obligations with respect to Communications Options issued under
the Amended U S WEST 1994 Stock Plan.

(5) Unexercised options issued under any of the Option Plans shall
continue in effect for their

<PAGE>

original term subject to paragraph (6) below and the following
adjustments to reflect the transactions contemplated by the
Separation Agreement.

(i) No Media Dividend shall be distributed with respect to any
Media Options. However, in accordance with the following
sentence, the number of Media Options held by any person shall be
converted into a higher number of options to purchase shares of
MediaOne Common Stock and the exercise price of each such option
shall be decreased. The number of options shall be increased and
the exercise price of each share under each option shall be
decreased to reflect the Media Dividend in a manner consistent
with Accounting Rule EITF 90-9 in order to preserve the economic
value of the options.

(ii) The Communications Options shall be converted to options to
purchase shares of New U S WEST Common Stock on a one for one
basis; the exercise price shall not change.

(6) Vested options under any of the Option Plans shall be exercised
on and after the Separation Time by an Employee by contacting the
stock plan administrator for his or her employer or former
employer. New U S WEST and MediaOne each agrees to act as agent
(the "crossover agent") for the other in the case of an exercise
of an option by an Employee of the crossover agent under an
Option Plan of the non-employing company. The crossover agent
for the non-employing company shall, by itself and/or through its
own third-party arrangements (i) effect an option exercise of the
applicable shares; (ii) report such exercise to the non-employing
company on a timely basis, not to exceed 30 days after the
exercise; (iii) collect from the Employee, and remit and/or
report to the Employee and/or the appropriate tax authorities, as
applicable, all taxes incurred by the crossover agent (as the
employing company) resulting from the exercise of an option under
the non-employing company's Option Plan, and all taxes required
to be withheld from the Employee's proceeds as a result of the
exercise of an option under the non-employing company's Option
Plan; (iv) deliver the stock to the Employee or pay the Employee
the excess of the sales proceeds of

<PAGE>

the applicable shares over the sum of the exercise price and all
taxes required to be withheld from the Employee's proceeds as a
result of the exercise; and (v) pay the non-employing company an
amount equal to the exercise price of such option on a timely
basis, not to exceed 30 days after the exercise. In addition,
the non-employing company agrees to honor the separation
policies adopted by the crossover agent (or its subsidiaries)
for purposes of determining if a separated Employee is eligible
to exercise an option under the non-employing company's Option
Plan. New U S WEST and MediaOne shall agree on the treatment of
options exercised by Terminated Employees after the Separation
Time.

(b) Restricted Stock. Communications Stock and Media Stock issued to
Employees or Terminated Employees under the Amended U S WEST 1994
Stock Plan which has not become vested under the terms of that plan as
of the Separation Time ("Restricted Communications Stock" and
"Restricted Media Stock" respectively) shall be treated as follows:

(1) Immediately prior to the Separation Time, Media Employees and
Terminated Media Employees shall surrender any Restricted
Communications Stock they hold and receive Restricted Media Stock
in exchange. The number of shares of Restricted Media Stock
received by each such individual shall equal the number of shares
of Restricted Communications Stock surrendered by such individual
multiplied by 1.0645 and further multiplied by the ratio of the
Average Value of the Communications Stock to the Average Value of
the Media Stock.

(2) Immediately prior to the Separation Time, Communications
Employees, Terminated Communications Employees and Terminated
Inc. Employees shall surrender any Restricted Media Stock they
hold as of the Separation Time and receive Restricted
Communications Stock in exchange. The number of shares of
Restricted Communications Stock received by each such individual
shall equal that number of shares of Restricted Media Stock
surrendered by such individual multiplied by 1.0645 and further
multiplied by the ratio of the Average Value of the Media Stock
to the Average Value of the Communications Stock.

<PAGE>

(3) Following the adjustments in paragraphs (1) and (2) above,
MediaOne shall retain the Amended U S WEST 1994 Stock Plan and
all obligations under such plan with respect to Media Restricted
Stock and shall amend such plan to provide for restricted stock
("Restricted MediaOne Common Stock") after the Separation Time.
In order to reflect the transactions contemplated by the
Separation Agreement, the Restricted Media Stock shall be subject
to the following adjustments. Following the adjustments in
paragraphs (1) and (2) above, (i) the Restricted Media Stock
shall be converted to Restricted MediaOne Common Stock on a one
for one basis and (ii) each share of Restricted Media Stock,
including shares described in paragraph (1) above but not those
described in paragraph (2) above, shall receive the Media
Dividend, provided that such Media Dividend shall be free of all
restrictions under the plan.

(4) Following the adjustments in paragraphs (1) and (2) above, New U
S WEST shall assume, under the new stock plan adopted pursuant to
subsection (a)(4) above, all obligations under the Amended U S
WEST 1994 Stock Plan with respect to Restricted Communications
Stock and shall amend such plan to provide for restricted stock
("Restricted New U S WEST Common Stock") after the Separation
Time. In order to reflect the transactions contemplated by the
Separation Agreement, following the adjustments in paragraphs (1)
and (2) above, the Restricted Communications Stock shall be
converted to Restricted New U S WEST Common Stock on a one for
one basis.

(5) Except for the Media Dividend set forth in paragraph (3) above,
each share of Restricted New U S WEST Common Stock and Restricted
MediaOne Common Stock outstanding after the application of the
foregoing paragraphs of this subsection (b) ("Post-Separation
Restricted Stock") shall vest in accordance with the vesting
period applicable to the grant of restricted stock to which each
share of Post-Separation Restricted Stock is attributable.

(c) LTIP. The U S WEST Communications Long-Term Incentive Plan ("LTIP")
shall be terminated as of the Separation Time and a new long-term
incentive plan (the "Communications LTIP") shall be established by

<PAGE>

New U S WEST. Awards under the LTIP to Communications Employees
shall be assumed by the Communications LTIP and shall continue under
their original terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease to have
any Liability with respect to such awards. The measurement period for
awards under the LTIP to Media Employees shall terminate as of the
Separation Time and the awards shall be calculated and paid out in
Restricted MediaOne Group Common Stock as of that time.

(d) ESTIP. The U S WEST, Inc. Executive Short Term Incentive Plan
("ESTIP") shall be retained by MediaOne and a new executive incentive
plan (the "Communications ESTIP") shall be established by New U S
WEST. Awards under the ESTIP to Communications Employees shall be
assumed by the Communications ESTIP and shall continue under their
original terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease to have
any Liability with respect to such awards.

(e) Phantom Stock. The units issued under the Amended U S WEST 1994 Stock
Plan which are valued in accordance with Communications Stock
("Phantom Communications Stock") and the units issued under the
Amended U S WEST 1994 Stock Plan which are valued in accordance with
Media Stock ("Phantom Media Stock") shall be treated as follows:

(1) The Phantom Communications Stock of a Media Employee or a Media
Director (as defined in Section 10(g) below) prior to the
Separation Time shall be converted into Phantom Media Stock
immediately prior to the Separation Time. The number of units of
Phantom Media Stock received by each such individual shall equal
the number of units of Phantom Communications Stock surrendered
by such individual multiplied by the ratio of the Average Value
of the Communications Stock to the Average Value of the Media
Stock.

(2) The Phantom Media Stock of a Communications Employee or
Communications Director (as defined in Section 10(g) below) prior
to the Separation Time shall be converted into Phantom
Communications Stock immediately prior to the Separation Time.
The number of units of Phantom Communications Stock received by
each such individual shall equal the number of units

<PAGE>

of Phantom Media Stock surrendered by such individual multiplied
by the ratio of the Average Value of the Media Stock to the
Average Value of the Communications Stock.

(3) Following the adjustments in paragraphs (1) and (2) above,
MediaOne shall retain the Amended U S WEST 1994 Stock Plan and
all obligations under such plan with respect to Phantom Media
Stock and shall amend such plan to provide for units which are
valued in accordance with MediaOne Common Stock ("Phantom
MediaOne Common Stock") after the Separation Time. In order to
reflect the transactions contemplated by the Separation
Agreement, following the adjustments in paragraphs (1) and (2)
above, the Phantom Media Stock, including units described in
paragraph (1) above but not those described in paragraph (2)
above, shall be converted to Phantom MediaOne Common Stock on the
following basis. The number of units of Phantom MediaOne Common
Stock credited shall equal the number of units of Phantom Media
Stock surrendered by such individual multiplied by the ratio of
the Average Value of the Media Stock to the excess of the Average
Value of the Media Stock over the product of the Dividend Number
multiplied by the Average Value of the Communications Stock.

(4) Following the adjustments in paragraphs (1) and (2) above, New U
S WEST shall assume, under the new stock plan adopted pursuant to
subsection (a)(4) above, all obligations under the Amended U S
WEST 1994 Stock Plan with respect to Phantom Communications Stock
and shall amend such plan to provide for units which are valued
in accordance with New U S WEST Common Stock ("Phantom New U S
WEST Common Stock") after the Separation Time. In order to
reflect the transactions contemplated by the Separation
Agreement, following the adjustments in paragraphs (1) and (2)
above, the Phantom Communications Stock shall be converted to
Phantom New U S WEST Common Stock on a one for one basis.

(5) MediaOne and New U S WEST shall cause all plans referred to in
this subsection (e) to be amended, as appropriate, to effect the
changes described herein as of the Separation Time.

<PAGE>

10. OTHER BENEFITS.

(a) Top-hat plans. As of the Separation Time:

(1) New U S WEST or a Subsidiary shall assume all plans maintained by
the Existing U S WEST Group prior to the Separation Time which
are intended to be described in Section 201(2) of ERISA ("Top-hat
Plans") and all Liabilities and obligations with respect to
Communications Employees, Terminated Communications Employees and
Terminated Inc. Employees under such plans. Such Top-hat Plans
shall include, without limitation, the U S WEST Nonqualified
Pension Plan and the U S WEST Deferred Compensation Plan. All
such plans shall be Communications Employee Benefit Plans. The
MediaOne Group shall have no Liabilities with respect to such
plans.

(2) MediaOne or a Subsidiary shall establish new Top-hat Plans
corresponding to the Top-hat Plans maintained by the Existing U S
WEST Group before the Separation Time and shall assume, under
such plans, all Liabilities and obligations with respect to Media
Employees and Terminated Media Employees under the Top-hat Plans
maintained by the Existing U S WEST Group prior to the Separation
Time. All such plans shall be Media Employee Benefit Plans. All
such Liabilities and obligations shall cease to be Liabilities or
obligations of the Top-hat Plans assumed by New U S WEST pursuant
to the preceding paragraph (1).

(3) Subject to paragraph (4) below, any trusts maintained by Existing
U S WEST or its Subsidiaries for the purpose of providing
benefits under a Top-hat Plan (the "Existing U S WEST Rabbi
Trusts") shall be transferred to and assumed by New U S WEST.

(4) MediaOne or a Subsidiary shall establish prior to the Separation
Time one or more trusts (the "MediaOne Rabbi Trusts") for the
purpose of providing benefits under its Top-hat Plans which
correspond to the Existing U S WEST Rabbi Trusts. As of the
Separation Time, Existing U S West shall cause the trustee or
trustees of the Existing U S WEST Rabbi Trusts to transfer to the
trustee or trustees of the MediaOne Rabbi Trusts any amounts held
in the Existing U

<PAGE>

S WEST Rabbi Trusts attributable to the benefits of Terminated
Media Employees.

(b) Employment contracts. Except for the severance agreements with
members of the Executive Group, all individual employment contracts,
including but not limited to severance agreements, retention
agreements, change-of-control agreements and letter agreements,
entered into by a member of the Existing U S WEST Group and a single
Communications Employee or a Terminated Communications Employee shall
be retained by, or assigned to and assumed by, as applicable, the New
U S WEST Group, provided they do not expire by their own terms as of
the Separation Time. The MediaOne Group shall have no Liabilities
with respect to such agreements. Any such employment contracts, other
than agreements described in paragraph (d) below, entered into by any
member of the Existing U S WEST Group and a single Media Employee or a
Terminated Media Employee shall be retained by, or assigned to and
assumed by, as applicable, the MediaOne Group, provided they do not
expire by their own terms as of the Separation Time. The New U S WEST
Group shall have no Liabilities with respect to such agreements. Any
Liability under such employment contracts, other than the severance
agreements with members of the Executive Group, entered into by any
member of the Existing U S WEST Group and a single Terminated Inc.
Employee shall be borne in accordance with Section 2(c) and (f) of
this EM Agreement.

(c) Split-dollar contracts. All split-dollar insurance contracts entered
into by the Existing U S WEST Group for the benefit of a
Communications Employee or a Terminated Communications Employee shall
be retained by, or assigned to and assumed by, as applicable, New U S
WEST; the MediaOne Group shall have no interest in, or Liabilities
with respect to, such contracts. Any such split-dollar insurance
contracts entered into by the Existing U S WEST Group for the benefit
of a Media Employee or a Terminated Media Employee shall be retained
by, or assigned to and assumed by, as applicable, MediaOne; the New U
S WEST Group shall have no interest in, or Liabilities with respect
to, such contracts. In order to assign and assume any such split
dollar life policies, the parties agree to accept any collateral
assignments, policy endorsements or such other documentation executed
by or on behalf of the applicable employees or terminated employees,
or any trustee of any trust to which such policy rights or incidents
of ownership under the policies have been assigned, as well as

<PAGE>

entering into any such agreements as may be necessary to fulfill
obligations to any insurance company or insurance agent or broker
under the policies to be assigned.

(d) Ex-Pat Employees. This sub-section applies to Employees ("Ex-Pat
Employees") currently employed by International who have entered into
agreements with Existing U S WEST or a Subsidiary which give such
Employees re-employment rights with Existing U S WEST or a domestic
Subsidiary thereof. If an Ex-Pat Employee notifies Existing U S WEST
in writing prior to May 1, 1998 that he wishes to exercise his right
to return to domestic employment prior to the Separation Time, the
Communications Business will either: (1) re-employ the Ex-Pat
Employee in accordance with his re-employment right; or (2) enter into
a new agreement with the Ex-Pat Employee terminating his re-employment
right. Any costs associated with re-employing the Ex-Pat Employee or
terminating his re-employment right in accordance with the prior
sentence shall be borne by the Communications Business. If an Ex-Pat
Employee does not notify Existing U S WEST in writing prior to May 1,
1998 that he wishes to exercise his right to return to domestic
employment prior to the Separation Time, all obligations under the
agreement which provides the re-employment right shall be assumed by
MediaOne. Any costs associated with assuming the re-employment right
of the Ex-Pat Employee in accordance with the prior sentence shall be
borne by New U S WEST and/or MediaOne as determined by the parties
through good faith negotiations to be completed prior to the
Separation Time.

(e) Vail Trust. The Theodore N. Vail Memorial Fund shall be transferred
to and assumed by New U S WEST as of the Separation Time.

(f) Leaves of Absence. Each member of the MediaOne Group and the New U S
WEST Group shall honor all terms and conditions of leaves of absence
that have been granted to any Employee before the Separation Time,
including such leaves that are commenced after the Separation Time, to
the extent that such Employees are assigned to that entity. Each such
entity shall be solely responsible for administering such leaves of
absence and compliance with all applicable laws relating to leaves of
absence, including the Family Medical Leave Act. Unless members of
the New U S WEST Group or MediaOne Group adopt other policies prior to
the Separation Time, each shall be considered to have adopted leave of
absence programs,

<PAGE>

effective as of the Separation Time, which are substantially
identical in all material respects to the leave of absence programs
in effect at the respective entities at the Separation Time.

(g) Non-Employee Director Plans.

(1) As of the Separation Time, New U S WEST shall assume the
Non-Employee Director Plans and all Liabilities and obligations
under such plans with respect to individuals who will be
directors of New U S WEST immediately after the Separation Time
and Retired Non-Employee Directors (collectively referred to as
"Communications Directors"). The MediaOne Group shall have no
Liabilities with respect to such agreements.

(2) As of the Separation Time, MediaOne shall establish new plans for
its non-employee directors ("Media Non-Employee Director Plans")
corresponding to the Non-Employee Director Plans maintained by U
S WEST before the Separation Time and shall assume, under such
plans, all Liabilities and obligations under the Non-Employee
Director Plans with respect to individuals who will be directors
of MediaOne ("Media Directors") immediately after the Separation
Time. All such Liabilities and obligations shall cease to be
Liabilities or obligations of the Non-Employee Director Plans
assumed by New U S WEST pursuant to paragraph (1) above. The New
U S WEST Group shall have no Liabilities with respect to such
agreements.

(3) MediaOne and New U S WEST shall cause all plans referred to in
this sub-section (g) to be amended, as appropriate, to effect the
changes described herein as of the Separation Time.

(h) Non-Employee State Executive Board Plan. As of the Separation Time,
New U S WEST shall assume the U S WEST Communications, Inc.
Non-Employee State Executive Board Deferred Compensation Plan (and any
predecessor plan) and be solely responsible for all Liabilities
thereunder. New U S WEST shall cause such plan to be amended, as
appropriate, to effect the changes described herein as of the
Separation Time.

<PAGE>

11. PORTABILITY.

Existing U S WEST and, if necessary after the Separation Time, MediaOne and
New U S WEST shall use reasonable best efforts to seek an amendment of the
Mandatory Portability Agreement established as of January 1, 1985, as
referenced in the U S WEST Pension Plan (the "MPA"), to allow New U S WEST
to become a "Tier II Signatory Company" under the MPA with the same rights
and obligations as have been granted to AirTouch Communications, Inc. as a
Tier II Signatory Company. MediaOne and New U S WEST may mutually agree to
additional situations where service credit would be granted for employees
transferring between one another (or their Subsidiaries) with associated
trust asset transfers after the Separation Time.

12. FURTHER AGREEMENTS.

(a) From and after the Separation Time, MediaOne shall, and shall cause
its Subsidiaries and successors to, provide credit under all Media
Employee Arrangements and Media Employee Benefit Plans to Media
Employees and Terminated Media Employees for service with the Existing
U S WEST Group prior to the Separation Time for purposes of
eligibility to participate, vesting and eligibility to retire, and for
purposes of calculating any severance benefits, to the same extent
such credit was provided under Employee Arrangements and Employee
Benefit Plans prior to the Separation Time.

(b) From and after the Separation Time, New U S WEST shall, and shall
cause its Subsidiaries and successors to, provide credit under all
Communications Employee Arrangements and Communications Employee
Benefit Plans to Communications Employees, Terminated Communications
Employees and Terminated Inc. Employees for service with the Existing
U S WEST Group prior to the Separation Time for purposes of
eligibility to participate, vesting and eligibility to retire, and for
purposes of calculating any severance benefits, to the same extent
such credit was provided under Employee Arrangements and Employee
Benefit Plans prior to the Separation Time.

(c) MediaOne and New U S WEST shall promptly reimburse each other for all
valid liability and expenses addressed in this EM Agreement which are
paid by the other and that constitutes a liability of MediaOne or New
U S WEST, as the case may be, upon presentation of an invoice thereon.
In the event that payment in full is not received within 45 days from
the date of

<PAGE>

the invoice, interest shall accrue at the rate of 7% per annum from
the date of the invoice.

13. COOPERATION.

(a) MediaOne, New U S WEST and their Subsidiaries shall cooperate with
each other in carrying out, implementing and defending the terms of
this EM Agreement, including cooperating with each other with respect
to any claims or litigation challenging the terms of the EM Agreement.

(b) Each party shall exchange such information with the other party and
their respective agents and vendors (without obtaining releases), as
may be reasonably requested by the other party, with respect thereto.
MediaOne and New U S WEST and their respective authorized agents
shall, subject to applicable laws on confidentiality, be given
reasonable and timely access to, and may make copies of, all
information relating to the subjects of this EM Agreement in the
custody of the other party, to the extent reasonably requested by the
other party. If any provision of this Agreement is dependent on the
consent of any third party (such as a vendor or a union) and such
consent is withheld, MediaOne and New U S WEST shall use their
reasonable best efforts to implement the applicable provisions of this
Agreement to the full extent practicable. If any provision of this
Agreement cannot be implemented due to the failure of such third party
to consent, MediaOne and New U S WEST shall negotiate in good faith to
implement the provision in a mutually satisfactory manner. The phrase
"reasonable best efforts" as used herein shall not be construed to
require the incurrence of any non-routine or unreasonable expense or
liability or the waiver of any right of MediaOne and New U S WEST (and
their respective Subsidiaries).

(c) MediaOne and New U S WEST agree to good faith mutual cooperation in
any investigation, inquiry or litigation which jointly involves them
or in which either party makes a reasonable request for such
cooperation. Each party will make its Employees available on a
reasonable basis to give testimony and assistance in connection with
any lawsuit, dispute, investigation or proceeding involving the other
party and arising out of activities for which the Employee had
responsibility prior to the Separation Time. The party requesting
such availability (the "Requesting Party") shall reimburse the
Employee for all reasonable out-of-pocket travel and other expenses
incurred in so cooperating, including without

<PAGE>

limitation airplane fare, hotel accommodations, meal charges and
other similar expenses, as well as reasonable fees and
disbursements for independent counsel for the Employee, if the
matter requires that the Employee have independent representation.
Such expenses will be reimbursed promptly after Employee's
submission to the Requesting Party of statements and such
reasonable detail as the Requesting Party may require. Any
request for cooperation, and the degree of cooperation provided,
pursuant to this paragraph will take into account (1) the
significance of the matters at issue in the lawsuit, dispute,
investigation or proceeding, and (ii) the Employee's other
personal and business commitments. In any case in which either
MediaOne or New U S WEST becomes aware that one of its Employees
is called (except by the other party) as a witness to testify in
any discovery or court proceeding relating to the other party, the
party employing such individual will notify the other party
immediately in order to give the other party a reasonable
opportunity to appear and/or assert any privilege to which it may
be entitled.

14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES.

(a) No provision of this EM Agreement or the Separation Agreement shall be
construed to create any right, or accelerate entitlement, to any
compensation or benefit whatsoever on the part of any Employee or
Terminated Employee or other future, present or former employee of
MediaOne, New U S WEST, or their respective Subsidiaries under any
Employee Benefit Plan or Employee Arrangement maintained by any of
such entities or otherwise.

(b) Without limiting the generality of the foregoing provisions of
subsection 14(a) above, except for the severance agreements applicable
to the Executive Group, neither (1) the transactions described in the
Separation Agreement including without limitation the Reorganization,
Contribution and Separation, (2) the termination of the Participating
Company status of New U S WEST or a New U S WEST Subsidiary, (3) the
transfer of sponsorship of any Employee Benefit Plans or Employee
Arrangements to New U S WEST, (4) the transfer of an Employee from one
member of the Existing U S WEST Group to another member in connection
with or in anticipation of the Reorganization, Contribution or
Separation at any time on or before the Separation Time nor (5) the
assignment and transfer of an Employee to the New U S

<PAGE>

WEST Group or MediaOne Group, shall cause any Employee to be
deemed to have incurred a termination of employment which entitles
such individual to the commencement of benefits under any Employee
Benefit Plan or Employee Arrangement maintained by MediaOne, New U
S WEST, or their respective Subsidiaries; nor shall any of the
events set forth in clauses (1) through (5) of this subsection
14(b) be treated as, or result in, a change in control under any
such Employee Benefit Plan or Employee Arrangement.

(c) To the extent applicable, each Employee Benefit Plan and Employee
Arrangement is hereby amended (without the need for further action) to
incorporate the provisions stated in subsection 14(b).

(d) Except as expressly provided in this Agreement, nothing in this
Agreement shall preclude New U S WEST or MediaOne or their respective
Subsidiaries, at any time after the Separation Time, from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect any Employee Benefit Plan or Employee
Arrangement maintained by such party, any benefit under any such plan
or arrangement, or any trust, insurance policy or funding vehicle
related to any such plan or arrangement.

(e) No provision in this EM Agreement or in the Separation Agreement shall
confer upon any person other than the signatories hereto any rights or
remedies with respect to the employment, compensation, benefits, or
other terms and conditions of employment of any persons.

15. MISCELLANEOUS.

(a) Payment of 1998 Administrative Costs and Expenses. Each member of the
Existing U S WEST Group shall be responsible for their allocable share
of the budgeted costs for benefits in 1998 until the Separation Time,
as well as their allocable share of unanticipated expenses incurred
prior to the Separation Time. In addition, MediaOne shall pay New
U S WEST for all expenses and costs relating to benefits incurred
after the Separation Time to the extent that the additional
expenses are (i) reasonable and necessary and (ii) incurred as a
result of, and for the purpose of, the normal administration of the
Media Employee Benefit Plans or Employee Arrangements after the
Separation Time. If any expenses are incurred at the request of
MediaOne, they shall be the sole responsibility of MediaOne.

<PAGE>

(b) Audit Rights.

(1) Information Provided. Each of MediaOne and New U S WEST, and
their duly authorized representatives, shall have the right to conduct
audits with respect to all information provided to it by the other
party. The party conducting the audit (the "Auditing Party") shall
have the sole discretion to determine the procedures and guidelines
for conducting audits and the selection of audit representatives under
this paragraph (1); provided, that no audits shall be permitted with
respect to the allocation or transfer of plan assets and liabilities.
The Auditing Party shall have the right to make copies of any records
at its expense, subject to the confidentiality provisions set forth in
the Separation Agreement, which are incorporated by reference herein.
The party being audited shall provide the Auditing Party's
representatives with reasonable access during normal business hours to
its operations, computer systems and paper and electronic files, and
provide workspace to its representatives. After any audit is
completed, the party being audited shall have the right to review a
draft of the audit findings and to comment on those findings in
writing within five business days after receiving such draft.

The Auditing Party's audit rights under this paragraph (1) shall
include the right to audit, or participate in an audit facilitated by
the party being audited, of any Subsidiaries and Affiliates of the
party being audited and of any benefit providers and third parties
with whom the party being audited has a relationship, or agents of
such party, to the extent any such persons are affected by or
addressed in this Agreement (collectively, the "Non-parties"). The
party being audited shall, upon written request from the Auditing
Party, provide an individual (at the Auditing Party's expense) to
supervise any audit of a Non-party. The Auditing Party shall be
responsible for supplying, at the Auditing Party's expense, additional
personnel sufficient to complete the audit in a reasonably timely
manner. The responsibility of the party being audited shall be
limited to providing, at the Auditing Party's expense, a single
individual at each audited site for purposes of facilitating the
audit.

(2) Vendor Contracts. After the Separation Time, MediaOne and New U
S WEST and their duly authorized representatives shall have the right
to conduct joint audits with respect to any Provider Contracts that
relate to both the MediaOne Welfare Plans and the New

<PAGE>

U S WEST Welfare Plans. The scope of such audits shall encompass
the review of all correspondence, account records, claim forms,
cancelled drafts (unless retained by the bank), provider bills,
medical records submitted with claims, billing corrections,
vendor's internal corrections of previous errors and any other
documents or instruments relating to the services performed by the
vendor under the applicable vendor contracts. MediaOne and New U S
WEST shall agree on the performance standards, audit methodology,
auditing policy and quality measures and reporting requirements
relating to the audits described in this paragraph (2) and the
manner in which costs incurred in connection with such audits will
be shared.

(c) Beneficiary Designations. All beneficiary designations made under the
Employee Benefit Plans or Employee Arrangements prior to the
Separation Time shall be transferred to and be in full force and
effect under the corresponding new Communications or Media Employee
Benefit Plans or Employee Arrangements until such beneficiary
designations are replaced or revoked by the individual who made the
beneficiary designation.

(d) Effect If Separation Does Not Occur. If the Separation does not
occur, then all actions and events that are, under this EM Agreement,
to be taken or occur effective as of the Separation Time, immediately
after the Separation Time, or otherwise contingent upon or in
connection with the Separation, shall not be taken or occur. In
addition, to the extent actions are taken or events occur prior to the
Separation Time in connection with the Reorganization or Contribution
or in anticipation of the Separation, then such events or actions
shall be reversed or deemed null and void.

(e) Provisions of Separation Agreement. The provisions of Articles X -
XII of the Separation Agreement shall, to the extent applicable and
not inconsistent with this EM Agreement, shall also apply to this EM
Agreement.

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this EM Agreement to be
duly executed on its behalf by its officers thereunto duly authorized, all as
of the day and year first above written.

U S WEST, Inc.

By:
-------------------------------------
Name:
Title:

USW-C, Inc.

By:
-------------------------------------
Name:
Title:

U S WEST Multimedia Communications,
Inc., plan sponsor of the:
Media Pension Plan
Media Savings Plan
Media VEBA
Other Media Employee Benefit Plans

By:
-------------------------------------
Name:
Title:

USW-C, Inc., plan sponsor of the:
U S WEST Pension Plan
U S WEST Savings Plan
MBAT and Life Insurance Trust
Other Communications Employee Benefit Plans

By:
-------------------------------------
Name:
Title:

<PAGE>

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

TAX SHARING AGREEMENT

between

U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)

and

USW-C, Inc.
(to be renamed U S WEST, INC.)

Dated as of , 1998
--------- ----

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

<PAGE>

TABLE OF CONTENTS

<TABLE>
Page
----
<S> <C>
ARTICLE I
Definitions; Certain Operating Conventions . . . . . . . . . . . . . . 2

ARTICLE II
Allocation and Payment . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE III
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE IV
Preparation and Filing of Tax Returns,
Cooperation and Record Retention . . . . . . . . . . . . . . . . . . . 10

ARTICLE V
Refunds, Audits and Adjustments. . . . . . . . . . . . . . . . . . . . 11

ARTICLE VI
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

<PAGE>

TAX SHARING AGREEMENT

TAX SHARING AGREEMENT, dated as of _____________, by and between U S
WEST, Inc., a Delaware corporation ("U S WEST") to be renamed MediaOne Group,
Inc. and USW-C, Inc., a Delaware corporation and wholly owned subsidiary of
U S WEST ("New U S WEST") to be renamed U S WEST, Inc.

W I T N E S S E T H

WHEREAS, New U S WEST and its subsidiaries are currently members of the
U S WEST Consolidated Group (as defined herein);

WHEREAS, pursuant to the Separation Agreement entered into between U S
WEST and New U S WEST dated _________ (the "Separation Agreement"), (a) U S
WEST shall effect a restructuring of certain of its assets, liabilities and
businesses, as a result of which New U S WEST shall own the Directories
Business and the businesses currently attributed to the Communications Group
(each as defined in the Separation Agreement) (the "Reorganization") and (b)
U S WEST shall distribute all of the outstanding capital stock of New U S
WEST to its stockholders (the "Separation");

WHEREAS, the parties intend that for United States federal income tax
purposes the Reorganization and the Separation shall qualify as tax-free
transactions pursuant to Sections 332, 368(a) and 355 of the Code (as defined
herein);

WHEREAS, the parties wish to (a) provide for the payment of tax
liabilities and entitlement to refunds thereof, allocate responsibility for,
and cooperation in, the filing of tax returns and provide for certain other
matters relating to taxes and (b) set forth certain covenants and indemnities
relating to the preservation of the tax-free status of the Reorganization and
the Separation.

NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein and in any other document executed in connection with this
Agreement, the parties agree as follows:

<PAGE>

ARTICLE I

DEFINITIONS; CERTAIN OPERATING CONVENTIONS

1.1 For the purposes of this Agreement, the following terms shall have
the meanings set forth below:

ADJUSTMENTS shall mean any proposed or final change in the Tax Liability
of a taxpayer.

CODE shall mean the Internal Revenue Code of 1986, as amended.

COMBINED RETURN shall mean any combined, unitary, or consolidated State
Income Tax return that includes one or more members of the MediaOne Group and
one or more members of the New U S WEST Group (as hereinafter defined).

COMBINED RETURN TAX SAVINGS shall mean, with respect to a Taxable Year
in which one or more Combined Returns were filed or required to be filed in
the Communications Group Region, the excess of the State Income Tax that
would have been payable to all Tax Authorities in the Communications Group
Region if the MediaOne Group had not been included in such Combined Returns
for such Taxable Year over the actual State Income Tax paid to such Tax
Authorities in respect of such Combined Returns.

COMMUNICATIONS GROUP REGION shall mean the 14-state region comprised of
the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska,
New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

CONTRIBUTED MEDIA GROUP SUBSIDIARIES shall mean each of U S WEST Media
Group, Inc. and U S WEST Capital Funding, Inc., and each of their respective
subsidiaries.

CONTRIBUTED SUBSIDIARIES shall mean each of U S WEST Foundation, U S
WEST Educational Foundation, U S WEST Investment Management Company, U S WEST
SPF, Co., U S WEST Federal Relations, Inc., and U S WEST IP Holdings, Inc.,
and each of their respective subsidiaries.

FEDERAL INCOME TAX shall mean federal Taxes determined on the basis of
net income or profits (including, but not limited to, any alternative minimum
tax, capital gains and any Tax on items of Tax preferences) but excluding
non-income Taxes such as federal payroll and excise Taxes.

<PAGE>

INDEMNIFYING PARTY shall mean any Person from which an Indemnified Party
is seeking indemnification pursuant to the provisions of this Agreement.

INDEMNIFIED PARTY shall mean any Person which is seeking indemnification
from an Indemnifying Party pursuant to the provisions of this Agreement.

IRS shall mean the United States Internal Revenue Service.

MEDIAONE GROUP shall mean, individually and collectively, as the case
may be, each member of the U S WEST Consolidated Group, other than any member
of the New U S WEST Group.

NEW U S WEST GROUP shall mean, individually and collectively, as the
case may be, New U S WEST and its present and future direct and indirect
subsidiaries; provided, however, that on or prior to the Separation Date,
none of the Contributed Subsidiaries or the Contributed Media Group
Subsidiaries shall be included as a member of the New U S WEST Group.

PERSON shall mean and includes any individual, corporation, company,
association, partnership, joint venture, limited liability company, joint
stock company, trust, unincorporated organization, or other entity.

POST-SEPARATION TAXABLE PERIOD shall mean a taxable period that begins
after the Separation Date.

PRE-SEPARATION TAXABLE PERIOD shall mean a taxable period that ends on
or before the Separation Date.

PRESENT VALUE BENEFIT shall mean the present value (based on a discount
rate equal to the short-term applicable federal rate as determined under
Section 1274(d) of the Code at the time of determination, and assuming that
the Indemnified Party will be liable for Taxes at all relevant times at the
maximum marginal rates) of any income tax benefit.

PROCEEDING shall mean any audit or other examination, or any judicial or
administrative proceeding, relating to liability for or refunds or
Adjustments with respect to Taxes.

REFUND shall mean any refund of Taxes, including any reduction in
liability for such Taxes by means of a credit, offset or otherwise.

<PAGE>

RULING REQUEST shall mean the request by U S WEST for an advance letter
ruling from the IRS with respect to certain Tax aspects of the Reorganization
and the Separation.

SEPARATE RETURN shall mean any Tax Return, including any consolidated,
combined or unitary Tax Return, filed by either the New U S WEST Group or the
MediaOne Group but excluding any Tax Return filed which includes one or more
members of both groups.

SEPARATION DATE shall mean the date the Separation is effected.

STATE INCOME TAX shall mean any state or local jurisdiction Taxes
imposed on or measured by gross or net income, value added, net worth or
capital stock. State Income Taxes do not include business and occupation
taxes, gross receipts taxes, excise, sales or use taxes, real property gains,
real or personal property, transfer or similar taxes.

STRADDLE PERIOD shall mean a taxable period that includes, but does not
end on, the Separation Date.

TAX OR TAXES shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, gains, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, custom duties, fees, assessments
and charges of any kind whatsoever, together with any interest and any
penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any transferee
liability in respect of Taxes.

TAX AUTHORITY shall mean the IRS and any other domestic or foreign
governmental authority responsible for the administration and collection of
Taxes.

TAX LIABILITIES shall mean all liabilities for Taxes.

TAX RETURNS shall mean all reports, returns, declaration forms and
statements filed or required to be filed with respect to Taxes.

TAX-TIMING ADJUSTMENT shall mean any Adjustment in one Taxable Year
which will result in an offsetting Adjustment or Adjustments (including an
Adjustment to the basis of an asset not eligible for depreciation or
amortization) in another Taxable Year.

<PAGE>

TAXABLE YEAR shall mean the year on the basis of which taxable income is
computed.

TREASURY shall mean the United States Department of the Treasury.

U S WEST CONSOLIDATED GROUP shall mean the affiliated group of
corporations, within the meaning of Section 1504(a) of the Code, of which U S
WEST is the common parent, and any member of such group.

1.2 OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms not
otherwise defined in this Agreement shall have the meaning ascribed to them
in the Separation Agreement.

(b) The words "hereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.

1.3 TERMINATION OF TAXABLE YEARS. For Federal Income Tax purposes, the
Taxable Year of each member of the New U S WEST Group (including the
Contributed Subsidiaries and the Contributed Media Group Subsidiaries) shall
end as of the close of the Separation Date. New U S WEST and U S WEST shall,
unless prohibited by applicable law, take all action necessary or appropriate
to close the taxable period of each member of the New U S WEST Group for all
Tax purposes as of the close of the Separation Date.

ARTICLE II

ALLOCATION AND PAYMENT

2.1 ALLOCATION OF TAXES. U S WEST and New U S WEST each agrees, on its
own behalf and on behalf of the MediaOne Group and the New U S WEST Group,
respectively, to allocate and pay its respective share of Taxes as provided
in this Agreement.

(a) Except as provided in Section 2.1(e), the Federal Income Tax
liability (including Refunds and deficiencies) of the U S WEST Consolidated
Group for any Pre-Separation Taxable Period and any Straddle Period shall be
allocated between the New U S WEST Group and the MediaOne Group in accordance
with Treasury Regulations Sections

<PAGE>

1.1552-1(a)(3) and 1.1502-33(d)(3). The fixed percentage under
Treasury Regulations Section 1.1502-33(d)(3) shall be 100 percent.

(b) Except as provided in Section 2.1(e), the State Income Tax
liability of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable Period and any Straddle Period in any state included
in the Communications Group Region in which a Combined Return is or is
required to be filed shall be allocated between the New U S WEST Group and
the MediaOne Group in proportion to the state taxable income (positive or
negative) of each member of each group included in such Combined Return, or,
where the basis is other than net income, in proportion to each member's
respective Tax base. Each group shall appropriately compensate the other
group for any reduction in State Income Tax liability resulting from the
other group's having negative state taxable income.

(c) Except as provided in Section 2.1(e), the State Income Tax
liability of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable Period and any Straddle Period in any state not
included in the Communications Group Region in which a Combined Return is or
is required to be filed shall be allocated between the New U S WEST Group and
the MediaOne Group as follows:

(i) For the Taxable Years ended December 31, 1996, December 31,
1997 and on the Separation Date, all such State Income Tax liability for
each such Taxable Year shall be allocated to the New U S WEST Group to
the extent such State Income Tax liability does not exceed the Combined
Return Tax Savings actually realized by the New U S WEST Group for each
such Taxable Year. Any excess State Income Tax liability shall be
allocated 66.6% to the New U S WEST Group and 33.4% to the MediaOne Group.

(ii) For Taxable Years ended on or prior to December 31, 1995,
all such State Income Tax liability shall be allocated 66.6% to the
New U S WEST Group and 33.4% to the MediaOne Group.

(iii) Notwithstanding the foregoing, any liability arising solely
out of the inclusion of the New U S WEST Group in a Tax Return which was
originally filed as a Separate Return by a member of the affiliated group
(as defined in Section 1504(a) of the Code) of which Continental
Cablevision, Inc. was the common parent corporation for the Taxable Year
ended December 31, 1996 shall be allocated 50% to the New U S WEST Group
and 50% to the MediaOne Group.

<PAGE>

(d) Except as provided in Sections 2.1(c)(iii) and 2.1(e), all Tax
Liabilities of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable Period and any Straddle Period arising out of the
filing of a Separate Return shall be allocated to the member to which such
Tax Liabilities relate.

(e) Any Tax Liability which is a Shared Liability (as defined in the
Separation Agreement), shall be allocated in the following manner:

(i) Any Tax Liability of U S WEST arising out of operations
conducted directly by it and any Tax Liability of the Contributed
Subsidiaries for any Pre-Separation Taxable Period or any Straddle Period
shall be allocated 58% to the New U S WEST Group and 42% to the MediaOne
Group.

(ii) Any Tax Liability arising out of Transaction Costs (as defined
in the Separation Agreement) shall be allocated as the underlying costs are
allocated pursuant to Section 1.1(l) of the Separation Disclosure Schedule.

2.2 TAX ATTRIBUTES. Tax attributes for Pre-Separation Taxable Periods
and any Straddle Period shall be allocated to the New U S WEST Group and the
MediaOne Group in accordance with the Code and Treasury Regulations (and any
applicable state, local and foreign laws or regulations). U S WEST and New U
S WEST shall jointly determine the amounts of such attributes as of the
Separation Date and hereby agree to compute all Tax Liabilities for Taxable
Years ending after the Separation Date consistently with that determination.

2.3 TAX-TIMING ADJUSTMENTS. To the extent that any portion of any Tax
Liability (or Tax benefit) allocated under Section 2.1 relates to a
Tax-timing Adjustment, that portion of such Tax Liability (or Tax benefit)
shall be allocated to the entity that will receive the benefit (or detriment)
of that Tax-timing Adjustment. For purposes of this Agreement, the fact that
the period or periods in which offsetting Adjustments will arise is unknown
or not determinable shall not be taken into account.

2.4 PENALTIES, ADDITIONS TO TAX AND INTEREST. Penalties, additions to
Tax and interest on any Tax deficiencies or overpayments will be allocated as
the underlying deficiencies or overpayments are allocated under this
Agreement.

2.5 PAYMENT OF TAXES. U S WEST and New U S WEST each agrees to pay or
cause to be paid their respective shares of Taxes as allocated and provided
in this Agreement.

<PAGE>

(a) For the Taxable Year ended December 31, 1997 and any Straddle
Period, New U S WEST shall timely pay to U S WEST an amount equal to the
allocable Federal Income Tax liability of the New U S WEST Group determined
under Section 2.1(a) and (e), including the New U S WEST Group's share of
estimated Federal Income Taxes. U S WEST shall be responsible for the
payment to the IRS of the Federal Income Tax liability of the U S WEST
Consolidated Group for such Taxable Years.

(b) For the Taxable Year ended December 31, 1997 and any Straddle
Period, New U S WEST shall timely pay to U S WEST an amount equal to the
allocable State Income Tax liability of the New U S WEST Group determined
under Sections 2.1(b), (c) and (e), including the New U S WEST Group's share
of estimated State Income Taxes. U S WEST shall be responsible for the
payment to the applicable Tax Authority of such State Income Tax liabilities.

2.6 CHARACTERIZATION OF PAYMENTS. For all Tax purposes, the New U S
WEST Group and the MediaOne Group agree to treat (i) any payment required by
this Agreement as either a contribution by U S WEST to New U S WEST or a
distribution by New U S WEST to U S WEST, as the case may be, occurring
immediately prior to the Separation Date and (ii) any payment of interest or
non-federal Taxes by or to a Tax Authority as taxable or deductible, as the
case may be, to the party entitled under this Agreement to retain such
payment or required under this Agreement to make such payment, in either case
except as otherwise mandated by applicable law.

ARTICLE III

INDEMNIFICATION

3.1 INDEMNIFICATION BY U S WEST. U S WEST shall pay, and shall
indemnify and hold the New U S WEST Group and their respective shareholders,
directors, officers, employees, affiliates, agents and successors harmless
from and against, without duplication, (i) all Tax Liabilities allocable to
the MediaOne Group under Article II, (ii) all Tax Liabilities attributable to
Tax Returns required to be filed by the MediaOne Group for any
Post-Separation Taxable Period, (iii) all Tax Liabilities incurred by the New
U S WEST Group by reason of the breach by U S WEST of any of its covenants
hereunder, and (iv) any costs and expenses related to the foregoing
(including, without limitation, reasonable attorneys' fees and expenses).

3.2 LIABILITY OF MEDIAONE GROUP FOR UNDERTAKING CERTAIN TRANSACTIONS.
Notwithstanding any other provision of this Agreement to the contrary, if, as
a result of any

<PAGE>

event, action, or failure to act wholly or partially within the control of
the MediaOne Group (including, without limitation, any event, action, or
failure to act that results in a breach of any representation or in the
inaccuracy of any statement made to the IRS in connection with, the Ruling
Request), or any other event related to the acquisition of U S WEST stock,
any Taxes are imposed on the New U S WEST Group with respect to any action
taken pursuant to the Separation and the Reorganization, including, without
limitation, the transactions that were intended to be tax-free under Sections
332, 355 and 368 of the Code, then U S WEST shall indemnify and hold harmless
the New U S WEST Group with respect to any such Taxes on an after-tax basis.

3.3 INDEMNIFICATION BY NEW U S WEST. New U S WEST shall pay, and shall
indemnify and hold the MediaOne Group and their respective shareholders,
directors, officers, employees, affiliates, agents and successors harmless
from and against, without duplication, (i) all Tax Liabilities allocable to
the New U S WEST Group under Article II, (ii) all Tax Liabilities
attributable to Tax Returns required to be filed by the New U S WEST Group
for any Post-Separation Taxable Period, (iii) all Tax Liabilities incurred by
the MediaOne Group by reason of the breach by New U S WEST of any of its
covenants hereunder and (iv) any costs and expenses related to the foregoing
(including, without limitation, reasonable attorneys' fees and expenses).

3.4 LIABILITY OF NEW U S WEST GROUP FOR UNDERTAKING CERTAIN
TRANSACTIONS. Notwithstanding any other provision of this Agreement to the
contrary, if, as a result of any event, action, or failure to act wholly or
partially within the control of the New U S WEST Group (including, without
limitation, any event, action or failure to act that results in a breach of
any representation or in the inaccuracy of any statement made to the IRS in
connection with, the Ruling Request), or any other event related to the
acquisition of New U S WEST stock, any Taxes are imposed on the MediaOne
Group with respect to any action taken pursuant to the Separation and the
Reorganization, including, without limitation, the transactions that were
intended to be tax-free under Sections 332, 355 and 368 of the Code, then New
U S WEST shall indemnify and hold harmless the MediaOne Group with respect to
any such Taxes on an after-tax basis.

3.5 PAYMENT. If the Indemnifying Party is required to indemnify the
Indemnified Party pursuant to this Article III, the Indemnified Party shall
submit its calculations of the amount required to be paid pursuant to this
Article IV (which shall be net of the Present Value Benefit realized or
realizable by the Indemnified Party), showing such calculations in sufficient
detail so as to permit the Indemnifying Party to understand the calculations.
Subject to the following sentence, the Indemnifying Party shall pay to the
Indemnified Party, no later than ten (10) business days after the
Indemnifying Party receives

<PAGE>

the Indemnified Party's calculations, the amount that the Indemnifying Party
is required to pay the Indemnified Party under this Article III. If the
Indemnifying Party disagrees with such calculations, it must notify the
Indemnified Party of its disagreement in writing within ten (10) business
days of receiving such calculations. Any dispute regarding such calculations
shall be resolved in accordance with Section 6.13 of this Agreement.

3.6 TIME LIMITS. Any claim under this Article III with respect to a
Tax Liability must be made no later than thirty (30) days after the
expiration of the applicable statute of limitations for assessment of such
Tax Liability.

ARTICLE IV

PREPARATION AND FILING OF TAX RETURNS, COOPERATION
AND RECORD RETENTION

4.1 FEDERAL TAX RETURNS. New U S WEST and U S WEST hereby agree to
cooperate fully with each other to meet filing requirements for the U S WEST
Consolidated Group Tax Returns for any Pre-Separation Taxable Period and any
Straddle Period. New U S WEST, as agent for the U S WEST Consolidated Group,
will be responsible for the filing of such Tax Returns for the Taxable Years
ended December 31, 1997 and ending December 31, 1998, and, at the request of
U S WEST, shall use its best efforts to file the Tax Return for the Taxable
Year ending December 31, 1998 by its original due date. For purposes of this
Section 4.1, cooperation includes making available all instructions,
workpapers, research, data and notes of any kind required for the completion
of the Tax Return, as well as making available personnel to assist in the
consolidation effort. Personnel requirements, including the use of third
party contractors, will be negotiated and agreed upon between U S WEST and
New U S WEST. Interviewing and hiring of third-party contractors will be
done jointly, and costs of these contractors will be shared equally. Any
software license costs specifically related to a separate entity shall be
borne by that entity. Where software license costs are not discernible as
separate entity costs, such software license costs will be shared equally.
Due dates for information required for the U S WEST Consolidated Group Tax
Returns will be negotiated between U S WEST and New U S WEST and good faith
efforts will be made to meet those dates.

4.2 COMBINED RETURNS. New U S WEST and U S WEST hereby agree to
cooperate fully with each other to meet filing requirements for Combined
Returns for any Pre-Separation Taxable Period and any Straddle Period. New U
S WEST, as agent for U S WEST, will be responsible for the filing of the
Combined Returns for the Taxable Years ended December 31, 1997 and ending
December 31, 1998 and, at the request of U S WEST, shall

<PAGE>

use its best efforts to file any Combined Returns for the Taxable Year ending
December 31, 1998 by their original due date. For purposes of this Section
4.2, cooperation includes making available all instructions, workpapers,
research, data and notes of any kind required for the completion of the
Combined Return, as well as making available personnel to assist in the
combination effort. Personnel requirements, including the use of third party
contractors, will be negotiated and agreed upon between U S WEST and New U S
WEST. Interviewing and hiring of third-party contractors will be done
jointly, and costs of these contractors will be shared equally. Any software
license costs specifically related to a separate entity shall be borne by
that entity. Where software license costs are not discernible as separate
entity costs, such software license costs will be shared equally. Due dates
for information required for Combined Returns will be negotiated between U S
WEST and New U S WEST and good faith efforts will be made to meet those dates.

4.3 SEPARATE RETURNS. Any Separate Return shall be prepared and caused
to be filed by the entity required by law to file such Separate Return.

4.4 COOPERATION; MAINTENANCE AND RETENTION OF RECORDS. U S WEST and
New U S WEST shall, and shall cause the MediaOne Group and the New U S WEST
Group respectively to, provide the requesting party with such assistance and
documents as may be reasonably requested by such party in connection with (i)
the preparation of any Tax Return, (ii) the conduct of any Proceeding, (iii)
any matter relating to Taxes of any member of the U S WEST Consolidated
Group, the New U S WEST Group or the MediaOne Group and (iv) any other matter
that is a subject of this Agreement. New U S WEST and U S WEST shall retain
or cause to be retained all Tax Returns, schedules and workpapers, and all
material records or other documents relating thereto, until the expiration of
the statute of limitations (including any waivers or extensions thereof) of
the Taxable Years to which such Tax Returns and other documents relate or
until the expiration of any additional period that any party reasonably
requests, in writing, with respect to specific material records or documents.
A party intending to destroy any material records or documents shall provide
the other party with reasonable advance notice and the opportunity to copy or
take possession of such records and documents. The parties hereto will
notify each other in writing of any waivers or extensions of the applicable
statute of limitations that may affect the period for which the foregoing
records or other documents must be retained.

<PAGE>

ARTICLE V

REFUNDS, AUDITS AND ADJUSTMENTS

5.1 REFUNDS OF TAXES. Except as provided in Section 5.2 below, New U S
WEST shall be entitled to all Refunds relating to Taxes (plus any interest
thereon received with respect thereto from the applicable Tax Authority) for
which New U S WEST is or may be liable pursuant to Articles II and III of
this Agreement, and U S WEST shall be entitled to all Refunds relating to
Taxes (plus any interest thereon received with respect thereto from the
applicable Tax Authority) for which U S WEST is or may be liable pursuant to
the provisions of Articles II and III of this Agreement. A party receiving a
Refund to which another party is entitled pursuant to this Agreement shall
pay the amount to which such other party is entitled (plus any interest
thereon received with respect thereto from the applicable Tax Authority)
within ten (10) days after the receipt of the Refund.

5.2 CARRYBACKS. (a) The carryback of any loss, credit or other Tax
attribute in any Post-Separation Taxable Period shall be in accordance with
the provisions of the Code and Treasury Regulations (and any applicable
state, local or foreign laws or regulations).

(b) In the event that the New U S WEST Group realizes any loss, credit
or other Tax attribute in any Post-Separation Taxable Period, such group may
elect to carry back such loss, credit or Tax attribute to a Pre-Separation
Taxable Period. U S WEST shall cooperate with New U S WEST in seeking from
the appropriate Tax Authority any Refund that reasonably would result from
such carryback. New U S WEST shall be entitled to any Refund (or other Tax
benefit) realized by the MediaOne Group (including any interest thereon
received from such Tax Authority) attributable to such carryback, within ten
(10) business days after such Refund (or other Tax benefit) is received;
PROVIDED, HOWEVER, that U S WEST shall be entitled to any Refund (or other
Tax benefit) that results from the carryback of a loss, credit or other Tax
attribute by the MediaOne Group from a Post-Separation Taxable Period to a
Pre-Separation Taxable Period.

(c) Except as otherwise provided by applicable law, if the MediaOne
Group and the New U S WEST Group both may carry back a loss, credit or other
Tax attribute to the same Pre-Separation Taxable Period, any Refund (or other
Tax benefit) resulting therefrom shall be allocated between U S WEST and New
U S WEST proportionately based on the relative amounts of the Refunds (or
other Tax benefits) to which the MediaOne Group and the New U S WEST Group,
respectively, would have been entitled had its carrybacks been the only
carrybacks to such Taxable Year.

<PAGE>

(d) To the extent that the amount of a Refund to which a party is
entitled under this Section 5.2 is reduced by the applicable Tax Authority as
a result of the offset of such amount against a Tax Liability of the other
party, as allocated under this Agreement, the party which receives the
benefit of such offset shall appropriately compensate the other party within
ten (10) days of receipt of such benefit.

5.3 FEDERAL AUDITS AND ADJUSTMENTS.

(a) NOTIFICATION OF AUDIT. Each of U S WEST and New U S WEST shall
give written notice to the other party of any audit of the U S WEST
Consolidated Group Tax Return for any Pre-Separation Taxable Period or
Straddle Period within ten (10) business days after receipt of written
notification of such audit from the IRS. Such notice shall include a copy of
the notification received from the IRS.

(b) STATUTE OF LIMITATIONS. Any extension of the statute of
limitations for any Pre-Separation Taxable Period or Straddle Period shall be
with the mutual agreement of U S WEST and New U S WEST. Any dispute
regarding the extension of the statute of limitations shall be resolved in
accordance with Section 6.13 of this Agreement.

(c) AUDIT ACTIVITY. Each of U S WEST and New U S WEST will coordinate
its respective efforts with respect to audits of any Pre-Separation Taxable
Period and any Straddle Period and will furnish the other with all necessary
workpapers and records to respond to audit inquiries. New U S WEST will be
responsible as agent for the U S WEST Consolidated Group for day-to-day
contact with IRS agents assigned to such audits. U S WEST will be
responsible for responding to audit inquiries regarding issues primarily
affecting Tax Liabilities of the MediaOne Group, but will act through New U S
WEST, rather than directly contacting the IRS with respect to such matters.

(d) NOTIFICATION. New U S WEST will provide timely reports to U S WEST
detailing significant activities, information requests, issues raised or
resolved, and any other relevant information, such reports to be no less
frequent than quarterly.

(e) PROPOSED ADJUSTMENTS. New U S WEST shall notify U S WEST of any
Adjustment to the U S WEST Consolidated Group Tax Returns within ten (10)
business days after receipt of notification of such Adjustment from the IRS.
New U S WEST shall include in its notice to U S WEST a copy of the
notification received from the IRS.

(i) AGREED ISSUES. New U S WEST will not enter into any agreement
with the IRS as agent for the U S WEST Consolidated Group with respect to any

<PAGE>

Adjustment without the written consent of U S WEST, in those cases where the
MediaOne Group would be liable for more than 50% of the proposed Tax
Liability (as allocated under this Agreement) attributable to such
Adjustment. For purposes of this paragraph, all determinations shall be made
separately for each Adjustment.

(ii) UNAGREED ISSUES. In the event U S WEST and New U S WEST, as
the case may be, do not agree to all Adjustments for a Taxable Year,
decisions regarding the procedures and preferred forum for contesting
Adjustments on unagreed issues shall be made by whichever of the MediaOne
Group or the New U S WEST Group is responsible for more than 50% of the
cumulative Tax Liability attributable to such Adjustments. The party making
the decision shall consult in good faith with the other party and shall
promptly notify the other party of its decision.

(iii) CONSENT NOT REQUIRED. Notwithstanding any other provision
of this Agreement, if the IRS notifies U S WEST that the IRS will deal
directly with the MediaOne Group with respect to its Tax Liability, U S WEST
shall have full authority to act for the MediaOne Group and resolve any issue
affecting its Tax Liability without the consent of New U S WEST. U S WEST
will provide New U S WEST with a timely report summarizing any such audit
activity, such report to be no less frequent than quarterly.

(f) FEDERAL REFUND CLAIMS. If the New U S WEST Group desires to file a
claim for Refund with respect to a Taxable Year for which it was a member of
the U S WEST Consolidated Group, it shall prepare and submit to U S WEST the
claim for Refund and a statement specifying the date on which the statute of
limitations for filing the Refund claim will expire. U S WEST will file the
Refund claim prior to the date specified as the last day to claim the Refund
if such a filing is commercially reasonable, and will take any other
appropriate action at New U S WEST's request necessary to secure the Refund.

(g) LITIGATION. Subject to the balance of this Section 5.3(g), U S
WEST and New U S WEST jointly shall conduct all Proceedings relating to
Adjustments of the MediaOne Group and the U S WEST Group as allocated under
this Agreement. U S WEST shall have the ability to control the conduct of
such Proceedings with respect to issues relating to an Adjustment for which
the MediaOne Group would be liable for more than 50% of the proposed Tax
Liability (as allocated under this Agreement) attributable to such
Adjustment. New U S WEST shall have the ability to control the conduct of
such Proceedings with respect to issues relating to an Adjustment for which
the New U S WEST Group would be liable for more than 50% of the proposed Tax
Liability (as allocated under this Agreement) attributable to such
Adjustment. The party with the ability to control the conduct of all or a
portion of the Proceedings pursuant to this Section 5.3(g) shall consult in
good faith with the other party,

<PAGE>

which other party shall be entitled to participate in all conferences,
meetings, and other matters related to the resolution of such Proceedings.

5.4 AUDITS AND ADJUSTMENTS RELATED TO COMBINED RETURNS.

(a) NOTIFICATION OF AUDIT. Each of U S WEST and New U S WEST shall
give written notice to the other party of any audit of a Combined Return for
any Pre-Separation Taxable Period or Straddle Period within ten (10) business
days after receipt of written notification of such audit from a Tax
Authority. Such notice shall include a copy of the notification received
from the relevant Tax Authority.

(c) AUDIT ACTIVITY. Each of U S WEST and New U S WEST will coordinate
its respective efforts with respect to audits of Combined Returns of any
Pre-Separation Taxable Period and any Straddle Period and will furnish the
other with all necessary workpapers and records to respond to audit
inquiries. New U S WEST will be responsible as agent for any Combined Return
for day-to-day contact with state Tax Authorities regarding such audits. U S
WEST will be responsible for responding to audit inquiries regarding issues
primarily affecting Tax Liabilities of the MediaOne Group, but will act
through New U S WEST, rather than directly contacting the appropriate Tax
Authorities with respect to such matters.

(d) NOTIFICATION. With respect to a Combined Return, New U S WEST will
provide timely reports to U S WEST detailing significant activities,
information requests, issues raised or resolved, and any other relevant
information, such reports to be no less frequent than quarterly.

(e) PROPOSED ADJUSTMENTS. New U S WEST shall notify U S WEST of any
Adjustment to a Combined Return within ten (10) business days after receipt
of notification of such Adjustment from the applicable state Tax Authority.
New U S WEST shall include in its notice to U S WEST a copy of the
notification received from such Tax Authority.

(i) AGREED ISSUES. New U S WEST will not enter into any agreement
with a state Tax Authority as agent for U S WEST with respect to any
Adjustment in connection with a Combined Return without the written consent
of U S WEST in such cases

<PAGE>

where the MediaOne Group would be liable for more than 50% of the proposed
Tax Liability (as allocated under this Agreement) at issue. For purposes of
this paragraph, all determinations shall be made separately for each
Adjustment.

(ii) UNAGREED ISSUES. In the event U S WEST and New U S WEST, as
the case may be, do not agree to all Adjustments with respect to a Combined
Return for a Taxable Year, decisions regarding the procedures and preferred
forum for contesting Adjustments on unagreed issues shall be made by
whichever of the MediaOne Group or the New U S WEST Group is responsible for
more than 50% of the cumulative Tax Liability attributable to such
Adjustments. The party making the decision shall consult in good faith with
the other party and shall promptly notify the other party of its decision.

(f) STATE REFUND CLAIMS. If the New U S WEST Group desires to file a
claim for Refund with respect to a Taxable Year for which it filed a Combined
Return, it shall prepare and submit to U S WEST the claim for Refund and a
statement specifying the date on which the statute of limitations for filing
the Refund claim will expire. U S WEST will file the Refund claim prior to
the date specified if such filing is commercially reasonable and will take
any other appropriate action at New U S WEST's request necessary to secure
the Refund.

(g) STATE TAX LITIGATION. Subject to the balance of this Section
5.4(g), U S WEST and New U S WEST jointly shall conduct all Proceedings
relating to Adjustments of the MediaOne Group and the New U S WEST Group
allocated under this Agreement in connection with a Combined Return. U S
WEST shall have the ability to control the conduct of such Proceedings with
respect to issues relating to an Adjustment for which the MediaOne Group
would be liable for more than 50% of the proposed Tax Liability (as allocated
under this Agreement) attributable to such Adjustment. New U S WEST shall
have the ability to control the conduct of such Proceedings with respect to
issues relating to an Adjustment for which the New U S WEST Group would be
liable for more than 50% of the proposed Tax Liability (as allocated under
this Agreement) attributable to such Adjustment. The party with the ability
to control the conduct of all or a portion of the Proceedings pursuant to
this Section 5.4(g) shall consult in good faith with the other party, which
other party shall be entitled to participate in all conferences, meetings,
and other matters related to the resolution of such Proceedings.

5.5 SEPARATE RETURN MATTERS. The New U S WEST Group and the MediaOne
Group will be responsible for and manage their respective Separate Return
Proceedings.

5.6 PAYMENT OF COSTS. All costs incurred, whether external or internal
(such as in-house tax and legal department salaries and other personnel),
with respect to a Proceeding

<PAGE>

shall be borne by the party with respect to which the costs relate. All
other costs relating to Tax Returns or Proceedings not otherwise provided for
in this Agreement shall be allocated 50% to the New U S WEST Group and 50% to
the MediaOne Group.

ARTICLE VI

MISCELLANEOUS

6.1 COVENANTS RELATING TO RULING REQUEST.

(a) U S WEST AND THE MEDIAONE GROUP. (i) U S WEST shall comply and
shall cause the MediaOne Group to comply with and otherwise not take any
action inconsistent with each representation and statement made to the IRS in
connection with the Ruling Request and (ii) until two (2) years after the
Separation Date, U S WEST will remain engaged in the active conduct of a
trade or business, as defined in Section 355(b) of the Code.

(b) NEW U S WEST AND THE NEW U S WEST GROUP. (i) New U S WEST shall
comply and shall cause the New U S WEST Group to comply with and otherwise
not take any action inconsistent with each representation and statement made
to the IRS in connection with the Ruling Request and (ii) until two (2) years
after the Separation Date, New U S WEST will remain engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Code.

6.2 TERMINATION OF PRIOR TAX SHARING AGREEMENTS. This Agreement shall
take effect on the Separation Date and shall replace all other agreements,
whether or not written, in respect of any Taxes between or among the MediaOne
Group on the one hand and the New U S WEST Group on the other. All such
replaced agreements shall be canceled as of the Separation Date to the extent
they relate to the New U S WEST Group, and any rights or obligations of the
MediaOne Group or the New U S WEST Group existing thereunder thereby shall be
fully and finally settled without any payment by any party thereto.

6.3 MERGER OR CONSOLIDATION. Neither New U S WEST nor U S WEST (in
either case, the "Transaction Party") shall (i) consolidate with or merge
into any Person or permit any Person to consolidate with or merge into the
Transaction Party (other than a merger or consolidation in which the
Transaction Party is the surviving or continuing corporation) or (ii) sell,
assign, transfer, lease or otherwise dispose of, in one transaction or a
series of related transactions, all or substantially all of the assets of the
Transaction Party, unless the resulting, surviving or transferee Person shall
expressly assume, by instrument in

<PAGE>

form and substance reasonably satisfactory to the other party, all of the
obligations of the Transaction Party under this Agreement.

6.4 SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such
party or by any entity that is contemplated to be a Subsidiary (as defined in
the Separation Agreement) of such party on or after the Separation Date.

6.5 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of Colorado, without reference to choice of law
principles, including matters of construction, validity and performance.

6.6 AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written Agreement signed by all of the parties hereto.

6.7 NOTICES. Notices, requests, permissions, waivers, referrals and
all other communications hereunder shall be in writing and shall be deemed to
have been duly given if signed by the respective persons giving them (in the
case of any corporation, the signature shall be by an officer thereof) and
delivered by hand or by telecopy or on the date of receipt indicated on the
return receipt if mailed (registered or certified, return receipt requested,
properly addressed and postage prepaid):

If to U S WEST, to:

U S WEST, Inc.
(to be renamed "MEDIAONE
GROUP, INC.")
188 Inverness Drive West
Englewood, Colorado 80112
Attention: Director of Taxes
Telephone: 303-
Telecopy: 303-

<PAGE>

If to New U S WEST, to:

USW-C, Inc.
(to be renamed "U S WEST, INC.")
6300 South Syracuse Way
Suite 700 North
Englewood, Colorado 80111
Attention: Director of Taxes
Telephone: 303-850-3900
Telecopy: 303-850-3959

Such names and addresses may be changed by notice given in accordance with
this Section 6.7.

6.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein, and supersedes and cancels all prior agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, respecting such subject matter.

6.9 HEADINGS; REFERENCES. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles" or "Sections" shall be deemed to be
references to Articles or Sections hereof unless otherwise indicated.

6.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all
of which shall constitute one and the same original.

6.11 PARTIES IN INTEREST; ASSIGNMENT; SUCCESSOR. Neither this
Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall
inure to the benefit of and be binding upon U S WEST and New U S WEST and
their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies under or by reason of this Agreement.

6.12 CONFIDENTIALITY. Each of New U S WEST and U S WEST shall hold,
and each of the New U S WEST Group and the MediaOne Group shall use its
reasonable best

<PAGE>

efforts to hold, in strict confidence all information concerning the other
party obtained by it prior to the Separation Date or furnished to it by such
other party pursuant to this Agreement pursuant to and in accordance with the
terms of Section 10.5 of the Separation Agreement.

6.13 ARBITRATION. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute
or otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties shall be exclusively
governed by and settled in accordance with the provisions of Section 12.2 of
the Separation Agreement, provided, however, that nothing contained in
Section 12.2 of the Separation Agreement shall preclude either party from
seeking or obtaining injunctive relief or equitable or other judicial relief
to enforce such Section 12.2, or, pending resolution of Disputes (as defined
in the Separation Agreement) under such Section, to preserve the status quo
or to enforce an arbitral award rendered pursuant to such Section.

6.14 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.

6.16 EFFECTIVE DATE. This Agreement shall become effective only upon
the occurrence of the Separation.

IN WITNESS WHEREOF, each of the Parties has caused this Tax Sharing
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first written above.

U S WEST, Inc.

By:
-------------------------------------
Name:
Title:

USW-C, Inc.

<PAGE>

By:
-------------------------------------
Name:
Title:

<PAGE>

RESTATED CERTIFICATE OF INCORPORATION
OF
U S WEST, INC.
(ORIGINALLY INCORPORATED ON DECEMBER 23, 1997
UNDER THE NAME USW-C, INC.)

ARTICLE I

NAME

The name of the corporation is U S WEST, Inc. (the "Corporation").

ARTICLE II

ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT

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

<PAGE>

CAPITAL STOCK

SECTION 1. AUTHORIZATION. 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 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.

SECTION 2. COMMON STOCK. 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, 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.

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), 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 series of Preferred Stock purchased, exchanged, converted or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and

<PAGE>

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 PREFERRED STOCK. There is hereby created a series
of Preferred Stock, designated Series A Junior 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:

3.1.1 DIVIDENDS AND DISTRIBUTIONS.

A. Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, (i) cash dividends in an amount per share
(rounded to the nearest cent) equal to 100 times the aggregate per share
amount of all cash dividends declared or paid on the Common Stock, and (ii) a
preferential cash dividend (the "Preferential Dividends"), if any, in
preference to the holders of Common Stock, on the first day of February, May,
August and November of each year (each 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,
payable in an amount (except in the case of the first Quarterly Dividend
Payment if the date of the first issuance of Series A Preferred Stock is a
date other than a Quarterly Dividend Payment date, in which case such payment
shall be a prorated amount of such amount) equal to $25 per share of Series A
Preferred Stock less the per share amount of all cash dividends declared on
the Series A Preferred Stock pursuant to clause (i) of this sentence 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. In the event the
Corporation shall, at any time after the issuance of any share or fraction of
a share of Series A Preferred Stock,

<PAGE>

make any distribution on the shares of Common Stock, whether by way of a
dividend or a reclassification of stock, a recapitalization, reorganization
or partial liquidation of the Corporation or otherwise, which is payable in
cash or any debt security, debt instrument, real or personal property or any
other property (other than cash dividends subject to the immediately
preceding sentence, a distribution of shares of Common Stock or other capital
stock of the Corporation or a distribution of rights or warrants to acquire
any such share, including any debt security convertible into or exchangeable
for any such share, at a price less than the Fair Market Value (as
hereinafter defined) of such share), then, and in each such event, the
Corporation shall simultaneously pay on each then outstanding share of Series
A Preferred Stock a distribution, in like kind, of 100 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the
Series A Preferred Stock to which holders thereof are entitled pursuant to
clause (i) of the first sentence of this paragraph and pursuant to the second
sentence of this paragraph are hereinafter referred to as "Dividends" and the
multiple of such cash and non-cash dividends on the Common Stock applicable
to the determination of the Dividends, which shall be 100 initially but shall
be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple". In the event the Corporation shall
at any time after __________, 1998 (the "Effective Date") declare or pay any
dividend or make any distribution on Common Stock payable in shares of Common
Stock, or effect a subdivision or split or a combination, consolidation or
reverse split of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, then in each such case the Dividend
Multiple thereafter applicable to the determination of the amount of
Dividends which holders of shares of Series A Preferred Stock shall be
entitled to receive shall be the Dividend Multiple applicable immediately
prior to such event multiplied by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

B. The Corporation shall declare each Dividend at the same time it
declares any cash or non-cash dividend or distribution on the Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash
dividend or distribution on the Common Stock in respect of

<PAGE>

which a Dividend is required to be paid shall be paid or set aside for
payment on the Common Stock unless a Dividend in respect of such dividend or
distribution on the Common Stock shall be simultaneously paid, or set aside
for payment, on the Series A Preferred Stock.

C. Preferential Dividends shall begin to accrue on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of any shares of Series A Preferred
Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall
not bear interest. Preferential 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.

3.1.2 VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:

(A) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the holders of the
Common Stock. The number of votes which a holder of Series A Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple". In
the event the Corporation shall at any time after the Effective Date declare
or pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes per share
to which holders of shares of Series A Preferred Stock shall be entitled
after such event shall be the Vote Multiple immediately prior to such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.

(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by-laws of the Corporation,

<PAGE>

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) In the event that the Preferential Dividends accrued on the
Series A Preferred Stock for four or more quarterly dividend periods, whether
consecutive or not, shall not have been declared and paid or irrevocably set
aside for payment, the holders of record of Preferred Stock of the
Corporation of all series (including the Series A Preferred Stock), other
than any series in respect of which such right is expressly withheld by the
Certificate of Incorporation or the authorizing resolutions included in any
Certificate of Designations therefor, shall have the right, at the next
meeting of stockholders called for the election of directors, to elect two
members to the Board of Directors, which directors shall be in addition to
the number required by the by-laws of the Corporation prior to such event, to
serve until the next Annual Meeting and until their successors are elected
and qualified or their earlier resignation, removal or incapacity or until
such earlier time as all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series A Preferred Stock shall have been paid (or
irrevocably set aside for payment) in full. The holders of shares of Series
A Preferred Stock shall continue to have the right to elect directors as
provided by the immediately preceding sentence until all accrued and unpaid
Preferential Dividends upon the outstanding shares of Series A Preferred
Stock shall have been paid (or set aside for payment) in full. Such
directors may be removed and replaced by such stockholders, and vacancies in
such directorships may be filled only by such stockholders (or by the
remaining director elected by such stockholders, if there be one) in the
manner permitted by law; provided, however, that any such action by
stockholders shall be taken at a meeting of stockholders and shall not be
taken by written consent thereto.

(D) Except as otherwise required by the Certificate of
Incorporation or by-laws of the Corporation or set forth herein, holders of
Series A Preferred Stock shall have no other special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for the taking of any
corporate action.

<PAGE>

3.1.3. CERTAIN RESTRICTIONS.

(A) Whenever Preferential Dividends or Dividends are in arrears or
the Corporation shall be in default of payment thereof, thereafter and until
all accrued and unpaid Preferential Dividends and Dividends, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been
paid or set irrevocably aside for payment in full, and in addition to any and
all other rights which any holder of shares of Series A Preferred Stock may
have in such circumstances, the Corporation shall not

(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration, any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series
A Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled if the full dividends accrued thereon
were to be paid;

(iii) except as permitted by subparagraph (iv) of this paragraph
3.1.3(A), redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (both as to dividends and
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock; or

(iv) 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 (either as to dividends or upon
liquidation, dissolution or winding up), except in accordance with a
purchase offer made to all holders of such shares upon such terms as the
Board of Directors,

<PAGE>

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 (as
hereinafter defined) 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 Section 3.1.3, purchase or otherwise
acquire such shares at such time and in such manner. A "Subsidiary" of the
Corporation shall mean any corporation or other entity of which securities or
other ownership interests having ordinary voting power sufficient to elect a
majority of the board of directors of such corporation or other entity or
other persons performing similar functions are beneficially owned, directly
or indirectly, by the Corporation or by any corporation or other entity that
is otherwise controlled by the Corporation.

(C) The Corporation shall not issue any shares of Series A
Preferred Stock except upon exercise of Rights issued pursuant to that
certain Rights Agreement dated as of _____________, 1998 between the
Corporation and State Street Bank and Trust Company, as Rights Agent, a copy
of which is on file with the Secretary of the Corporation at its principal
executive office and shall be made available to stockholders of record
without charge upon written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing contained in the provisions
hereof shall prohibit or restrict the Corporation from issuing for any
purpose any series of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of the Series A Preferred Stock.

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 upon their retirement and cancellation shall become authorized
but unissued shares of Preferred Stock, without designation as to series, and
such shares may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors.

<PAGE>

3.1.5. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless the holders of shares of Series A
Preferred Stock shall have received for each share of Series A Preferred
Stock, subject to adjustment as hereinafter provided, (A) $100 ($1.00 per one
one-hundredth of a share) plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment or, (B) if greater than the amount specified in clause (i)(A) of
this sentence, an amount equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, as the same may be adjusted
as hereinafter provided and (ii) to the holders of stock ranking on a parity
upon liquidation, dissolution or winding up with the Series A Preferred
Stock, unless simultaneously therewith distributions are made ratably on the
Series A Preferred Stock and all other shares of such parity stock in
proportion to the total amounts to which the holders of shares of Series A
Preferred Stock are entitled under clause (i)(A) of this sentence and to
which the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of
Series A Preferred Stock may be entitled upon liquidation, dissolution or
winding up of the Corporation pursuant to clause (i)(B) of the foregoing
sentence is hereinafter referred to as the "Participating Liquidation Amount"
and the multiple of the amount to be distributed to holders of shares of
Common Stock upon the liquidation, dissolution or winding up of the
Corporation applicable pursuant to said clause to the determination of the
Participating Liquidation Amount, as said multiple may be adjusted from time
to time as hereinafter provided, is hereinafter referred to as the
"Liquidation Multiple". In the event the Corporation shall at any time after
the Effective Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock into
a greater or lesser number of shares of Common Stock, then, in each such
case, the Liquidation Multiple thereafter applicable to the determination of
the Participating Liquidation Amount to which holders of Series A Preferred
Stock shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied by a

<PAGE>

fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

3.1.6. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS.

(A) In the event that holders of shares of Common Stock receive
after the Effective Date in respect of their shares of Common Stock any share
of capital stock of the Corporation (other than any share of Common Stock),
whether by way of reclassification, recapitalization, reorganization,
dividend or other distribution or otherwise (a "Transaction"), then, and in
each such event, the dividend rights, voting rights and rights upon the
liquidation, dissolution or winding up of the Corporation of the shares of
Series A Preferred Stock shall be adjusted so that after such event the
holders of Series A Preferred Stock shall be entitled, in respect of each
share of Series A Preferred Stock held, in addition to such rights in respect
thereof to which such holder was entitled immediately prior to such
adjustment, to (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such Transaction multiplied by the additional
dividends which the holder of a share of Common Stock shall be entitled to
receive by virtue of the receipt in the Transaction of such capital stock,
(ii) such additional voting rights as equal the Vote Multiple in effect
immediately prior to such Transaction multiplied by the additional voting
rights which the holder of a share of Common Stock shall be entitled to
receive by virtue of the receipt in the Transaction of such capital stock and
(iii) such additional distributions upon liquidation, dissolution or winding
up of the Corporation as equal the Liquidation Multiple in effect immediately
prior to such Transaction multiplied by the additional amount which the
holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Corporation by virtue of the
receipt in the Transaction of such capital stock, as the case may be, all as
provided by the terms of such capital stock.

(B) In the event that holders of shares of Common Stock receive
after the Effective Date in respect of their shares of Common Stock any right
or warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share

<PAGE>

less than the Fair Market Value of a share of Common Stock on the date of
issuance of such right or warrant, then and in each such event the dividend
rights, voting rights and rights upon the liquidation, dissolution or winding
up of the Corporation of the shares of Series A Preferred Stock shall each be
adjusted so that after such event the Dividend Multiple, the Vote Multiple
and the Liquidation Multiple shall each be the product of the Dividend
Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be,
in effect immediately prior to such event multiplied by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum
number of shares of Common Stock which could be acquired upon exercise in
full of all such rights or warrants and the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such issuance
of rights or warrants plus the number of shares of Common Stock which could
be purchased, at the Fair Market Value of the Common Stock at the time of
such issuance, by the maximum aggregate consideration payable upon exercise
in full of all such rights or warrants.

(C) In the event that holders of shares of Common Stock receive
after the Effective Date in respect of their shares of Common Stock any right
or warrant to purchase capital stock of the Corporation (other than shares of
Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the
Corporation (other than Common Stock), at a purchase price per share less
than the Fair Market Value of such shares of capital stock on the date of
issuance of such right or warrant, then and in each such event the dividend
rights, voting rights and rights upon liquidation, dissolution or winding up
of the Corporation of the shares of Series A Preferred Stock shall each be
adjusted so that after such event each holder of a share of Series A
Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such event, to receive (i) such
additional dividends as equal the Dividend Multiple in effect immediately
prior to such event multiplied, first, by the additional dividends to which
the holder of a share of Common Stock shall be entitled upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction (as hereinafter
defined) and (ii) such

<PAGE>

additional voting rights as equal the Vote Multiple in effect immediately
prior to such event multiplied, first, by the additional voting rights to
which the holder of a share of Common Stock shall be entitled upon exercise
of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction and
(iii) such additional distributions upon liquidation, dissolution or winding
up of the Corporation as equal the Liquidation Multiple in effect immediately
prior to such event multiplied, first, by the additional amount which the
holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Corporation upon exercise of
such right or warrant by virtue of the capital stock which could be acquired
upon such exercise and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Fair Market Value of a
share of the capital stock subject to a right or warrant distributed to
holders of shares of Common Stock of the Corporation as contemplated by this
paragraph immediately after the distribution thereof and the purchase price
per share for such share of capital stock pursuant to such right or warrant
and the denominator of which shall be the Fair Market Value of a share of
such capital stock immediately after the distribution of such right or
warrant.

(D) For purposes of this Certificate of Designations, the "Fair
Market Value" of a share of capital stock of the Corporation (including a
share of Common Stock) on any date shall be deemed to be the average of the
daily closing price per share thereof over the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date;
provided, however, that, in the event that such Fair Market Value of any such
share of capital stock is determined during a period which includes any date
that is within 30 Trading Days after (i) the ex-dividend date for a dividend
or distribution on stock payable in shares of such stock or securities
convertible into shares of such stock, or (ii) the effective date of any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Fair Market
Value shall be appropriately adjusted by the Board of Directors of the
Corporation to take into account ex-dividend or post-effective date trading.
The closing price for any day shall be the last sale price, regular way, or,
in case, no such sale takes place on such day, the average of the closing bid
and asked

<PAGE>

prices, regular way (in either case, as reported in the applicable
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange), or, if the shares are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading
on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or if on any such date the shares are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the shares
selected by the Board of Directors of the Corporation. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the shares are listed or admitted to trading is open for the
transaction of business or, if the shares are not listed or admitted to
trading on any national securities exchange, on which the New York Stock
Exchange or such other national securities exchange as may be selected by the
Board of Directors of the Corporation is open. If the shares are not
publicly held or not so listed or traded on any day within the period of 30
Trading Days applicable to the determination of Fair Market Value thereof as
aforesaid, "Fair Market Value" shall mean the fair market value thereof per
share as determined in good faith by the Board of Directors of the
Corporation. In either case referred to in the foregoing sentence, the
determination of Fair Market Value shall be described in a statement filed
with the Secretary of the Corporation.

3.1.7. CONSOLIDATION, MERGER, ETC. In case 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, then in any such case
each outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case
may be, for which or into which each share of Common Stock is changed or
exchanged multiplied by the highest of the Vote

<PAGE>

Multiple, the Dividend Multiple or the Liquidation Multiple in effect
immediately prior to such event.

3.1.8. EFFECTIVE TIME OF ADJUSTMENTS.

(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.

(B) The Corporation shall give prompt written notice to each
holder of a share of Series A Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights or rights upon liquidation, dissolution
or winding up of the Corporation of such shares required by the provisions
hereof. Notwithstanding the foregoing sentence, the failure of the
Corporation to give such notice shall not affect the validity of or the force
or effect of or the requirement for such adjustment.

3.1.9. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable at the option of the Corporation or any holder
thereof. Notwithstanding the foregoing sentence of this Section, the
Corporation may acquire shares of Series A Preferred Stock in any other
manner permitted by law, the provisions hereof and the Certificate of
Incorporation.

3.1.10. RANKING. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Designations relating to a subsequent
series of preferred stock of the Corporation, the Series A Preferred Stock
shall rank junior to all other series of the Corporation's preferred stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up and senior to the Common Stock.

3.1.11. AMENDMENT. The provisions hereof and the Certificate of
Incorporation shall not be amended in any manner which would adversely affect
the rights, privileges or powers of the Series A Preferred Stock without, in
addition to any other vote of stockholders required by law, the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series
A Preferred Stock, voting together as a single class.

3.1.12. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share (in one one-

<PAGE>

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.

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;

(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

<PAGE>

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 series of Preferred
Stock, 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 and subject
to the rights of the holders of any series of Preferred Stock, 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.

<PAGE>

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 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

<PAGE>

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

<PAGE>

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 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).

<PAGE>

(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 in 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

<PAGE>

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

(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

<PAGE>

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:

<PAGE>

(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
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.

<PAGE>

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
662 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

<PAGE>

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.

<PAGE>

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 written
consent of the sole stockholder of the Corporation in accordance with the
provisions of Sections 228, 242 and 245 of the Delaware General Corporation
Law, has been executed by ______________________, its ______________________,
this day of , 1998.

U S WEST, INC.

By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------

<PAGE>

BYLAWS

U S WEST, INC.

(FORMERLY USW-C, INC.)

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of U S WEST,
INC. (formerly USW-C, Inc.) (the "Corporation") in the State of Delaware
shall be at 1209 Orange Street, in the City of Wilmington, County of New
Castle, 19801 and its registered agent at such address shall be The
Corporation Trust Company, or such other office or agent as the Board of
Directors of the Corporation (the "Board") shall from time to time select.

SECTION 2. OTHER OFFICES. The Corporation may also have an office
or offices, and keep the books and records of the Corporation, except as may
otherwise be required by law, at such other place or places, either within or
without the State of Delaware, as the Board may from time to time determine
or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETING. All meetings of the stockholders of
the Corporation shall be held at the office of the Corporation or at such
other places, within or without the State of Delaware, as may from time to
time be fixed by the Board.

SECTION 2. ANNUAL MEETINGS. The annual meeting of the
stockholders for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on the
first Friday of June in each year, at an hour to be named in the notice of
the meeting, unless such day should fall on a legal holiday in the State of
Colorado, in which event the meeting shall be held on the next succeeding
business day that is not a legal holiday, or on such date and at such hour as
shall from time to time be fixed by the Board. Any previously scheduled
annual meeting of the stockholders may be postponed by action of

<PAGE>

the Board taken prior to the time previously scheduled for such annual
meeting of stockholders.

SECTION 3. SPECIAL MEETINGS. Except as otherwise required by law
or the Certificate of Incorporation of the Corporation (the "Certificate"),
special meetings of the stockholders for any purpose or purposes may be
called by the Chairman of the Board, the Chief Executive Officer or a
majority of the entire Board. Only such business as is specified in the
notice of any special meeting of the stockholders shall come before such
meeting.

SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by
law, written notice of each meeting of the stockholders, whether annual or
special, shall be given, either by personal delivery or by mail, not less
than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to notice of the meeting. If mailed, such
notice shall be deemed given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as
it appears on the records of the Corporation. Each such notice shall state
the place, date and hour of the meeting, and the purpose or purposes for
which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who shall attend such meeting in
person or by proxy without protesting, prior to or at the commencement of the
meeting, the lack of proper notice to such stockholder, or who shall sign a
written waiver of notice thereof, whether before or after such meeting.
Notice of adjournment of a meeting of stockholders need not be given if the
time and place to which it is adjourned are announced at such meeting, unless
the adjournment is for more than 30 days or, after adjournment, a new record
date is fixed for the adjourned meeting.

SECTION 5. QUORUM. Except as otherwise provided by law or by the
Certificate, the holders of a majority of the votes entitled to be cast by
the stockholders entitled to vote generally, present in person or by proxy,
shall constitute a quorum for the transaction of business at any meeting of
the stockholders; PROVIDED, HOWEVER, that in the case of any vote to be taken
by classes, the holders of a majority of the votes entitled to be cast by the
stockholders of a particular class shall constitute a quorum for the
transaction of business by such class.

SECTION 6. ADJOURNMENTS. The chairman of the meeting or the
holders of a majority of the votes entitled to be cast by the stockholders
who are present in person or by proxy may adjourn

<PAGE>

the meeting from time to time whether or not a quorum is present. In the
event that a quorum does not exist with respect to any vote to be taken by a
particular class, the chairman of the meeting or the holders of a majority of
the votes entitled to be cast by the stockholders of such class who are
present in person or by proxy may adjourn the meeting with respect to the
vote(s) to be taken by such class. At such adjourned meeting at which a
quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called.

SECTION 7. ORDER OF BUSINESS. (a) At each meeting of the
stockholders, the Chairman of the Board or, in the absence of the Chairman of
the Board, the Chief Executive Officer or, in the absence of the Chief
Executive Officer, such person as shall be selected by the Board shall act as
chairman of the meeting. The order of business at each such meeting shall be
as determined by the chairman of the meeting. The chairman of the meeting
shall have the right and authority to prescribe such rules, regulations and
procedures and to do all such acts and things as are necessary or desirable
for the proper conduct of the meeting, including, without limitation, the
establishment of procedures for the maintenance of order and safety,
limitations on the time allotted to questions or comments on the affairs of
the Corporation, restrictions on entry to such meeting after the time
prescribed for the commencement thereof, and the opening and closing of the
voting polls.

(b) At any annual meeting of stockholders, only such business shall
be conducted as shall have been brought before the annual meeting (i) by or
at the direction of the chairman of the meeting, (ii) pursuant to the notice
provided for in Section 4 of this Article II or (iii) by any stockholder who
is a holder of record at the time of the giving of such notice provided for
in this Section 7, who is entitled to vote at the meeting and who complies
with the procedures set forth in this Section 7.

(c) For business properly to be brought before an annual meeting by
a stockholder, the stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation (the "Secretary").
To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
90 days prior to the date of an annual meeting of stockholders. To be in
proper written form, a stockholder's notice to the Secretary shall set forth
in writing as to each matter the stockholder proposes to bring before the
annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the

<PAGE>

annual meeting; (ii) the name and address of the stockholder proposing such
business and all persons or entities acting in concert with the stockholder;
(iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and all persons or entities acting in
concert with such stockholder; and (iv) any material interest of the
stockholder in such business. The foregoing notice requirements shall be
deemed satisfied by a stockholder if the stockholder has notified the
Corporation of his or her intention to present a proposal at an annual
meeting and such stockholder's proposal has been included in a proxy
statement that has been prepared by management of the Corporation to solicit
proxies for such annual meeting; PROVIDED, HOWEVER, that if such stockholder
does not appear or send a qualified representative to present such proposal
at such annual meeting, the Corporation need not present such proposal for a
vote at such meeting, notwithstanding that proxies in respect of such vote
may have been received by the Corporation. Notwithstanding anything in the
bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this Section 7. The
chairman of an annual meeting shall, if the facts warrant, determine that
business was not properly brought before the annual meeting in accordance
with the provisions of this Section 7 and, if the chairman should so
determine, the chairman shall so declare to the annual meeting and any such
business not properly brought before the annual meeting shall not be
transacted.

SECTION 8. LIST OF STOCKHOLDERS. It shall be the duty of the
Secretary or other officer who has charge of the stock ledger to prepare and
make, at least 10 days before each meeting of the stockholders, a complete
list of the stockholders entitled to vote thereat, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in such stockholder's name. Such list shall be produced and kept
available at the times and places required by law.

SECTION 9. VOTING. (a) Except as otherwise provided by law or by
the Certificate, each stockholder of record of any class or series of capital
stock of the Corporation shall be entitled at each meeting of stockholders to
such number of votes for each share of such stock as may be fixed in the
Certificate or in the resolution or resolutions adopted by the Board
providing for the issuance of such stock, registered in such stockholder's
name on the books of the Corporation:

(1) on the date fixed pursuant to Section 6 of Article VII of
these bylaws as the record date for the determination

<PAGE>

of stockholders entitled to notice of and to vote at such meeting; or

(2) if no such record date shall have been so fixed, then at the
close of business on the day next preceding the day on which notice of
such meeting is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held.

(b) Each stockholder entitled to vote at any meeting of
stockholders may authorize not in excess of three persons to act for such
stockholder by proxy. Any such proxy shall be delivered to the secretary of
such meeting at or prior to the time designated for holding such meeting. No
such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period.

(c) At each meeting of the stockholders, all corporate actions to
be taken by vote of the stockholders (except as otherwise required by law and
except as otherwise provided in the Certificate or these bylaws) shall be
authorized by a majority of the votes cast by the stockholders entitled to
vote thereon who are present in person or represented by proxy, and where a
separate vote by class is required, a majority of the votes cast by the
stockholders of such class who are present in person or represented by proxy
shall be the act of such class.

(d) Unless required by law or determined by the chairman of the
meeting to be advisable, the vote on any matter, including the election of
directors, need not be by written ballot. In the case of a vote by written
ballot, each ballot shall be signed by the stockholder voting, or by such
stockholder's proxy.

SECTION 10. INSPECTORS. The chairman of the meeting shall appoint
one or more inspectors to act at any meeting of stockholders. Such
inspectors shall perform such duties as shall be specified by the chairman of
the meeting. Inspectors need not be stockholders. No director or nominee
for the office of director shall be appointed such inspector.

ARTICLE III

BOARD OF DIRECTORS

SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the

<PAGE>

Board, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate directed or
required to be exercised or done by the stockholders.

SECTION 2. NUMBER, QUALIFICATION AND ELECTION. (a) Except as
otherwise fixed by or pursuant to the provisions of Article V of the
Certificate relating to the rights of the holders of any class or series of
stock having preference over the common stock of the corporation as to
dividends or upon liquidation, the number of directors of the Corporation
shall be determined from time to time by the Board by the affirmative vote of
directors constituting at least a majority of the entire Board; provided that
the number thereof may not be less than six nor more than seventeen.

(b) The directors, other than those who may be elected 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 upon liquidation
pursuant to the terms of Article V of the Certificate or any resolution or
resolutions providing for the issuance of such stock adopted by the Board,
shall be classified, with respect to the time for which they severally hold
office, into three classes as nearly equal in number as possible, 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 upon
liquidation, at each such 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.

(d) In any election of directors held at a meeting of stockholders,
the persons receiving a plurality of the votes cast by the stockholders
entitled to vote thereon at such meeting who are present or represented by
proxy, up to the number of directors to be elected in such election, shall be
deemed elected.

SECTION 3. NOTIFICATION OF NOMINATION. Subject to the rights of
the holders of any class or series of stock having a preference over the
common stock as to dividends or upon liquidation, nominations for the
election of directors may be made by the Board or by any stockholder who is a
stockholder of record

<PAGE>

at the time of giving of the notice of nomination provided for in this
Section 3 of this Article III and who is entitled to vote for the election of
directors. Any stockholder of record entitled to vote for the election of
directors at a meeting may nominate persons for election as directors only if
timely written notice of such stockholder's intent to make such nomination is
given, either by personal delivery or by United States mail, postage prepaid,
to the Secretary. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
(i) with respect to an election to be held at an annual meeting of
stockholders, not less than 60 days prior to the date of such annual meeting
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, not less than 15 days following
the public announcement of the date of such special meeting. Each such
notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination, of all persons or entities acting in concert
with the stockholder, and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or entities acting in
concert with the stockholder (naming such person or entities) pursuant to
which the nomination or nominations are to be made by the stockholder; (d)
such other information regarding each nominee proposed by the stockholder as
would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had each nominee
been nominated, or intended to be nominated, by the Board; (e) the class and
number of shares of the Corporation that are beneficially owned by the
stockholder and all persons or entities acting in concert with the
stockholder; and (f) the consent of each nominee to being named in a proxy
statement as nominee and to serve as a director of the Corporation if so
elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made after compliance with the foregoing
procedure. Only such persons who are nominated in accordance with the
procedures set forth in this Section 3 of this Article III shall be eligible
to serve as directors of the Corporation.

SECTION 4. QUORUM AND MANNER OF ACTING. Except as otherwise
provided by law, the Certificate or these bylaws, a majority of the entire
Board shall constitute a quorum for the transaction of business at any
meeting of the Board, and, except as so provided, the vote of a majority of
the directors present at

<PAGE>

any meeting at which a quorum is present shall be the act of the Board. The
chairman of the meeting or a majority of the directors present may adjourn
the meeting to another time and place whether or not a quorum is present. At
any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called.

SECTION 5. PLACE OF MEETING. The Board may hold its meetings at
such place or places within or without the State of Delaware as the Board may
from time to time determine or as shall be specified or fixed in the
respective notice or waivers of notice thereof.

SECTION 6. REGULAR MEETINGS. Regular meetings of the Board shall
be held at such times and places as the Chairman of the Board or the Board
shall from time to time by resolution determine. If any day fixed for a
regular meeting shall be a legal holiday under the laws of the place where
the meeting is to be held, the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day.

SECTION 7. SPECIAL MEETINGS. Special meetings of the Board shall
be held whenever called by the Chairman of the Board or by a majority of the
directors.

SECTION 8. NOTICE OF MEETINGS. Notice of regular meetings of the
Board or of any adjourned meeting thereof need not be given. Notice of each
special meeting of the Board shall be given by overnight delivery service or
mailed to each director, in either case addressed to such director at such
director's residence or usual place of business, at least two days before the
day on which the meeting is to be held or shall be sent to such director at
such place by telegraph or telecopy or be given personally or by telephone,
not later than the day before the meeting is to be held, but notice need not
be given to any director who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to
such director. Every such notice shall state the time and place but need not
state the purpose of the meeting.

SECTION 9. RULES AND REGULATIONS. The Board may adopt such rules
and regulations not inconsistent with the provisions of law, the Certificate
or these bylaws for the conduct of its meetings and management of the affairs
of the Corporation as the Board may deem proper.

<PAGE>

SECTION 10. PARTICIPATION IN MEETING BY MEANS OF COMMUNICATION
EQUIPMENT. Any one or more members of the Board or any committee thereof may
participate in any meeting of the Board or of any such committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such
meeting.

SECTION 11. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board or any committee thereof
may be taken without a meeting if all of the members of the Board or of any
such committee consent thereto in writing and the writing or writings are
filed with the minutes or proceedings of the Board or of such committee.

SECTION 12. RESIGNATIONS. Any director of the Corporation may at
any time resign by giving written notice to the Board, the Chairman of the
Board, the Chief Executive Officer, the President or the Secretary. Such
resignation shall take effect at the time specified therein or, if the time
be not specified therein, upon receipt thereof; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective.

SECTION 13. REMOVAL OF DIRECTORS. Directors may be removed only
as provided in Section 5 of Article VI of the Certificate.

SECTION 14. VACANCIES. 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 upon liquidation, any vacancies on the Board
resulting from death, resignation, removal or other cause shall only be
filled by the Board by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board, or by
a sole remaining director, and newly created directorships resulting from any
increase in the number of directors shall be filled by the Board, or if not
so filled, by the stockholders at the next annual meeting thereof or at a
special meeting called for that purpose in accordance with Section 3 of
Article II of these bylaws. Any director elected in accordance with the
preceding sentence of this Section 14 of this Article III shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.

<PAGE>

SECTION 15. COMPENSATION. Each director, in consideration of such
person serving as a director, shall be entitled to receive from the
Corporation such amount per annum and such fees for attendance at meetings of
the Board or of committees of the Board, or both, as the Board shall from
time to time determine. In addition, each director shall be entitled to
receive from the Corporation reimbursement for the reasonable expenses
incurred by such person in connection with the performance of such person's
duties as a director. Nothing contained in this Section 15 of this Article
III shall preclude any director from serving the Corporation or any of its
subsidiaries in any other capacity and receiving proper compensation therefor.

ARTICLE IV

COMMITTEES OF THE BOARD OF DIRECTORS

SECTION 1. ESTABLISHMENT OF COMMITTEES OF THE BOARD OF DIRECTORS;
ELECTION OF MEMBERS OF COMMITTEES OF THE BOARD OF DIRECTORS; FUNCTIONS OF
COMMITTEES OF THE BOARD OF DIRECTORS. The Board may, in accordance with and
subject to the General Corporation Law of the State of Delaware, from time to
time establish committees of the Board to exercise such powers and
authorities of the Board, and to perform such other functions, as the Board
may from time to time determine.

SECTION 2. PROCEDURE; MEETINGS; QUORUM. Regular meetings of
committees of the Board, of which no notice shall be necessary, may be held
at such times and places as shall be fixed by resolution adopted by a
majority of the members thereof. Special meetings of any committee of the
Board shall be called at the request of a majority of the members thereof.
Notice of each special meeting of any committee of the Board shall be given
by overnight delivery service or mailed to each member, in either case
addressed to such member at such member's residence or normal place of
business, at least two days before the day on which the meeting is to be held
or shall be sent to such members at such place by telegraph or telecopy or be
given personally or by telephone, not later than the day before the meeting
is to be held, but notice need not be given to any member who shall, either
before or after the meeting, submit a signed waiver of such notice or who
shall attend such meeting without protesting, prior to it or at its
commencement, the lack of such notice to such member. Any special meeting of
any committee of the Board shall be a legal meeting without any notice
thereof having been given, if all the

<PAGE>

members thereof shall be present thereat. Notice of any adjourned meeting of
any committee of the Board need not be given. Any committee of the Board may
adopt such rules and regulations not inconsistent with the provisions of law,
the Certificate or these bylaws for the conduct of its meetings as such
committee of the Board may deem proper. A majority of the members of any
committee of the Board shall constitute a quorum for the transaction of
business at any meeting, and the vote of a majority of the members thereof
present at any meeting at which a quorum is present shall be the act of such
committee. Each committee of the Board shall keep written minutes of its
proceedings and shall report on such proceedings to the Board.

ARTICLE V

OFFICERS

SECTION 1. NUMBER; TERM OF OFFICE. The officers of the
Corporation shall be such officers as the Board may from time to time
determine, which may include a Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer, General Counsel and one or more
Vice Presidents (including, without limitation, Assistant, Executive and
Senior Vice Presidents) and a Treasurer, Secretary and Controller and such
other officers or agents with such titles and such duties as the Board may
from time to time determine, each to have such authority, functions or duties
as provided in these bylaws or as the Board may from time to time determine,
and each to hold office for such term as may be prescribed by the Board and
until such person's successor shall have been chosen and shall qualify, or
until such person's death or resignation, or until such person's removal in
the manner hereinafter provided. One person may hold the offices and perform
the duties of any two or more of said officers; PROVIDED, HOWEVER, that no
officer shall execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law, the Certificate or these
bylaws to be executed, acknowledged or verified by two or more officers. The
Board may from time to time authorize any officer to appoint and remove any
such other officers and agents and to prescribe their powers and duties. The
Board may require any officer or agent to give security for the faithful
performance of such person's duties.

SECTION 2. REMOVAL. Any officer may be removed, either with or
without cause, by the Board at any meeting thereof or, except in the case of
any officer elected by the Board, by any superior officer upon whom such
power may be conferred by the Board.

<PAGE>

SECTION 3. RESIGNATION. Any officer may resign at any time by
giving notice to the Board, the Chief Executive Officer or the Secretary.
Any such resignation shall take effect at the date of receipt of such notice
or at any later date specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.

SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired
portion of the term in the manner prescribed in these bylaws for election to
such office.

SECTION 5. CHAIRMAN OF THE BOARD; POWERS AND DUTIES. The Chairman
of the Board shall preside at all meetings of the stockholders and the Board
at which he or she is present. Unless otherwise precluded from doing so by
these By-laws, the Chairman of the Board may be a member of the committees of
the Board. The Chairman of the Board shall act as chairman at all meetings
of the stockholders at which he or she is present unless he or she elects
that the Chief Executive Officer shall so preside. The Chairman of the Board
may be designated by the Board as an officer of the Company and may be
elected by the Board as the Chief Executive Officer. The Chairman of the
Board shall perform all duties as may be assigned to him or her by the Board
of Directors. In case of the absence or disability of the Chairman of the
Board or a vacancy in the office, Chief Executive Officer or, if none, the
President shall exercise all the powers and perform all the duties of the
Chairman of the Board.

SECTION 6. CHIEF EXECUTIVE OFFICER; POWERS AND DUTIES. Subject to
the control of the Board, the Chief Executive Officer shall supervise and
direct generally all the business and affairs of the Corporation. Any
document may be signed by the Chief Executive Officer or any other person who
may be thereunto authorized by the Board or the Chief Executive Officer. The
Chief Executive Officer may appoint such assistant officers as are deemed
necessary.

SECTION 7. PRESIDENT, EXECUTIVE VICE PRESIDENTS, SENIOR VICE
PRESIDENTS AND VICE PRESIDENTS; POWERS AND DUTIES. The President shall be
the chief operating officer of the Corporation. The President and each
Executive Vice President, each Senior Vice President, and each Vice President
shall have such powers and perform such duties as may be assigned by the
Board of Directors or the Chief Executive Officer.

<PAGE>

SECTION 8. SECRETARY AND ASSISTANT SECRETARIES; POWERS AND DUTIES.
The Secretary shall attend all meetings of the stockholders and the Board
and shall keep the minutes for such meetings in one or more books provided
for that purpose. The Secretary shall be custodian of the corporate records,
except those required to be in the custody of the Treasurer or the
Controller, shall keep the seal of the Corporation, and shall execute and
affix the seal of the Corporation to all documents duly authorized for
execution under seal on behalf of the Corporation, and shall perform all of
the duties incident to the office of Secretary, as well as such other duties
as may be assigned by the Chief Executive Officer or the Board.

The Assistant Secretaries shall perform such of the Secretary's
duties as the Secretary shall from time to time direct. In case of the
absence or disability of the Secretary or a vacancy in the office, an
Assistant Secretary designated by the Chief Executive Officer or by the
Secretary, if the office is not vacant, shall perform the duties of the
Secretary.

SECTION 9. CHIEF FINANCIAL OFFICER; POWERS AND DUTIES. The Chief
Financial Officer shall be responsible for maintaining the financial
integrity of the Corporation, shall prepare the financial plans for the
Corporation, and shall monitor the financial performance of the Corporation
and its subsidiaries, as well as performing such other duties as may be
assigned by the Chief Executive Officer or the Board.

SECTION 10. TREASURER AND ASSISTANT TREASURERS; POWERS AND DUTIES.
The Treasurer shall have care and custody of the funds and securities of the
Corporation, shall deposit such funds in the name and to the credit of the
Corporation with such depositories as the Treasurer shall approve, shall
disburse the funds of the Corporation for proper expenses and dividends, and
as may be ordered by the Board, taking proper vouchers for such
disbursements. The Treasurer shall perform all of the duties incident to the
office of Treasurer, as well as such other duties as may be assigned by the
Chief Executive Officer or the Board.

The Assistant Treasurers shall perform such of the Treasurer's
duties as the Treasurer shall from time to time direct. In case of the
absence or disability of the Treasurer or a vacancy in the office, an
Assistant Treasurer designated by the Chief Executive Officer or by the
Treasurer, if the office is not vacant, shall perform the duties of the
Treasurer.

SECTION 11. GENERAL COUNSEL; POWERS AND DUTIES. The General
Counsel shall be a licensed attorney at law and shall be

<PAGE>

the chief legal officer of the Corporation. The General Counsel shall have
such power and exercise such authority and provide such counsel to the
Corporation as deemed necessary or desirable to enforce the rights and
protect the property and integrity of the Corporation, shall also have the
power, authority, and responsibility for securing for the Corporation all
legal advice, service, and counseling, and shall perform all of the duties
incident to the office of General Counsel, as well as such other duties as
may be assigned by the Chief Executive Officer or the Board.

SECTION 12. CONTROLLER AND ASSISTANT CONTROLLERS; POWERS AND
DUTIES. The Controller shall be the chief accounting officer of the
Corporation and shall keep and maintain in good and lawful order all accounts
required by law and shall have sole control over, and ultimate responsibility
for, the accounts and accounting methods of the Corporation and the
compliance of the Corporation with all systems of accounts and accounting
regulations prescribed by law. The Controller shall audit, to such extent
and at such times as may be required by law or as the Controller may think
necessary, all accounts and records of corporate funds or property, by
whomsoever kept, and for such purposes shall have access to all such accounts
and records. The Controller shall make and sign all necessary and proper
accounting statements and financial reports of the Corporation, and shall
perform all of the duties incident to the office of Controller, as well as
such other duties as may be assigned by the Chief Executive Officer or the
Board.

The Assistant Controllers shall perform such of the Controller's
duties as the Controller shall from time to time direct. In case of the
absence or disability of the Controller or a vacancy in the office, an
Assistant Controller designated by the Chief Executive Officer or the
Controller, if the office is not vacant, shall perform the duties of the
Controller.

SECTION 13. SALARIES. The salaries of all officers of the
Corporation shall be fixed by or in the manner provided by the Board. If
authorized by a resolution of the Board, the salary of any officer other than
the Chief Executive Officer may be fixed by the Chief Executive Officer or a
Committee of the Board. No officer shall be disqualified from receiving a
salary by reason of also being a director of the Corporation.

<PAGE>

ARTICLE VI

INDEMNIFICATION

SECTION 1. SCOPE OF INDEMNIFICATION. (a) The Corporation shall
indemnify an indemnified representative against any liability incurred in
connection with any proceeding in which the indemnified representative may be
involved as a party or otherwise, by reason of the fact that such person is
or was serving in an indemnified capacity, except to the extent that any such
indemnification against a particular liability is expressly prohibited by
applicable law or where a judgment or other final adjudication adverse to the
indemnified representative establishes, or where the Corporation determines,
that his or her acts or omissions (i) were in breach of such person's duty of
loyalty to the Corporation or its stockholders, (ii) were not in good faith
or involved intentional misconduct or a knowing violation of law, or (iii)
resulted in receipt by such person of an improper personal benefit. The
rights granted by this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification, contribution, or advancement
of expenses may be entitled under any statute, certificate of incorporation,
agreement, contract of insurance, vote of stockholders or disinterested
directors, or otherwise. The rights of indemnification and advancement of
expenses provided by or granted pursuant to this Article shall continue as to
a person who has ceased to be an indemnified representative in respect of
matters arising prior to such time and shall inure to the benefit of the
heirs, executors, administrators and personal representatives of such a
person.

(b) If an indemnified representative is not entitled to
indemnification with respect to a portion of any liabilities to which such
person may be subject, the Corporation shall nonetheless indemnify such
indemnified representative to the maximum extent for the remaining portion of
the liabilities.

(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the indemnified representative is not
entitled to indemnification.

(d) To the extent permitted by law, the payment of indemnification
provided for by this Article, including the advancement of expenses pursuant
to Section 2 of this Article VI, with respect to proceedings other than those
brought by or in the right of the Corporation, shall be subject to the
conditions that the indemnified representative shall give the Corporation
prompt

<PAGE>

notice of any proceeding, that the Corporation shall have complete charge of
the defense of such proceeding and the right to select counsel for the
indemnified representative, and that the indemnified representative shall
assist and cooperate fully in all matters respecting the proceeding and its
defense or settlement. The Corporation may waive any or all of the
conditions set forth in the preceding sentence. Any such waiver shall be
applicable only to the specific payment for which the waiver is made and
shall not in any way obligate the Corporation to grant such waiver at any
future time. In the event of a conflict of interest between the indemnified
representative and the Corporation that would disqualify the Corporation's
counsel from representing the indemnified representative under the rules of
professional conduct applicable to attorneys, it shall be the policy of the
Corporation to waive any or all of the foregoing conditions subject to such
limitations or conditions as the Corporation shall deem to be reasonable in
the circumstances.

(e) For purposes of this Article:

(1) "indemnified capacity" means any and all past, present, or
future services by an indemnified representative in one or more capacities as
a director, officer, employee, or agent of the Corporation or, at the request
of the Corporation, as a director, officer, employee, agent, fiduciary, or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan, or other entity or enterprise; any indemnified representative
serving an affiliate of the Corporation in any capacity shall be deemed to be
doing so at the request of the Corporation;

(2) an "affiliate of the Corporation" means an entity that directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Corporation;

(3) "indemnified representative" means any and all directors,
officers, and employees of the Corporation and any other person designated as
an indemnified representative by the Board;

(4) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage, excise tax assessed with respect
to an employee benefit plan, or cost or expense of any nature (including,
without limitation, expert witness fees, costs of investigation, litigation
and appeal costs, attorneys' fees, and disbursements); and

<PAGE>

(5) "proceeding" means any threatened, pending, or completed
action, suit, appeal, or other proceeding of any nature, whether civil,
criminal, administrative, or investigative, whether formal or informal,
whether external or internal to the Corporation, and whether brought by or in
the right of the Corporation, a class of its security holders or otherwise.

SECTION 2. ADVANCING EXPENSES. All reasonable expenses incurred
in good faith by an indemnified representative in advance of the final
disposition of a proceeding described in Section 1 of this Article VI shall
be advanced to the indemnified representative by the Corporation. Before
making any such advance payment of expenses, the Corporation shall receive an
undertaking by or on behalf of the indemnified representative to repay such
amount if it shall ultimately be determined that such indemnified
representative is not entitled to be indemnified by the Corporation pursuant
to this Article VI. No advance shall be made by the Corporation if a
determination is reasonably and promptly made by a majority vote of
disinterested directors, even if the disinterested directors constitute less
than a quorum, or (if such a quorum is not obtainable or, even if obtainable,
a quorum of disinterested directors so directs) by independent legal counsel
in a written opinion, that, based upon the facts known to the Board or
counsel at the time such determination is made, the indemnified
representative has acted in such a manner as to permit or require the denial
of indemnification pursuant to the provisions of Section 1 of this Article VI.

ARTICLE VII

CAPITAL STOCK

SECTION 1. SHARE OWNERSHIP. (a) Holders of shares of stock of each
class of the Corporation shall be recorded on the books of the Corporation
and ownership of such stock shall be evidenced by a certificate or other form
as shall be approved by the Board. Certificates representing shares of stock
of each class, if any, shall be signed by, or in the name of, the Corporation
by the Chairman of the Board or the President, any Vice President and by the
Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer of the Corporation, and sealed with the seal of the Corporation,
which may be a facsimile thereof. Any or all such signatures may be
facsimiles if countersigned by a transfer agent or registrar. Although any
officer, transfer agent or registrar whose manual or facsimile signature is
affixed to such a certificate ceases to be such officer, transfer agent or
registrar before such certificate has

<PAGE>

been issued, it may nevertheless be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still such at the
date of its issue.

(b)The stock ledger and blank share certificates shall be kept by
the Secretary or by a transfer agent or by a registrar or by any other
officer or agent designated by the Board.

SECTION 2. TRANSFER OF SHARES. Transfers of shares of stock of
each class of the Corporation shall be made only on the books of the
Corporation by the holder thereof, or by such holder's attorney thereunto
authorized by a power of attorney duly executed and filed with the Secretary
or a transfer agent for such stock, if any, and on surrender of the
certificate or certificates, if any, for such shares properly endorsed or
accompanied by a duly executed stock transfer power (or by proper evidence of
succession, assignment or authority to transfer) and the payment of any taxes
thereon; PROVIDED, HOWEVER, that the Corporation shall be entitled to
recognize and enforce any lawful restriction on transfer. The person in
whose name shares are registered on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the Corporation;
PROVIDED, HOWEVER, that whenever any transfer of shares shall be made for
collateral security and not absolutely, and written notice thereof shall be
given to the Secretary or to such transfer agent, such fact shall be stated
in the entry of the transfer. No transfer of shares shall be valid as
against the Corporation, its stockholders and creditors for any purpose,
except to render the transferee liable for the debts of the Corporation to
the extent provided by law, until it shall have been entered in the stock
records of the Corporation by an entry showing from and to whom transferred.

SECTION 3. REGISTERED STOCKHOLDERS AND ADDRESSES OF STOCKHOLDERS.
(a) The Corporation shall be entitled to recognize the exclusive right of a
person registered on its records as the owner of shares of stock to receive
dividends and to vote as such owner, shall be entitled to hold liable for
calls and assessments a person registered on its records as the owner of
shares of stock, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares of stock on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.

(b)Each stockholder shall designate to the Secretary or transfer
agent of the Corporation an address at which notices of meetings and all
other corporate notices may be delivered or

<PAGE>

mailed to such person, and, if any stockholder shall fail to designate such
address, corporate notices may be delivered to such person by mail directed
to such person at such person's post office address, if any, as the same
appears on the stock record books of the Corporation or at such person's last
known post office address.

SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The
Corporation may issue to any holder of shares of stock the certificate for
which has been lost, stolen, destroyed or mutilated a new certificate or
certificates for shares, upon the surrender of the mutilated certificate or,
in the case of loss, theft or destruction of the certificate, upon
satisfactory proof of such loss, theft or destruction. The Board, or a
committee designated thereby, or the transfer agents and registrars for the
stock, may, in their discretion, require the owner of the lost, stolen or
destroyed certificate, or such person's legal representative, to give the
Corporation a bond in such sum and with such surety or sureties as they may
direct to indemnify the Corporation and said transfer agents and registrars
against any claim that may be made on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.

SECTION 5. REGULATIONS. The Board may make such additional rules
and regulations as it may deem expedient concerning the issue and transfer of
shares of stock of each class of the Corporation and may make such rules and
take such action as it may deem expedient concerning the issue of
certificates in lieu of certificates claimed to have been lost, destroyed,
stolen or mutilated.

SECTION 6. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment or any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board may fix, in advance, a record date,
which shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. A determination of
stockholders entitled to notice of or to vote at a meeting of the
stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board may fix a new record date for the adjourned meeting.

<PAGE>

SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board may appoint,
or authorize any officer or officers to appoint, one or more transfer agents
and one or more registrars.

ARTICLE VIII

SEAL

The Board shall provide a corporate seal, which shall be in the
form of a circle and shall bear the full name of the Corporation and the
words and figures of "Corporate Seal Delaware", or such other words or
figures as the Board may approve and adopt. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.

ARTICLE IX

FISCAL YEAR

The fiscal year of the Corporation shall end on the 31st day of
December in each year.

ARTICLE X

AMENDMENTS

Any bylaw may be adopted, repealed, altered or amended by
two-thirds of the entire Board at any meeting thereof. The stockholders of
the Corporation shall have the power to amend, alter or repeal any provision
of these bylaws only to the extent and in the manner provided in the
Certificate.

<PAGE>

[Letterhead of Weil, Gotshal & Manges LLP]

March 18, 1998

U S WEST, Inc.
USW-C, Inc.
7800 East Orchard Road
Englewood, Colorado 80111

Ladies and Gentlemen:

We have acted as counsel to U S WEST, Inc., a Delaware corporation
("U S WEST"), and USW, Inc., a Delaware corporation ("New U S WEST"), in
connection with the preparation and filing of the Registration Statement
(File no. 333-45765) of New U S WEST on Form S-4 (as amended, the
"Registration Statement") relating to the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of shares of Common Stock,
par value $.01 per share ("New U S WEST Common Stock"), of New U S WEST to be
issued to U S WEST's stockholders pursuant to the terms of a Separation
Agreement (the "Separation Agreement"), to be entered into between U S WEST
and New U S WEST. Pursuant to the Separation Agreement and subject to the
terms and conditions set forth therein, (i) each outstanding share of U S
WEST Communications Group Common Stock, par value $.01 per share, of U S WEST
will be redeemed for one share of New U S WEST Common Stock and (ii) a
fraction of a share of New U S WEST Common Stock will be issued as a dividend
on each outstanding share of U S WEST Media Group Common Stock, par value
$.01 per share (the "Separation").

In so acting, we have reviewed the Registration Statement,
including the proxy statement and prospectus contained therein (the "Proxy
Statement"), the form of restated certificate of incorporation of New U S
WEST (the

<PAGE>

March 18, 1998
Page 2

"Restated Certificate") to be filed with the Secretary of State of Delaware
immediately prior to the effective time of the Separation, and the form of
Separation Agreement. In addition, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments, and such certificates
or comparable documents of public officials and of officers and
representatives of U S WEST and New U S WEST, and have made such inquiries of
such officers and representatives, as we have deemed relevant and necessary
as a basis for the opinions hereinafter set forth.

In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents of
officers and representatives of U S WEST and New U S WEST. We have also
assumed the due execution and delivery of the Separation Agreement and the
Restated Certificate and the due filing of the Restated Certificate with the
Secretary of State of Delaware prior to the effective time of the Separation.

Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:

1. New U S WEST is a corporation duly incorporated and validly
existing under the laws of the State of Delaware.

2. The shares of New U S WEST Common Stock to be issued in
connection with the Separation and registered pursuant to the Registration
Statement have been duly authorized and, when issued as contemplated by the
Separation Agreement, will be validly issued, fully paid and nonassessable.

The opinions expressed herein are limited to the corporate laws of
the State of Delaware, and we express no opinion as to the effect on the
matters covered by this letter of the laws of any other jurisdiction.

<PAGE>

March 18, 1998
Page 3

The opinions expressed herein are rendered solely for your benefit
in connection with the transactions described herein. These opinions may not
be used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without our prior written consent.

We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the references to this firm under the
heading "Chapter 9: The Annual Meeting and Certain Other Matters Legal
Matters" in the Proxy Statement, without admitting that we are "experts"
under the Securities Act or the rules and regulations promulgated thereunder
with respect to any part of the Registration Statement.

Very truly yours,

<PAGE>

Subsidiaries of USW-C, Inc.

Upon consummation of the Separation, the following entities will be
subsidiaries of USW-C, Inc.:

U S WEST Capital Funding, Inc.
U S WEST Advanced Technologies, Inc.
U S WEST Business Resources, Inc. (CO)
U S WEST Business Resources, Inc. (DE)
U S WEST Corporate Transportation, Inc.
U S WEST Communications, Inc.
Block 142 Parking Garage Association
El Paso County Telephone Company
Malheur Home Telephone Company
Mubeta Development Co.
Training Partnerships, Inc.
1200 Landmark Center Condominium Association, Inc.
U S WEST Wireless, L.L.C.
U S WEST Communications Federal Services, Inc.
U S WEST Communications Services, Inc.
U S WEST Enhanced Services, Inc.
U S WEST Interprise America, Inc.
U S WEST Information Technologies, Inc.
U S WEST Long Distance, Inc.
U S WEST Education Foundation
U S WEST Federal Relations, Inc.
U S WEST Foundation
U S WEST Investment Management Company
U S WEST IP Holdings, Inc.
U S WEST Media Group, Inc.
U S WEST Dex, Inc.
Interactive Video Enterprises, Inc.
LOCALTouch Holdings, Inc.
LOCALTouch Directory Services, Inc.
Please Hold Promotions, Inc.
U S WEST SPF Co.

<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the inclusion in this Registration Statement on Form S-4 of
USW-C, Inc. and Proxy Statement of U S WEST, Inc. of our report dated February
12, 1996 on our audit of the consolidated financial statements of U S WEST, Inc.
for the year ended December 31, 1995.

We consent to the inclusion in this Registration Statement on Form S-4 of
USW-C, Inc. and Proxy Statement of U S WEST, Inc. of our report dated February
6, 1998, on our audit of the combined financial statements and combined
financial statement schedule of New U S WEST for the year ended December 31,
1995.

We consent to the incorporation by reference in this Registration Statement
on Form S-4 of USW-C, Inc. and Proxy Statement of U S WEST, Inc. of our reports
dated February 12, 1996 on our audits of the consolidated financial statements
and financial statement schedule of U S WEST, Inc., as of December 31, 1995 and
for the years ended December 31, 1995 and 1994, which reports are included in U
S WEST, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996.

We consent to the incorporation by reference in this Registration Statement
on Form S-4 of USW-C, Inc. and Proxy Statement of U S WEST, Inc. of our report
dated February 12, 1996, on our audits of the combined financial statements of U
S WEST Communication Group, as of December 31, 1995, and for the years ended
December 31, 1995 and 1994, which report is included in U S WEST, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.

We consent to the incorporation by reference in this Registration Statement
on Form S-4 of USW-C, Inc. and Proxy Statement of U S WEST, Inc. of our report
dated February 12, 1996, on our audits of the combined financial statements and
Supplementary Selected Proportionate Results of Operations of U S WEST Media
Group, as of December 31, 1995, and for the years ended December 31, 1995 and
1994, which report is included in U S WEST, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996.

We also consent to the reference to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.
Denver, Colorado
March 17, 1998

<PAGE>

[ARTHUR ANDERSEN LLP LETTERHEAD]

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports dated February 12, 1998 on the combined financial statements of New U S
WEST, the financial statement schedule of New U S WEST, the consolidated
financial statements of U S WEST, Inc. and the Supplementary Selected
Proportionate Results of Operations for U S WEST, Inc., as of December 31, 1997
and 1996, and for the years then ended, included in this Registration Statement
on Form S-4 of USW-C, Inc. and Proxy Statement of U S WEST, Inc. (together the
"Registration Statement"), and to all references to our Firm included in this
Registration Statement.

/s/ Arthur Andersen LLP

Denver, Colorado
March 17, 1998.

<PAGE>
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