CORECOMM LTD, S-3/A, 1999-11-19

CORECOMM LTD
S-3/A, 1999-11-19
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999

REGISTRATION STATEMENT NO. 333-90113

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

CORECOMM LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
BERMUDA 4812 NONE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON, HM 12 BERMUDA
(441) 295-2244
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

CORECOMM LIMITED

110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8485
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPY TO:

<TABLE>
<S> <C>
JOHN C. KENNEDY, ESQ. RICHARD J. LUBASCH, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON CORECOMM LIMITED
1285 AVENUE OF THE AMERICAS 110 EAST 59TH STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10022
(212) 373-3000 (212) 906-8485
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: At such time or
times on and after which the Registration Statement becomes effective as the
Selling Stockholders may determine.
------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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<PAGE> 2

PROSPECTUS

CORECOMM LIMITED
-------------------------

6% CONVERTIBLE SUBORDINATED NOTES DUE 2006
AND SHARES OF COMMON STOCK

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

Selling securityholders who are identified in this prospectus may use this
prospectus to offer and sell an indeterminate number of:

- our 6% Convertible Subordinated Notes due 2006

- shares of our common stock which will be issued upon conversion of the
convertible notes

We will not receive any proceeds from the sale of convertible notes or
shares by the selling securityholders. The offering price for the convertible
notes is not set but will be determined according to negotiation between a
selling securityholder and the prospective purchaser. The offering price for the
common stock will be negotiated or, if sold on the Nasdaq National Market, at
the prevailing market price. We will pay all expenses (other than selling
commissions and fees and stock transfer taxes) of the registration and sale of
the convertible notes and the common stock.

Our common stock is traded on the Nasdaq National Market under the symbol
COMM. On November 17, 1999, the last reported sales price of the common stock
was $46.13 per share. There is no public market for the convertible notes, and
we do not intend to apply for listing of them on the Nasdaq National Market or
any other securities exchange or to seek approval for quotation of them through
any automated quotation system.

WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE
8, WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE SECURITIES, BEFORE YOU
MAKE YOUR INVESTMENT DECISION.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is November 19, 1999

<PAGE> 3

In this prospectus, the terms "Company," "CoreComm," "we," "us" and "our"
refer to CoreComm Limited and, unless the context requires otherwise, its
consolidated subsidiaries.

The term "Acquisitions" refers to the acquisitions of MegsINet Inc. and
certain assets of USN Communications, Inc. in May 1999, the assets of Stratos
Internet Group, Inc. in November 1998, the operating assets and related
liabilities of OCOM Corporation in June 1998, and Digicom, Inc. and the
operating assets of JeffRand Corp. (known as Wireless Outlet) in April 1998.

Neither the convertible notes nor the common stock have been recommended by
any federal or state securities commission or regulatory authority or the
Registrar of Companies of Bermuda or the Bermuda Monetary Authority.
Furthermore, these authorities have not confirmed that this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------

WE HAVE NOT UNDERTAKEN ANY ACTION TO PERMIT A PUBLIC OFFERING OF THE SHARES
OUTSIDE THE UNITED STATES OR TO PERMIT THE POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS OUTSIDE THE UNITED STATES. PERSONS OUTSIDE THE UNITED STATES WHO COME
INTO POSSESSION OF THIS PROSPECTUS MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY
RESTRICTIONS RELATING TO THE OFFERING OF THE SHARES AND THE DISTRIBUTION OF THIS
PROSPECTUS OUTSIDE OF THE UNITED STATES.
-------------------------

Smart LECSM is a service mark of CoreComm Limited.
<PAGE> 4

PROSPECTUS SUMMARY

This summary highlights information about us which is contained elsewhere
or incorporated by reference into this prospectus. This summary may not contain
all the information that is important to you. You should read the entire
prospectus, including the section entitled "Risk Factors" and the financial
statements and related notes, carefully before making a decision. Various
statements in this prospectus are forward-looking statements. Please refer to
the section entitled "Disclosure Regarding Forward-looking Statements." Smart
LECSM is a service mark of CoreComm Limited.

CORECOMM LIMITED

We are a holding company whose main asset is our wholly-owned subsidiary,
CoreComm, Inc. We intend to pursue other opportunities (in addition to those
through CoreComm, Inc.) in the telecommunications industry as they arise.

CORECOMM, INC.

We currently offer local and long distance telephone, Internet access and
intend to offer high-speed data services to business and residential customers
located principally in the following states: Ohio, Illinois, Michigan, New York
and Massachusetts. As of June 30, 1999, we had a total of approximately 100,000
business and residential telephony access lines in service and approximately
80,000 Internet customers. We currently operate an asynchronous transport mode,
or "ATM," network, which connects more than 80 cities using approximately 20,000
route miles of leased broadband circuits, which we are expanding even further to
be national in scope. This will allow us to take advantage of economies of scale
in the delivery of voice, video and data. We have been developing our
multi-service offerings since 1996 and are in the process of expanding our
products to include high speed services utilizing Digital Subscriber Line, or
"DSL," technology. With DSL, a single copper loop can be used to deliver
telephony and high speed data services simultaneously. We are currently in
various stages of constructing our Smart LEC network in six of the largest
markets in the U.S., which represent approximately 18 million access lines.

Our success primarily depends upon our management's approach to our
network, back office and customer acquisition, as well as our ability to:

- target large, underserved segments in concentrated metropolitan areas,
addressing the underlying demand for consumer choice in traditional
telephony as well as growing demand for high-speed data services;

- capture multiple revenue streams through offering customers bundled
service offerings, differentiated from other providers;

- deliver "Internet Centric" product offerings and support to our
customers;

- leverage proven management talent; and

- utilize Smart LEC strategy to maximize speed to market and minimize
investment risk.

In May 1999, we completed two significant strategic acquisitions. We
acquired MegsINet Inc., a national Internet service provider with a national ATM
network and local telecommunications facilities in

1
<PAGE> 5

Chicago. We acquired MegsINet for $16.8 million in cash and 2.1 million shares
of common stock. In addition, we assumed or repaid $21.3 million of MegsINet
debt.

In addition to MegsINet, in May 1999, we acquired the wireline assets of
USN Communications, Inc., which was a competitive local exchange carrier that
operated on a resale basis. We purchased the USN assets for $26.4 million in
cash, warrants to purchase 525,000 shares of common stock and a potential
contingent payment to be paid in July 2000 (which is capped at $58.6 million).
The contingent payment is payable only if the USN assets meet or exceed
operating performance thresholds. We purchased the USN assets through the
bankruptcy court process.

Prior to our spinoff from Cellular Communications of Puerto Rico, Inc.,
which we refer to as "CCPR," in September 1998, CCPR contributed to us $181.0
million in cash, businesses, assets and licenses. The cash has been used to
finance our acquisitions of USN and MegsINet and for general corporate purposes.
In addition, we have issued shares of our common stock and options or warrants
to purchase our common stock in connection with those acquisitions, totaling
$43.2 million (as valued in accordance with GAAP).

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

Our common stock is listed on the Nasdaq National Market and trades under
the symbol "COMM." Our office is located at 110 East 59th Street, New York, New
York 10022, and our telephone number is (212) 906-8485. We also have offices at
Cedar House, 41 Cedar Avenue, Hamilton, HM, 12, Bermuda, (441) 295-2244.

2
<PAGE> 6

CORPORATE STRUCTURE

We are a Bermuda corporation that was formed in March 1998 as a subsidiary
of CCPR (formerly CoreComm Incorporated), which has since become a wholly-owned
subsidiary of SBC Communications, Inc. CCPR created us in order to pursue new
telecommunications opportunities. Prior to spinning us off, CCPR contributed to
us, which we then contributed to CoreComm, Inc., the operating assets of OCOM,
the capital stock of Digicom, the assets of Wireless Outlet and the subsidiary
that owns our LMDS licenses. CCPR spun us off in September 1998. We are a
holding company that conducts our operations through direct and indirect
subsidiaries.

The following chart sets forth our corporate structure:

[Flow Chart]
- ---------------

(1) We have other subsidiaries which are not material to our business.

(2) None of our subsidiaries are guaranteeing or providing credit support for
the convertible notes. We currently anticipate obtaining additional
financing at the subsidiary level in the future.

3
<PAGE> 7

THE OFFERING

Securities Offered............ Up to $175,000,000 aggregate principal amount
of our 6% Convertible Subordinated Notes due
2006 and up to 4,258,944 shares of our common
stock, plus such indeterminate number of
additional shares of common stock that may be
issued from time to time upon conversion of the
convertible notes by reason of adjustment to
the conversion price in certain circumstances
described in this prospectus.

Maturity...................... October 1, 2006

Interest...................... April 1 and October 1 of each year, commencing
April 1, 2000

Conversion.................... The convertible notes, unless previously
redeemed, will be convertible at the option of
the holder of them at any time after 90 days
following the date of their original issuance
and prior to maturity into shares of common
stock at a conversion price of $41.09 per
share, subject to adjustment in certain events.
Please refer to the section entitled
"Description of Convertible
Notes -- Conversion."

Optional Redemption........... On or after October 1, 2002, we may redeem some
or all of the convertible notes at any time at
the redemption prices, and subject to certain
limitations, described in the section
"Description of Convertible Notes" under the
heading "Optional Redemption."

Ranking....................... The convertible notes are general unsecured
obligations ranking junior to all of our
existing and future senior debt (as we define
it in this prospectus). In addition, they will
effectively rank behind all of our secured
debts to the extent of the value of the assets
securing those debts and all existing and
future debts and other liabilities of our
subsidiaries. As of September 30, 1999,
assuming we had completed this offering, the
convertible notes would have been effectively
subordinated to $39.6 million of indebtedness
of our subsidiaries and $33.9 million of other
liabilities of our subsidiaries.

As of June 30, 1999, CoreComm Limited had no
senior debt or secured debt outstanding. The
indenture governing the convertible notes does
not limit the amount of indebtedness that we or
our subsidiaries may incur in the future.

Change of Control............. If we experience specific kinds of changes in
control, we must offer to repurchase the
convertible notes at the prices listed in the
section "Description of Convertible Notes"
under the heading "Repurchase at the Option of
Holders."

Risk Factors.................. Please refer to "Risk Factors" for a discussion
of certain factors that should be considered in
evaluating an investment in the convertible
notes.

Use of Proceeds............... The selling securityholders will receive all of
the net proceeds from the sale of the offered
securities sold pursuant to this

4
<PAGE> 8

prospectus. We will not receive any proceeds
from sales by the selling securityholders of
the offered securities.

United States Federal Tax
Considerations.............. There are certain federal income tax
considerations associated with purchasing,
holding and disposing of the convertible notes
and our common stock. Please refer to "Certain
United States Federal Tax Considerations."

5
<PAGE> 9

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The historical financial information presented below of the Company and its
predecessor, the operating assets of OCOM Corporation, which we refer to as the
"OCOM Corporation Telecoms Division," was derived from the consolidated
financial statements and the related notes included in this prospectus.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. The unaudited pro forma financial information gives effect to
the Acquisitions. The unaudited pro forma financial information is not
necessarily indicative of the actual results of operations that would have
occurred had the Acquisitions actually occurred on the assumed dates or expected
future results.

You should read the following information in conjunction with the sections
entitled "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial
Information," the consolidated financial statements and the related notes and
the other financial data appearing in this prospectus.

<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
THE PREDECESSOR
PRO FORMA COMPANY (OCOM)
------------------------------ ----------------------------------- ---------------
FOR THE PERIOD FROM
APRIL 1, 1998
NINE MONTHS NINE MONTHS (DATE OPERATIONS FOR THE
ENDED YEAR ENDED ENDED COMMENCED) TO PERIOD FROM
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, JANUARY 1, 1998
1999 1998 1999 1998(1) TO MAY 31, 1998
------------- -------------- ------------- ------------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues....................... $ 76,843 $ 148,174 $ 37,139 $ 6,713 $ 1,452
Costs and expenses
Operating expenses........... 75,048 131,205 37,524 5,584 772
Selling, general and
administrative
expenses.................. 71,600(2) 204,210 44,781(2) 18,575(2) 3,205
Depreciation and
amortization.............. 20,447 16,936 11,679 980 257
Corporate expenses........... 6,489 -- 6,489 -- --
Nonrecurring charges......... -- 28,987(3) -- -- --
-------- --------- -------- -------- -------
Total costs and
expenses................ 173,584 381,338 100,473 25,139 4,234
-------- --------- -------- -------- -------
Operating loss................. (96,741) (233,164) (63,334) (18,426) (2,782)
Other income (expense), net.... (425) 1,512 1,008 2,171 --
-------- --------- -------- -------- -------
Net loss....................... $(97,166) $(231,652) $(62,326) $(16,255) $(2,782)
======== ========= ======== ======== =======
Basic and diluted net loss per
share........................ $ (4.09) $ (10.58) $ (2.85) $ (.82) $ (.14)
Weighted average shares........ 23,783 21,896 21,873 19,785 19,776
OTHER DATA:
Capital expenditures........... N/A N/A $ 14,906 $ 2,344 $ 623
EBITDA(4)...................... $(68,749) $(187,241) $(44,110) $(12,860) $(2,525)
</TABLE>

6
<PAGE> 10

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------
HISTORICAL AS ADJUSTED(5)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 38,406 $207,094
Working capital............................................. 7,523 176,211
Fixed assets -- net......................................... 78,100 78,100
Total assets................................................ 238,849 413,849
Subsidiary debt and capital lease obligations (includes
current portion).......................................... 39,633 39,633
Convertible notes........................................... -- 175,000
Stockholders' equity........................................ 164,331 164,331
</TABLE>

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

(1) During the period from April 1, 1998 (date operations commenced) to December
31, 1998, CCPR made the following contributions to us prior to our spin-off
by CCPR: (a) businesses acquired by CCPR in April and June 1998 and (b) the
subsidiary that owns various LMDS licenses in Ohio that were acquired for an
aggregate of $25.2 million.

(2) Includes a compensation charge of $1.1 million and $4.6 million from the
issuance of our stock options for the nine months ended September 30, 1999
and for the period from April 1, 1998 (the date our operations commenced) to
December 31, 1998, respectively.

(3) Nonrecurring charges were incurred by USN during the year ended December 31,
1998, primarily related to a restructuring plan.

(4) EBITDA consists of earnings (loss) before income taxes plus net interest
expense and depreciation and amortization expense. It also excludes
compensation charge from the issuance of stock options, corporate expenses
and nonrecurring charges. You should not think of EBITDA as an alternative
measure of operating results or cash flows from operating activities, as
determined in accordance with generally accepted accounting principles. We
have included EBITDA because it is a widely used financial measure of the
potential capacity of a company to incur and service debt. Our reported
EBITDA may not be comparable to similarly titled measures used by other
companies.

(5) The as adjusted balance sheet information gives effect to the offering of
convertible notes.

7
<PAGE> 11

RISK FACTORS

You should consider carefully all of the information set forth in this
prospectus and incorporated by reference in this prospectus. Please refer to
"Where You Can Find More Information About Us." You should particularly evaluate
the following risks before deciding to purchase the convertible notes or the
common stock issuable upon conversion of the convertible notes. Various
statements in this prospectus (including some of the following factors)
constitute forward-looking statements. Please refer to the section entitled
"Disclosure Regarding Forward-looking Statements."

RISK FACTORS RELATING TO THE CONVERTIBLE NOTES

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE CONVERTIBLE NOTES.

We have substantial debt and debt service obligations. As of September 30,
1999, we would have had $214.6 million of consolidated indebtedness outstanding
and $164.3 million of stockholders' equity giving effect to the issuance of the
convertible notes. We are also currently negotiating with equipment
manufacturers for significant vendor financing. In addition, from time to time,
we may pursue additional debt financing arrangements. The indenture governing
the convertible notes does not restrict our or our subsidiaries' ability to
incur additional indebtedness.

The substantial amount of debt that we have and that we or our subsidiaries
may incur in the future could have important consequences for you. For example,
it could:

- make it more difficult for us to satisfy our obligations with respect to
the convertible notes;

- limit our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes;

- increase our vulnerability to adverse economic and industry conditions;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and

- place us at a competitive disadvantage compared to our competitors that
have less debt.

THE CONVERTIBLE NOTES ARE SUBORDINATED AND UNSECURED.

The convertible notes are general unsecured obligations ranking junior to
all our existing and future senior debt. In addition, the convertible notes are
effectively junior to all our existing and future secured indebtedness to the
extent of the value of the assets securing that indebtedness. As a result of
this subordination, in the event of our bankruptcy, liquidation or
reorganization or certain other events, our assets will be available to pay
obligations on the convertible notes only after all of our senior debt (as
defined in this prospectus) and all of our secured debt, to the extent of the
value of the assets securing that debt, has been paid in full, and there may not
be sufficient assets remaining to pay amounts due on any or all of the
convertible notes then outstanding. In addition, to the extent our assets cannot
satisfy in full the secured indebtedness, the holders of the secured
indebtedness would have a claim for any shortfall that would rank equally in
right of payment with the convertible notes. The indenture governing the
convertible notes does not prohibit or limit our or our subsidiaries' incurrence
of additional debt, including senior debt or secured debt, and the incurrence of
any such additional indebtedness could adversely affect our ability to pay our
obligations on the convertible notes.

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<PAGE> 12

Please refer to the section entitled "Description of Convertible
Notes -- Subordination of Convertible Notes."

BECAUSE WE ARE A HOLDING COMPANY, YOUR RIGHT TO RECEIVE PAYMENT ON THE
CONVERTIBLE NOTES IS EFFECTIVELY JUNIOR TO OUR SUBSIDIARIES' EXISTING
INDEBTEDNESS AND POSSIBLY TO ALL OF OUR FUTURE BORROWINGS, AND PAYMENT ON THE
CONVERTIBLE NOTES EFFECTIVELY DEPENDS ON RECEIVING INCOME FROM OUR
SUBSIDIARIES WHICH HAVE NO OBLIGATIONS TO MAKE ANY PAYMENTS ON THE CONVERTIBLE
NOTES.

We are a holding company and we conduct our operations entirely through our
subsidiaries. We have few assets of significance other than the capital stock of
CoreComm, Inc. and our other subsidiaries. Consequently, we are dependent upon
dividends or other intercompany transfers of funds from our direct and indirect
subsidiaries to meet our debt service obligations, including those related to
the convertible notes. Our subsidiaries are separate legal entities that have no
obligation to pay any amounts due under the convertible notes. Our subsidiaries
do not guarantee the payment of the convertible notes. Furthermore, our
subsidiaries are not obligated to make funds available to us, and creditors of
our subsidiaries will have a superior claim to our subsidiaries' assets. In
addition, our subsidiaries' ability to make any payments to us will depend on
their earnings, the terms of their indebtedness, business and tax considerations
and legal restrictions.

Our subsidiaries are permitted to enter into various debt agreements that
restrict their ability to pay dividends, make advances or otherwise distribute
funds to us. We cannot assure you that CoreComm, Inc. or any of our other
subsidiaries will be able to pay dividends or otherwise distribute funds to us
in an amount sufficient to pay the principal of or interest on the convertible
notes.

The convertible notes are effectively junior in right of payment to all of
our subsidiaries' existing or future indebtedness and other liabilities. As of
September 30, 1999, our subsidiaries had $39.6 million of indebtedness and $33.9
million of other liabilities. Our subsidiaries intend to incur significant
indebtedness in the future (including vendor financing described in the section
entitled "Description of Our Other Indebtedness"). The indenture governing the
convertible notes permit our subsidiaries to incur indebtedness and other
liabilities without restriction. If indebtedness is issued by a subsidiary, the
holders' claim for any shortfall would effectively rank senior to the
convertible notes with respect to such subsidiary's assets. Accordingly, there
might only be a limited amount of assets available to satisfy your claims as a
holder of the convertible notes upon an acceleration of the maturity of the
convertible notes.

RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS MAY SIGNIFICANTLY LIMIT OUR
ABILITY TO EXECUTE OUR BUSINESS STRATEGY AND INCREASE THE RISK OF DEFAULT
UNDER OUR DEBT OBLIGATIONS.

Any debt instruments for future indebtedness incurred by us or our
subsidiaries are expected to contain a number of covenants which may
significantly limit our or our subsidiaries' ability to, among other things:

- borrow additional money;

- make capital expenditures and other investments;

- pay dividends;

- merge, consolidate or dispose of our assets; and

- enter into transactions with related entities.

In addition, in the future our debt instruments or those of our
subsidiaries may contain financial maintenance covenants. If we fail to comply
with these covenants, we will be in default under the applicable debt
instrument. A default, if not waived, could result in acceleration of our
indebtedness, in which case the debt would become immediately due and payable.
If this occurs, we may not be able to repay our debt or borrow sufficient funds
to refinance it. Even if new financing is available, it may not be on terms that
are acceptable to us. In addition, complying with these covenants may cause us
to take actions that we otherwise would not take, or not take actions that we
otherwise would take. Please refer to the section entitled "Description of
Convertible Notes -- Certain Covenants."
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<PAGE> 13

YOU MAY FIND IT DIFFICULT TO SELL YOUR CONVERTIBLE NOTES.

The initial purchasers of the convertible notes informed us that they
currently intend to make a market in the convertible notes. However, they are
not obligated to do so and any such market making may be discontinued at any
time without notice. We do not intend to apply for listing of the convertible
notes on any securities exchange or to seek approval for quotation through any
automated quotation system. Accordingly, we cannot assure you about the ongoing
development or liquidity of any market for the convertible notes. If an active
public market for the convertible notes does not develop or is interrupted, the
market price and liquidity of the convertible notes may be adversely affected.

The liquidity of any market for the convertible notes will depend upon
various factors, including:

- the number of holders of the convertible notes;

- the interest of securities dealers in making a market for the convertible
notes;

- the performance of the common stock into which the convertible notes may
be converted;

- our financial performance and prospects; and

- our industry's general outlook.

WE MAY BE UNABLE TO PAY OUR DEBT OBLIGATIONS IF A CHANGE OF CONTROL OCCURS
UNDER THE INDENTURE.

Upon certain change of control events, holders of the convertible notes may
require us to repurchase all or a portion of their convertible notes at a
purchase price equal to 101% of the principal amount of the convertible notes,
plus any additional amounts and any accrued and unpaid interest on the
convertible notes. Our ability to repurchase the convertible notes upon a change
of control event will be limited by the terms of our other debt agreements, if
any, and the debt agreements of our subsidiaries. Upon such a change of control
event, we may also be required immediately to repay the outstanding principal
and other amounts owed by us under our other financing agreements. In
particular, our subsidiaries could be required in the future to make a
repurchase offer to the holders of any indebtedness.

We may not be able to repay amounts outstanding under our other financing
agreements or the financing agreements of our subsidiaries, repurchase any
indebtedness of our subsidiaries or obtain necessary consents, if any, to
repurchase the convertible notes. Any requirement to offer to purchase the
convertible notes may result in our having to refinance our outstanding
indebtedness, which we may not be able to do. In addition, even if we were able
to refinance that debt, the financing may be on unfavorable terms.

RISK FACTORS RELATING TO THE COMMON STOCK

OUR ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRORS AND MAY
DEPRESS OUR STOCK PRICE.

Our memorandum of association and by-laws contain provisions that could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of us. These
provisions include the following:

- we may issue preferred stock with rights senior to those of our common
stock;

- we have a classified board of directors;

- our by-laws prohibit action by written consent by shareholders; and

- we require advance notice for nomination of directors and for shareholder
proposals.

The indenture for the convertible notes also contains provisions that could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of us. These
provisions would require us to make an offer to purchase all of the convertible
notes. Provisions such as these in our or our subsidiaries' indebtedness may
decrease the likelihood that stockholders will receive a possibly substantial
premium for their shares over then current market prices,
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and may limit the ability of stockholders to approve transactions that they may
deem to be in their best interest.

In addition, under our shareholder rights plan, holders of our common stock
are entitled to one preferred share purchase right for each outstanding share of
common stock they hold, exercisable under certain defined circumstances
involving a potential change of control as discussed in this prospectus. The
preferred share purchase rights have the anti-takeover effect of causing
substantial dilution to a person or group that attempts to acquire us on terms
not approved by our board of directors. Those provisions could have a material
adverse effect on the premium that potential acquirors might be willing to pay
in an acquisition or that investors might be willing to pay in the future for
shares of our common stock. Please refer to the section entitled "Description of
the Capital Stock."

RESTRICTIONS ON DIVIDENDS.

We have never paid cash dividends on our common stock. In addition, the
payment of any dividends by us in the future will be at the discretion of our
board of directors and will depend upon, among other things, future earnings,
operations, capital requirements, our general financial condition, the general
financial condition of our subsidiaries and general business conditions.

In addition, our or our subsidiaries' future debt instruments may restrict
our payment of dividends or the payment of dividends or distributions to us by
our subsidiaries. Please refer to the sections entitled "--We expect to continue
to incur negative cash flow from operations and net losses. Specifically, we
expect our revenues from the USN assets will decline significantly" and
"Dividend Policy."

THE MARKET PRICE OF OUR COMMON STOCK AND THE CONVERTIBLE NOTES COULD BE
VOLATILE.

The market price of our common stock has been subject to volatility and, in
the future, the market price of our common stock and the convertible notes could
fluctuate widely in response to numerous factors, many of which are beyond our
control. These factors include, among other things, actual or anticipated
variations in our operating results, earnings releases by us and our
competitors, announcements of technological innovations, changes in financial
estimates by securities analysts, market conditions in the industry and the
general state of the securities markets, governmental legislation or regulation,
currency and exchange rate fluctuations, as well as general economic and market
conditions, such as recessions.

RISK FACTORS RELATING TO OUR BUSINESS

WE HAVE HAD MOSTLY NEW OR LIMITED OPERATIONS.

We have only recently begun to develop the requisite staff and plans
necessary to effectively manage and operate our businesses, which include:

- Smart LEC Businesses:

- Competitive Local Exchange Carrier, or "CLEC," service, which is local
phone service that competes with the older, established regional phone
companies such as Ameritech or Bell Atlantic, including Centrex
service, which is centralized telecommunications for office buildings,
and

- Internet Service Provider Business;

- LMDS, which is a wireless system for delivery of multiple
telecommunications and television services; and

- Other businesses, including landline long distance service, paging and
cellular telephone service.

Therefore, historical financial information reflects that we are in the early
growth stage of our development and may make it more difficult for you to
evaluate our performance. You should be aware of the difficulties encountered by
enterprises in development, like us, especially in view of the highly
competitive nature of the telecommunications industry.

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WE DO NOT HAVE MUCH HISTORY OPERATING AS AN INDEPENDENT COMPANY, WHICH MEANS
THAT FUTURE OPERATING RESULTS MAY DIFFER FROM THOSE PRESENTED HERE.

We were formed from various previously owned subsidiaries of another
company, CCPR, as well as from other independent businesses, and have only
approximately one year's worth of operating history as an independent public
company. Accordingly, you should be aware that the financial statements included
with this prospectus may not necessarily reflect the results of operations,
financial condition and cash flows that would have been achieved had we been
operating as an independent company during the periods presented.

Our future results of operations will also depend upon a number of factors
and events, including the following:

- the level of demand for our various services;

- the substantial competition we encounter in all of our businesses;

- future unforeseen changes in the regulations that govern our businesses;
and

- the ongoing costs associated with our transition to an independent
company.

WE EXPECT TO CONTINUE TO INCUR NEGATIVE CASH FLOW FROM OPERATIONS AND NET
LOSSES. SPECIFICALLY, WE EXPECT OUR REVENUES FROM THE USN ASSETS WILL DECLINE
SIGNIFICANTLY.

On a pro forma basis giving effect to the Acquisitions, we had net losses
for the nine months ended September 30, 1999 and for the fiscal year ended
December 31, 1998 of $97.2 million and $231.7 million, respectively. Capital and
operating expenditures for our Smart LEC network and other businesses will
result in negative cash flow, which we expect will continue at least until we
establish an adequate customer base. We also expect to incur substantial future
operating losses, and we cannot assure you that we will achieve or sustain
profitability in the future. If we fail to become profitable, it could adversely
affect our ability to sustain our operations and to obtain additional required
funds. In addition, failing to become profitable would adversely affect our
ability to pay the required payments on the convertible notes and our other
indebtedness. Please refer to the section entitled "-- Risk Factors Relating to
the Convertible Notes."

We expect that our revenues from our recently acquired USN assets may
continue to decline significantly over the next several months as customers
continue to leave or "churn" off the service. Until we are satisfied with the
quality of these operations, we do not intend to actively sell additional lines
through USN. Thus, we expect an extended period of revenue declines associated
with the USN assets. The decline could be 40% of revenues or more compared with
the first half of fiscal year 1999 on an annualized basis. For more information,
please refer to the section entitled "Unaudited Pro Forma Financial
Information."

WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY BECAUSE
DOING SO DEPENDS ON FACTORS BEYOND OUR CONTROL, WHICH COULD ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS.

Our success depends on our ability to implement our business strategy in
order to increase our earnings and cash flow. Our results of operations and cash
flow will be adversely affected if we cannot fully implement our business
strategy. Successful implementation depends on factors specific to the
telecommunications industry and numerous other factors beyond our control. These
include changes in:

- general economic conditions;

- adverse changes in local markets;

- lack of attractiveness of a particular product;

- evolving consumer preferences;

- federal, state and local regulations;

- risks of product tampering; and

- our continued ability to hire and retain qualified management personnel.

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In addition, because of these and other factors, we may not be able to
construct our Smart LEC network within the time periods and costs described in
this prospectus. If we cannot construct our Smart LEC network or if there are
delays or cost overruns, our business, financial condition and results of
operations will be adversely affected.

TO DEVELOP OUR BUSINESS, FUND OUR CAPITAL COMMITMENTS AND SERVICE OUR
INDEBTEDNESS AND OTHER OBLIGATIONS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF
CASH.

The continued development, construction and operation of our business
requires substantial capital. Our Smart LEC strategy requires large amounts of
capital to build and maintain our network, which includes building through
acquisitions. In addition, our businesses that resell services provided by
larger, facilities-based companies, will require additional money to acquire new
customers and to finance our support of these new customers. Our businesses will
also require additional billing, customer service and other back-office
expenditures.

We cannot currently estimate the amount of the development costs of our
LMDS services. We anticipate, however, that the costs will be several times the
$25.2 million paid for the LMDS licenses, which we purchased through a
government auction last year. We are uncertain about these costs because LMDS is
a new technology, and there have not yet been enough companies building LMDS
networks for there to be a standard for costs of equipment, such as transmitters
needed to broadcast signals and receivers to receive the broadcasts.

In addition, we will require significant amounts of capital to finance our
other capital expenditures, meet our operating costs and meet all of our debt
service and other obligations as they become due, including a potential
contingent cash payment in July 2000 in connection with our acquisition of
certain assets of USN.

We intend to fund these requirements from cash, cash equivalents and
marketable securities on hand, future issuances of debt and equity and funds
internally generated by our operations. In particular, we expect our business to
depend on our ability to raise debt and equity through financings in the public
and private markets. We cannot give you any assurance that sufficient resources
will be available to meet our expected requirements and obligations. None of our
subsidiaries guaranteed or provided any credit support for the convertible
notes. Please refer to the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

As a result, we cannot assure you that we will be able to repay our
indebtedness, including the convertible notes. Accordingly, we may be required
to consider a number of measures, including:

- limiting or eliminating certain of our business projects, including,
without limitation, our entry into additional markets;

- refinancing all or a portion of our debt;

- seeking modifications of the terms of our debt;

- seeking additional debt financing, which would be subject to obtaining
necessary lender consents;

- seeking additional equity financing; or

- a combination of these measures.

We cannot assure you that any of the possible measures can be accomplished,
or can be accomplished in sufficient time to make timely payments with respect
to our indebtedness. In addition, we cannot assure you that any measures can be
accomplished on terms which are favorable to us and our subsidiaries.

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WE MAY NOT BE ABLE TO ASSIMILATE OUR RECENT ACQUISITIONS OR TO SUCCESSFULLY
IDENTIFY, MANAGE AND ASSIMILATE FUTURE ACQUISITIONS, INVESTMENTS AND STRATEGIC
ALLIANCES. FAILING TO DO SO WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

We entered into the Acquisitions to strengthen our positions in the
provision of both Internet and telephone services and to create the opportunity
for potential cost savings. Achieving the benefits of the Acquisitions will
depend in part on integrating technology, operations and personnel in a timely
and efficient manner to minimize the risk that the Acquisitions will result in
the unplanned loss of customers or key employees or the continued diversion of
the attention of management. Another challenge is to demonstrate to our
customers that the Acquisitions will not result in adverse changes in client
service standards or business focus and persuade our personnel that our business
cultures are compatible. We cannot assure you that the Acquisitions can be
successfully integrated or that any of the anticipated benefits will be
realized, and failure to do so could have a material adverse effect on our
business, financial condition and operating results.

In the future, we may acquire or try to acquire products and businesses
from, make investments in, or enter into strategic alliances with, companies
which have products or distribution networks in our current markets or in areas
into which we intend to expand our network. Any future acquisitions,
investments, strategic alliances or related efforts will be accompanied by risks
such as:

- the difficulty of identifying appropriate acquisition candidates;

- the difficulty of assimilating the operations of the respective entities;

- the potential disruption of our ongoing business;

- the inability of management to capitalize on the opportunities presented
by acquisitions, investments, strategic alliances or related efforts;

- the failure to successfully incorporate licensed or acquired trademarks
and technology rights into our manufacturing and distribution of our
products;

- the inability to maintain uniform standards, controls, procedures and
policies; and

- the impairment of relationships with employees and customers as a result
of changes in management.

We cannot assure you that we would be successful in overcoming these risks
or any other problems encountered with these acquisitions, investments,
strategic alliances or related efforts. Please refer to the sections entitled
"Business -- Business Strategy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Acquisitions."

WE DEPEND ON THE SERVICES OF A SMALL NUMBER OF KEY MANAGEMENT PEOPLE.

We believe that our success depends to a significant extent upon the
abilities and continued efforts of our senior management, including George S.
Blumenthal, our Chairman of the Board of Directors, J. Barclay Knapp, our
President, Chief Executive Officer and Chief Financial Officer and Patty J.
Flynt, our Senior Vice President and Chief Operating Officer. The loss of the
services of any of these people could have a negative effect upon our results of
operations and financial condition. You should be aware that several members of
senior management are officers and/or directors of other companies and that none
of these individuals have entered into employment agreements with us.

MANY OF OUR OFFICERS AND DIRECTORS FACE POTENTIAL CONFLICTS OF INTEREST
BECAUSE THEY ARE OFFICERS AND DIRECTORS OF OTHER COMPANIES IN THE
TELECOMMUNICATIONS INDUSTRY, WHICH COULD IMPEDE THEIR ABILITY TO MAKE
DECISIONS FOR US. SOME OF OUR OFFICERS AND OTHER EMPLOYEES ARE EMPLOYED BY OUR
AFFILIATES.

Many of our directors and officers are also directors and officers of other
companies in our industry and some are employed by our affiliates. In addition,
some of our officers and all of our directors are also officers and directors of
NTL Incorporated, which is a telecommunications company that has historical ties
to us. From time to time, opportunities may arise that would be pursued by one
or more of these
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companies and us at the same time. In addition, as described in "Certain
Relationships and Related Transactions," we and NTL have entered into various
transactions and service arrangements. Because all of our directors are
directors of NTL, decisions about these opportunities or transactions may result
in a conflict of interest. In those instances, our board of directors will seek
to act, with the advice of our counsel, in a manner consistent with each
director's duties to us and our stockholders under the law.

Furthermore, many of our officers and employees allocate their business
time among us and NTL. These officers and employees will not be available on a
full-time basis to us in the future and they may have duties to these other
companies which may interfere with their duties to us.

WE FACE HEAVY COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY FOR ALL OF THE
SERVICES WE CURRENTLY PROVIDE AND THOSE WE INTEND TO PROVIDE IN THE FUTURE.

CLEC

In each of our markets, we face competition from larger, better capitalized
incumbent local exchange carriers, or "ILECs," including Ameritech and Bell
Atlantic, as well as other providers of telecommunications services, such as
GTE, other CLECs and cable television companies. We also face competition or
prospective competition from other telecommunications companies. For example,
AT&T, MCI WorldCom and Sprint, among other carriers, have begun to offer local
telecommunications services in major U.S. markets using their own facilities or
by resale of the ILECs, or other providers' services. In fact, some of our
competitors, including AT&T, MCI WorldCom and Sprint, have entered into
interconnection agreements with Ameritech to provide local exchange service in
states in which we currently operate.

In addition to these long distance carriers, entities that currently offer
or are potentially capable of offering switched telecommunications services
include:

- other CLECs;

- other long distance carriers;

- wireless telephone system operators;

- large customers who build private networks;

- cable television companies; and

- other utilities.

Competition in the CLEC business will continue to intensify in the future
due to the increase in the size, resources and number of market participants.
Many facilities-based CLECs have committed substantial resources to building
their networks or to purchasing CLECs or inter-exchange carriers, or "IXCs,"
with complementary facilities. By building or purchasing a network or entering
into interconnection agreements or resale agreements with ILECs, including
Regional Bell Operating Companies, or "RBOCs," a facilities-based provider can
offer single source local and long distance services similar to those we offer.
These additional alternatives may provide these competitors with greater
flexibility and a lower cost structure than ours. Some of these CLECs and other
facilities-based providers of local exchange service are acquiring or being
acquired by IXCs. Any of these combined entities may have resources far greater
than ours. These combined entities may provide a bundled package of
telecommunications products, including local and long distance telephone, that
is in direct competition with the products offered or planned to be offered by
us.

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INTERNET

The Internet services market is extremely competitive. We compete directly
or indirectly with the following categories of companies:

- established online services, such as America Online, the Microsoft
Network and Prodigy;

- local, regional and national Internet Service Providers, or "ISPs," such
as MindSpring, Rocky Mountain Internet and Internet America;

- national telecommunications companies, such as AT&T and GTE;

- RBOCs, such as Ameritech and Bell Atlantic; and

- online cable services, such as Excite@Home and Roadrunner.

This competition will increase as large diversified telecommunications and
media companies acquire ISPs and as ISPs consolidate into larger, more
competitive companies. Diversified competitors may bundle other services and
products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. As a result, our businesses may suffer.

Our DSL service offering will also face competition from traditional
telephone companies, cable modem service providers, competitive
telecommunications companies, traditional and new national long distance
carriers, other Internet service providers, on-line service providers and
wireless and satellite service providers. Many of these competitors have longer
operating histories, greater name recognition and better strategic relationships
than we do.

LMDS

Depending on the services ultimately offered through our LMDS business, it
could face the same competition as our CLEC business. In addition, to the extent
that it is used to deliver pay television, our planned LMDS business will
compete with franchised cable television systems and may face competition from
several other types of multichannel video service providers, "MVPDs," such as:

- Multichannel Multipoint Distribution Systems;

- Satellite Master Antenna Television Systems;

- Direct Broadcast Satellite, "DBS," and other television receive-only
satellite dishes;

- video service from telephone companies; and

- open video system operators.

MVPDs face competition from other sources of entertainment, such as movie
theaters and computer on-line (including Internet) services. Further, premium
movie services offered by MVPDs have encountered significant competition from
the home video industry. In areas where several off-air television broadcasts
can be received without the benefit of terrestrial distribution systems, MVPDs
have experienced competition from such broadcasters. Online services and ISPs
also serve as a source of competition to MVPDs.

The Telecommunications Act relaxed the regulatory barriers to entry by
ILECs into the provision of video programming in their local telephone service
areas, and substantially reduced current and future regulatory burdens on
franchised cable television systems, thus potentially resulting in significant
additional competition to LMDS operators from local telephone companies and
franchised cable television systems.

OTHER BUSINESSES

service faces competition from other cellular carriers, such as VodaFone
AirTouch and AT&T, and from "personal communications service", or "PCS,"
carriers, such as Sprint PCS. Our paging services are similarly exposed to
competition from other providers of paging services operating in the same local
markets, regionally or nationally.

GENERAL

Some of our present competitors and potential future competitors may have
greater financial, technical, marketing, personnel and other resources than us.
The competitive environment could have a variety of adverse effects on us. For
example, it could:

- require price reductions in the fees for services and require increased
spending on marketing, network capacity and product development;

- negatively impact our ability to generate greater revenues and profits
from sources other than our core local and long distance telephone,
cellular and Internet service businesses;

- limit our ability to develop new products and services;

- limit our ability to continue to grow our subscriber base; and

- result in attrition in our subscriber base.

Any of the above events could have an adverse impact on revenues or result
in an increase in costs as a percentage of revenues, either of which could have
a material adverse effect on our business, financial condition and operating
results.

OUR RELIANCE ON ILECS AND OTHER FACILITIES-BASED PROVIDERS OF
TELECOMMUNICATIONS SERVICES AND CHANGES TO OUR AGREEMENTS WITH SUCH PROVIDERS
COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

We depend upon our agreements with the ILECs operating in our existing and
targeted markets. There are two primary types of agreements we enter into with
these providers:

- Interconnection agreements, which specify how we connect our network with
the network of the ILECs in each of our markets; and

- Resale agreements, through which we provide telecommunications services
on a resale basis.

Federal legislation regulating the telecommunications industry has enhanced
competition in the local service market by requiring the ILECs to provide access
to their networks through interconnection agreements and to offer unbundled
elements of their network and retail services at prescribed rates to other
telecommunications carriers. The termination of any of our contracts with our
carriers or a reduction in the quality or increase in cost of their services
could have a material adverse effect on our financial condition and results of
operations. We are presently renegotiating two of our interconnection agreements
under "renegotiation clauses" that either we or the ILECs have invoked.

Our interconnection agreements require the ILECs to provide sufficient
transmission capacity to keep blocked calls between our networks within industry
limits. Accordingly, we are partially dependent on the ILECs in our efforts to
provide our customers with superior service and avoid blocked calls. The failure
by the ILECs to comply with their obligations under our interconnection
agreements could result in customer dissatisfaction and the loss of existing and
potential customers. In addition, the rates charged to us under the
interconnection agreements may limit our flexibility to price our services at
rates that are low enough to attract a sufficient number of customers and permit
us to operate profitably.

Interconnection agreements are subject to review and approval by various
federal and state regulators. In addition, parties to the agreements may seek to
have the agreements modified based upon the outcome of regulatory or judicial
rulings occurring after the dates of the agreements. The outcome of these
rulings, or any modified agreements, could have a material adverse effect on us.
In addition, certain aspects of interconnection agreements, including the price
and economic terms of these agreements, have been subject to litigation and
regulatory action. Please refer to the section entitled "Regulation."

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We rely on telecommunications carriers to transmit our traffic over local
and long distance networks. Our dependence on other facilities-based carriers
means that we depend on the quality and condition of their networks. These
networks may experience disruptions that are not easily remedied. Thus, the
following conditions of the facilities-based carriers could cause interruption
in service and/or reduced capacity for our customers:

- physical damage;

- power loss; and

- software defects (including the inability to update their systems to be
Year 2000 compliant).

We depend upon cooperation with the ILECs and other providers for the
provision and repair of transmission facilities and to provide the services and
network components that we order. We may not be able to obtain the facilities
and services we require at satisfactory quality levels, rates, terms and
conditions, which could delay the buildout of our networks and degrade the
quality of service to our subscribers. In particular, we will depend upon the
quality of copper lines owned by telephone companies that deliver services to
our end users. Particularly sensitive to the quality of these lines will be our
planned DSL offering. The quality of service we will be able to provide through
that offering will depend in part on the quality of the copper lines.

In addition, we depend on certain suppliers of network services, hardware
and software. If our suppliers fail to provide us with network services,
equipment or software in the quantities, at the quality levels or at the times
we require, or if we cannot develop alternative sources of supply, it will be
difficult, if not impossible, for us to provide our services.

The pace at which are able to add new customers and services could be
adversely affected if the ILECs do not provide us with necessary network
elements, collocation space, intercompany network connections and the means to
share information about customer accounts, service orders and repairs on a
timely basis. In addition, our ability to provide high-speed data services
through technologies such as DSL will be dependent on our obtaining space from
the various ILECs for collocation of our equipment in the ILECs' central offices
and elsewhere. In many instances the ILECs do not timely or fully comply with
these requirements. Also, the rules governing which elements the ILECs must
provide and the cost methodology for providing these elements are currently
under FCC and judicial review.

In the event that our long distance carriers are unable to handle the
growth in customer usage, we could try to transfer traffic to a carrier with
sufficient capacity, but we cannot be sure that additional capacity will be
available. If any of the local exchange carriers are unable to handle the growth
in customer usage, we would be required to use another local carrier, which
could be difficult in light of the limited number of local carriers with their
own facilities. In the event we elect to use other carriers, the charges for
services may exceed those under the existing contracts, which could have a
material adverse effect on our financial condition and results of operations.

In addition, the accurate and prompt billing of our customers is dependent
upon the timeliness and accuracy of call detail records provided by the carriers
whose services we resell. We cannot be sure that our current carriers will
continue to provide, or that new carriers will provide, accurate information on
a timely basis. A carrier's failure to do so could have a material adverse
effect on our ability to bill our customers and, therefore, on our operating
results. Please refer to the section entitled "Business."

THE TELECOMMUNICATIONS INDUSTRY IS HIGHLY REGULATED BY THE FEDERAL GOVERNMENT
AND BY STATE GOVERNMENTS, AND POTENTIAL REGULATORY CHANGES COULD HAVE AN
ADVERSE EFFECT ON OUR OPERATIONS.

CLEC AND OTHER BUSINESSES

In our telephony businesses, we are subject to extensive regulation by the
FCC and by the public utility commissions of various states. Changes in
statutes, regulations or judicial interpretations could have material adverse
effects on our operations. The FCC is currently considering various aspects of
local exchange competition, including pricing flexibility for ILECs with regard
to interstate access charges

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assessed on IXCs, universal service payments, eligibility to provide
universal service, access to telecommunications services by persons with
disabilities, telephone number portability, rates for resold services and
unbundled network elements, availability of various ILEC network elements,
access to advanced services (e.g., DSL) provided by ILECs, and reciprocal
compensation for calls to ISPs. An unfavorable decision on any one of these
items could decrease our revenues, increase our costs, and make it more
difficult to attract and retain customers. It is impossible to determine at this
time how the FCC will rule on any of these issues.

INTERNET

We provide Internet services through data transmissions over public
telephone lines and their networks. These transmissions are subject to
regulation of the FCC and state public utility commissions described above. As
an Internet service provider, we are not subject to direct regulation by the FCC
or any other governmental agency, other than regulations applicable to
businesses generally. However, we could become subject to FCC or other
regulatory agency regulation, especially as Internet services and
telecommunications services converge. Changes in the regulatory environment
could decrease our revenues, increase our costs and affect our service
offerings.

There have been various regulations and court cases relating to liability
of ISPs and other on-line service providers for information carried on or
through their services or equipment, including in the areas of copyright,
indecency, obscenity, defamation and fraud. The United States Supreme Court
declared the Communications Decency Act of 1996 to be unconstitutional as it
applies to the transmission of indecent on-line communications to minors, and a
lower court declared the 1998 Federal Child Online Protection Act to be
unconstitutional. Other federal and state statutes continue to prohibit the
online distribution of obscene materials. The law in this area is unsettled and
there may be new legislation and court decisions that expose ISPs to liabilities
or affect their services.

Additional laws and regulations may be adopted with respect to the
Internet, covering issues such as Universal Service Fund support payments,
content, user privacy, pricing, libel, obscene material, indecency, taxation,
gambling, intellectual property protection and infringement and technology
export and other controls. Other federal Internet-related legislation has been
introduced which may limit commerce and discourse on the Internet. The FCC
recently ruled that ISPs are enhanced service providers, calls to ISPs are
jurisdictionally interstate, and ISPs should not pay access charges applicable
to telecommunications carriers. The FCC is examining inter-carrier compensation
for calls to ISPs, which could affect ISPs' costs.

BECAUSE OF THE FAST PACE OF TECHNOLOGICAL CHANGE IN THE TELECOMMUNICATIONS
INDUSTRY, THERE IS A RISK THAT WE WILL FALL BEHIND OR WILL FAIL TO
SUCCESSFULLY ADDRESS CHANGE, WHICH COULD HARM OUR ABILITY TO COMPETE AND COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.

The telecommunications industry is subject to rapid and significant changes
in technology. We cannot predict the effect of technological changes on our
business. However, the cost of implementing emerging and future technologies may
be significant, and our ability to fund the implementation of those technologies
will depend on our ability to obtain additional financing.

The Internet services market is characterized by rapid technological
change, evolving industry standards, changes in member needs and frequent new
service and product introductions. Our future success depends, in part, on our
ability to use leading technologies effectively, develop our technical
expertise, enhance our existing services and develop new services that meet
changing member needs on a timely and cost-effective basis. In particular, we
must provide subscribers with the appropriate products, services and guidance to
best take advantage of the rapidly evolving telecommunications industry. Our
failure to respond in a timely, cost-efficient and effective manner to new and
evolving technologies (such as those offering greater bandwidth services, among
others) could have a negative impact on our business and financial results.

Our business may also be affected by problems caused by computer viruses,
security breaches and other inappropriate uses of our network (e.g., email
"spamming"). Alleviating these problems may cause
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interruptions, delays or cessation in service to our members, which could cause
them to terminate their membership or assert claims against us.

OUR INTERNET BUSINESS DEPENDS ON CONTINUED GROWTH OF THE INTERNET AS A MEDIUM
OF COMMUNICATION AND COMMERCE.

Our future success in the ISP business substantially depends on continued
growth in the use of the Internet. Although we believe that Internet usage and
popularity will continue to grow, we cannot be certain that this growth will
continue or that it will continue in its present form. If Internet usage
declines or evolves away from our business, our growth in this case will slow or
stop and our financial results may suffer.

OUR SERVICES DEPEND UPON OUR NETWORK INFRASTRUCTURE.

Success in our businesses depends, in part, on the capacity, reliability
and security of our Smart LEC network infrastructure. Currently, we provide
Internet service over our own network and, as explained more fully in the
section entitled "Business," we expect to provide telephony services over our
own network in the near future. Network capacity constraints may occur in the
future, both at the local and national levels. These capacity constraints would
result in slowdowns, delays or inaccessibility when members try to use a
particular service. Poor network performance could cause customers to
discontinue service with us. Reducing the incidence of such problems will
require constantly expanding and improving our infrastructure, which could be
very costly and time consuming.

We must also protect our infrastructure against fire, power loss,
telecommunications failure, computer viruses, security breaches and similar
events. We do not currently maintain a redundant or backup network operations
center. A natural disaster or other unanticipated occurrence at our switch or
collocation facilities, network operations center or points-of-presence through
which members connect to the Internet, in the networks of telecommunications
carriers we use, or in the Internet backbone in general could cause
interruptions in our Internet services.

OUR PLANNED LMDS SYSTEM INVOLVES NEW AND LARGELY UNTESTED TECHNOLOGY, SO THERE
IS A RISK THAT UNANTICIPATED TECHNICAL PROBLEMS WILL CAUSE DIFFICULTIES FOR
THIS BUSINESS.

Our planned LMDS broadband wireless telecommunications system uses new
technology with a limited operating history whose system architecture remains
subject to further development and refinement. In the past, other companies
using LMDS have experienced technical difficulties, some of which have affected
subscriber acceptance of their systems. Additional technical issues may arise in
the course of system deployment that could adversely affect reception quality
and our ability to cover different service areas. In addition, we believe that a
significant percentage of the households in our LMDS markets may be located in
"shadowed" areas capable of receiving the transmitted signal only with the
assistance of small, low cost "repeaters," which we may deploy. Two-way services
that we may launch will require the development and mass production of special
equipment. We cannot be sure that the equipment needed for two-way services will
become commercially available at an acceptable cost. You should also be aware
that our ability to support high service volumes will be limited to the
technology involved in LMDS, including limited available bandwidth.

WE ARE A BERMUDA COMPANY AND ARE THUS SUBJECT TO THE LAWS OF A FOREIGN COUNTRY
THAT DIFFER FROM THE LAWS OF MOST U.S. STATES.

Our corporate affairs are governed by our memorandum of association and
by-laws and by the laws governing corporations incorporated in Bermuda. The
rights of our shareholders and the responsibilities of members of our board of
directors under Bermuda law are different from those applicable to a corporation
incorporated in the United States. Please refer to the section entitled
"Description of the Capital Stock."

20
<PAGE> 24

USE OF PROCEEDS

The selling securityholders will receive all of the proceeds from the sale
of the securities sold under this prospectus. We will not receive any of the
proceeds from sales by the selling securityholders of the offered securities.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted and traded on the Nasdaq National Market under
the symbol "COMM." The following table provides, for the periods indicated, the
high and low last reported sales prices per share of our common stock as
reported on the Nasdaq National Market, as adjusted to give effect to a 3-for-2
stock split by way of stock dividend paid on September 2, 1999.

<TABLE>
<CAPTION>
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
1998
Third Quarter (beginning September 4, 1998)................ $10.00 $ 6.67
Fourth Quarter........................................... $11.50 $ 5.00
1999
First Quarter............................................ $26.08 $10.92
Second Quarter........................................... $33.00 $24.17
Third Quarter............................................ $38.25 $30.80
Fourth quarter (through November 17, 1999)............... $53.50 $35.75
</TABLE>

The market price of shares of our common stock may fluctuate. As a result,
you are urged to obtain current market quotations. On November 17, 1999, the
last reported sales price per share for our common stock, as reported on the
Nasdaq National Market, was $46.13. As of November 17, 1999, there were
approximately 368 recordholders of our common stock. This figure does not
reflect beneficial ownership of shares held in nominee name.

DIVIDEND POLICY

Since our inception, we have not declared or paid any cash dividends on our
common stock. We currently intend to retain our earnings for future growth and,
therefore, we do not anticipate paying cash dividends in the foreseeable future.
Our or our subsidiaries' future debt instruments may restrict our payment of
dividends on our equity securities, including the common stock.

21
<PAGE> 25

CAPITALIZATION

The following table shows our cash, cash equivalents and marketable
securities, and capitalization as of September 30, 1999, and as adjusted to give
effect to the original offering of the convertible notes. You should read this
table together with the consolidated financial statements and related notes
incorporated in this prospectus and the information in the sections entitled
"Unaudited Pro Forma Financial Information," "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and marketable securities............ $ 38,406 $207,094
======== ========
Current portion of long-term debt........................... $ 16,604 $ 16,604
======== ========
Long-term debt(1)
Subsidiary debt and capital lease obligations(2).......... $ 23,029 $ 23,029
6% Convertible notes due 2006............................. -- 175,000
-------- --------
Total long-term debt................................... 23,029 198,029
-------- --------
Stockholder's equity:
Series preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $0.01 par value, 75,000,000 shares
authorized; 25,443,000 issued and outstanding(3)....... 254 254
Additional paid-in capital................................ 242,658 242,658
(Deficit)................................................. (78,581) (78,581)
-------- --------
Total stockholder's equity............................. 164,331 164,331
-------- --------
Total capitalization................................... $187,360 $362,360
======== ========
</TABLE>

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

(1) We are negotiating with equipment manufacturers including Cisco Systems,
Inc., Lucent Technologies, Inc., and Nortel Networks Corporation for
significant vendor financing. The vendors may provide equipment financing to
one or more of our subsidiaries. We cannot assure you that any of these
negotiations will result in an agreement. Please refer to the section
entitled "Description of Our Other Indebtedness."

(2) Represents $5,384,000 of indebtedness and $17,645,000 of capital lease
obligations of our subsidiaries that are payable to third parties.

(3) As adjusted for the 3-for-2 stock split by way of stock dividend paid on
September 2, 1999. Does not include 7,835,000 shares of common stock subject
to options or warrants and approximately 4,259,000 shares of common stock
subject to conversion of the convertible notes.

22
<PAGE> 26

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma financial information gives effect to (1) the
acquisition of the assets and related liabilities of OCOM Corporation in June
1998, (2) the acquisition of all of the outstanding capital stock of Digicom in
April 1998, (3) the acquisition of all of the operating assets of JeffRand Corp.
(known as Wireless Outlet) in April 1998, (4) the acquisition of Stratos in
November 1998, (5) the acquisition of MegsINet in May 1999 and (6) the
acquisition of certain assets of USN in May 1999. The pro forma financial
information is based on our historical financial statements and the historical
financial statements of OCOM, Digicom, Wireless Outlet, Stratos, MegsINet and
USN.

The acquisitions have been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their fair value. The contribution of assets initially acquired by
CCPR to us were accounted for at historical cost in a manner consistent with a
transfer of entities under common control which is similar to that used in a
"pooling of interests." Our historical financial statements include the results
of the contributed companies for all periods owned by CCPR.

The unaudited pro forma condensed consolidated statement of operations for
the nine months ended September 30, 1999 and for the year ended December 31,
1998 gives effect to the Acquisitions as if they had been consummated on January
1, 1998.

The pro forma adjustments are based upon available information and
assumptions that we believe are reasonable at the time made. We believe that any
variations from the available information and assumptions applied will not have
a material effect on the pro forma financial statements presented. The unaudited
pro forma condensed consolidated financial statements do not purport to present
our results of operations had the acquisitions occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The unaudited pro forma condensed consolidated
statements of operations do not reflect any adjustments for synergies that we
expect to realize. We cannot assure you as to the amounts of, or that any, cost
savings or revenue enhancements will be realized.

A significant component of the revenues included in the historical pro
forma results is associated with our acquisition of certain assets of USN.
Although USN quickly developed a large customer list and revenue base in 1997
and 1998, it had difficulties under its previous management providing services,
including billing, customer care and other operational areas, and filed for
bankruptcy in February 1999. In May 1999, we purchased the wireline assets of
USN out of bankruptcy for $26.4 million in cash, warrants to purchase an
aggregate of 525,000 shares of its common stock and a contingent payment based
on future operating results that is capped at $58.6 million.

Since the acquisition, we have been focusing on improving these operations,
and have been successful in many areas. However, we do not intend to actively
sell additional lines in these markets until we are fully satisfied with the
quality of the operations.

Consequently, and consistent with our due diligence, transaction structure
and purchase price, revenues associated with USN assets have declined
significantly since our acquisition, and additional declines may continue over
the next several months as customers leave or "churn" off the service. We
anticipate that the future operating results derived from the USN assets will
improve once the customer base is stabilized, although we have no way of
assuring this. Please refer to the section entitled "Disclosure Regarding
Forward-looking Statements."

The unaudited pro forma financial statements should be read in conjunction
with our financial statements and notes thereto, and with the financial
statements and notes thereto of OCOM (our predecessor), MegsINet and USN
appearing elsewhere in this prospectus.

23
<PAGE> 27

CORECOMM LIMITED

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 1999

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
CORECOMM MEGSINET USN
HISTORICAL HISTORICAL(1) HISTORICAL(1) ADJUSTMENTS PROFORMA
---------- ------------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 37,139 $ 2,785 $ 36,919 $ -- $ 76,843
Operating expenses.............. 37,524 3,740 33,784 -- 75,048
Selling, general and
administrative expenses....... 43,725 3,489 23,330 -- 70,544
Corporate expenses.............. 6,489 -- -- -- 6,489
Stock option based
compensation.................. 1,056 -- -- -- 1,056
Depreciation.................... 6,674 1,679 4,803 (2,455)(D) 10,701
Amortization.................... 5,005 -- 80 4,661(A) 9,746
-------- ------- -------- ------- --------
Operating (loss)................ (63,334) (6,123) (25,078) (2,206) (96,741)
Interest income and other....... 2,577 27 (646) -- 1,958
Interest expense................ (1,569) (814) (5,405) 5,405(C) (2,383)
-------- ------- -------- ------- --------
Net income (loss) before
reorganization items.......... $(62,326) $(6,910) $(31,129) $ 3,199 $(97,166)
======== ======= ======== ======= ========
Basic and diluted net (loss) per
share......................... $ (2.85) $ (4.09)
======== ========
Weighted average shares......... 21,873 1,910 23,783
======== ======= ========
</TABLE>

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

(1) For the period from January 1, 1999 to date of acquisition.

24
<PAGE> 28

CORECOMM LIMITED

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PROFORMA
PREDECESSOR FOR
(OCOM) ACQUISITIONS
JANUARY 1, COMPLETED
1998 PRIOR TO
CORECOMM TO MAY 31, OTHER DECEMBER 31, MEGSINET
HISTORICAL(1) 1998(2) ACQUISITIONS(3) ADJUSTMENTS 1998 HISTORICAL
------------- ----------- --------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues....................... $ 6,713 $ 1,452 $3,334 $ -- $ 11,499 $ 4,172
Operating expenses............. 5,584 772 2,025 -- 8,381 4,867
Selling, general and
administrative expenses...... 13,989 3,205 1,077 -- 18,271 2,739
Non-recurring charges.......... -- -- -- -- -- --
Compensation charge from the
issuance of stock options.... 4,586 -- -- (4,586)(B) -- --
Depreciation................... 749 255 133 -- 1,137 1,082
Amortization................... 231 2 -- 195(A) 428 --
-------- ------- ------ ------- -------- -------
Operating income (loss)........ (18,426) (2,782) 99 4,391 (16,718) (4,516)
Interest income and other...... 2,192 -- -- -- 2,192 --
Interest expense............... (21) -- -- -- (21) (659)
-------- ------- ------ ------- -------- -------
Net income (loss) from
continuing
operations................... $(16,255) $(2,782) $ 99 $ 4,391 $(14,547) $(5,175)
======== ======= ====== ======= ======== =======
Basic and diluted net (loss)
per share.................... $ (.82) $ (.74)
======== ========
Weighted average shares........ 19,785 19,785
======== ========

USN
HISTORICAL ADJUSTMENTS PROFORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues....................... $ 132,503 $ -- $ 148,174
Operating expenses............. 117,957 -- 131,205
Selling, general and
administrative expenses...... 183,200 -- 204,210
Non-recurring charges.......... 28,987 -- 28,987
Compensation charge from the
issuance of stock options.... -- -- --
Depreciation................... 9,317 (6,467)(D) 5,069
Amortization................... 252 11,187(A) 11,867
--------- -------- ---------
Operating income (loss)........ (207,210) (4,720) (233,164)
Interest income and other...... 14,973 (14,973)(C) 2,192
Interest expense............... (30,099) 30,099(C) (680)
--------- -------- ---------
Net income (loss) from
continuing
operations................... $(222,336) $ 10,406 $(231,652)
========= ======== =========
Basic and diluted net (loss)
per share.................... $ (10.58)
=========
Weighted average shares........ 2,111 21,896
======== =========
</TABLE>

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

(1) For the period from April 1, 1998 (date operations commenced) to December
31, 1998.

(2) Our predecessor for the period from January 1, 1998 to May 31, 1998.

(3) For the periods from January 1, 1998 to date of acquisition.

25
<PAGE> 29

CORECOMM LIMITED

PRO FORMA ADJUSTMENTS (UNAUDITED) (IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
1998 SEPTEMBER 30, 1999
------------ ------------------
<S> <C> <C> <C>
A. To record the amortization of intangibles
Amortization of intangibles over 2, 7 or 10 years:
For the acquisitions completed prior to December 31, 1998
(one year of amortization less the historical amount
recorded)................................................... $ 195 $ --
======= =======
For the MegsINet and USN acquisitions, less the historical
amount recorded............................................. $11,187 $ 4,661
======= =======
B. To adjust for compensation recorded in connection with our
spin
off to the shareholders of CCPR............................. $(4,586) $ --
======= =======
C. To eliminate USN interest income and interest expense from
cash not acquired and debt not assumed
D. To adjust USN depreciation for fixed assets not acquired and
for the write down of the fixed assets acquired to fair
value....................................................... $(6,467) $(2,455)
======= =======
</TABLE>

26
<PAGE> 30

SELECTED CONSOLIDATED FINANCIAL DATA

Our selected financial data that relate to the period from April 1, 1998 to
December 31, 1998 have been derived from our historical financial statements
audited by Ernst & Young LLP, independent auditors. The selected historical
financial data of OCOM that relate to the period from January 1, 1998 to May 31,
1998 and for the years ended December 31, 1997, 1996 and 1995 have been derived
from the historical financial statements of OCOM audited by Ernst & Young LLP,
independent auditors. The selected historical financial data of OCOM as of and
for the year ended December 31, 1994 is unaudited and has been derived from the
financial statements of OCOM. The accompanying unaudited interim financial
information as of September 30, 1999 and for the nine months ended September 30,
1999 and for the period from April 1, 1998 (date operations commenced) to
September 30, 1998 include all adjustments (consisting only of normal recurring
accruals) which are, in our opinion, necessary for a fair presentation of our
results of operations for those interim periods. Operating results for the nine
months ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1999.

<TABLE>
<CAPTION>
CORECOMM LIMITED
----------------------------------------------------------
FOR THE
FOR THE PERIOD FROM
PERIOD FROM APRIL 1, 1998
FOR THE APRIL 1, 1998 (DATE OPERATIONS
NINE MONTHS (DATE OPERATIONS COMMENCED) TO
ENDED COMMENCED) TO DECEMBER 31,
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 1998(1)
------------------ ------------------ ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $ 37,139 $ 3,812 $ 6,713
Costs and expenses..... 100,473 14,567 25,139
Net income (loss)...... (62,326) (10,007) (16,255)
Basic and diluted net
(loss) per share..... $ (2.85) $ (.51) $ (.82)
Weighted average
shares............... 21,873 19,781 19,785
OTHER DATA(3):
Capital
expenditures....... 14,906 1,821 2,344
Ratio of earnings to
fixed charges(4)... -- -- --

THE PREDECESSOR (OCOM)
-------------------------------------------------------
FOR THE
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1, 1998 -------------------------------------
TO MAY 31, 1998 1997 1996 1995(2) 1994
--------------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $ 1,452 $ 3,579 $ 5,103 $ 4,001 $ 3,690
Costs and expenses..... 4,234 7,954 6,333 8,413 2,987
Net income (loss)...... (2,782) (4,379) (1,097) (4,154) 1,048
Basic and diluted net
(loss) per share..... $ (.14) $ (.22) $ (.06) $ (.25) $ .07
Weighted average
shares............... 19,776 19,613 19,794 16,605 14,801
OTHER DATA(3):
Capital
expenditures....... 623 1,435 183 180 81
Ratio of earnings to
fixed charges(4)... -- -- -- -- 22x
</TABLE>

<TABLE>
<CAPTION>
THE PREDECESSOR (OCOM)
CORECOMM LIMITED ---------------------------------
----------------------------- DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ---------------------------------
1999 1998(1) 1997 1996 1995 1994
------------- ------------ ------ ----- ------ ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities................................... $ 38,406 $136,879 $ -- $ -- $ -- $ --
Working capital................................ 7,523 133,899 (950) (491) (42) 148
Fixed assets--net.............................. 78,100 3,582 1,269 270 226 172
Total assets................................... 238,849 176,526 1,731 917 1,020 670
Subsidiary notes payable and capital lease
obligations (includes current portion)....... 39,633 634 -- -- -- --
Stockholders' equity........................... 164,331 169,297 -- -- -- --
Parent's investment............................ -- -- 321 (208) 207 353
</TABLE>

27
<PAGE> 31

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

(1) During the period from April 1, 1998 (date operations commenced) to December
31, 1998, CCPR made the following contributions to us prior to our spin-off
from CCPR: (a) a cash contribution of $150 million, (b) businesses acquired
by CCPR in April and June 1998 and (c) the subsidiary that owns various LMDS
licenses in Ohio that were acquired for an aggregate of $25,241,000.

(2) OCOM incurred one-time costs of $2,294,000 in 1995 in connection with the
expansion of its cellular long distance resale business into certain AT&T
Wireless markets.

(3) We have never declared or paid any cash dividends.

(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest, amortization of debt issuance costs and the portion of
rental expense that represents the interest factor. Earnings were
insufficient to cover our fixed charges by $61,487,000 for the nine month
period ended September 30, 1999; $10,007,000 for the period from April 1,
1998 to September 30, 1998; $15,815,000 for the period from April 1, 1998 to
December 31, 1998; $2,782,000 for OCOM's period from January 1, 1998 to May
31, 1998; and $4,379,000, $1,097,000 and $4,154,000 for the fiscal years
ended December 31, 1997, 1996 and 1995, respectively.

28
<PAGE> 32

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

The following discussion and analysis represents our financial condition
and results of operations and that of our consolidated subsidiaries. You should
read our consolidated financial statements, upon which this is based, included
elsewhere in this prospectus. Various statements in the following discussion and
analysis are "forward-looking statements." Please refer to the section entitled
"Disclosure Regarding Forward-looking Statements."

OVERVIEW

We are an innovative communications company that provides integrated
telephone, Internet and data services to both business and residential customers
in targeted markets throughout the United States. We are a holding company and
have no independent business operations. All of our business operations are
conducted through our subsidiaries. We currently offer local and long distance
telephone, Internet access and intend to offer high-speed data services to
customers located principally in the following states: Ohio, Illinois, Michigan,
New York and Massachusetts. As of June 30, 1999, we had a total of approximately
100,000 business and residential telephony access lines in service and
approximately 80,000 Internet customers. We intend to pursue other opportunities
in the telecommunication industry as they arise.

We currently deliver our Internet services over our ATM network, which has
approximately 90 points of presence and approximately 20,000 route miles of
leased broadband circuits, which we are expanding even further to be national in
scope. We are also in the process of installing a switch-based Smart LEC network
to provide all of our integrated telecommunications and data services. While
this network is under construction, we are presently providing telephone
services to our customers principally through reselling services from the ILECs
and IXCs. Please refer to the section entitled "Business."

Prior to our spinoff from CCPR in September 1998, CCPR contributed to us
$181.0 million in cash, businesses, assets and licenses. The cash has been used
to finance our acquisitions of USN and MegsINet and for general corporate
purposes. In addition, we have issued shares of our common stock and options or
warrants to purchase our common stock in connection with those acquisitions,
totaling $43.2 million (as valued in accordance with GAAP).

We derive revenue principally from:

- Monthly recurring charges for the use of our services, including local
telephone, Internet access, data services and cellular and paging
services, and for the features associated with those services;

- Usage-based charges for additional use of our services, such as telephone
calls; and

- Non-recurring initial charges, such as installation charges and equipment
sales.

A significant component of the 1999 results is associated with the
acquisition of certain assets of USN. Although USN quickly developed a large
customer list and revenue base in 1997 and 1998, it had difficulties under its
previous management providing services, including billing, customer care and
other operational areas, and filed for bankruptcy in February 1999. Since the
acquisition, we have been focusing on improving these operations, and have been
successful in many areas. However, we do not intend to actively sell additional
lines in these markets until we are fully satisfied with the quality of the
operations. Consequently, and consistent with our due diligence, transaction
structure and purchase price, revenues associated with the USN assets have
declined significantly since our acquisition, and additional declines may
continue over the next several months as customers leave or "churn" off the
service. We anticipate that the future operating results derived from the USN
assets will improve once the customer base is stabilized, although we have no
way of assuring this. Please refer to the section entitled "Disclosure Regarding
Forward-looking Statements."

Our network and service costs are primarily from:

- The cost of leasing transport circuits for interconnection from the ILEC
and other service providers;

- The cost of resold services, such as local and long distance services;

29
<PAGE> 33

- Costs related to the operation of our network; and

- Other costs related to providing services to our customers.

In connection with the expansion and development of our networks, we expect
to increase significantly our capital expenditures, our sales and marketing
expenditures, and our other operating expenditures as we deploy our networks and
support additional end-users. Accordingly, we expect to incur substantial and
increasing net losses for at least the next several years. Please refer to the
section entitled "Risk Factors--We expect to continue to incur negative cash
flow from operations and net losses.

The development and expansion of our business and the construction of our
Smart LEC networks will require significant expenditures. The deployment of our
network in a particular market requires up-front expenditures related to
operations as well as capital expenditures for equipment. Expenses related to
operations include regional management, sales and marketing expenses, facilities
expense and other costs related to providing and maintaining services prior to
reaching profitability. Capital expenditures include the costs and equipment
related to our regional switch site, including the Class 5 telephony switch, ATM
switches, routers, servers, modem banks and SONET Multiplexers. In our
collocated facilities, equipment to be purchased includes telephony access
equipment, DSLAMs, modem equipment and access concentrators, SONET Multiplexers
and POTS splitters. Once the network is in place, there will be additional
capital expenditures to support incremental end users.

ACQUISITIONS

We were formed by CCPR in March 1998 in order to succeed to the businesses
and assets that were operated by OCOM Corporation and to pursue new
telecommunications opportunities outside of Puerto Rico and the U.S. Virgin
Islands. We were formerly a wholly owned subsidiary of CCPR. Our CLEC, cellular
long distance, landline long distance and cellular long distance resale
businesses were formerly owned and operated by OCOM Corporation Telecoms
Division, which is our predecessor business. CCPR acquired the operating assets
and related liabilities of these businesses from OCOM on June 1, 1998 and prior
to spinning us off, CCPR contributed to us, and we subsequently contributed to
CoreComm, Inc., the operating assets of OCOM, the capital stock of Digicom, the
assets of Wireless Outlet and the subsidiary that owns our LMDS licenses.

In 1998 and 1999, we completed several acquisitions. In April 1998, we
purchased Digicom, Inc., a telecommunications provider based in Cleveland, Ohio
which provides telephony services to business customers and has
telecommunications facilities in several locations in the Cleveland area for
$2.1 million, and certain operating assets and related liabilities of JeffRand
Corp. (known as Wireless Outlet) for $400,000. In June 1998, we purchased a
portion of the assets of OCOM Corporation, a telecommunications reseller that
had been a subsidiary of NTL Incorporated, for $1.3 million. In November 1998,
we purchased the assets of Stratos Internet Group, Inc., an Internet service
provider based in Cleveland which offers dial up and dedicated Internet access,
as well as web hosting and other services, for $1.5 million.

In May 1999, two additional significant acquisitions were completed. We
acquired MegsINet Inc., a national Internet network service provider with a
national ATM network and local telecommunications facilities in Chicago. We
purchased 100% of MegsINet's stock for a total consideration of $16.8 million in
cash plus 2.1 million shares of our common stock. In addition, we assumed or
repaid $21.3 million of MegsINet debt.

We also acquired, in May 1999, the wireline assets of USN, which is based
in Chicago. As USN was in bankruptcy, we bought its wireless assets through the
bankruptcy court process. USN was a competitive local exchange carrier that
operates on a resale basis. We acquired USN for $26.4 million in cash, warrants
to purchase 375,000 shares of our common stock at a price of $20 per share and
150,000 shares at a price of $33 1/3 per share and a potential contingent
additional cash payment in July 2000 that is payable if the USN assets meet or
exceed operating performance thresholds. However, the total additional cash
consideration we will pay for the USN assets is capped at $58.6 million.

30
<PAGE> 34

RESULTS OF OPERATIONS

We have issued, and in the future will issue, options to employees pursuant
to the CoreComm Limited 1998 Stock Option Plan. In addition, CoreComm, Inc. has
a stock option plan under which up to 30% of its capital stock (based on the
number of shares outstanding at the time of an initial public offering of its
common stock or its spin-off from us) is reserved for issuance pursuant to
option grants. Options granted under CoreComm, Inc.'s plan are not exercisable
unless and until an initial public offering of its common stock occurs or is
spun-off by us. If and when the options become exercisable, we may be required
to take a non-cash charge against earnings in an amount equal to the excess, if
any, of the fair market value of the common stock underlying the options over
the exercise price of the options. We expect that the amount of the non-cash
charge could be significant. Please refer to the section entitled "Disclosure
Regarding Forward-looking Statements."

As a result of the completion of the acquisitions of 100% of the stock of
MegsINet Inc. and the wireline assets of USN Communications, Inc. in May 1999,
and 53% of the equity of Q-east Holding Limited in August 1999, the Company
consolidated the results of operations of these businesses from the dates of
acquisition. The results of these businesses are not included in the 1998
results.

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND FOR THE PERIOD FROM APRIL 1, 1998 (DATE
OPERATIONS COMMENCED) TO SEPTEMBER 30, 1998

The increase in revenues to $37,139,000 from $3,812,000 is primarily due to
acquisitions in 1999, which accounted for $24,804,000 of the increase. The
remainder of the increase is primarily due to an increase in CLEC and ISP
revenues from an increase in customers, offset by the decline in cellular long
distance revenue as a result of customers switching to other long distance
providers. In the third quarter of 1999, the Company sold most of its prepaid
cellular debit card business and the Company terminated its cellular long
distance business in certain markets. The Company had revenues in the nine
months ended September 30, 1999 of $2,202,000 from the prepaid cellular debit
card business and $484,000 from the cellular long distance business in these
markets.

Operating costs increased to $37,524,000 from $3,173,000 primarily due to
acquisitions in 1999, which accounted for $26,747,000 of the increase. The
remainder of the increase is primarily due to the increase in revenues.
Operating costs as a percentage of revenues increased to 101% from 83%. The
increase in percentage terms is the result of an increase in the fixed component
of operating expenses due to the migration toward a facilities-based
infrastructure through new leases in 1999 and the MegsINet acquisition in May
1999. Operating costs as a percentage of revenues is expected to remain higher
than 1998 levels until customer and revenue growth exceeds the increases in
facilities-based infrastructure costs. In the nine months ended September 30,
1999, operating costs were $2,400,000 from the prepaid cellular debit card
business and $343,000 from the cellular long distance business in the terminated
markets.

Selling, general and administrative expenses increased to $43,725,000 from
$5,777,000 primarily due to acquisitions in 1999, which accounted for
$19,102,000 of the increase. The remainder of the increase is a result of
increased selling and marketing costs and increased customer service costs.
These costs are expected to increase in the foreseeable future as we grow our
operations and customer base.

Corporate expenses include the costs of the Company's officers and
headquarters staff, the costs of operating the headquarters and costs incurred
for strategic planning and evaluation of business opportunities. Corporate
expenses increased to $6,489,000 from $514,000 because the 1998 expenses did not
represent a full period of results due to the fact that the spin-off from CCPR
occurred on September 2, 1998, at which time corporate expenses commenced, and
because allocated charges from NTL have increased due to the sales in 1999 of
other affiliated companies.

The compensation charge of $1,056,000 in 1999 is a non-cash charge recorded
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," related to a change in employee stock option agreements. The
compensation charge of $4,586,000 in 1998 is a non-cash charge recorded in
accordance with APB Opinion No. 25, as a one time charge related to the issuance
of the Company's

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<PAGE> 35

stock options to holders of CCPR's stock options in connection with the
Company's distribution to CCPR's shareholders.

Depreciation expense increased to $6,674,000 from $397,000 as a result of
acquisitions in 1999, which accounted for $4,475,000 of the increase and an
increase in fixed assets.

Amortization expense increased to $5,005,000 from $120,000 due to the
amortization of goodwill and other intangibles from the acquisitions in 1999.

Interest income and other, net, increased to income of $3,416,000 from
$749,000 primarily due to interest income on the Company's cash, cash
equivalents and marketable securities. In addition, the Company sold its prepaid
cellular debit card business and incurred a loss of $150,000.

Interest expense increased to $1,569,000 from $1,000 due to interest on the
notes payable and capital leases.

The income tax provision of $839,000 in 1999 is for state and local income
tax.

PERIOD FROM APRIL 1, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997

The increase in revenues to $6,713,000 from $3,579,000 is primarily due to
acquisitions in 1998, which accounted for $4,535,000 of the increase. OCOM's
revenues decreased to $2,178,000 from $3,579,000 because OCOM's revenues prior
to its acquisition in June 1998 of $1,452,000 are not included in the 1998
amount. OCOM's cellular long distance revenues continued to decline in 1998 as a
result of customers switching to other long distance providers, which trend is
expected to continue to occur. This reduction in revenues was offset by
increases in CLEC and cellular revenues.

Operating costs increased to $5,584,000 from $1,581,000 primarily due to
acquisitions in 1998, which accounted for $3,895,000 of the increase. Operating
costs as a percentage of revenues increased to 83% from 44%. This increase is
the result of the reduction in cellular long distance revenues which to date has
the highest gross margin of our telecommunications businesses.

Selling, general and administrative expenses increased to $13,989,000 from
$5,934,000 as a result of increased selling and marketing costs and increased
customer service costs. These costs are expected to increase in the foreseeable
future. These increases were offset by a reduction in billing costs due to the
implementation of in-house billing in the fourth quarter of 1997.

The compensation charge of $4,586,000 in 1998 is a non-cash charge recorded
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," as a one time charge related to the issuance of our warrants and
stock options to holders of CCPR's stock options in connection with the
spin-off.

Depreciation expense increased to $749,000 from $428,000 as a result of an
increase in fixed assets, primarily computer hardware and software.

Amortization expense increased from $231,000 from $11,000 due to the
amortization of goodwill from the acquisitions in 1998.

Interest income and other, net, increased to income of $2,632,000 from
expense of $4,000 primarily due to $2,585,000 of interest income on our cash,
cash equivalents and marketable securities.

Interest expense increased to $21,000 from zero due to interest on the note
payable and capital leases.

The income tax provision of $440,000 in 1998 is for state and local tax.

YEARS ENDED DECEMBER 31, 1997 AND 1996

Revenues decreased to $3,579,000 from $5,103,000 primarily due to a
reduction in cellular long distance revenues as a result of customers switching
to other long distance providers. The reduction in

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<PAGE> 36

cellular long distance revenues was partially offset by revenues from landline
long distance and cellular service, both of which were introduced subsequent to
December 31, 1996.

Operating costs decreased to $1,581,000 from $3,065,000 as a result of the
decline in revenues. Operating costs as a percentage decreased to 44% from 60%
due to the improvement in the margin on cellular long distance as a result of a
reduction in the wholesale cost.

Selling, general and administrative expenses increased to $5,934,000 from
$3,119,000 as a result of increased selling and marketing costs, customer
service costs and management costs due to the increased efforts beginning in
late 1996 to grow and develop OCOM's business.

Depreciation expenses increased to $428,000 from $138,000 as a result of an
increase in fixed assets, primarily computer hardware and software.

Interest income and other, net, decreased to expense of $4,000 from income
of $133,000 primarily due to the termination of OCOM's consulting agreement with
AT&T Wireless for assistance in marketing and implementing a cellular long
distance resale business.

LIQUIDITY AND CAPITAL RESOURCES

We will require significant resources to fund the construction of our
facilities-based network, develop and expand our existing businesses and
licenses, acquire or develop additional telecommunications-related businesses,
and fund near term operating losses and debt service. We intend to use cash and
securities on hand of $38.4 million at September 30, 1999 and the proceeds from
the convertible notes issued in October 1999 of $169 million to meet our
operating and capital requirements through 2000. However, we will require
additional financing in order to meet our requirements after 2000, and
potentially to fund capital expenditures in 2000. We are currently negotiating
with equipment manufacturers to provide us with vendor financing, and we
currently anticipate obtaining additional financing at the subsidiary level in
the future. However, there can be no assurance that the proposed financings will
occur.

HISTORICAL USES OF CASH. For the nine months ended September 30, 1999,
cash used in operating activities increased to $47,973,000 from cash provided by
operating activities of $3,340,000 in the period from April 1, 1998 (date
operations commenced) to September 30, 1998, primarily due to the increase in
the net loss to $62,326,000 from $10,007,000. The net loss increased as a result
of acquisitions and an increase in selling and marketing costs and customer
service expenses as we have grown the business.

For the nine months ended September 30, 1999, cash used to purchase fixed
assets increased to $14,906,000 from $1,821,000 in the period from April 1, 1998
(date operations commenced) to September 30, 1998. The increase was due to
acquisitions and as a result of an increase in fixed asset purchases. The cash
used for acquisitions of $47,056,000 in the nine months ended September 30, 1999
is primarily for payments in connection with the MegsINet and USN acquisitions.

NETWORK CONSTRUCTION. We intend to significantly expand our
telecommunications infrastructure in the United States over the next several
years. We have already begun the process of installing switches, Internet
points-of-presence, and other telecommunications facilities in many states. The
anticipated amount of such expenditures has yet to be determined, and will be
related to the speed and location of equipment deployment, as well as the mix of
resold vs. facilities-based services.

We are in the final stages of constructing Smart LEC networks in Cleveland,
Ohio; Columbus, Ohio; and Chicago, Illinois. We expect our Smart LEC network to
be operational in these markets and to begin migrating our existing customers
onto the network in the remainder of 1999 and the first quarter of 2000. We are
currently developing three additional markets: Detroit, Michigan; New York, New
York; and Boston, Massachusetts, which we expect to be operational in 2000.
These six markets comprise approximately 18 million total access lines. In
connection with these markets, we are in the process of establishing collocation
facilities in 129 ILEC central offices. We have also identified approximately 30
additional markets where we currently intend to deploy our Smart LEC networks in
2000-2002.

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<PAGE> 37

We believe that our Smart LEC strategy enables us to enter and construct
our networks into new cities with relatively low up-front expenditures and a
significant proportion of success-based capital expenditures. Depending on the
size of the market, we expect our up-front capital expenditures to be
approximately $7 to $10 million, which includes the costs of installing our
switch facility and our collocation facilities and other related initial set-up
and installation expenses.

The significant majority of the additional capital costs will be based on
subscriber levels. These costs will include equipment to increase network
capacity, such as ports and modems in our switch and access devices. These costs
will vary based on the type, volume and services of each customer, but are
estimated to be approximately $400-$500 per line. For example, a sample target
market may have 1 million business lines and 2 million residential lines, for a
total of 3 million lines. Our total level of capital expenditures for that
market will depend on our level of penetration. If we are able to gain 3%
overall penetration of the market, we would serve approximately 90,000 lines,
and based on approximately $400-$500 per line, we would spend approximately
$35-$45 million on additional capital costs developing and expanding our
networks in the market. A lower or higher penetration would decrease or
increase, respectively, our additional capital costs.

The foregoing summary of the cost structure of our entry into a typical
market does not purport to be indicative of our performance, but is provided
solely as a basis for understanding our basic cost structure for individual
communications services in a typical target market. You should be aware that our
actual performance could differ materially from our current expectations.

OPERATIONS. Our businesses will also consume capital to acquire new
customers and to finance the working capital required to support these new
customers. These businesses will also require additional billing, customer
service and other back-office infrastructure. These capabilities can be expanded
in-house or can be outsourced to reduce up-front capital requirements. To date,
our strategy has been to utilize the expertise developed by our management to
develop in-house billing and back-office capabilities.

LMDS. Local Multipoint Distribution Service ("LMDS") is a newly authorized
fixed broadband wireless service that may be used to provide high-speed data
transfer, telephone service, telecommunications network transmission, Internet
access, video broadcasting, video conferencing, and other services. The spectrum
is useable for communications services from a fixed antenna, but is not suitable
for mobile or portable communications. LMDS can be used to provide a wireless
high-capacity broadband service for the "last mile" to a home or office.

The amount of capital required to construct the LMDS systems is not easily
quantifiable at this time, but is likely to be several times the $25 million
cost of the licenses. In addition to up-front network construction costs, a
significant ongoing capital requirement will be the cost to acquire customer
premise equipment to receive and transmit LMDS signals. The network and customer
premise equipment costs are not easily quantifiable because a defacto standard
has yet to emerge among the LMDS auction winners and because insufficient orders
have been placed with manufacturers who determine likely prices for equipment.
As license holders choose equipment manufacturers and one or more equipment
standard emerges, prices will become more easily quantifiable. We will deploy
this LMDS network only if we determine that we can achieve sufficient returns on
our capital invested, from reduced costs associated with providing our services
or from new services which we can offer through LMDS technology.

ACQUISITIONS. In May 1999, we acquired MegsINet and certain assets of USN
Communications. The USN acquisition includes a contingent payment in July 2000
which is payable only if the USN assets meet or exceed operating performance
thresholds. The total additional cash consideration that we may pay for the USN
assets is capped at $58.6 million. Also, we will require significant capital to
fund the expansion and operations related to those acquisitions. In the future,
we plan to make further appropriate acquisitions which may require significant
capital expenditures.

SOURCES OF LIQUIDITY. Our operations were initially funded by the $150
million cash capital contribution from CCPR in connection with the spin-off. In
October 1999, we issued $175 million principal amount of 6% Convertible
Subordinated Notes due 2006, and received net proceeds of

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<PAGE> 38

$169 million. We expect to experience substantial negative cash flow for the
next several years due to the continued development of our Smart LEC network and
our other businesses. Our cash flow requirements will depend upon:

- our network development schedules;

- acquisition opportunities;

- operating results; and

- technological developments.

Longer term, it is likely that we will be required to raise additional
financing to fully build out our planned networks. We are currently negotiating
with equipment manufacturers, including Cisco Systems, Inc., Lucent
Technologies, Inc. and Nortel Networks Corporation, to provide us with vendor
financing. In the aggregate, such financings are anticipated to be significant.
We are presently in the process of completing negotiations on terms for these
transactions and expect to enter into definitive agreements upon completion of
the negotiations. However, until definitive agreements are reached with each
vendor, we cannot be certain that the proposed financings will occur, that the
terms will not change or that any alternative financing on terms satisfactory to
us will be available.

Our ability to raise additional capital will be dependent on a number of
factors, such as general economic and market conditions, which are beyond our
control. If we are unable to obtain additional financing or to obtain it on
favorable terms, we may be required to delay the construction of our Smart LEC
network, forego attractive business opportunities, or take other actions which
could adversely affect our business, results of operations and financial
condition.

We are a holding company with no significant assets other than cash and
securities and investments in and advances to our subsidiaries. We are therefore
likely to be dependent upon receipt of funds from our subsidiaries to meet our
own obligations. However, our subsidiaries' proposed debt agreements may prevent
the payment of dividends, loans or other distributions to us (except in certain
limited circumstances).

YEAR 2000

We have mostly completed a comprehensive Year 2000 project designed to
identify and assess the risks associated with our information systems,
operations and infrastructure, suppliers, and customers that are not Year 2000
compliant, and to develop, implement and test remediation and contingency plans
to mitigate these risks. The project included four phases: (1) identification of
risks, (2) assessment of risks, (3) development of remediation and contingency
plans and (4) implementation and testing.

Our assessment was primarily focused on both our information technology, or
"IT", systems, in particular our billing, provisioning and customer service
systems, and the readiness of the significant facilities-based carriers that we
depend upon for our resale services. Our leased office space and other non-IT
equipment which may have embedded technology that may be affected by the year
2000 problem was separately assessed.

- We have completed the assessment and upgrades of our financial IT
systems. The upgrades were supplied by vendors for nominal additional
cost.

- We completed the assessment, renovation and validation of the billing,
provisioning and customer service IT systems except for the IT systems of
USN and MegsINet. We incurred nominal costs to complete the renovation
and validation of these systems since they are new systems that were
designed to be year 2000 ready.

- The billing, provisioning and customer service IT systems used by USN and
MegsINet require more significant remediation at an estimated cost of
$300,000. The mission critical work is expected to be completed and
tested prior to December 1999. We do not expect any significant
remediation difficulties.

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- Primarily all of the cost of upgrades and purchases of hardware and data
communications equipment to complete the implementation of year 2000
readiness was part of our planned growth and upgrade capital expenditures
in 1999. The total cost was approximately $300,000. In addition, we
purchased a new server for approximately $250,000 as part of the year
2000 project and for other uses.

- Our evaluation of the readiness of our significant vendors is completed.
We requested information from these vendors in order to determine the
extent to which we may be vulnerable to their failure to correct their
own year 2000 problems. We have received responses from all of these
vendors.

- We currently believe the most reasonably likely worst case scenario with
respect to the Year 2000 is the failure of one or more of our significant
facilities-based vendors, including utilities, to be ready for the year
2000. This could cause a temporary interruption in our provision of
service to customers or in our ability to bill our customers, or both.
Either or both could have a material adverse effect on our operations,
although it is not possible at this time to quantify the amount of
revenues and gross profit that might be lost, or the costs that could be
incurred. Our contingency plan to address some of these risks involve
switching customers to another wholesale provider, which would require
time to implement and may be constrained due to capacity and/or training
limitations.

As the Year 2000 project continues, we may discover additional problems,
may not be able to develop, implement or test remediation or contingency plans,
or may find that the costs of these activities exceed current expectations. In
many cases, we are relying on assurances from suppliers that new and upgraded
information systems and other products will be Year 2000 ready. We have tested
primarily all such third-party systems and products. However, we cannot be sure
that our tests were adequate or that, if problems are identified in our
remaining testing, they will be addressed by the supplier in a timely and
satisfactory way.

Because we use a variety of information systems and have additional systems
embedded in our operations and infrastructure, we cannot be sure that all of our
systems will work together in a Year 2000-ready fashion. Furthermore, we cannot
be sure that we will not suffer business interruptions, either because of our
own Year 2000 problems or those of third-parties upon whom we rely on for
services. We are continuing to evaluate our Year 2000-related risks and
corrective actions. However, the risks associated with the Year 2000 problem are
pervasive and complex; they can be difficult to identify and address, and can
result in material adverse consequences to us.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in the reported market risks since the
end of the most recent fiscal year, except as follows. As a result of the
MegsINet and USN acquisitions, the amount of our liabilities (notes payable and
capital leases) at fixed interest rates has increased. However, we do not
currently believe it is necessary to manage this exposure to interest rate
changes. In addition, we do not currently believe it is necessary to manage our
exposure to foreign currency exchange rate changes. We do not use derivative
instruments to manage our exposure to interest rate or foreign currency exchange
rate changes.

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BUSINESS

CORECOMM LIMITED

CORECOMM, INC.

INTRODUCTION

CoreComm, Inc. is an innovative communications company that provides
integrated telephone, Internet and data services to business and residential
customers in targeted markets throughout the United States. We are exploiting
the convergence of telecommunications and information services through our
"Smart LECSM" network strategy and by offering bundled packages of services
which are intended to provide customers greater choice, flexibility and value
than typical offerings from other operators. Our Smart LEC network strategy
involves the ownership of switches and related equipment for the provisioning of
services, and the leasing of the unbundled local loop--or last mile--as made
possible by the Telecommunications Act of 1996, combined with the provisioning
of an IP based, national network. This configuration of local and national owned
and leased facilities allows us to deliver a wide range of communications
services over a network architecture which we design to be capital efficient and
primarily requires success-based incremental capital. Our goal is to expand our
facilities, geography and services to become a leading switch-based
communications provider in selected major markets across the United States.

We currently offer local and long distance telephone, Internet access and
intend to offer high-speed data services to business and residential customers
located principally in the following states: Ohio, Illinois, Michigan, New York
and Massachusetts. As of June 30, 1999, we had a total of approximately 100,000
business and residential telephony access lines in service and approximately
80,000 Internet customers. We currently operate an asynchronous transport mode
(ATM) network, which connects more than 80 cities using approximately 20,000
route miles of leased broadband circuits, which we are expanding even further to
be national in scope. This will allow us to take advantage of economies of scale
in the delivery of voice, video and data. We have been developing our
multi-service offerings since 1996 and are in the process of expanding our
products to include high speed services utilizing Digital Subscriber Line (DSL)
technology. With DSL, a single copper loop can be used to deliver telephony and
high speed data services simultaneously. We are currently in various stages of
constructing our Smart LEC network in six of the largest markets in the U.S.,
which represent approximately 18 million access lines.

Management's approach to its network, back office and customer acquisition
will be critical to our success, as well as the following key components of our
strategy:

- capture multiple revenue streams through offering customers bundled
service offerings, differentiated from other providers;

- deliver "Internet Centric" product offerings and support to our
customers;

- leverage proven management talent; and

- utilize Smart LEC strategy to maximize speed to market and minimize
investment risk.

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Business Strategy Overview

A core part of our business strategy is to offer bundled communications
services, including local and long distance telephony services, Internet access
and high speed data services, such as connectivity utilizing DSL technology, all
with a single bill. We believe that an integrated telephony and Internet
strategy utilizing DSL technology, which can be delivered over a single leased
copper loop, will be particularly appealing to our targeted customer base and
will significantly enhance our ability to attract, retain and gain additional
revenues from our subscribers.

Our service offerings, and in particular, DSL high-speed data services, are
based on the following customer proposition: "Customers buy what they need and
pay for what they get."

We believe there are several benefits to DSL, including:

- High bandwidth, high-speed, "always on" Internet connections;

- Dedicated, not shared bandwidth, which allows for "guaranteed"
performance levels;

- Ratable service, which allows us to tailor the service to the customers'
needs and allows the customers to determine how much money to expend for
the amount of high speed bandwidth they need;

- Ability to use the same loop for voice and data simultaneously;

- Enhanced security;

- Utilization of existing copper infrastructure, which allows faster
rollout and lowers deployment costs;

- Increased telephony margins as a result of packaging of services over a
single local loop; and

- Deployment with success-based capital expenditures.

We combine and price our products to give the customer increased
flexibility, choice, and "value for money," while also enhancing convenience and
simplicity. With this strategy, we believe that we can capture a larger share of
our customers' communications expenditures and increase customer retention. In
addition, we are currently investigating ways to add video services, including
multichannel television, as a part of our bundled offerings. Our bundling of
services can often be differentiated from other incumbent operators because we
face fewer regulatory requirements and from other operators because we are not
constrained by the technical limits or cost structure of a less advanced or less
capital efficient network architecture. We believe that our DSL proposition is
especially important as we compete against data service providers utilizing
cable modems, who have difficulty guaranteeing a direct correlation between
price paid and speed of access received.

The Internet is a key management tool in the marketing, provisioning and
billing of our services, as well as in the ongoing support of our customers. We
also intend to use the Internet as a sales tool by attracting customers through
our web site, www.core.com. We are actively developing and incorporating systems
to deliver "Internet Centric" operational support systems which are planned to
add functionality in the areas of electronic billing, web-based customer care
and e-commerce and e-services. We intend to use the Internet as an efficient
means of communication with our business and residential customers, providing
on-line sign-up and self-provisioning of services. We believe that using the
Internet to communicate with the customer will not only be convenient for the
customer, but will also increase our operating efficiency. We believe that by
encouraging the self-provisioning of communications products, especially in the
broader residential market, we will particularly attract the most data-intensive
and higher margin customers at lower customer acquisition costs.

We intend to focus on both residential and small to medium-sized business
customers, including the Small Office/Home Office (SOHO) market, located in
major metropolitan areas in the United States. These segments contain many
communications-intensive customers that we believe are often underserved by both
existing incumbent carriers and new entrants. We seek to attract customers in
these segments by
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offering innovative services, superior customer service and overall value. By
targeting both of these sectors, we expand our potential revenue base, leverage
our marketing costs over a greater number of potential customers and increase
network utilization with more subscribers. We believe that marketing through the
Internet utilizing the self-provisioning of services will allow us to deploy our
strategy more rapidly than we could with only a direct sales force.

Continuity of Management

Our management has extensive experience in developing and marketing bundled
communications services, building proprietary back office systems to support
residential and business customers, and designing and constructing large
integrated communications networks. Our management team's accomplishments in the
telecommunications industry span nearly 20 years. There are several members of
this team that have worked together for a decade or more:

- Our President and Chief Executive Officer, Barclay Knapp, was a member of
the original management team at Cellular Communications, Inc. (CCI),
which was an original applicant for cellular licenses in the United
States in 1982. Mr. Knapp is also the President and CEO of NTL
Incorporated.

- Our Chairman, George Blumenthal, was a member of the original management
team of Cellular Communications, Inc. Mr. Blumenthal also serves as the
Chairman of NTL.

- Our Chief Operating Officer, Patty Flynt, joined Cellular Communications,
Inc. in 1989, where she was the director of its Management Information
Services division. Ms. Flynt also served as the MIS director at NTL.

In the key areas of our operations, our management includes individuals who
have worked with CCI, NTL and their historical affiliates for many years and
have significant telecommunications industry experience. Below is a partial list
of several of those individuals and their area of expertise:

<TABLE>
<CAPTION>
PREVIOUS HISTORICAL
NAME OPERATIONAL AREA AFFILIATES YEAR JOINED
- ---- ------------------- ------------------- -----------
<S> <C> <C> <C>
Thomas S. DellaRocco...................... Networks CCI, NTL 1984
Stefan Eckert............................. Sales CCI 1985
Beth K. Fisher............................ Customer Operations CCI 1985
Kimberly K. Liston........................ MIS CCI, NTL 1990
Donald B. Miller.......................... Marketing CCI 1986
Paul J. Nelson............................ Sales CCI 1991
Chris Y. Skudder.......................... Customer Operations CCI, NTL 1992
Richard J. Lubasch........................ General Counsel CCI, NTL 1986
</TABLE>

The continuity of this team is due to their success in working together
throughout the corporate lineage that began with Cellular Communications, Inc.
in 1981. In addition to these individuals, there are other members of our
management team and staff who were part of CCI, or part of a later joint venture
between CCI and AirTouch Communications, Inc. that was formed in 1991. Several
of our directors have also been involved with each of these companies. CCI was
acquired by AirTouch Communications, Inc. in 1996.

Out of Cellular Communications, Inc., several publicly traded companies
were spun-off. Our management team developed these other communications
companies:

- NTL Incorporated, a telecommunications, cable television and Internet
provider which operates principally in the United Kingdom. Giving effect
to recently announced acquisition agreements, NTL's franchise areas cover
approximately 12 million homes, representing approximately 50% of the
homes and an even larger share of the businesses in the United Kingdom.
NTL has already

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<PAGE> 43

achieved an industry leading customer penetration rate of 46% in the
original areas it built-out and marketed.

- Cellular Communications of Puerto Rico, Inc. (CCPR), which operated the
dominant cellular business in Puerto Rico and the U.S. Virgin Islands,
and from which CoreComm Limited was spun-off in 1998.

- Cellular Communications International, Inc. (CCIL), which was a
co-founder of Ominitel Pronto Italia, spa, which owns the second cellular
license in Italy.

The core management team remained intact and guided the above companies to
substantial success, culminating in the acquisitions of each of CCI, CCIL and
CCPR by major telecommunications companies.

<TABLE>
<CAPTION>
COMPANY TRANSACTION
- ------- -----------
<S> <C>
Cellular Communications, Inc. Acquired by AirTouch for $2.5 billion (August
1996)
Cellular Communications International, Inc. Acquired by Mannesman and Olivetti for $1.8
billion (March 1999)
Cellular Communications of Puerto Rico, Inc. Acquired by SBC Communications, Inc. for $814
million (August 1999)
</TABLE>

Communications Industry

We are participating in the large and rapidly changing U.S. wireline
telecommunications industry. We believe that the wireline telecommunications
industry benefits from positive price elasticity, as well as growing,
non-cyclical demand for services. According to the U.S. Census Bureau, the total
wireline segment of the U.S. telecommunications market was estimated to be
approximately $193 billion in 1997. Approximately 50% of this revenue is derived
from local service and network access. In addition, demand for access to the
Internet and data services has a significant effect on the U.S. communications
industry, and is expected to continue its rapid growth. Various estimates
project this segment to grow significantly over the next several years.

As demonstrated on the chart below, as a wireline telecommunications
services provider, CoreComm is operating in the largest of the communications
related industries, which represents significant market opportunities for us:

<TABLE>
<CAPTION>
INDUSTRY U.S. MARKET SIZE HISTORY
- -------- ------------------- ---------
<S> <C> <C>
Wireline Telecommunications $ 193 120 years
billion(1997)(1)
TV Broadcasting 36 billion(1997)(2) 60 years
Cellular 33 billion(1997)(1) 17 years
Cable & Satellite 31 billion(1997)(2) 50 years
Radio 14 billion(1997)(2) 70 years
</TABLE>

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

(1) Source: U.S. Census Bureau

(2) Source: Euromonitor International Inc.

40
<PAGE> 44

AVERAGE MONTHLY HOUSEHOLD SPENDING

[AVERAGE MONTHLY HOUSEHOLD SPENDING GRAPH]
Source: PricewaterhouseCoopers

The Smart LEC SM Overview

Our Smart LEC strategy is designed to allow us to enter communications
markets rapidly and to offer a variety of operating benefits, including:
improved operating margins, enhanced control of the customer experience,
success-based capital expenditures, and higher overall returns on capital. In
addition, we believe that the efficiency and broad reach of this network
strategy, in conjunction with our diversified product offering, enable us to
operate under a business plan which requires only a small share of each of our
target markets for a successful return on investment.

The Smart LEC network strategy combines the building and owning of key
network facilities with the leasing of other services from the ILECs and other
telecommunications carriers under the following general principles:

We build those parts of the network which we believe:

- significantly improve operating margins (for example, Class 5 switches);

- are necessary to enhance the services to the customer (for example, DSL
equipment or DSLAMs); and

- are not generally available from other providers.

Conversely, we lease those portions of the network which we believe:

- are disproportionately expensive to build;

- are readily available to be leased economically from other providers; and

- do not impact our ability to interact with the customer.

We are in the final stages of constructing our Smart LEC network in
Cleveland, Ohio; Columbus, Ohio; and Chicago, Illinois. We expect our Smart LEC
network to be operational in these markets and to begin migrating our existing
customers onto the network by the end of 1999. We are currently developing three
additional markets: Detroit, Michigan; New York, New York; and Boston,
Massachusetts, which we

41
<PAGE> 45

expect to be operational in 2000. These six markets comprise approximately 18
million total access lines. In connection with these markets, we are in the
process of establishing collocation facilities in approximately 129 ILEC central
offices. We have also identified approximately 30 additional markets where we
intend to deploy our Smart LEC network in 2000-2002. Please refer to "Risk
Factors" beginning on page 11.

We currently deliver our Internet services over our broadband ATM network,
which has approximately 90 points of presence and approximately 20,000 route
miles of leased broadband circuits throughout the United States. Pending
installation of our switches and expansion of our ATM network, we are presently
providing telephony services to our customers through reselling services from
the ILECs and IXCs. We intend to migrate existing resale customers to our
switch-based networks as they are installed and operational.

Based upon our historical experience we are developing sophisticated
proprietary integrated systems and procedures that support all aspects of our
business, including customer provisioning systems, billing systems, and customer
care and collections support systems. Additionally, our systems support
electronic bonding with the ILEC in each of our markets. We believe that an
effective back office is essential to efficiently serving our customers and
achieving successful overall customer satisfaction and retention.

BUSINESS STRATEGY

Our objective is to become a leading provider of integrated communications
services in our target markets. We believe that we will successfully compete
with the incumbent operators and achieve attractive returns on capital by
pursuing the following key strategies:

Provide Services to both Business and Residential Customers. We focus on
marketing and packaging our services with product offerings that are tailored to
small-to-medium-sized business customers and communications-intensive
residential markets. Because our networks are capital efficient and because we
will lease the "last mile" to the customer, we believe that our business model
uniquely allows us to serve profitably both the business and residential
communities. We believe that each segment offers certain advantages: the
small-to-medium-sized business market offers high volume and revenue per
customer, as well as increased geographical concentration of users; the
residential market offers a large, underserved, growing market with
significantly less competition from other providers. For example, in Ohio we are
one of only a few competitive providers which markets local telecommunications
services to the residential market. In addition, targeting both sectors allows
us to leverage the fixed cost aspects of our network as well as our marketing
and packaging programs.

Offer Bundled Services. We provide our customers with "one-stop shopping,"
offering local and long distance telephony, Internet and data services. Our
services are packaged and priced in bundles which give the customer increased
flexibility, choice, and "value for money". We emphasize offerings which are
easy to value by the consumer, and allow them to "buy what they need and pay for
what they get." We typically offer a platform of basic services and then create
ways for customers to add additional services easily and conveniently according
to customer preferences. Our current service offerings include: local dial tone
and local calling; enhanced telephony features, such as call waiting; long
distance calling services; dial-up and dedicated Internet access; and data
services. Our integrated offerings enhance convenience by giving the customer
one point of contact for all of these services, providing the services on a
single bill and simplifying the decision-making process. In addition to
attracting customers, we believe this strategy also improves our profitability
by increasing our average revenue per customer with additional higher margin
services, reducing customer acquisition and other operating costs, and improving
customer retention.

Own and Operate Capital Efficient Networks. Our strategy is to provide our
full range of communications services over our capital efficient, switch-based
network infrastructure which combines the building of key network facilities
with the leasing of other elements from the ILEC or other telecommunications
carriers. We believe that our network strategy offers a variety of benefits
including: attractive operating margins, control of the customer experience,
greater speed to market, broad geographic

42
<PAGE> 46

reach, ability to serve both businesses and residential customers, success-based
capital expenditures, and higher overall returns on capital.

"Internet Centric" Strategy. We use the Internet as a key tool of our
business strategy. First, Internet access is one of our core service offerings.
We believe that demand for access to the Internet will continue to grow rapidly
in both the business and residential markets, and that our bundled Internet and
telephony product offerings will be attractive to potential customers. Second,
we currently use our www.core.com web site as a sales tool to increase awareness
about CoreComm and our products and services, and to access the large and
growing number of users of the World Wide Web. We also intend to use the
Internet to efficiently communicate with our customers. In the future, we intend
to be able to communicate with virtually every CoreComm customer over the
Internet. We will provide on-line sign-up, feature selection, billing,
moves/adds/changes, and customer care. We currently offer customers the option
to receive their bills via e-mail, and are in the process of expanding our
systems for these additional on-line services. We believe that communicating
with the customer electronically will significantly increase our operating
efficiency by reducing our sales costs, customer service costs and billing
costs, as well as our bad debt expense. We also believe that this strategy will
provide added convenience for the customer, which will further differentiate us
from our competitors.

Effective Marketing Over Wide Areas. We intend to develop and utilize
effective marketing techniques to implement our business plan. We believe that
our efficient network will allow us to leverage our fixed cost infrastructure to
reach wide geographic areas within our target markets. The ability to resell
ILEC services expands our overall potential service area even further. Our
ability to offer targeted, customer-convenient services over wide areas enables
us to utilize mass marketing strategies and other efficient methods of
communicating our offerings to our potential customers. We believe that these
initiatives will increase the awareness of the CoreComm brand and attract new
customers in our target markets.

Distinguish CoreComm From Its Competitors. Our strategies seek to
differentiate us from other communications providers. To satisfy customer needs,
we offer an integrated bundle of services that is not typically offered by a
single provider, and package these services into product offerings that are
unique in their emphasis on choice and flexibility. We can differentiate our
service offerings in part because we are less constrained by regulatory
requirements than ILECs, and not as limited by less capital efficient networks
as other operators. In addition, we offer customer service and support which is
superior to what customers have often experienced in the past with their ILEC or
other providers. We have developed our own sophisticated back office systems to
enable us to do so effectively and efficiently. We believe that our on-line
billing and customer service will further differentiate the way we interact with
customers. Through these and other factors, we try to create an image for
CoreComm that emphasizes us as an important member of the community, offering
our services over broad areas, to both business and residential customers, with
superior reliability and service. We believe differentiating CoreComm in this
manner will help us attract and retain our customers.

Leverage Experience of Proven Management. Our management team has had
significant experience in developing several successful communications companies
in the U.S., the United Kingdom and other countries. We believe that our
management's experience will enhance our ability to execute our business plan,
and will contribute to our overall operational success and results. Our
management has designed attractive, bundled communications services and product
offerings. In addition, our management has previously developed its own internal
systems for billing, MIS and customer care. We believe that a high quality back
office is critical for effectively and efficiently serving the customer. Many
members of our management team have worked together for 10 to 15 years. Our
senior management founded and operates NTL Incorporated, a large
telecommunications, cable television and Internet provider which operates
principally in the United Kingdom. At NTL, management has had experience
competing against incumbent operators by offering business and residential
customers bundled packages of integrated communications services, including
telephony, cable TV and Internet access. NTL has developed creative marketing
and packaging strategies which have delivered industry leading customer
penetration rates (46% versus the industry average of 32%) and churn rates which
are less than half the industry average. Our
43
<PAGE> 47

senior management has also been involved with other communications ventures,
including Cellular Communications, Inc., Cellular Communications of Puerto Rico,
Inc., and Cellular Communications International, Inc. which operated cellular
businesses in Ohio and Michigan, Puerto Rico, and Italy, respectively. In these
ventures, our management has typically achieved successful operating results,
developed significant experience competing against incumbent operators, built
and maintained sophisticated communications networks and back office support
systems, and gained recognition in the communications industry and the capital
markets. CoreComm represents an effort to capitalize on this history of
experience and operational success to exploit the significant communications
opportunities in the U.S.

Expand Through Strategic Acquisitions. We have expanded and grown our
operations through strategic acquisitions. We look for acquisitions that enhance
our ability to execute our business strategy, including adding complementary
network and facilities, increasing revenues, and gaining management talent. We
intend to continue to pursue such opportunities in order to accelerate the
growth and success of our operations.

THE SMART LECSM NETWORK

The Smart LEC strategy allows us to implement our own switch-based
telecommunications network without the significant additional expense, time
commitment and general financial risk of building our own local loops and
transmission facilities. We believe this strategy will improve our overall
return on capital and lower the level of risk associated with the execution of
our business plan, based on the following general advantages:

- reduced capital expenditures associated with leasing rather than building
local loop and transport facilities;

- greater certainty of return from success-based capital spending;

- increased network utilization as a result of the access to multiple
revenue streams and the ability to increase leased capacity
incrementally; and

- lower overall market penetration requirements as a result of reduced
network costs.

Advantages of the Smart LEC network

We believe that this network strategy offers a variety of specific
benefits including:

Lower Overall Cost--We believe that the Smart LEC network can be
deployed at a much lower cost than building conventional networks. The cost
of conventional networks includes the cost of all of the network facilities
included in the Smart LEC build, plus the construction of conduit,
transport capacity and associated infrastructure to connect network access
points, switch facilities and customers. The deployment of these
transmission route components involves significant expense, and their
elimination under our strategy should considerably decrease our capital
expenditure requirements. Whereas the construction of full network
facilities has been estimated to cost between $1,000 to $3,000 per line,
depending on the specifications of the network, we estimate that our Smart
LEC network will cost less than $500 per line, while still providing
comparable basic telephony services and additional advanced services.

Lower Required Customer Penetration--Due to the reduced cost of
building the Smart LEC network, our business model requires a lower level
of customer penetration to be successful as compared to a full-facilities
network. Because there is a reduced amount of up-front investment, we
believe that we can gain profitability and a sufficient return on capital
with a relatively small percentage of market share. This advantage not only
lowers our exposure to risk, but also gives us the flexibility to design
our offerings to target a specific subscriber base of
communications-intensive users without the requirement of necessarily
attracting a large portion of the market. The ability to serve both
business and residential customers also increases our potential overall
market.

44
<PAGE> 48

Success-based Capital Expenditures--An additional benefit of our Smart
LEC network is the "success-based" cost structure of the capital
expenditures as we can delay capital expenditures until after customers are
obtained. Conventional fiber networks typically require the network
construction to be fully completed in advance of obtaining customers,
generating high initial capital expenditures. Under our Smart LEC strategy,
certain switch and access facilities are installed ahead of time, but the
majority of capital is invested to increase the capacity of the network
based on our success in attracting customers. We can therefore enter a
market with a significantly lower up-front investment, and add facilities
and leased capacity over time as we grow our customer base. A significant
portion of our network expenses can therefore be incurred later and with
more certain returns.

Control of the Customer Experience--We believe that having greater
control over the services that we offer enhances our ability to improve the
overall customer experience. Through the facilities which we install, we
have control over the services provided to customers, including the
operation of features, phone numbers, and line testing and servicing.
Control over the implementation of the products enables us to better manage
the service and to more easily offer custom packages of products and
features. We believe that our delivery and marketing of targeted,
customer-convenient, easy-to-understand packages differentiates us from our
competition.

Ability to Serve Business and Residential Customers--Our Smart LEC
network architecture is designed to reach both business and residential
customers. Because we are leasing rather than building the local connection
to the customer, we believe we can economically reach the residential
market despite its lower density relative to the business market. As a
result, we are able to reach and serve the significant consumer segment,
which has typically had significantly fewer competitors than the business
segment. In addition, there are significant synergies which accrue from the
ability to serve both business and residential market segments, including
benefits to our marketing, service operations and network utilization.

Higher Operating Margins--We believe that deploying key network
infrastructure will enable us to achieve significantly higher gross margins
than the margins obtained under total service resale. Total service resale,
which is the resale of complete services from ILECs without installing
owned facilities, typically generates gross profit margins of approximately
20-25%. Under the Smart LEC strategy, rather than reselling the entire
service, we will be leasing only certain unbundled network elements, such
as local loops and transport. We will use our own facilities for network
interconnection, switching, features, and other network elements. By
design, the facilities which we own and install are those which have a
significant positive impact on our gross margins. By utilizing our own
facilities for certain key portions of the network, we believe that we can
increase our operating margins significantly above the margins which can be
achieved with resale.

Increased Speed to Market--The Smart LEC strategy will also increase
the speed at which we can enter additional markets. The time needed to
construct a conventional network is extended by factors such as civil
construction, the permit application process, certifications, and network
management. Although constructing the Smart LEC network involves certain
similar procedures, the majority of the installation work takes place in
our own facilities and leased collocations of the ILECs, and significant
route network construction elements are eliminated, which should contribute
to an increased speed to market under our strategy. Whereas conventional
networks typically take between 18 to 24 months to construct, we believe
our networks can generally be installed in a 6 to 12 month time frame.

Access to Wide Geographical Areas--We believe the cost structure of
the Smart LEC network will enable us to enter target areas which may not be
economical for a full facilities network. When building a conventional
network, density is a critical factor because the distance between the
local switch and customers has a significant impact on build costs. In the
Smart LEC network, although density is still important, it is less critical
because the local loops are already built and are simply leased from ILECs.
The ability to lease certain portions of the network therefore expands the
potential territories that can be economically served by our network. In
addition, we can offer total

45
<PAGE> 49

service resale in areas that are not yet served by our network, which
expands our operating territory even further. Because ILECs are typically
connected to all businesses and residences in its region, our ability to
lease or resell these connections gives us considerable geographic
flexibility and reach within our target markets. We believe that we will
realize several advantages from having the ability to serve broad
geographical areas, including operating synergies, marketing efficiencies
and the enhancement of our overall company image presented to potential
customers.

Network Development and Architecture

Under our Smart LEC strategy, we build those portions of the network that
we believe will significantly increase our gross margins, are necessary to
control the services provided to the customer, and can be deployed rapidly and
efficiently. We lease those portions of the network that are readily available
to be leased economically from other providers. Accordingly, we are building the
Smart LEC network in each target market through a combination of the following
three central elements:

- Installing telephony and data equipment in our target metropolitan areas,
including: Class 5 telephony switches, ATM switches and Internet
point-of-presence equipment in our own facilities, along with telephony
access devices, DSL access equipment, modems and other equipment in
facilities collocated with the ILEC. These devices switch and route voice
and data transmissions across the network.

- Leasing the "last mile" or "local loop" (the portion of the network
extending from the end-office to the customer's premises). This local
connection is leased by us from the ILECs as an "Unbundled Network
Element" as provided under the Telecommunications Act of 1996. These
local loops are used to transport voice and data services, for Internet
access services, as well as for DSL and other high capacity voice and
data applications. For larger customers or concentrated groups of users
(such as multi-dwelling units), we lease circuits with greater bandwidth
for this local connection.

- Leasing the transport capacity to carry voice and data both regionally
(between our collocated facilities and our regional switch) and
nationally (between our regional switches, our national Internet
points-of-presence, other carriers, and the Internet). We will lease
these services from ILECs, CLECs, IXCs, Competitive Access Providers
(CAPs) and other providers. We use these leased circuits to transport our
own voice and data traffic and deliver it to the most economical point of
interconnection with other carriers. These leased circuits are
interconnected using our national ATM facilities.

As a complement to the network described above, we also resell complete
services from ILECs (total service resale). Although we intend to serve
customers primarily over our own network, resale allows us to expand our target
markets by adding service areas where our facilities are not yet installed. This
enables us to market our services prior to and during the installation of our
network, and then connect customers to our facilities once they are in place.
Resale also allows us to serve customers that may not be within economical reach
of our switch-based network. Although providing customers service on a resale
basis generates lower gross margins, we believe that there are advantages to
offering comprehensive geographical coverage within our target markets,
particularly when competing with an ILEC.

We believe that the quantity of existing and planned fiber transport
facilities available from other carriers will be sufficient to satisfy our need
for leased transport facilities and permit us to obtain these facilities at
competitive prices for the foreseeable future. Several factors contribute to
this view: there is significant transport capacity in place today and we often
have the ability to choose from multiple providers including the ILECs; the
number of new providers building networks continues to increase; most providers
are consistently increasing their network capacity; and advances in wave
division multiplexing technology have continued to increase the capacity of
existing fiber plant. In addition, the ability to lease transport from the ILECs
gives us broad geographic coverage. As the volume of our traffic grows, however,
in the future it may become economical to build our own transport facilities in
certain markets.

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<PAGE> 50

We currently lease transport capacity from multiple carriers across our
regional and national networks, including, among others:

<TABLE>
<CAPTION>
ILECS OTHER CARRIERS
<S> <C>
Ameritech ICG
Bell Atlantic IXC
Bell South Level 3
Frontier MCI WorldCom
SBC NEXTLINK
US West Qwest
</TABLE>

Below is an overall diagram of the CoreComm Smart LECSM network. We
generally lease the local loop and transport portions of the network and
own the access, connection and switching points:

[CoreComm SMART LEC Network Illustration]

47
<PAGE> 51

Nationally, as we construct regional Smart LEC networks, our ATM network
will interconnect these local networks and other points-of-presence
across the U.S. over leased circuits to provide national data, voice and
Internet connectivity. Below is a diagram which generally depicts these
connections:

[National ATM map]

Network Technologies

Our Smart LEC network will be capable of carrying both voice and data
communications using the following technologies:

- Standard Telephony--the traditional, reliable transmission of voice over
local loop copper wire and regional and national fiber optical
transmission path which, through the use of switches, becomes a dedicated
end-to-end circuit.

- Internet Protocol (IP)--the structure of data transmitted over the
Internet. Because Internet Protocol involves splitting data into
"packets" which are transmitted independently and reassembled at their
destination, Internet Protocol does not require a dedicated end-to-end
circuit and many different communications messages can be routed
simultaneously over the same transmission facilities, resulting in
greatly improved efficiency. This technology is currently being developed
to be used reliably for voice service.

- Digital Subscriber Line (DSL)--a transmission technology that allows for
the transport of significant levels of voice and data at high speeds over
conventional, copper phone lines. These higher transmission rates can be
used for high-speed Internet access, to transport multiple voice lines
over a single loop, or for both simultaneously.

- Asynchronous Transfer Mode (ATM)--a transport protocol that supports many
types of high-speed transmissions including voice, data, video, audio and
imaging. ATM allows for the use of individual circuits for multiple
simultaneous purposes, increasing network efficiency.

- Digital Loop Carrier (DLC)--an access technology allowing us to aggregate
and concentrate the voice traffic collected at the collocation facility
to more efficiently transport this traffic to our switches.

Local and Regional Network Deployment

We have identified six major metropolitan areas as the initial target
markets for the rollout of our regional Smart LEC networks. We are in the final
stages of constructing our Smart LEC network in the following three markets:
Cleveland, Ohio; Columbus, Ohio; and Chicago, Illinois. We expect our Smart

48
<PAGE> 52

LEC network to be operational in these markets and to begin migrating our
existing customers onto the network by the end of 1999. In addition, we are
currently constructing our network in three additional markets: Detroit,
Michigan; New York, New York; and Boston, Massachusetts. We expect the networks
in these markets to be operational in 2000. These six markets comprise
approximately 18 million total access lines. We are in the process of
establishing collocation facilities in approximately 129 ILEC central offices in
these markets. The significant majority of these are physical collocations,
under which we have space within the central office that is dedicated to our
exclusive use.

We have also identified more than 30 additional markets where we intend to
deploy our Smart LEC network in 2000, 2001, and 2002. These markets are in
several states, including: Pennsylvania, Maryland, Connecticut, Indiana,
Missouri, Florida, Texas and California, among others. We expect to deploy some
of these additional markets to be operational in 2000. The buildout schedule, as
well as the final selection of our markets, will depend on a number of factors,
including the success and speed of the rollout of the initial six markets, ILEC
interconnection agreements, and other factors. We will continue to offer our
Internet services nationally over our leased ATM network. Please refer to "Risk
Factors" beginning on page 11.

Key data for our initial six markets is listed in the following table:

<TABLE>
<CAPTION>
DATE OF ESTIMATED
SMART LEC BUSINESS ESTIMATED COLLOCATIONS IN
CITY BUILDOUT(1) LINES(2) RESIDENTIAL LINES(2) TOTAL LINES(2) PROGRESS(3)
- ---- ----------- --------- -------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Cleveland, OH.................... 1999 423,733 922,473 1,346,206 14
Columbus, OH..................... 1999 273,345 597,662 871,007 12
Chicago, IL...................... 1999 1,893,902 3,022,030 4,915,932 33
Detroit, MI...................... 2000 851,821 1,775,068 2,626,889 24
New York, NY..................... 2000 1,782,190 3,858,804 5,640,994 26
Boston, MA....................... 2000 859,422 1,492,218 2,351,640 20
--------- ---------- ---------- ---
Total.................. 6,084,413 11,668,255 17,752,668 129
</TABLE>

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

(1) Based on our current buildout schedule.
(2) Company estimates based on FCC, iMarket and TargetPro. Represents estimated
lines within the MSA.
(3) We are in various stages of the collocation process depending on the market
and its priority in our buildout schedule. Our collocation process consists
of the following basic phases:
- Gathering of demographic data for each region and selection of
specific ILEC facilities for collocation;
- Filing applications with the appropriate ILECs for collocation
rights at each selected location;
- Upon receipt of each approval, doing an evaluation of each
facility;
- Building by the ILEC of a "cage" or preparation of space in which
our equipment will be placed; and
- Installing and testing of our equipment.
We have at least obtained approval of our application for all collocations
in progress.

In determining our target markets, we prepare detailed analyses of
telecommunications and demographic data. Our target markets are chosen based on
a number of factors, including:

- Overall size of the telecommunications market;

- Concentration of business and residential customers;

- The availability of local transport networks and providers;

- Demographic statistics;

- The locations of our existing resale customers;

- Our relationship with the ILEC and interconnection terms; and

- Regulatory environment.

We are currently certified to operate as a CLEC and/or long distance
telecommunications provider in 18 U.S. states.

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<PAGE> 53

We believe that our Smart LEC strategy enables us to enter and construct
our network into new cities with relatively low up-front capital expenditures,
and a significant proportion of success-based capital expenditures. Depending on
the size of the market and other factors, our up-front costs to enter a market
are expected to be approximately $7 to $10 million, which includes initial
set-up costs associated with entering a market, such as the installation of our
switch and collocation facilities. Additional capital expenditures will be based
on subscriber levels and services offered and are estimated to be approximately
$400-500 per line. Therefore, a significant portion of the total capital
expenditures in a given market will be incurred only as we increase our
subscriber base and the related capacity of the network.

National Network

We currently have in place an ATM network which connects more than 80 U.S.
cities. We have facilities located in each of these points of presence, and have
leased DS-1 to DS-3 circuits to interconnect this network and to reach the major
national Internet access points. Approximately 20 owned ATM switches are now
being used across our network, with additional switches scheduled to be deployed
throughout 1999. The ATM switches allow us to carry multiple services
efficiently over our circuits. We directly peer with major backbone providers
including MCI WorldCom and PSINet. These peering arrangements help us maintain a
competitive low cost network. This national network will interconnect our local
Smart LEC networks as they are deployed.

Our national network currently interconnects our point-of-presence
facilities in the following cities:

Akron, OH
Albuquerque, NM
Atlanta, GA
Austin, TX
Birmingham, AL
Boise, ID
Boston, MA
Champaign, IL
Charlotte, NC
Chicago, IL
Cincinnati, OH
Cleveland, OH
Colorado Springs, CO
Columbia, SC
Columbus, OH
Corpus Christie, TX
Dallas/Ft. Worth, TX
Dayton, OH
Denver, CO
Des Moines, IA
Detroit, MI
El Paso, TX
Flint, MI
Grand Rapids, MI
Green Bay, WI
Greensboro, NC
Greenville, SC
Houston, TX
Indianapolis, IN
Irvine, CA
Jackson, MS
Kansas City, MO
Knoxville, TN
Lansing, MI
Las Vegas, NV
Laurel, MD
Lexington, KY
Little Rock, AR
Los Angeles, CA
Louisville, KY
Madison, WI
Memphis, TN
Merriville, IN
Milwaukee, WI
Minneapolis/St. Paul, MN
Montgomery, AL
Nashville, TN
New Orleans, LA
New York, NY
Oklahoma City, OK
Omaha, NE
Peoria, IL
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Portage, IN
Portland, OR
Raleigh/Durham, NC
Reno, NV
Richmond, VA
Rochester, NY
Rockford, IL
Sacramento, CA
Salt Lake City, UT
San Antonio, TX
San Diego, CA
San Francisco, CA
San Jose/Mae West, CA
South Bend, IN
Spokane, WA
Springfield, IL
St. Louis, MO
Stamford, CT
Tallahassee, FL
Toledo, OH
Topeka, KS
Traverse City, MI
Tucson, AZ
Tulsa, OK
Washington, DC

Our national leased circuits currently cover approximately 6,500 miles of
DS-3 circuits and approximately 13,300 miles of DS-1 circuits. As we further
increase the capacity and reach of our network over the next 12 months, we
expect to contract for the lease of additional approximately 10,000 miles of
additional OC-3 circuits, DS-3 circuits and DS-1 circuits.

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The following map illustrates the reach of our ATM network today:

[CURRENT ATM NETWORK GRAPHIC]

LMDS Broadband Wireless Spectrum

As a complement to our Smart LEC network, we own LMDS licenses for the
broadband wireless spectrum. Our licenses cover nearly all of the state of Ohio
and represent more than 10.5 million "POPs". With 1,150 MHz of spectrum, these
licenses have much greater bandwidth than cellular or PCS licenses (up to 30
MHz) or other fixed wireless licenses (80-400 MHz). We are the fourth largest
holder of this spectrum in North America. NEXTLINK Communications, Inc. is the
largest license holder, and has licenses for major U.S. population centers
outside of Ohio.

LMDS is a newly authorized fixed broadband wireless service that may be
used to provide high-speed data transfer, telephone service, telecommunications
network transmission, Internet access, video broadcasting, video conferencing,
and other services. LMDS uses frequencies in the 28GHz to 31GHz range. The
spectrum is useable for communication services from a fixed antenna, but is not
suitable for mobile or portable communications. The service is subject to line
of site limitations and rain attenuation, but current systems seek to reduce
these impediments through advanced system architecture and the strategic
placement of transmitters. The point-to-multipoint technology of LMDS allows a
single hub site antenna to be used to form multiple paths with customer antennas
at numerous locations. LMDS can thus be used to provide a wireless high-capacity
broadband service for the "last mile" to a subscriber's home or office.

As LMDS technology advances, we intend to use this spectrum to offer
additional communications services and to expand the reach of our network. For
some locations, we believe that LMDS may offer a substantially lower cost
solution for providing high-quality broadband services than other competing
delivery systems such as fiber or copper extensions. LMDS equipment is not in
general commercial service at this time, but technology is currently in
development and we have established relationships with several equipment
vendors.

Through a wholly owned subsidiary, in June 1998, we were awarded the
following A-Block licenses in 15 markets in Ohio with a total of 10,573,982 POPs
(representing more than 95% of the POPs in Ohio). Each LMDS license covers a
defined Basic Trading Area, and our A-Block LMDS licenses consist of 1,150 MHz
of spectrum. CoreComm bid $25.2 million for such licenses, for an average of
$2.39 per POP.

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<TABLE>
<CAPTION>
OHIO MARKETS POPS(1)
- ------------ ----------
<S> <C>
Cleveland-Akron............................................. 2,894,133
Cincinnati.................................................. 1,990,451
Columbus.................................................... 1,477,891
Dayton-Springfield.......................................... 1,207,689
Toledo...................................................... 782,184
Canton-New Philadelphia..................................... 513,623
Youngstown-Warren........................................... 492,619
Lima........................................................ 249,734
Mansfield................................................... 221,514
Zanesville-Cambridge........................................ 178,179
Findlay-Tiffin.............................................. 147,523
Sandusky.................................................... 133,019
Ashtabula................................................... 99,821
Chillicothe................................................. 93,579
Marion...................................................... 92,023
----------
Total.................................................. 10,573,982
==========
</TABLE>

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

(1) POPs are the estimated population of a market. The number of POPs owned by
an operator does not represent the number of users of its services and is
not necessarily indicative of the number of potential subscribers. Rather,
this term is used only as a basis for comparison of the current size of
system operators. The FCC used POPs in the LMDS auction for determining
initial payments, bidder eligibility, and minimum bids. The POPs in this
chart are based upon the April 1, 1990 U.S. Department of Commerce, Bureau
of the Census data. Total POPs in the state of Ohio according to this data
are 11,079,503.

The Telecommunications Act of 1996

Our ability to lease unbundled network elements from incumbent providers is
the result of the Telecommunications Act of 1996. The Telecommunications Act
opened up the local telecommunications exchange market to competition, creating
an attractive opportunity for us and other carriers. The Telecommunications Act
requires that ILECs offer the use of their networks for total resale or the
lease of unbundled network elements, and that ILECs permit other carriers to
collocate and interconnect their equipment within the ILECs' central offices.
Moreover, an ILEC is prohibited from entering the long distance market in its
home region until it is determined that there is a significant level of
competition in its local service market.

PRODUCTS AND SERVICES

We currently offer our business and residential customers an extensive
array of voice and data services in order to satisfy and capture all of their
communications needs.

Bundled Packages

In our current service offerings, we bundle communications products and
services in order to give our customers increased convenience, flexibility and
choice, at good "value for money." We typically offer a platform of basic
services, which represents a minimum selection of services to be offered, and
then create ways for the customers to easily and conveniently increase the other
services purchased according to their tastes.

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<PAGE> 56

For example, in our current residential service offering, we combine a
basic package with the concept of "Feature Points" as follows:

<TABLE>
<S> <C> <C> <C> <C>
Home Option: Option 1: Option 2: Option 3:
Monthly Price: Add:
$19.95 $28.95 $42.95 -----
Internet
Includes: Dialtone Dialtone Dialtone
Second Line
Local Calls Local Calls Local Calls
Feature Points: 2 5 10
</TABLE>

<TABLE>
<CAPTION>
FEATURES FEATURE POINTS
- -------- --------------
<S> <C>
Long Distance (30 minutes).................................. 1
Long Distance (100 minutes)................................. 3
Call Waiting, 3-way Calling, Call Forwarding (each)......... 1
Caller ID, Voicemail, Pager (each).......................... 2
</TABLE>

According to these offerings, customers can choose the amount they would
like to spend on telephone services, determine the package that they would like
to subscribe to, and then have the flexibility to choose which features they
would like included as part of the bundle. For example, if a customer chooses
Home Option 2, they would pay $28.95 per month, and receive five free feature
points to "spend" in any way they would like. They could choose 100 minutes of
free long distance plus voicemail, or 30 minutes of long distance, plus call
waiting, 3-way calling, and a pager (or any other combination of features with
five feature points).

We are continually refining our product offerings, and the services listed
above are currently being modified to include our Internet services, second line
options, and other related products. For example, we are currently finalizing
plans to offer Internet access service as part of our bundled offerings, which
is expected to include the ability to buy Internet access and a second line for
a combined price, the ability to select Internet access using the feature points
described above, and other flexible alternatives and features such as, unlimited
and measured access, various e-mail options, and bundled web page hosting.
Although the specific components of our offerings will change, we will continue
our strategy of designing attractive marketing packages which give the customer
flexibility and choice, with convenient ways to subscribe to additional
services.

Voice and Data Services

We currently offer the following voice, data and Internet services to
business and residential customers in our markets:

- Local Exchange Services -- including standard dial tone, local calling,
Centrex services, Emergency 911 services, operator assisted calling,
access to the long distance network, and other related services.

- Custom Calling Features -- including call waiting, call forwarding,
caller ID, voice mail, conference calling and other enhanced features.

- Long Distance Services -- including 1+ interLATA calls (which are calls
across Local Access and Transport Areas), intraLATA calls, international
calls, 800/888/877 toll free services, calling cards and other related
services.

- Internet Access Services -- including dial-up and dedicated access to the
Internet over conventional modems, ISDN, T-1, DS-3 and higher speed
connections.

- Web Site Hosting and Design -- including dedicated and shared site
hosting and, typically through third parties, web site design.

- Data Networking Services -- including a variety of data circuits and
networking solutions.

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DSL Offering

DSL is a transmission technology that allows for the high speed transport
of significant levels of voice and data over conventional, copper phone lines.
DSL can deliver speeds of up to 7 Mbits per second, which is the equivalent of
more than 100 voice grade circuits, over a single copper loop.

The higher speed provided by DSL technology enables consumers to transfer
data or access the Internet at high speeds. In addition to significantly
increasing data transfer rates, DSL technology provides an alternative for
providing multiple voice lines or voice and data carried over the same pair of
twisted copper wire. By using DSL, businesses can obtain the same number of
voice lines over a single loop that would normally be obtained using a more
expensive standard T1 or other circuit. DSL technology also makes it possible
for business or residential customers to obtain telephone service and high-speed
data service simultaneously over a standard copper telephone line.

We believe there are several benefits to DSL, including:

- High bandwidth, high-speed, "always on" Internet connections;

- Dedicated, not shared bandwidth, which allows for "guaranteed"
performance levels;

- Ratable service, which allows us to tailor the service to the
customers' needs and allows the customers to determine how much money
to expend for the amount of high speed bandwidth they need;

- Ability to use the same loop for voice and data simultaneously;

- Enhanced security;

- Utilization of existing copper infrastructure, which allows faster
rollout and lowers deployment costs;

- Increased telephony margins as a result of packaging of services over
a single local loop; and

- Deployment with success-based capital expenditures.

We believe our Smart LEC network is well suited to capitalize on DSL
technology. In our own switch facilities and our collocation facilities, we are
deploying DSL access equipment. DSLAMs are connected to the copper loops at the
end office, and aggregate and concentrate the data traffic from the end user.
DSL technology is limited by the length of the loop being used, which typically
must be less than three miles, as well as other factors such as the condition
and quality of the copper line. We are planning to rollout our DSL network and
services simultaneously with the telephony network, beginning in our initial
markets in 1999 and 2000. We intend to use DSL to provide high-speed Internet
access and data services, combined data and voice services over a single copper
loop, and voice circuit trunking to connect multiple access lines.

We intend to deploy multiple forms of DSL in order to provide a broad
service offering to our customers and to expand the DSL coverage of our target
markets. Our offerings are expected to include different forms of Asymmetric DSL
(ADSL) including Rate Adaptive DSL (RADSL) and G.lite, Symmetric DSL (SDSL) and
Integrated DSL (IDSL). We believe that a widely accepted standard, such as
G.lite, will enhance our ability to penetrate our target markets with DSL
services.

Other Related Services

Cellular and Paging Services. As a complement to our voice and data
services, we also offer cellular and paging services. Although these are not
core products and do not utilize our own networks, they are offered as an
additional service for our business and residential customers for added choice
and convenience. We are currently offering cellular services in Ohio and
Michigan, and may choose to add other markets in the future. Our paging service
is available nationally. We have resale agreements with the three major
providers of cellular service in Michigan and Ohio: AirTouch Cellular, GTE
Mobilenet Inc. and Ameritech Mobile Communications, Inc. In addition, we sell
retail cellular long distance telephone services to cellular customers of
various local cellular service providers who have chosen us as their long
distance service provider.

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IP Telephony. With recent advancements in the development of telephony
equipment using Internet Protocol, the overall quality of telephone calls
delivered over an IP network has become increasingly reliable and has become
more equivalent to the circuit-switched network. Although we are not currently
using this technology to deliver our voice traffic, our local and national
networks have been designed to allow for the use of IP telephony when and if
reliable technology becomes available.

Under this technology, our platform would compress and convert voice into
IP packets using voice compression algorithms, digital signal processors and
ancillary software. These packets would then be transmitted via our national IP
network. Due to its scalability and compression features, this technology would
allow a greater quantity of simultaneous voice calls and data to be carried over
the network compared to traditional circuit switching, thus utilizing
significantly less bandwidth. Potential services offered under this technology
would include local and long distance calling, fax transmission, call
termination, national voicemail, and other related services.

SALES AND MARKETING

Our marketing strategy is to provide business and residential customers a
bundled package of high quality telecommunications services at competitive
prices, delivered with quality care and service to the customer.

In its prior experience, our management has had significant success in
marketing integrated communications products in several other operations both in
the U.S. and abroad. We believe much of this success was due to our management's
ability to creatively and effectively design and market integrated
communications products and services. We intend to capitalize on this experience
to develop service offerings to attract and retain business and residential
customers in our target markets.

A core part of our strategy is to offer our customers bundled
telecommunications, Internet and data services. Our integrated service offerings
are packaged and priced to give the customer increased flexibility, choice, and
"value for money", while also enhancing convenience. Our offerings can be
created to allow flexibility to meet individual customer needs, and are
conveniently offered on a single bill. We believe that offering combined
packages of local and long distance telephony, Internet access and data services
is attractive to the potential business and residential customers in our target
markets. In addition to attracting customers, we believe this strategy also
improves our profitability by increasing average revenue per customer, reducing
customer acquisition costs and other operating costs, and improving customer
retention.

The broad reach of the Smart LEC network enables us to market our services
over wide geographical areas. By using a combination of resold and switch-based
services, we will not be limited to offering services only in areas where we
have built our own networks. We intend to capitalize on our ability to market
over wide areas by utilizing mass marketing strategies and other efficient
methods of communicating with our potential customer base. For example, we have
contracted to be one of only four gate sponsors for the new football stadium for
the Cleveland Browns. Under this agreement, we have prominent placement of
advertisements throughout the stadium, an entry gate known as the CoreComm Gate,
game giveaway opportunities, and other related advertising benefits. The broad
reach of our network across the Cleveland area allows us to take advantage of
such mass market opportunities. We believe that these and other initiatives will
increase the awareness of the CoreComm brand and will attract new business and
residential customers in our target markets. We believe that the ability to
market over larger areas will increase the efficiency and effectiveness of our
marketing and advertising programs.

In the business market, we will focus on a direct sales approach, targeting
small and medium-sized businesses. We believe that small to medium-sized
businesses represent a large and growing market which is currently underserved
by the ILECs and competitive providers. We seek to attract these target
customers with customer-convenient bundles, providing simplicity, flexibility
and ease of decision-making. We use our sales force to sell directly to
customers, to establish a relationship with telecoms managers, and to better
understand and service their communications needs. We generally employ sales
people with significant experience in the telecommunications industry. In order
to effectively incentivize our sales force, a large portion of their
compensation is performance-based and focused on sales and customer retention.
We try to attract and retain qualified sales people by offering them the
opportunity to work with a

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successful management team in an entrepreneurial environment, with equity
participation through stock options.

CUSTOMER INTERFACE AND PROPRIETARY SYSTEMS

We believe that the customer experience must be easy, enjoyable, and
exceptional. We have developed integrated systems and procedures that will
substantially support all aspects of our business, including provisioning,
billing, customer care and collections. Our information services and customer
care operations are closely linked to ensure that all related operations are
effectively integrated. We believe this focus on the customer experience will
provide us with a competitive advantage in attracting and retaining customers.

"Internet Centric" Approach

We are in the process of actively developing and incorporating systems to
deliver "Internet Centric" operational support systems. These customer-facing
systems are expected to add functionality in the areas of electronic billing,
web-based customer care and e-commerce. We are preparing to support a
substantial portion of our customer interactions over the World Wide Web. Our
customers will be able to order new services, view and pay their bill online,
and interact with our customer care department on a 24 x 7 x 365 basis, all
without using the telephone. We believe that this method of communicating with
the customer will not only be convenient for the customer, but will also
increase our operating efficiency.

We intend to employ a variety of techniques to effectively and efficiently
serve the customer, including:

Efficient Fulfillment of Services--Our systems support electronic
tracking of orders from provisioning through installation. Service
orders will flow directly from the consumer to our back office, and then
on to the ILEC. Administrative controls in our support systems are
designed to provide timely identification and resolution of customer
concerns and issues.

Low-cost Billing--We have developed a customer friendly, fully
integrated billing statement covering all of the communications services
supplied. The statement currently can be delivered electronically via
e-mail. Customers may elect to pay their bill automatically via credit
card or direct debit. We are further developing web-based electronic
bill presentment and payment capabilities. These services will reduce
billing costs while providing value-added services to customers such as
the ability to sort billing data and create customized reports.

Smart Customer Care--We intend to continue to develop sophisticated
customer care systems that will increase our use of the Internet as a
means of communicating with our customers. We will soon be making
customer care available via e-mail, which will allow for simple requests
and changes to be processed without use of the phone and for customer
care associates to work from outside of our facilities. These and other
initiatives are expected to improve the efficiency of our customer care
resources by developing on-line tools which will enable customers to
communicate more efficiently with us and even service themselves when
appropriate.

Electronic Bonding & Proprietary Systems

We are currently bonded electronically with Ameritech and Bell Atlantic.
This electronic interface allows for timely and accurate service ordering and
provisioning of our customers. We have real-time access to customer information
as well as real-time order entry and confirmation. We provision service to
customers through our proprietary systems, which are designed to interface with
the ILECs' systems through a variety of delivery mechanisms. Our systems and
processes have been developed to decrease the risk of human error associated
with provisioning customers by manual keying or fax.

Our customer interface systems have been developed and continue to be
enhanced in a client/server environment that allows for flexibility to
accommodate an expanding customer base, efficient entry into new markets,
switch-based services, and rapid development of additional functionality. Our
proprietary systems handle all pre-ordering activities, including obtaining
customer service records (CSR), finding and

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reserving telephone numbers, verifying customer addresses, validating due dates,
searching the ILEC's switches for feature availability (COFA), and yellow page
listings.

In addition, we have developed proprietary methods of ordering and
provisioning services through ILECs by formatting and sending electronic data
interchange (EDI) messages. These systems use common software for the actual
sending and receiving of purchase orders and acknowledgements, but use custom
code for the content of these messages. We typically use off-the-shelf software
for standard processes that is readily available, and develop proprietary
systems when such processes need to be modified to meet our needs.

We intend to continue to commit significant resources to develop our
electronic interfaces with ILECs as we provide additional services. We view the
efficiency and the accuracy of our communications and interface with ILECs as an
important strategic priority.

COMMUNICATIONS INDUSTRY

We are participating in the large and rapidly changing U.S. wireline
telecommunications industry. We believe that the wireline telecommunications
industry benefits from positive price elasticity, as well as growing,
non-cyclical demand for services. According to the U.S. Census Bureau, the total
market size of the telecommunications services industry (which excludes cable
television and Internet access) has increased from approximately $160 billion in
1990 to approximately $256 billion in 1997. This represents growth of 60% over
this period. The wireline segment of this market accounts for approximately $193
billion, or 75% of the total telecommunications services market in 1997.
Approximately 50% of wireline segment revenues are derived from local service
and network access.

According to FCC data, the total local revenue generated by the CLECs and
competitive access providers was less than 2% of the total U.S. local revenues
in 1997. As of June 30, 1998, CLEC lines (resold and switched) constituted
approximately 1.6% of the total switched lines in the U.S.

The emergence of the Internet and demand for data services has had a
significant effect on the U.S. communications industry. The use of the Internet
in both businesses and residences has been increasing rapidly, and is expected
to continue its growth. Forrester Research projects that revenues from Internet
access services will grow from $10.3 billion in 1998 to $61.8 billion in 2003 in
the U.S. They also project that web hosting revenues will increase from $900
million in 1998 to $14.7 billion in 2003 in the U.S. Frost and Sullivan project
that the total U.S. market for high-speed and switched data services will grow
at an annual rate of approximately 17%, from $18.0 billion in 1997 to
approximately $40 billion by 2002. The Gartner Group forecasts data traffic to
grow more than five times faster than voice traffic through 2002, and that DSL
revenue will grow at an annual rate of over 200% from 1998 to 2003, to reach
$18.0 billion.

We believe the overall size and growth of the U.S. communications market
presents a significant opportunity for competitive communications providers.
There are several factors which we believe will enhance the ability for
competitive providers to compete with the incumbent operators, including general
market receptivity to alternative providers, the desire in the business market
to diversify services to multiple suppliers, and the ability of competitive
providers to attractively bundle services and to offer improved customer
service.

OUR OTHER BUSINESSES

We are exploring other telecommunications opportunities both domestically
and internationally, including offering prepaid cellular telephone services and
other telecommunications opportunities.

To this end, in August 1999, we acquired a 53% equity stake in Q-east
Holding Limited, a Taiwan-based startup reseller of telephone services. Q-east
provides long distance service to American consumers calling into Greater China
on a pre-paid basis, via pre-paid calling cards, and on a post-paid basis to
Taiwanese businesses. Q-east also provides termination services into Greater
China for Tier 1 and Tier 2 telecommunications carriers. Q-east is in the
process of building a network in Asia to support voice, fax and data services
for carriers, ISPs and end users. Q-east is also exploring other
telecommunications

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opportunities throughout Greater China's markets. To date, CoreComm has invested
approximately $2.5 million into Q-east Holding Limited.

COMPETITION

The telecommunications industry and all of its segments are highly
competitive and many of our existing and potential competitors have greater
financial, marketing, technical and other resources than we do. Please refer to
the section entitled "Risk Factors--We face heavy competition in the
telecommunications industry for all of the services we currently provide and
those we intend to provide in the future." Competition for our products and
services is based on price, quality, network reliability, service features and
responsiveness to customers' needs.

CLEC

In each of our markets, we face competition from ILECs, including Ameritech
and Bell Atlantic, as well as other providers of telecommunications services,
such as GTE, other CLECs and cable television companies. In the local exchange
markets, our principal competitor will be the ILECs. We also face competition or
prospective competition from one or more CLECs. For example the following
companies have each begun to offer local telecommunications services in major
U.S. markets using their own facilities or by resale of the incumbent local
exchange carrier's services or other providers' services: AT&T, MCI WorldCom,
ICG, NEXTLINK and Sprint.

Some of our competitors, including AT&T, MCI WorldCom and Sprint, have
entered into interconnection agreements with Ameritech in states in which we
operate. These competitors either have begun or in the near future likely will
begin offering local exchange service in those states. In addition to these long
distance service providers and existing CLECs, entities that currently offer or
are potentially capable of offering switched telecommunications services
include:

- wireless telephone system operators;

- large customers who build private networks;

- cable television companies; and

- other utilities.

Competition in our CLEC business will continue to intensify in the future
due to the increase in the size, resources and number of market participants.
Many facilities-based CLECs have committed substantial resources to building
their networks or to purchasing CLECs or IXCs with complementary facilities. By
building or purchasing a network or entering into interconnection agreements or
resale agreements with ILECs, including RBOCs and IXCs, a provider can offer
single source local and long distance services similar to those offered by us.
Such additional alternatives may provide such competitors with greater
flexibility and a lower cost structure than us. Some of these CLECs and other
facilities-based providers of local exchange service are acquiring or being
acquired by IXCs. These combined entities may provide a bundled package of
telecommunications products, including local and long distance telephony, that
is in direct competition with the products offered or planned to be offered by
us.

Under the Telecommunications Act and related federal and state regulatory
initiatives, barriers to local exchange competition are being removed. The
availability of broad-based local resale and introduction of facilities-based
local competition are required before the RBOCs may provide in-region long
distance services originating in their traditional service area. The RBOCs are
currently allowed to offer certain in-region "incidental" long distance services
(such as cellular, audio and visual programming and certain interactive storage
and retrieval functions) and to offer out-of-region landline long distance
services.

Section 271 of the Telecommunications Act prohibits a RBOC from providing
long distance service that originates (or in certain cases terminates) in one of
its in-region states until the RBOC has satisfied certain statutory conditions
in that state and has received the approval of the FCC. The FCC to date has
denied each application for such approval, including the application of
Ameritech for in-region long distance authority in Michigan. We anticipate that
a number of RBOCs, including Ameritech, will file

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additional applications for in-region long distance authority in certain states.
The FCC will have 90 days from the date an application for in-region long
distance authority is filed to decide whether to grant or deny the application.
Based on continuing legal challenges, we do not believe that any RBOC will
provide in-region long distance services on a significant basis prior to the
year 2000.

Once the RBOCs are allowed to offer widespread in-region long distance
services, they will be in position to offer single-source local and long
distance services similar to those offered by CoreComm and the largest IXCs.

While new business opportunities have been made available to us through the
Telecommunications Act and other federal and state regulatory initiatives,
regulators are likely to provide the ILECs with an increased degree of
flexibility with regard to pricing of their services as competition increases.
The Ameritech resale agreement contains certain pricing protections, including
adjustments in the wholesale rates to be consistent with any changes in the
Ameritech retail rates. Nevertheless, if the ILECs elect to lower their rates
and sustain lower rates over time, this may adversely affect our revenues from
and place downward pressure on the rates we can charge. We believe the effect of
lower rates may be offset by the increased revenues available by offering new
products and services to our target customers as well as increased usage, but we
cannot be sure that this will occur. In addition, future regulatory decisions
may afford the ILECs excessive pricing flexibility or other regulatory relief
which could have a material adverse effect on us.

INTERNET

The Internet services market is also extremely competitive. We compete
directly or indirectly with the following categories of companies:

- established online services, such as America Online, the Microsoft
Network and Prodigy;

- local, regional and national ISPs, such as MindSpring, Rocky Mountain
Internet and Internet America;

- national telecommunications companies, such as AT&T and GTE;

- RBOCs, such as Ameritech and Bell Atlantic; and

- online cable services, such as Excite@Home and Roadrunner.

Our DSL service offering will also face competition from the traditional
telephone companies, cable modem service providers, competitive
telecommunications companies, traditional and new national long distance
carriers, other Internet service providers, on-line service providers and
wireless and satellite service providers.

LMDS

Depending on the services ultimately offered through our LMDS business, it
could face the same competition as outlined above. In addition, the extent it is
used it deliver pay television, our planned LMDS business will compete with
franchised cable television systems and also may face competition from several
other types of MVPDs:

- Multichannel Multipoint Distribution Systems;

- Satellite Master Antenna Television Systems;

- DBS and other television receive-only satellite dishes;

- video service from telephone companies; and

- open video system operators.

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MVPDs face competition from other sources of entertainment, such as movie
theaters and computer on-line services. Further, premium movie services offered
by MVPDs have encountered significant competition from the home video industry.
In areas where several off-air television broadcasts can be received without the
benefit of terrestrial distribution systems, MVPDs have experienced competition
from such broadcasters. Online services and ISPs also serve as a source of
competition to MVPDs.

The Telecommunications Act relaxed the regulatory barriers to entry by
ILECs into the provision of video programming in their local telephone service
areas, and it substantially reduces current and future regulatory burdens on
franchised cable television systems, thus potentially resulting in significant
additional competition to LMDS operators from local telephone companies and
franchised cable television systems.

OTHER BUSINESSES

In addition to our CLEC, Internet and LMDS businesses, our other businesses
face strong competition as well. These competitive businesses include long
distance service, cellular service and paging service. Our long distance service
faces competition from long distance carriers, including facilities-based
carriers such as AT&T, MCI WorldCom and Sprint and resellers of long distance
service. Our cellular service faces competition from other cellular carriers,
such as Vodafone AirTouch and AT&T, and from PCS carriers, such as Sprint PCS.
Our paging services are similarly exposed to competition from other providers of
paging services operating in the same local markets, regionally or nationally.

CUSTOMER DEPENDENCE AND SEASONALITY

We do not depend upon any single customer for any significant portion of
our business. Neither our business nor the telecommunications industry are
generally characterized as having a material seasonal element, and we do not
expect our business or the industry to become seasonal in the foreseeable
future.

EMPLOYEES

As of September 30, 1999, we had an aggregate of approximately 800
employees. None of our employees are represented by any labor organization. We
believe that our relationship with our employees is excellent.

PROPERTIES

Some of our subsidiaries lease office space which we believe is adequate to
serve our present business operations and our needs for the foreseeable future.
Please refer to the notes to our consolidated financial statements, included
elsewhere in this Offering Memorandum, for information concerning our lease
commitments.

LEGAL PROCEEDINGS

We are not involved in any legal disputes that are expected to have a
material adverse effect on our financial condition.

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REGULATION

OVERVIEW

The telecommunications services we provide are subject to regulation by
federal, state and local government agencies. The following summary does not
purport to describe all current and proposed regulations and laws affecting the
telecommunications industry. Other existing federal and state regulations and
legislation are the subject of judicial proceedings, legislative hearings and
administrative proposals, which could change in varying degrees the manner in
which this industry operates. Neither the outcome of these proceedings nor their
impact on the telecommunications industry or our business can be determined at
this time. Future federal or state regulations and legislation may be less
favorable to us than current regulation and legislation and therefore may have a
material and adverse impact on our business and financial prospects. In
addition, we may expend significant financial and managerial resources to
participate in proceedings setting rules at either the federal or state level,
without achieving a favorable result.

At the federal level, the FCC has jurisdiction over interstate and
international services and interstate services are communications that originate
in one state and terminate in another. Intrastate services are communications
that originate and terminate in a single state and state public service
commissions exercise jurisdiction over intrastate services. Municipalities and
other local government agencies may also regulate limited aspects of our
business, such as use of government-owned rights-of-way and construction
permits. Our networks are also subject to numerous local regulations such as
building codes, franchise and right-of-way licensing requirements.

TELECOMMUNICATIONS ACT OF 1996

The federal Telecommunications Act, enacted in 1996, has resulted and will
continue to result in substantial changes in the marketplace for
telecommunications services. These changes include, at present, opening local
exchange services to competition and, in the future, a substantial increase in
the addressable services for us. Among its more significant provisions, the
Telecommunications Act:

- removes legal barriers to entry into all telecommunications services,
such as long distance and local exchange services;

- requires ILECs (e.g., Ameritech or Bell Atlantic) to "interconnect" with
and provide services for resale by competitors;

- establishes procedures for ILECs to enter into new services, such as long
distance and cable television;

- relaxes regulation of telecommunications services provided by ILECs and
all other telecommunications service providers; and

- directs the FCC to establish an explicit subsidy mechanism for the
preservation of universal service.

The FCC was also directed by Congress to revise and make explicit subsidies
inherent in the access charge paid by IXCs for use of local exchange carriers'
services.

REMOVAL OF ENTRY BARRIERS

The provisions of the Telecommunications Act should enable us to provide a
full range of local telecommunications services in any state. Although we will
be required to obtain certification from state public service commissions in
almost all cases, the Telecommunications Act should limit substantially the
ability of a state public service commission to deny a request for
certification. The provisions of the Telecommunications Act also reduce the
barriers to entry by other potential competitors and therefore increase the
level of competition we will likely face in all markets affected by the Act.
Please refer to the section entitled "Business--Competition."

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INTERCONNECTION WITH LOCAL EXCHANGE CARRIER FACILITIES

A company cannot compete effectively with the ILECs in the switched local
telephone services market unless it is able to connect its facilities with the
ILEC's facilities and obtain access to certain essential services and resources
under reasonable rates, terms and conditions. The Telecommunications Act imposes
a number of access and interconnection requirements on all local exchange
providers, including CLECs, with additional requirements imposed on non-rural
ILECs. These requirements are intended to provide access to certain networks
under reasonable rates, terms and conditions. Specifically, ILECs must provide
the following:

UNBUNDLING OF NETWORK ELEMENTS. ILECs must offer access to various
unbundled elements of their network. This requirement allows new entrants to
purchase at cost-based rates elements of an ILEC's network that may be necessary
to provide service to a new entrant's customers.

DIALING PARITY. All local exchange carriers must provide dialing parity,
which means that a customer calling to or from a CLEC network cannot be required
to dial more digits than is required for a comparable call originating and
terminating on the ILEC's network.

TELEPHONE NUMBER PORTABILITY. Telephone number portability enables a
customer to keep the same telephone number when the customer switches local
exchange carriers.

RECIPROCAL COMPENSATION. The duty to provide reciprocal compensation means
that local exchange carriers must terminate calls that originate on competing
networks in exchange for a given level of compensation and that they are
entitled to termination of calls that originate on their network, for which they
must pay a given level of compensation.

RESALE. All local exchange carriers generally may not prohibit or place
unreasonable restrictions on the resale of their services. In addition, ILECs
must offer local exchange services to resellers at a wholesale rate that is less
than the retail rate charged to end users.

ACCESS TO RIGHTS-OF-WAY. All ILECs, CLECs and certain other utilities must
provide access to their poles, ducts, conduits and rights-of-way on a
reasonable, nondiscriminatory basis.

ILECs are required to negotiate in good faith with other carriers that
request any or all of the arrangements discussed above. If a requesting carrier
is unable to reach agreement with the ILEC within a prescribed time, either
carrier may request arbitration by the applicable state commission.

While the Telecommunications Act generally requires ILECs to offer
interconnection, unbundled network elements and resold services to CLECs,
ILEC-to-CLEC interconnection agreements may have short terms, requiring the CLEC
to renegotiate the agreements. ILECs may not provide timely provisioning or
adequate service quality, thereby impairing a CLEC's reputation with customers
who can easily switch back to the ILEC. In addition, the prices set in the
agreements may be subject to significant rate increases if state regulatory
commissions establish prices designed to pass on to the CLECs part of the
intrastate cost of providing universal service.

In January 1999, the United States Supreme Court upheld the FCC's authority
to adopt pricing rules for interconnection services unbundled network elements
and resale by CLECs. However, the Supreme Court instructed the FCC to reconsider
aspects of its 1996 order regarding the extent to which ILECs are required to
unbundle elements of their networks. The FCC's pricing rules are also subject to
further judicial review. On remand from the Supreme Court, the FCC adopted an
order on September 15, 1999, which specified the unbundled elements that ILECs
must make available to competitors. The FCC reaffirmed that incumbents must
provide unbundled access to six of the seven network elements that were listed
in the FCC's 1996 order. According to the FCC, the seventh item, operator and
directory assistance services, are no longer necessary to permit competition.
The FCC's order also added additional unbundled elements to the list-subloops,
portions of loops, dark fiber optic loops and transport-but declined, except in
limited circumstances, to require ILEC's to unbundle the facilities used to
provide high-speed Internet access and other data services. In addition, the FCC
initiated a further rulemaking proceeding to consider

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whether carriers should be able to use certain unbundled elements as a
substitute for the ILEC's special access services.

In February 1999, the FCC determined that calls to ISPs are interstate in
nature, thus falling under the FCC's jurisdiction. The FCC's February 1999
ruling has been appealed by several parties. The FCC has since initiated a
review of compensation arrangements between ILECs and CLECs for calls to ISPs.
This review could adversely affect the compensation that CLECs, including us,
receive for carrying such traffic. In addition, certain state regulatory
commission decisions regarding reciprocal compensation for termination of calls
to ISPs could lead to lower revenues for CLECs.

Several ILECs have filed petitions at the FCC and have initiated
legislative efforts to effect a waiver of the obligation to unbundle and offer
services for resale with regard to high-speed data or "advanced" services. In
addition, the ILECs are seeking to provide such services on an interLATA (long
distance) basis before they have been granted approval by the FCC pursuant to
Section 271 of the Communications Act to enter the long distance market.
Although the FCC has held that advanced services continue to be subject to the
resale and unbundling obligations of the Act, it has commenced a proceeding to
determine whether ILECs can create separate affiliates for advanced services
that would be free of these obligations. In addition, the FCC recently obtained
a voluntary remand from the U.S. Court of Appeals for the D.C. Circuit of a case
initiated by US West to consider further the issue of whether an ILEC's advanced
services fall into the category of "telephone exchange service" or "exchange
access service." If the FCC agrees with US West that advanced services are
neither telephone exchange or exchange access services, it could mean that
advanced services are not subject to the resale, unbundling, and other
provisions of Sections 251(b) and (c) of the 1996 Act. Even if the FCC does not
support US West's view on this matter, if it fails to support its decision
properly during the remand period, it could be reversed by the Court of Appeals.
Either of these results would make it more difficult for us to obtain access to
an ILEC's advanced services.

There are also numerous bills being considered by Congress that would
deregulate the provision of advanced services by ILECs. These regulatory or
legislative outcomes could have an adverse effect on our ability to obtain
access to the network elements necessary for the provision of advanced services
to our customers or to compete with ILECs in the provision of such services.

LOCAL EXCHANGE CARRIER ENTRY INTO NEW MARKETS

Our principal competitor in each market we enter is the ILEC. Prior to the
enactment of the Telecommunications Act, the RBOCs generally were prohibited by
the consent decree that broke up the Bell System from providing long distance
services. The Telecommunications Act established procedures under which a RBOC
can provide landline long distance services originating from (and in certain
cases, terminating in) its traditional telephone service area after receiving
approval from the FCC. The interconnection offered or provided by the RBOC must
comply with a competitive checklist that incorporates the interconnection
requirements discussed above. Please refer to the section entitled
"--Interconnection with Local Exchange Carrier Facilities." RBOCs are currently
permitted to provide landline long distance services to customers outside of
their local service areas and in conjunction with their mobile telephone service
offerings.

Approval from the FCC will enable a RBOC to provide customers with a full
range of local and long distance telecommunications services. The provision of
landline long distance services by RBOCs is expected to reduce the market share
of the major long distance carriers, which may be significant customers of our
services. Consequently, the entry of the RBOCs into the long distance market may
have adverse consequences on the ability of CLECs both to generate access
revenues from the IXCs and to compete in offering a package of local and long
distance services. To date, the FCC has denied each application for in-region
long distance service. More RBOC requests to provide in-region long distance
service are expected to be filed with the FCC in the near future.

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RELAXATION OF REGULATION

A goal of the Telecommunications Act is to increase competition for
telecommunications services, thereby reducing the need for regulation of these
services. To this end, the Telecommunications Act requires the FCC to streamline
its regulation of ILECs and permits the FCC to forbear from regulating
particular classes of telecommunications services or providers. Since we are a
non-dominant carrier and, therefore, are not heavily regulated by the FCC, the
potential for regulatory forbearance likely will be more beneficial to the ILECs
than to us in the long run.

The Communications Act requires all common carriers to charge just and
reasonable rates for their services and to file schedules of these rates with
the FCC. These schedules are known as "tariffs" and they represent a contract
between a carrier and its customers. The Telecommunications Act permits the FCC
to "forbear" from enforcing certain provisions of the Communications Act and the
FCC has used this authority to determine that it is in the public interest to
prohibit carriers from filing tariffs for their interstate services. This
decision of the FCC and its "mandatory detariffing" has been stayed by the U.S.
Court of Appeals for the D.C. Circuit. If the FCC is successful in its attempt
to preclude telecommunications providers from filing tariffs, it may increase
our exposure to litigation. Currently, tariffs contain provisions limiting
carriers' liability on a variety of issues. In the absence of filed tariffs,
carriers would have to rely on negotiated contracts with each customer to
provide such liability limitations.

Another FCC decision permits, but does not require, CLECs to file tariffs
for the charges that they levy on interstate long distance carriers for
completing calls to CLEC customers (refer to the discussion of "access charges"
below). In the absence of a tariff, a carrier depends on a contract with its
customers to determine the rates and conditions of service.

UNIVERSAL SERVICE AND ACCESS CHARGE REFORM

On May 8, 1997, the FCC issued an order implementing the provisions of the
Telecommunications Act relating to the preservation and advancement of universal
telephone service. This order requires all telecommunications carriers providing
interstate telecommunications services, including us, to contribute to universal
service support. Our share of the contributions used to support schools,
libraries and rural health care programs is based on our share of the total
industry end user telecommunications revenues. Our share of the federal
high-cost fund is based on our share of total interstate telecommunications
revenue. Although we have already begun contributing to the federal universal
service fund, the amount of our required contribution changes each quarter.
Several parties have appealed the FCC's May 8, 1997 order. The appeals have been
consolidated and are pending in the United States Court of Appeals for the Fifth
Circuit. A number of states have their own universal service programs. In May
1999, the FCC adopted a framework for a new, forward-looking, high-cost support
mechanism that will provide support for non-rural telecommunications carriers.
The FCC stated that the support mechanism will be used only to determine federal
support and will not impose any obligation on a state to impose intrastate
surcharges. It is not possible to determine at this time what effect this ruling
will have on the level of contributions we are required to make to either the
federal or various state universal service programs, or if it will become easier
for us to become qualified as recipients of universal service funds when we
serve high-cost areas.

In a related proceeding, on May 16, 1997, the FCC issued an order
implementing certain reforms to its access charge rules. Access charges are
charges imposed by local exchange carriers on long distance providers for access
to the local exchange network, and are designed to compensate the local exchange
carrier for its investment in the local network. The FCC regulates interstate
access and the states regulate intrastate access. This order required ILECs to
substantially decrease over time the prices they charge for switched and special
access and changed how access charges are calculated. These changes are intended
to reduce access charges paid by IXCs to local exchange carriers and shift
certain usage-based charges to flat-rated, monthly per-line charges. To the
extent that these rules are effective in reducing access charges, our ability to
offer customers lower-cost access services might be impaired. Additionally, the
FCC ruled that ILECs may no longer impose certain interconnection charges on
competitive providers that interconnect with the ILEC at the end offices but do
not use the transport facilities.

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On August 27, 1999, the FCC issued an order implementing further reforms to
its access charge rules. The FCC's order granted price cap LECs greater pricing
flexibility, and instituted other access charge reforms designed to increase
competition and reduce access charges. These changes could impair our ability to
offer customers lower-cost access services. The FCC also issued a notice of
proposed rulemaking, proposing additional pricing flexibility. In addition, the
FCC stated that it is considering whether to adopt rules constraining CLEC
access charges. To the extent CLEC access charges are reduced, our revenue could
decrease.

Some state public service commissions have adopted rules or are currently
considering actions to preserve universal services and promote the public
interest.

FEDERAL REGULATION GENERALLY

Through a series of proceedings, the FCC has established different levels
of regulation for "dominant carriers" and "non-dominant carriers." Only ILECs
are classified as dominant; all other providers of domestic interstate services
are classified as non-dominant carriers. As a non-dominant carrier, we are
subject to relatively limited regulation by the FCC. However, at a minimum, we
must offer interstate services at just and reasonable rates in a manner that is
not unreasonably discriminatory.

The FCC has adopted rules requiring ILECs to provide collocation to CLECs
for the purpose of interconnecting their competing networks. Under the rules
adopted by the Local Competition Orders, ILECs are required to provide either
physical collocation or virtual collocation at their switching offices.
Recently, the FCC established new rules designed to make it easier and less
expensive for CLECs to obtain collocation at ILEC central offices by, among
other things, restricting the ILECs' ability to prevent certain types of
equipment from being collocated and requiring ILECs to offer alternative
collocation arrangements to CLECs. While these rules are likely to benefit us,
it is uncertain whether they will be implemented by ILECs in a favorable manner.
In addition, ILECs have asked the FCC to reconsider aspects of the new
collocation rules.

All local exchange carriers, including CLECs, must:

- make their services available for resale by other carriers;

- provide nondiscriminatory access to rights-of-way;

- offer reciprocal compensation for termination of traffic; and

- provide dialing parity and telephone number portability.

In addition, the Telecommunications Act requires all telecommunications
carriers to contribute to the universal service mechanism established by the FCC
and to ensure that their services are accessible to and usable by persons with
disabilities. Moreover, the FCC is considering the regulatory implications of
various aspects of local exchange competition. Any or all of these proceedings
may negatively affect CLECs, including us.

The May 21, 1997 order reforming the FCC's price cap formula and the August
27, 1999 order granting ILECs substantial pricing flexibility with regard to
interstate access services afford ILECs greater flexibility in establishing
rates and provide additional incentives to foster efficiency. Because these
regulatory initiatives enable ILECs to offer selectively reduced rates for
access services, the rates we may charge for access services could be
constrained. Our rates also will be constrained by our competitors which,
excluding the ILECs, are subject to the same streamlined regulatory regime as us
and can price their services to meet competition.

The FCC is currently examining intercarrier compensation for the
termination of calls to ISPs, which could affect both CLECs' and ISPs' costs.

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STATE REGULATION GENERALLY

Most state public service commissions require companies to be certified to
provide common carrier services. These certifications generally require a
showing that the carrier has adequate financial, managerial and technical
resources to offer the proposed services in a manner consistent with the public
interest.

In addition to obtaining certification, in each state, we must negotiate
terms of interconnection with the incumbent local exchange carrier before we can
begin providing switched services. Under the Telecommunications Act, the FCC has
adopted interconnection requirements, certain portions of which have been upheld
by the United States Supreme Court and other portions of which are subject to
reconsideration by the FCC or further judicial review. Please refer to the
section entitled "--Interconnection with Local Exchange Carrier Facilities."
State public utility commissions are required to approve interconnection
agreements before they become effective and must arbitrate disputes among the
parties upon request. We have already entered into interconnection agreements
with Ameritech and Cincinnati Bell Telephone. In addition, we have acquired
MegsINet which also has an interconnection agreement with Ameritech. We have
also initiated the process of negotiations with Ameritech and Bell Atlantic for
additional interconnection agreements. Regulatory changes could require
renegotiation of relevant portions of existing interconnection agreements, or
subject them to additional court and regulatory proceedings.

Some recent state regulatory commission decisions regarding the
applicability of the Telecommunications Act's reciprocal compensation provisions
to the termination of calls placed to ISPs could result in lower revenues for
CLECs in those states. The issue remains undecided in various other states.

We are not presently subject to price regulation based on costs or
earnings. Most states require CLECs to file tariffs setting forth the terms,
conditions and prices for intrastate services. Some states permit tariffs to
list a rate range or set prices on an individual case basis.

Several states provide ILECs with flexibility for their rates, special
contracts (selective discounting) and tariffs, particularly for services deemed
subject to competition. This pricing flexibility increases the ability of the
incumbent local exchange carrier to compete with us and constrains the rates we
may charge for its services. In light of the additional competition that is
expected to result from the Telecommunications Act, states may grant ILECs
additional pricing flexibility. At the same time, some ILECs may request
increases in certain local exchange rates to offset revenue losses due to
competition.

REGULATION OF RESELLERS

The FCC has defined resale as any activity in which a party (the reseller)
subscribes to the services or facilities of a facilities-based provider (or
another reseller) and then reoffers communications services to the public for
profit, with or without adding value. Resellers are common carriers generally
subject to all rules and regulations placed on providers of the underlying
services by either the FCC or the states in which they operate. The FCC has held
that prohibitions on the resale of common carrier services are unjust,
unreasonable, and unlawfully discriminatory in violation of the Communications
Act. Accordingly, all common carriers must make their services available for
resale at rates, terms, and conditions that do not unreasonably discriminate
against resellers. The Telecommunications Act imposes the additional duty upon
incumbent local exchange carriers to make their services available for resale at
wholesale rates. The FCC adopted specific requirements for determining such
wholesale rates for local telecommunications services. While the United States
Supreme Court upheld the FCC's authority to adopt these rules, the FCC's
specific pricing rules are subject to further judicial review. As to other
telecommunications services, however, there is no regulation that requires
discounts to resellers below those offered to end users of the same quantities
of like services. The FCC has determined that because of the competitive
development of broadband commercial mobile radio service, it will eliminate the
explicit requirement that those services be offered for resale after November
24, 2002.

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LOCAL GOVERNMENT AUTHORIZATIONS

Many jurisdictions where we may provide service require license or
franchise fees based on a percentage of certain revenues. Because the
Telecommunications Act specifically allows municipalities to charge fees for use
of the public rights-of-way, it is likely that jurisdictions that do not
currently impose fees will seek to impose fees in the future. However, the
amount and basis of these fees have been successfully challenged by several
telecommunications service providers. Federal courts have struck down municipal
ordinances that (1) do not relate the fees imposed under the ordinance to the
extent of a provider's use of the rights-of-way; (2) do not relate the fees
imposed under the ordinance to the costs incurred by the local government in
maintaining the rights-of-way; or (3) seek to impose fees based on a concept of
the "value" of the use to the provider by relating the fees to provider
revenues. Additionally, because the Telecommunications Act requires
jurisdictions to charge non-discriminatory fees to all telecommunications
providers, telecommunications providers are challenging municipal fee structures
that excuse other companies, particularly the ILECs, from paying license or
franchise fees, or allow them to pay fees that are materially lower than those
that are required from new competitors such as CoreComm. A number of these
decisions have been appealed and, in any event, it is uncertain how quickly
particular jurisdictions will respond to the court decisions without a specific
legal challenge initiated by us or another CLEC to the fee structure at issue.

LOCAL MULTIPOINT DISTRIBUTION SERVICE

The FCC has established a new wireless service named local multipoint
distribution service, or "LMDS." The FCC allocated two frequency blocks in each
of 493 Basic Trading Areas in the U.S. to LMDS: Block A with 1,150 MHz of
spectrum in the 28 GHz and 31 GHz bands, and Block B with 150 MHz in the 31 GHz
band. LMDS licenses are awarded for ten-year terms with renewal expectancies
provided to licensees that make a showing of substantial service in their
licensed areas.

LMDS may be used to provide any kind of communications service on a common
carrier or non common-carrier basis. Radio frequencies in the 28 and 31 GHz
bands are generally capable of only "line-of-sight" transmission and reception,
are subject to interference from certain weather conditions, and do not lend
themselves to mobile applications. LMDS is expected to be used for the delivery
of various broadband services to homes and offices, including
telecommunications, Internet access, and two-way video. At least seven other
countries, including Canada and Mexico, have licensed LMDS on either a permanent
or experimental basis. LMDS licensees are expected to be able to provide a wide
array of services, two-way capabilities, and high capacity through the use of
newer digital equipment and transmission mechanisms. The FCC expects that
Block-A LMDS licensees especially, by applying cellular-style frequency re-use
technology to an already large frequency bandwidth, have the potential to become
competitors to ILECs and cable operators. Accordingly, the LMDS rules prohibit
ownership of Block-A licenses by ILECs and incumbent cable operators prior to
July 2000, but permit an applicant that would otherwise be prohibited from
holding a Block-A license to apply for a waiver of the ownership restriction by
showing that it does not have market power in its telephone or cable service
area.

The FCC held a simultaneous, multiple-round auction for the 986 LMDS
licenses which closed on March 25, 1998. 104 winning participants bid a total of
$578,663,029 for 864 licenses. No auction participant placed the minimum opening
bid on any of the remaining 122 licenses, which were reauctioned in April and
May, 1999. In the initial auction, we won 15 Block-A licenses for Basic Trading
Areas encompassing substantially all population centers in the state of Ohio,
for a total bid of $25,241,133. Auction participants that had average gross
revenues for the previous three years of $75 million or less, when aggregated
with all commonly controlled affiliates, were entitled to bidding credits of
25%, 35%, or 45%. We did not qualify for any bidding credit. The FCC has since
granted our 15 LMDS licenses with an effective date of June 8, 1998.

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FUTURE INTERNATIONAL OPERATIONS

We may ultimately expand our operations to other countries and currently
provides international resale services. The FCC requires every carrier that
intends to originate international telecommunications from within the U.S.,
either through the use of its own facilities or on a resale basis, to secure in
advance an authorization from the FCC under Section 214 of the Communications
Act. Additionally, these carriers must file with the FCC a tariff containing the
rates, terms, and conditions of their international service offerings. In
applying for a 214 Authorization, a carrier must disclose any affiliations with
or special concessions from foreign carriers or nations. The FCC has streamlined
its procedures for granting 214 Authorizations, providing a routine grant of
such authorizations in 35 days unless an application is formally opposed or the
applicant is affiliated with a carrier that controls bottleneck
telecommunications facilities in a foreign country, in which case the applicant
may be subject to more stringent regulation as a "dominant" carrier.
Additionally, applicants affiliated with foreign carriers in countries that are
signatories to the Telecommunications Annex to the World Trade Organization
General Agreement of Trade in Services, including Canada, have a reduced burden
of demonstrating their "non-dominance." Carriers that have received 214
Authorizations are subject to certain reporting requirements, must file
contracts with foreign correspondents, and are restricted in the provision of
certain services to certain nations, such as the use of resold private lines for
switched services and the provision of any services to countries on the FCC's
"exclusion list." We hold a 214 Authorization for both facilities-based and
resale international services and has filed a tariff for its international
resale services.

INTERNET REGULATION

The FCC currently does not regulate the provision of Internet service,
although it does regulate common carriers that provide elements of the
"backbone" networks on which the Internet is based. Similarly, state public
utility commissions generally do not regulate Internet service, except in some
limited circumstances where incumbent local exchange carriers provide Internet
services. The FCC and some states, however, are reviewing the development of the
Internet and the types of services that are provided through it. For example, if
the FCC should determine that an Internet service provider offers a service that
is an exact substitute for long distance telephone service with the sole
distinction that it is based on a packet-switched network rather than a
circuit-switched network, the FCC may determine that it should provide
regulatory parity for the services

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES

The following table provides information about our directors and executive
officers:

DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
George S. Blumenthal...................... 55 Chairman of the Board of Directors
J. Barclay Knapp.......................... 42 President, Chief Executive Officer, Chief
Financial Officer and Director
Patty J. Flynt............................ 48 Senior Vice President -- Chief Operating Officer;
President of Operating Company
Richard J. Lubasch........................ 53 Senior Vice President -- General Counsel and
Secretary
Gregg Gorelick............................ 40 Vice President -- Controller and Treasurer
Alan J. Patricof.......................... 64 Director
Warren Potash............................. 67 Director
Sidney R. Knafel.......................... 68 Director
Ted H. McCourtney......................... 60 Director
Del Mintz................................. 71 Director
</TABLE>

The CoreComm Limited Certificate of Incorporation provides for a classified
Board of Directors consisting of three classes as nearly equal in number as
possible with the directors in each class serving staggered three year terms.
The Class I directors will be George S. Blumenthal and J. Barclay Knapp; the
Class II directors will be Alan J. Patricof and Warren Potash and the Class III
directors will be Sidney R. Knafel, Ted H. McCourtney and Del Mintz. The terms
of the Class I, Class II and Class III Directors will expire in 2000, 2001 and
2002, respectively. At each annual meeting of the stockholders, the successors
to the class of directors whose term expires will be held in the third year
following their election.

The following is a brief description of the present and past business
experience of each of the persons who serve as our directors and executive
officers:

DIRECTORS AND EXECUTIVE OFFICERS:

GEORGE S. BLUMENTHAL has been our director since March 1998. Mr. Blumenthal
was Chairman, Treasurer and a director of CCPR from February 1992 until its sale
and was Chief Executive Officer from March 1994 until March 1998. In addition,
Mr. Blumenthal is Chairman, Treasurer and a director of NTL. Mr. Blumenthal is
also a director of Andover Togs, Inc. Mr. Blumenthal was Chairman, Treasurer and
a director of Cellular Communications International from its organization until
April 1994. Mr. Blumenthal was also Chairman, Treasurer and a director of
Cellular Communications from its founding in 1981 until its merger in 1996 into
a subsidiary of AirTouch Communications, Inc., which we refer to as the "CCI
Merger." Mr. Blumenthal's term as our director expires at our annual meeting in
2000.

J. BARCLAY KNAPP has been our President, Chief Executive Officer, Chief
Financial Officer and director since March 1998. Mr. Knapp was appointed
President of CCPR in March 1994 and Chief Executive Officer in March 1998, and
remained in those positions until the sale of CCPR. Mr. Knapp has been a
director of Cellular Communications of Puerto Rico since February 1992 and was
Chief Financial Officer from that date to 1997. Mr. Knapp was Executive Vice
President, Chief Operating Officer and a director of Cellular Communications
International from July 1991 until June 1998. He is President, Chief Executive
Officer and a director of NTL. Mr. Knapp was also Executive Vice President,
Chief Operating Officer, Chief Financial Officer and a director of Cellular
Communications until the CCI Merger. Mr. Knapp's term as our director expires at
our annual meeting in 2000.

69
<PAGE> 73

PATTY J. FLYNT has served as our Senior Vice President--Chief Operating
Officer and President of our operating company since 1998. She has worked with
CoreComm and its historical affiliates since 1989. She previously served as
Group Managing Director--Information Systems for NTL, and Vice President of
Information Systems for Cellular Communications. Prior to joining Cellular
Communications, she served in the Information Services division of Blue
Cross/Blue Shield of Ohio for 17 years.

RICHARD J. LUBASCH has been our Senior Vice President--General Counsel and
Secretary since March 1998. Additionally, Mr. Lubasch was CCPR's Senior Vice
President-- General Counsel and Secretary from February 1992 until its sale. He
was also the Senior Vice President--General Counsel, Secretary and Treasurer of
Cellular Communications International from July 1991 until its sale, is
Executive Vice President--General Counsel and Secretary of NTL and has been
Senior Vice President--General Counsel and Secretary of NTL since its formation.
Mr. Lubasch was Vice President--General Counsel and Secretary of Cellular
Communications from July 1987 until the CCI Merger.

GREGG GORELICK has been our Vice President--Controller and Treasurer since
March 1998. Mr. Gorelick was CCPR's Vice President--Controller from February
1992 until its sale, held that position at Cellular Communications International
from July 1991 until its sale and has held that position at NTL since its
formation. From 1981 to 1986 he was employed by Ernst & Whinney (now known as
Ernst & Young LLP). Mr. Gorelick is a certified public accountant and was Vice
President--Controller of Cellular Communications from 1986 until the CCI Merger.

ALAN J. PATRICOF has been our director since March 1998. Mr. Patricof is
Co-Chairman of Patricof & Co. Ventures, Inc., a venture capital firm he founded
in 1969. Mr. Patricof was a director of Cellular Communications International
from July 1991 until its sale in March 1999 and was a director of CCPR from
February 1992 until its sale. Additionally, Mr. Patricof has been a director of
NTL since its formation and is a director of other privately owned companies.
Mr. Patricof's term as our director expires at our annual meeting in 2001.

WARREN POTASH has been our director since March 1998. Mr. Potash retired in
1991 as President and Chief Executive Officer of the Radio Advertising Bureau, a
trade association, a position he held since 1989. Prior to that time, and
beginning in 1986, he was President of New Age Communications, Inc., a
communications consultancy firm. Until his retirement in 1986, Mr. Potash was a
Vice President of Capital Cities/ABC Broadcasting, Inc., a position he held sine
1970. Mr. Potash was also a director of Cellular Communications International
from July 1991 until its sale, and was a director of CCPR from February 1992
until its sale and of NTL since its formation. Mr. Potash's term as our director
expires at our annual meeting in 2001.

SIDNEY R. KNAFEL has been our director since March 1998. Mr. Knafel has
also been Managing Partner of SRK Management Company, a private investment
concern, since 1981. In addition, Mr. Knafel is Chairman of Insight
Communications, Inc. and BioReliance Corporation. Mr. Knafel is also a director
of General American Investors Company, Inc., IGENE Biotechnology, Inc. and some
privately owned companies, was a director of Cellular Communications
International from July 1991 until its sale, was a director of CCPR from
February 1992 until its sale and of NTL since its formation. Mr. Knafel's term
as our director expires at our annual meeting in 2002.

TED H. MCCOURTNEY has been our director since March 1998. Mr. McCourtney is
a General Partner of Venrock Associates, a venture capital investment
partnership, a position he has held since 1970. Mr. McCourtney also has been a
director of NTL since its formation and serves as a director of Medpartners
Inc., Visual Networks, Inc. and several privately owned companies. Mr.
McCourtney's term as our director expires at our annual meeting in 2002.

DEL MINTZ has been our director since March 1998. Mr. Mintz is President of
Cleveland Mobile Tele Trak, Inc., Cleveland Mobile Radio Sales, Inc. and Ohio
Mobile Tele Trak, Inc., companies providing telephone answering and radio
communications services in Cleveland and Columbus, respectively. Mr. Mintz has
held similar positions with the predecessors of these companies since 1967. Mr.
Mintz is

70
<PAGE> 74

president of several other companies, and was President and a principal
stockholder of Cleveland Mobile Cellular Telephone, Inc. before that company was
acquired through a merger with CCI's predecessor in 1985. Mr. Mintz was also a
director of Cellular Communications International from July 1991 until its sale,
and was a director of CCPR from February 1992 until its sale. Additionally, Mr.
Mintz has been a director of NTL since its formation and is a director of
several privately owned companies. Mr. Mintz's term as our director expires at
our annual meeting in 2002.

BERMUDA RESIDENT REPRESENTATIVE AND SECRETARY

We are required, as a matter of Bermuda law, to maintain a representative
presence in Bermuda and have elected to appoint a resident representative. The
resident representative is entitled to attend and speak, but not to vote at
meetings of the board or any committee of the board or of the shareholders. Hugh
Gillespie, an attorney with Appleby, Spurling & Kempe, our Bermuda legal
advisor, is also our initial resident representative.

CLAIRE SOUSA is employed by A.S. & K. Services Ltd., a Bermuda Corporation,
and an affiliate of Appleby, Spurling & Kempe, as a corporate administrator and
serves as our Secretary resident in Bermuda.

EXECUTIVE COMPENSATION

The table below discloses compensation received by our Chief Executive
Officer and our four other most highly paid executive officers for the period
from March 16, 1998 (the date that we were formed) through December 31, 1998. In
addition, the executive officers may also receive options under our stock option
plan described in the section entitled "--Stock Option Plans."

SUMMARY COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
----------------------------------- COMMON
OTHER ANNUAL STOCK ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
YEAR SALARY($) BONUS($) ($) OPTIONS(#)(4) ($)
---- --------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Barclay Knapp................... 1998 21,200 -- -- 926,478 --
President and Chief
Executive and Financial Officer
George S. Blumenthal(2)............ 1998 20,600 -- -- 846,813 --
Chairman
Richard J. Lubasch................. 1998 17,300 -- -- 201,685 --
Senior Vice President -- General
Counsel and Secretary
Patty J. Flynt..................... 1998 183,600 131,400 -- 36,250 --
Senior Vice President
Chief Operating Officer
Gregg Gorelick..................... 1998 10,000 -- 57,900(3) 78,404 --
Vice President -- Controller and
Treasurer
</TABLE>

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

(1) NTL provides us with management, financial, legal and technical services.
Amounts charged to us consist of salaries and direct costs allocated to us.
In 1998, NTL charged us $313,000. It is not practicable to determine the
amounts of these expenses that would have been incurred had we operated as
an unaffiliated entity. However, we believe the allocation method is
reasonable. The named executives, except Ms. Flynt, receive salaries from
NTL and spend portions of their time providing executive management to NTL
and us.

71
<PAGE> 75

(2) Mr. Blumenthal resigned as Chief Executive Officer in March 1998, and Mr.
Knapp was appointed Chief Executive Officer in March 1998.

(3) Other annual compensation consists of relocation expenses of $57,900.

(4) 1998 option grants do not include an aggregate of 225,880 options issued to
the named executives as a result of an adjustment to pre-existing options in
CCPR as a consequence of the spin-off.

OPTION GRANTS TABLE

The following table provides information on stock option grants during 1998
to the named executive officers.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATE OF STOCK
SECURITIES GRANTED PRICE APPRECIATION FOR
UNDERLYING TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE OR ----------------------
GRANTED IN FISCAL BASE PRICE EXPIRATION 5% ($) 10%($)
(#) YEAR ($/SHARE)(1) DATE $21.47 $34.19
---------- --------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Barclay Knapp............... --(2) --% -- -- -- --
George S. Blumenthal........... --(3) -- -- -- -- --
Richard J. Lubasch............. --(4) -- -- -- -- --
Patty J. Flynt(5).............. 30,000(6) 0.88 13.18 08/20/08 248,707 630,268
Gregg Gorelick(5).............. 5,000(7) 0.15 13.18 03/12/08 41,451 105,045
20,000(7) 0.59 13.18 08/20/08 165,804 420,178
</TABLE>

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

(1) Our common stock began trading on the Nasdaq National Market on September 4,
1998. The closing price on September 4, 1998 was $14.25.

(2) Does not include 818,750 warrants and 107,728 options as a result of an
adjustment to pre-existing options in CCPR as a consequence of our spin-off.

(3) Does not include 818,750 warrants and 28,063 options as a result of an
adjustment to pre-existing options in CCPR as a consequence of our spin-off.

(4) Does not include 171,250 warrants and 30,435 options as a result of an
adjustment to pre-existing options in CCPR as a consequence of our spin-off.

(5) All options were granted on March 13, 1998 or August 21, 1998; 20% were
exercisable upon issuance, 20% became exercisable on January 1, 1999 and an
additional 20% will become exercisable on each of January 1, 2000, 2001 and
2002. Upon a change of control of us, all unvested options become fully
vested and exercisable.

(6) Does not include 6,250 options as a result of an adjustment to pre-existing
options in CCPR as a consequence of our spin-off.

(7) Does not include 53,404 options as a result of an adjustment to pre-existing
options in CCPR as a consequence of our spin-off.

72
<PAGE> 76

OPTION EXERCISES AND YEAR-END VALUE TABLE

The following table provides information on stock option exercises during
1998 by the named executive officers and the value at December 31, 1998 of
unexercised in-the-money options held by each of the named executive officers.
None of the named executive officers exercised options during 1998.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR-END AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END(#) OPTIONS AT FY-END($)(1)
EXERCISABLE(E)/ EXERCISABLE(E)/
NAME UNEXERCISABLE(E) UNEXERCISABLE(U)
- ---- -------------------- ------------------------
<S> <C> <C>
J. Barlclay Knapp................................... 926,478(E) 3,767,036(E)
0(U) 0(U)
George S. Blumenthal................................ 28,063(E) 426,586(E)
0(U) 0(U)
Richard J. Lubasch.................................. 201,685(E) 904,961(E)
0(U) 0(U)
Patty J. Flynt...................................... 12,250(E) 110,233(E)
24,000(U) 61,680(U)
Gregg Gorelick...................................... 41,904(E) 437,506(E)
36,500(U) 93,805(U)
</TABLE>

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

(1) Based on the closing price on the Nasdaq National Market on December 31,
1998 of $15.75.

STOCK OPTION PLANS

In 1998, our Board of Directors adopted the CoreComm Limited 1998 Stock
Option Plan, reserving under it shares for issuances to employees and directors.

The purpose of our 1998 Stock Option Plan is intended to encourage stock
ownership by our employees and non-employee directors, and the employees and
non-employee directors of our divisions, subsidiary corporations and other
affiliates, so as to encourage our employees to continue being employed by us
and to put forth maximum efforts for the success of our business. Under our 1998
Stock Option Plan, grants may be made of options to acquire shares of our common
stock. The options may be "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code. The terms of options granted under our
1998 Stock Option Plan, including provisions regarding vesting, exercisability,
exercise price and duration, are generally set by the Compensation Committee of
our Board of Directors.

In addition, in January 1999, CoreComm, Inc., one of our wholly-owned
subsidiaries, adopted a stock option plan. Options granted under that plan will
not become exercisable unless and until there is either a registered public
offering of CoreComm, Inc.'s common stock or we spin-off CoreComm, Inc. The
purpose of CoreComm, Inc.'s option plan is to encourage stock ownership by its
employees and non-employee directors, and the employees and non-employee
directors of its divisions, subsidiary corporations and other affiliates, so as
to encourage its employees to continue being employed by CoreComm, Inc. and to
put forth maximum efforts for the success of its business. Under the plan,
options to purchase up to a maximum of 30% percent of the common stock of
CoreComm, Inc. may be issued (based on the number of shares outstanding at the
time of CoreComm, Inc.'s initial public offering or its spin-off from us). No
single individual may be granted in any calendar year options to purchase more
than 80% of the shares of common stock available for issuance under CoreComm,
Inc.'s option plan. In general, options under both plans are 20% vested at grant
and vest 20% each January 1 after they are granted, until they are fully vested.

73
<PAGE> 77

CoreComm, Inc.'s option plan is administered by the Compensation and Option
Committee of its Board of Directors or any other committee that is appointed by
its Board of Directors or its Compensation and Option Committee. The Option
Committee has the right, subject to the terms of the option plan, to grant
options, determine which options will be incentive stock options and which will
be nonqualified stock options, determine the purchase price of shares of common
stock covered by each option, determine the persons to whom such options will be
granted, the time or times at which options will be granted and the number of
shares covered by each option.

74
<PAGE> 78

SECURITY OWNERSHIP

The following table provides, as of November 17, 1999, information
regarding the beneficial ownership of our common stock by (i) each of our
executive officers and directors, (ii) all such directors and executive officers
as a group and (iii) each person known by us to be the beneficial owner of more
than 5% of any class of our voting securities as calculated in accordance with
Rule 13d-3 of the Exchange Act.

<TABLE>
<CAPTION>
PRESENTLY
EXERCISABLE
OPTIONS,
WARRANTS AND
EXECUTIVE OFFICERS, DIRECTORS COMPANY CONVERTIBLE
AND PRINCIPAL STOCKHOLDERS(1) STOCK NOTES(2) TOTAL PERCENT(2)(3)
- ----------------------------- --------- ------------ --------- -------------
<S> <C> <C> <C> <C>
J. Barclay Knapp(4)......................... 961,293 414,521 1,375,814 5.31%
George S. Blumenthal(5)..................... 1,175,457 287,720 1,463,177 5.67
Richard J. Lubasch(6)....................... 200,720 102,029 302,749 1.18
Patty J. Flynt.............................. 0 87,376 87,376 *
Gregg Gorelick.............................. 59,267 51,599 110,866 *
Sidney R. Knafel............................ 276,263 36,786 313,049 1.23
Ted H. McCourtney(7)........................ 489,034 27,036 516,070 2.02
Del Mintz(8)................................ 988,725 53,822 1,042,547 4.08
Alan J. Patricof(9)......................... 116,801 36,786 153,587 *
Warren Potash(10)........................... 46,976 52,464 99,440 *
Ronald Baron(11)............................ 3,579,600 413,725 3,993,325 15.40
Baron Capital Group, Inc.(11)
Bamco, Inc.(11)
Baron Capital Management, Inc.(11)
Baron Asset Fund(11)
767 Fifth Avenue
New York, NY 10153
Snyder Capital Management, L.P.(12)......... 2,966,343 0 2,966,343 11.63
Snyder Capital Management, Inc.(12)
350 California Street, Suite 1460
San Francisco, CA 94104
NWQ Investment Management Company(13)....... 1,326,732 0 1,326,732 5.20
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
Wallace R. Weitz & Company(14).............. 1,278,450 0 1,278,450 5.01
1125 South 103rd Street, Suite 600
Omaha, NE 68124-6008
All directors and officers as a group (ten
in number)................................ 4,314,536 1,150,139 5,464,675 20.49
</TABLE>

- ---------------
* Represents less than one percent.

(1) Unless otherwise noted, the business address of each person is 110 East
59th Street, New York, NY, 10022.

(2) Includes shares of common stock purchased upon the exercise of options
which are exercisable or become so in the next 60 days, which we refer to
as "presently exercisable options," shares of common stock purchased upon
the exercise of warrants and common stock issuable upon conversion of
convertible notes.

(3) Includes common stock, presently exercisable options and warrants and
common stock issuable upon conversion of convertible notes.

75
<PAGE> 79

(4) Includes $300,000 of the convertible notes, convertible into 7,301 shares
of common stock.

(5) Includes 2,970 shares of common stock owned by trusts for the benefit of
Mr. Blumenthal's children. An additional 4,500 shares of common stock are
owned by Mr. Blumenthal's wife, as to which shares Mr. Blumenthal disclaims
beneficial ownership. Also includes 389,893 shares of common stock and
56,034 options held by Grantor Retained Annuity Trusts.

(6) Includes 156 shares of common stock owned by Mr. Lubasch as custodian for
his child, as to which shares Mr. Lubasch disclaims beneficial ownership.

(7) Includes 411,000 shares of common stock held by various entities of which
Mr. McCourtney is a general partner, as to which shares Mr. McCourtney
disclaims beneficial ownership except to the extent of his pro-rata
interest. An additional 780 shares of common stock are held by trusts for
the benefit of Mr. McCourtney's children, as to which shares Mr. McCourtney
disclaims beneficial ownership.

(8) Includes 38 shares of common stock owned by Mr. Mintz's wife, as to which
shares Mr. Mintz disclaims beneficial ownership. Also includes $700,000 of
the convertible notes, convertible into 17,036 shares of common stock.

(9) Includes 1,597 shares of common stock owned by Mr. Patricof's wife, as to
which shares Mr. Patricof disclaims beneficial ownership.

(10) Includes $250,000 of convertible notes, convertible into 6,084 shares of
common stock.

(11) Based solely upon Schedule 13-G (Amendment No. 1), dated February 8, 1999,
filed by Ronald Baron, Baron Capital Group, Inc., Bamco, Inc., Baron
Capital Management, Inc. and Baron Asset Fund with the SEC and $10,000,000
of the convertible notes, convertible into 243,368 shares of common stock.

(12) Based solely upon Schedule 13-G, dated February 8, 1999, filed by Snyder
Capital Management, L.P. and Snyder Capital Management, Inc. with the SEC.

(13) Based solely upon Schedule 13-G, dated February 16, 1999, filed by NWQ
Investment Management Company with the SEC.

(14) Based solely upon Schedule 13-G, dated February 9, 1999, filed by Wallace
R. Weitz & Company with the SEC.

76
<PAGE> 80

SELLING SECURITYHOLDERS

The following table provides, as of November 17, 1999, the respective
principal amount of convertible notes beneficially owned and offered by each
selling securityholder, the common stock owned by each selling securityholder
and the common stock issuable upon conversion of the convertible notes, which
may be sold from time to time by such selling securityholder under this
prospectus. This information has been obtained from the selling securityholders.
This prospectus relates to the resale of up to $175,000,000 aggregate principal
amount of convertible notes and shares of common stock issuable upon conversion
of the convertible notes. This table may be supplemented from time to time to
add holders of up to an additional $3,923,000 aggregate principal amount of
convertible notes and the shares of common stock issuable upon conversion of
such convertible notes.

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT OF COMMON TOTAL
CONVERTIBLE NOTES PERCENT OF TOTAL COMMON STOCK STOCK TO BE OUTSTANDING
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO REGISTERED COMMON
SELLING SECURITYHOLDERS AND OFFERED CONVERTIBLE NOTES ORIGINAL OFFERING HEREBY(1) STOCK(2)
- ----------------------- ------------------- ----------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation........... $ 28,392,000 16.2% 0 690,972 2.4%
Reliance Insurance Company....... 25,000,000 14.3 0 608,421 2.0
Deutsche Bank Securities Inc..... 14,250,000 8.1 0 346,800 1.2
New York Life Insurance
Company........................ 9,300,000 5.3 0 226,332 *
Lipper Convertibles, L.P. ....... 8,250,000 4.7 0 200,579 *
MFS Series Trust VI:
MFS Utilities Fund............. 7,880,000 4.5 0 191,774 *
BNP Arbitrage SNC................ 7,500,000 4.3 0 182,527 *
Baron Capital Partners, L.P...... 7,000,000 4.0 0 170,358 *
Baron Growth Fund Series of Baron
Asset Fund..................... 5,000,000 2.9 0 121,685 *
Baron Small Cap Series of Baron
Asset Fund..................... 5,000,000 2.9 0 121,685 *
MainStay Convertible Fund........ 5,000,000 2.9 0 121,685 *
CIBC World Markets
International Arbitrage
Corp........................... 4,500,000 2.6 0 109,516 *
Van Kampen Harbor
Fund Inc....................... 3,877,000 2.2 0 94,354 *
Cumberland Partners.............. 3,445,000 2.0 0 83,840 *
IBM Retirement Plan.............. 3,161,000 1.8 0 76,929 *
Chase Manhattan N.A., Trustee for
IBM Retirement Plan Dtd
12/18/45....................... 3,161,000 1.8 0 76,929 *
Bankers Trust, Trustee for
Chrysler Corp. Emp. #1 Pension
Plan Dtd 4/1/89................ 2,294,000 1.3 0 55,829 *
Lipper Convertibles Series II,
L.P. .......................... 2,000,000 1.1 0 48,674 *
MFS/Sunlife Series Trust:
Utilities Series............... 1,930,000 * 0 46,970 *
New York Life Insurance and
Annuity Corporation............ 1,700,000 * 0 41,373 *
Morgan Stanley Dean Witter....... 1,650,000 * 0 40,156 *
Morgan Stanley Dean Witter
Convertible Securities Trust... 1,500,000 * 0 36,506 *
Van Kampen Utility Fund.......... 1,380,000 * 0 33,585 *
State Street Bank, Custodian for
GE Pension Trust............... 1,216,000 * 0 29,594 *
State of Connecticut Combined
Investment Funds............... 1,070,000 * 0 26,040 *
</TABLE>

77
<PAGE> 81

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT OF COMMON TOTAL
CONVERTIBLE NOTES PERCENT OF TOTAL COMMON STOCK STOCK TO BE OUTSTANDING
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO REGISTERED COMMON
SELLING SECURITYHOLDERS AND OFFERED CONVERTIBLE NOTES ORIGINAL OFFERING HEREBY(1) STOCK(2)
- ----------------------- ------------------- ----------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Fidelity Financial Trust:
Fidelity Convertible
Securities Fund............... 1,000,000 * 0 24,337 *
Chrysler Corporation Master
Retirement Trust............ 920,000 * 0 22,390 *
MFS Variable Insurance Trust:
MFS Utility Series.......... 870,000 * 0 21,173 *
MFS Series Trust V: MFS Total
Return Fund................. 816,000 * 0 19,859 *
Van Kampen Convertible
Securities Fund............. 743,000 * 0 18,082 *
Del Mintz..................... 700,000 * 0 17,035 *
Vanguard Convertible
Securities Fund, Inc........ 630,000 * 0 15,332 *
Southport Partners
International, Ltd. ........ 600,000 * 0 14,602 *
LongView Partners............. 525,000 * 0 12,777 *
Forest Global Convertible Fund
Series A-5.................. 510,000 * 0 12,412 *
TQA Master Fund, Ltd.......... 500,000 * 0 12,169 *
Bancroft Convertible Fund,
Inc......................... 500,000 * 0 12,169 *
Ellsworth Convertible Growth
and Income Fund, Inc........ 500,000 * 0 12,169 *
Lazard Freres et Compagnie.... 500,000 * 0 12,169 *
Irving B. Spitz............... 500,000 * 0 12,169 *
OCM Convertible Trust......... 495,000 * 0 12,047 *
State Employees' Retirement
Fund of the State of
Delaware.................... 490,000 * 0 11,925 *
Partner Reinsurance Company
Ltd......................... 480,000 * 0 11,682 *
Forest Fulcrum Fund LP........ 400,000 * 0 9,735 *
TQA Master Plus Fund, Ltd..... 350,000 * 0 8,518 *
LongView Partners B, L.P. .... 348,000 * 0 8,469 *
Southport Management Partners,
L.P. ....................... 300,000 * 0 7,301 *
Warren Potash & Marie C.
Potash Co-Trustees under
Potash Living Trust Dtd
10/18/95.................... 250,000 * 40,375 6,084 *
Cumber International NV....... 242,000 * 0 5,890 *
Value Line Convertible
Fund, Inc................... 200,000 * 0 4,868 *
Radix Associates.............. 200,000 * 0 4,868 *
Franklin & Marshall College... 174,000 * 0 4,235 *
Penn Treaty Network America
Insurance Co................ 155,000 * 0 3,773 *
LDG Limited................... 150,000 * 0 3,650 *
LongView Partners C, L.P. .... 116,000 * 0 2,823 *
Motion Picture Industry Health
Plan -- Active Member
Fund........................ 110,000 * 0 2,677 *
</TABLE>

78
<PAGE> 82

<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT OF COMMON TOTAL
CONVERTIBLE NOTES PERCENT OF TOTAL COMMON STOCK STOCK TO BE OUTSTANDING
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO REGISTERED COMMON
SELLING SECURITYHOLDERS AND OFFERED CONVERTIBLE NOTES ORIGINAL OFFERING HEREBY(1) STOCK(2)
- ----------------------- ------------------- ----------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Bill W. Mintz TTEE Revocable
Living Trust.................. 100,000 * 29,700 2,434 *
Gary L. Mintz................. 100,000 * 2,612 2,434 *
Mark Mintz.................... 100,000 * 1,562 2,434 *
Deltec Asset Management
Corporation................. 100,000 * 0 2,434 *
Stuart Schapiro............... 100,000 * 0 2,434 *
Joan Schapiro................. 100,000 * 0 2,434 *
Lawrence Flinn, Jr.
Master Partnership I........ 100,000 * 0 2,434 *
Stanley Knapp................. 100,000 * 0 2,434 *
LLT Limited................... 100,000 * 0 2,434 *
Charles V. Schaefer, Jr. ..... 72,000 * 0 1,752 *
Delta Associates Limited
Partnership................. 70,000 * 0 1,704 *
C-Valor Ltd. ................. 61,000 * 0 1,485 *
Edwin L. Cox.................. 58,000 * 0 1,412 *
Motion Picture Industry Health
Plan -- Retiree Member
Fund........................ 55,000 * 0 1,338 *
Forest Alternative Strategies
Fund II LP Series A5I....... 30,000 * 0 730 *
Peter E. Haas and Miriam L.
Haas........................ 28,000 * 0 681 *
Lawrence J. Stupski Revocable
Trust....................... 22,000 * 0 535 *
Sylvan IMA Ltd. c/o Forest
Investment Management LLC... 20,000 * 0 487 *
Forest Alternative Strategies
Fund II LP A5M.............. 15,000 * 0 365 *
The Stupski Family Trust...... 7,000 * 0 170 *
Singer Associates............. 6,000 * 0 146 *
MFS Series Trust I: MFS
Convertible Securities
Fund........................ 3,000 * 0 73 *
------------
Total..................... $171,077,000
</TABLE>

- ---------------
* Less than one percent.

(1) The shares of common stock to be registered by this prospectus are
calculated on an "as converted" basis using the conversion rate described in
this prospectus.

(2) Assumes conversion of all common stock registered by this prospectus.

Except as described below, none of the selling securityholders listed above
has, or within the past three years has had, any position, office or other
material relationship with us or any of our predecessors or affiliates. Because
the selling securityholders may offer all or some portion of the above
referenced securities under this prospectus or otherwise, no estimate can be
given as to the amount or percentage of the securities that will be held by the
selling securityholders upon termination of any sale. In addition, the

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selling securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of such securities since October 6, 1999 in
transactions exempt from the registration requirements of the Securities Act.
The selling securityholders may sell all, part or none of the securities listed
above.

Del Mintz and Warren Potash have been our directors since March 1998. They
were also directors of CCPR from February 1992 until its sale in 1999. Bill W.
Mintz is the brother of Del Mintz. Mark Mintz and Gary L. Mintz are sons of Del
Mintz. Donaldson, Lufkin & Jenrette Securities Corporation was an initial
purchaser of the initial offering of the convertible notes, and has informed us
that it expects to make a market in the convertible notes. Please refer to the
section entitled "Risk Factors -- You may find it difficult to sell your
convertible notes." Baron Capital Partners, L.P., Baron Growth Fund Series of
Baron Asset Fund and Baron Small Cap Series of Baron Asset Fund are affiliates
of Ronald Baron, Baron Capital Group, Inc., Bamco, Inc., Baron Capital
Management, Inc. and Baron Asset Fund, which beneficially own 14.86% of our
common stock.

Generally, only selling securityholders identified in the foregoing table
who beneficially own the offered securities set forth opposite their respective
names may sell offered securities under the registration statement, of which
this prospectus forms a part. We may from time to time include additional
selling securityholders in supplements to this Prospectus.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONFLICTS OF INTEREST

Many of our officers and directors are also officers and directors of other
companies in our industry and some are employed by our affiliates. Their duties
to these companies may require significant amounts of their attention and may
also present conflicts of interest, either of which may impede their ability to
make decisions for us. Please refer to the section entitled "Risk
Factors -- Many of our officers and directors face potential conflicts of
interest because they are officers and directors of other companies in our
industry, which could impede their ability to make decisions for us. Some of our
officers and other employees are employed by our affiliates."

SERVICES PROVIDED BY NTL

NTL provides us and our subsidiaries with management, financial, legal and
technical services, access to office space and equipment and use of supplies.
Amounts charged to us by NTL consist of salaries and direct costs allocated to
us where identifiable, and a percentage of the portion of NTL's corporate
overhead which cannot be specifically allocated to NTL (which is agreed upon by
our Board of Directors and the Board of Directors of NTL). It is not practicable
to determine the amounts of these expenses that would have been incurred had we
operated as an unaffiliated entity. In our opinion, this allocation method is
reasonable. For the nine months ended September 30, 1999 and the year ended
December 31, 1998, NTL charged us $1,418,000 and $313,000, respectively.

In 1998, the percentage of NTL's non-allocated overhead that was charged to
us was 30 percent. This percentage was increased to 50% because two other
companies that had been sharing these expenses have been sold.

OTHER SERVICES

Through our subsidiary, CoreComm Newco, Inc., we currently provide billing
and software development services to subsidiaries of NTL, and historically
provided such services to CCPR. We believe that these transactions are priced on
an arm's length basis. Profits of $619,000 were realized from providing these
services for the nine months ended September 30, 1999. The recent sale of CCPR
will not have a significant impact on these profits. Profits of $138,000 were
realized from providing these services from January 1, 1998 to May 31, 1998, and
profits of $217,000 were realized from providing these services for the year
ended December 31, 1997.

ADMINISTRATIVE SERVICES AGREEMENT

We and CoreComm, Inc. intend to enter into an administrative services
agreement whereby the parties will agree to allocate the expenses described in
"-- Services provided by NTL" and CoreComm, Inc. will agree to provide
operational personnel and services to us as described in "-- Other Services"
above. The allocation of cost and expenses will be substantially the same as the
historical allocation among the parties.

TAX DISAFFILIATION AGREEMENT

Under the terms of the Tax Disaffiliation Agreement between CCPR and us,
CCPR agreed to pay and indemnify us against all federal, state and local
domestic taxes relating to the businesses of CCPR and its subsidiaries before
our spin-off. We will similarly pay and indemnify CCPR against those taxes
relating to our businesses and the businesses of our subsidiaries before the
spin-off. Based on current information available to us, it is unlikely that we
will be required to pay any amounts.

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ASSIGNMENT AND ASSUMPTION AGREEMENT

As we have contributed the acquired USN assets to one of our subsidiaries,
that subsidiary has entered into an Assignment and Assumption Agreement with us
under which the USN assets were transferred to the subsidiary and our remaining
obligations under the asset purchase agreement were assumed by the subsidiary.
In addition, CoreComm, Inc. agreed to pay or reimburse us for any contingent
payment that must be paid in connection with the purchase of the USN assets.

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DESCRIPTION OF CONVERTIBLE NOTES

GENERAL

The convertible notes were issued under an indenture, dated as of October
6, 1999, between us and The Chase Manhattan Bank, as trustee. The following
description is a summary of the material provisions of the indenture. It does
not restate this agreement in its entirety. We urge you to read the indenture
and registration rights agreement because they, and not this description, define
your rights as holders of these convertible notes. A copy of the indenture is
filed as an exhibit to the registration statement of which this prospectus forms
a part.

You can find the definitions of certain terms used in this description
under the subheading "Definitions." In this section of the prospectus entitled
"Description of Convertible Notes" when we refer to CoreComm, or "we", "our", or
"us", we are referring only to CoreComm Limited and not any of its subsidiaries.

The convertible notes are unsecured obligations, subordinated in right of
payment to all our existing and future Senior Debt as described under
"--Subordination of Convertible Notes" and convertible into our common stock as
described under "--Conversion." The indenture does not contain any financial
covenants or restrictions on the payment of dividends, the incurrence of Senior
Debt or issuance or repurchase of our securities. The indenture contains no
covenants or other provisions to afford protection to holders of the convertible
notes in the event of a highly leveraged transaction by us except to the extent
described under "--Repurchase at the Option of Holders." The convertible notes
are not guaranteed by any of our subsidiaries.

We conduct all of our operations through our subsidiaries. We depend upon
the cash flow of our subsidiaries to meet our obligations, including our
obligations under the convertible notes. As a result, the convertible notes are
effectively subordinated to all existing and future indebtedness and other
liabilities and commitments of our subsidiaries with respect to the cash flow
and assets of those subsidiaries.

PRINCIPAL, MATURITY AND INTEREST

The convertible notes are limited to $175,000,000 aggregate principal
amount. The convertible notes mature on October 1, 2006. Interest on the
convertible notes accrues at a rate of 6% per annum from the date of original
issuance, payable semiannually on April 1 and October 1, commencing on April 1,
2000. We will make each interest payment to the holders of record of the
convertible notes on the immediately preceding March 15 and September 15.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.

We are required to pay special interest on the convertible notes under
various circumstances, all as further described under the caption "Registration
Rights." All references in this section to interest on the convertible notes
include any special interest that may be payable and all references to a payment
of principal include any premium that may be payable.

The convertible notes are payable both as to principal and interest on
presentation of the convertible notes if in certificated form at the offices or
agencies we maintain for such purpose within the City and State of New York or,
at our option, payment of interest may be made by check mailed to the holders of
the convertible notes at their respective addresses set forth in the register of
holders of convertible notes or, if a holder who holds an aggregate principal
amount of at least $5.0 million of convertible notes so requests, by wire
transfer of immediately available funds to an account previously specified in
writing by such holder to us and the trustee. Until otherwise designated by us,
our office or agency in New York, will be the offices of the trustee maintained
for such purpose. The convertible notes are issued in registered form, without
coupons, and in denominations of $1,000 and integral multiples of $1,000.

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CONVERSION

The holder of any convertible note has the right, exercisable at any time
after 90 days following the date of original issuance of the convertible note
and prior to its maturity, to convert the principal amount of the convertible
note (or any portion of it that is an integral multiple of $1,000) into shares
of our common stock at the conversion price set forth on the cover page of this
prospectus, subject to adjustment as described below, which we refer to as the
"Conversion Price," except that if a convertible note is called for redemption,
the conversion right will terminate at the close of business on the business day
immediately preceding the date fixed for redemption. Upon conversion, no
adjustment or payment will be made for interest, but if any holder surrenders a
convertible note for conversion after the close of business on the record date
for the payment of an installment of interest and prior to the opening of
business on the next interest payment date, then, notwithstanding conversion,
the interest payable on the interest payment date will be paid to the registered
holder of the convertible note on the record date. In that event, convertible
notes, when surrendered for conversion, need not be accompanied by payment of an
amount equal to the interest payable on the interest payment on the portion
converted. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest.

The Conversion Price is subject to adjustment upon the occurrence of
certain events, including:

(1) the issuance of shares of common stock as a dividend or distribution on
the common stock;

(2) the subdivision or combination of the outstanding common stock;

(3) the issuance to substantially all holders of common stock of rights or
warrants to subscribe for or purchase common stock (or securities
convertible into common stock) at a price per share less than the then
current market price per share, as defined;

(4) the distribution of shares of our capital stock (other than common
stock), evidences of indebtedness or other assets (excluding dividends
in cash, except as described in clause (5) below) to all holders of
common stock;

(5) the distribution, by dividend or otherwise, of cash to all holders of
common stock in an aggregate amount that, together with the aggregate
of any other distributions of cash that did not trigger a Conversion
Price adjustment to all holders of our common stock within the 12
months preceding the date fixed for determining the stockholders
entitled to such distribution and all Excess Payments in respect of
each tender offer or other negotiated transaction by us or any of our
Subsidiaries for common stock concluded within the preceding 12 months
not triggering a conversion price adjustment, exceeds 15% of the
product of the current market price per share (determined as set forth
below) on the date fixed for the determination of stockholders entitled
to receive such distribution times the number of shares of common stock
outstanding on such date;

(6) payment of an Excess Payment in respect of a tender offer or other
negotiated transaction by us or any of our subsidiaries for common
stock, if the aggregate amount if such Excess Payment, together with
the aggregate amount of cash distributions made within the preceding 12
months not triggering a conversion price adjustment and all Excess
Payments in respect of each tender offer or other negotiated
transaction by us or any of our subsidiaries for common stock concluded
within the preceding 12 months not triggering a conversion price
adjustment, exceeds 15% of the product of the current market price per
share on the expiration of the tender offer or the consummation of the
other negotiated transaction, as the case may be, times the number of
shares of common stock outstanding on that date; and

(7) the distribution to substantially all holders of common stock of rights
or warrants to subscribe for securities (other than those referred to
in clause (3) above). In the event of a distribution to substantially
all holders of common stock of rights to subscribe for additional
shares of our capital stock (other than those referred to in clause (3)
above), we may, instead of making any adjustment in the Conversion
Price, make proper provision so that each holder of a convertible

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note who converts the convertible note after the record date for the
distribution and prior to the expiration or redemption of the rights
will be entitled to receive upon that conversion, in addition to shares
of common stock, an appropriate number of rights. No adjustment of the
Conversion Price will be made until cumulative adjustments amount to
one percent or more of the Conversion Price as last adjusted.

If we reclassify or change our outstanding common stock, or consolidate
with or merge into or transfer or lease all or substantially all of our assets
to any person, or we are a party to a merger that reclassifies or changes our
outstanding common stock, the convertible notes will become convertible into the
kind and amount of securities, cash or other assets which the holders of the
convertible notes would have owned immediately after the transaction if the
holders had converted the convertible notes immediately before the effective
date of the transaction.

The indenture also provides that if rights, warrants or options expire
unexercised the Conversion Price shall be readjusted to take into account the
actual number of warrants, rights or options which were exercised.

In the indenture, the "current market price" per share of common stock on
any date is deemed to be the average of the daily market prices for the shorter
of (1) 10 consecutive business days ending on the last full trading day on the
exchange or market referred to in determining the Daily Market Prices prior to
the time of determination (as defined in the indenture) or (2) the period
commencing on the date next succeeding the first public announcement of the
issuance of rights or warrants or distribution through the last full trading day
prior to the time of determination.

We are permitted to make such reductions in the Conversion Price as we, in
our discretion, determine to be advisable in order that any stock dividend,
subdivision of shares, distribution or rights to purchase stock or securities or
distribution of securities convertible into or exchangeable for stock made by us
to our stockholders will not be taxable to the recipients.

SUBORDINATION OF CONVERTIBLE NOTES

The convertible notes are subordinate in right of payment to all of our
existing and future Senior Debt. The indenture does not restrict the amount of
Senior Debt or other Indebtedness of us or any Subsidiary of us. As of September
30, 1999, assuming the original issuance of the convertible notes had been
completed, the convertible notes would effectively rank junior to $39.6 million
of indebtedness of our subsidiaries and $33.9 million of other liabilities of
our subsidiaries. We have no debt outstanding other than the convertible notes.

The payment of the principal of, interest on or any other amounts due on
the convertible notes is subordinated in right of payment to the prior payment
in full of all our Senior Debt. No payment on account of principal of,
redemption of, interest on or any other amounts due on the convertible notes,
including, without limitation, any payments on the Change of Control Offer, and
no redemption, purchase or other acquisition of the convertible notes may be
made unless

(1) full payment of amounts then due on all Senior Debt have been made or
duly provided for pursuant to the terms of the instrument governing
that Senior Debt, and

(2) at the time for, or immediately after giving effect to, any such
payment, redemption, purchase or other acquisition, there does not
exist under any Senior Debt or any agreement under which any Senior
Debt has been issued, any default that has not been cured or waived and
which has resulted in the full amount of the Senior Debt being declared
due and payable. In addition, the indenture provides that if any of the
holders of any issue of Senior Debt notify (the "Payment Blockage
Notice") us and the trustee that a default has occurred giving the
holders of the Senior Debt the right to accelerate the maturity of the
convertible notes, no payment on account of principal, redemption,
interest, special interest, if any, or any other amounts due on the
convertible notes and no purchase, redemption or other acquisition of
the convertible notes will

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be made for the period (the "Payment Blockage Period") commencing on
the date notice is received and ending on the earlier of:

(A) the date on which the default was cured or waived, or

(B) 180 days from the date notice is received. Notwithstanding the
foregoing, only one Payment Blockage Notice with respect to the
same event of default or any other events of default existing and
unknown to the person giving notice at the time of notice on the
same issue of Senior Debt may be given during any period of 360
consecutive days unless the event of default or other events of
default have been cured or waived for a period of not less than 90
consecutive days. No new Payment Blockage Period may be commenced
by the holders of Senior Debt during any period of 360 consecutive
days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived.

Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of us or acceleration of the principal
amount due on the convertible notes because of any Event of Default, all Senior
Debt must be paid in full before the holders of the convertible notes are
entitled to any payments whatsoever.

As a result of these subordination provisions, in the event of our
insolvency, holders of the convertible notes may recover ratably less than our
general creditors.

If the payment of the convertible notes is accelerated because of an Event
of Default, we or the trustee shall promptly notify the holders of Senior Debt
or the trustee(s) for the Senior Debt of the acceleration. We may not pay the
convertible notes until five days after the holders or trustee(s) of Senior Debt
receive notice of the acceleration and, after which we may pay the convertible
notes only if the subordination provisions of the indenture otherwise permit
payment at that time.

In the event that notwithstanding anything to the contrary contained in
this section, the trustee or any holder of convertible notes receives any
payment or distribution of our assets of any kind in contravention of any of the
terms of the indenture, whether in cash, property or securities, including,
without limitation by way of set-off or otherwise, in respect of the convertible
notes before all Senior Debt is paid in full, then the payment or distribution
will be held by the recipient in trust for the benefit of holders of Senior
Debt, and will be immediately paid over or delivered to the holders of Senior
Debt or their representative or representatives to the extent necessary to make
payment in full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holder
of Senior Debt.

The convertible notes are our exclusive obligations. Since our operations
are conducted through our Subsidiaries, our cash flow and our consequent ability
to service debt, including the convertible notes, depends upon the earnings of
our Subsidiaries and the distribution of those earnings to, or under loans or
other payments of funds by those Subsidiaries to, us. The payment of dividends
and the making of loans and advances to us by our Subsidiaries may be subject to
statutory or contractual restrictions, depend upon the earnings of those
Subsidiaries and are subject to various business considerations.

Our right to receive assets of any of our Subsidiaries upon their
liquidation or reorganization (and the consequent right of the holders of the
convertible notes to participate in those assets) is effectively subordinated to
the claims of that Subsidiary's creditors (including trade creditors), except to
the extent that we are recognized as a creditor of that Subsidiary, in which
case our claims would still be subordinate to any security interests in the
assets of that Subsidiary and any indebtedness of that Subsidiary senior to that
held by us.

The indenture does not limit the amount of additional indebtedness,
including Senior Debt, which we can create, incur, assume or guarantee, nor will
the indenture limit the amount of indebtedness and other liabilities which any
Subsidiary can create, incur, assume or guarantee.

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OPTIONAL REDEMPTION

Except as set forth under "--Optional Tax Redemption," the convertible
notes are not redeemable at our option prior to October 1, 2002. After that
date, the convertible notes are subject to redemption at our option, in whole or
in part, after not less than 30 nor more than 60 days' notice, at the redemption
prices set forth below, expressed as percentages of principal amount plus
accrued and unpaid interest on those amounts, in each case, to the applicable
redemption date, if redeemed during the twelve-month period beginning on October
1 of the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002...................................................... 103.429%
2003...................................................... 102.571%
2004...................................................... 101.714%
2005...................................................... 100.857%
2006...................................................... 100.000%
</TABLE>

In each case of a redemption of any convertible notes referred to under
"-- Optional Tax Redemption," redemption of the convertible notes will be made
at their principal amount together with accrued and unpaid interest and special
interest, if any, to the applicable redemption date.

OPTIONAL TAX REDEMPTION

The convertible notes may be redeemed at our option, in whole but not in
part, after not less than 30 nor more than 60 days' prior notice, at any time at
a redemption price equal to their principal amount together with accrued and
unpaid interest to the date fixed for redemption if there has occurred any
change in or amendment to the laws (or any regulations or official rulings) of
Bermuda or any Other Relevant Jurisdiction (as defined below), or any change in
or amendment to the official application or interpretation of those laws,
regulations or rulings (a "Change in Tax Law"), which become effective after the
Issuance Date, as a result of which we are or would be required on the next
succeeding Interest Payment Date to pay Additional Amounts with respect to the
convertible notes with respect to withholding taxes imposed by Bermuda or any
Other Relevant Jurisdiction, (or any political subdivision or taxing authority
thereof or therein) (a "Withholding Tax") and the Withholding Tax is imposed at
a rate that exceeds the rate (if any) at which Withholding Tax was imposed on
the Issuance Date; provided, however, that

(1) this paragraph does not apply to the extent that, at the Issuance Date
it was known or would have been known had professional advice of a
nationally recognized accounting firm in Bermuda or any Other Relevant
Jurisdiction, as the case may be, been sought, that a Change in Tax Law
in Bermuda or any Other Relevant Jurisdiction, was to occur after the
Issuance Date;

(2) no notice of redemption may be given earlier than 90 days prior to the
earliest date on which we would be obliged to pay the Additional
Amounts were a payment in respect of the convertible notes then due;

(3) at the time the notice of redemption is given, the obligation to pay
the Additional Amounts remains in effect; and

(4) the payment of the Additional Amounts cannot be avoided by the use of
any reasonable measures available to us.

The convertible notes may also be redeemed, in whole but not in part, at
any time at a redemption price equal to their principal amount plus accrued and
unpaid interest and special interest, if any, to the date fixed for redemption
if the person formed after the Issuance Date by a consolidation, amalgamation,
reorganization or reconstruction (or other similar arrangement) of us or the
person into which we are merged after the Issuance Date or to which we convey,
transfer or lease our properties and assets after the Issuance Date
substantially in entirety (collectively, a "Subsequent Consolidation") is
required, as

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consequence of the Subsequent Consolidation and as a consequence of a Change in
Tax Law in Bermuda or any Other Relevant Jurisdiction occurring after the date
of the Subsequent Consolidation to pay Additional Amounts with respect to
Withholding Tax on the convertible notes and the Withholding Tax is imposed at a
rate that exceeds the rate (if any) at which Withholding Tax was or would have
been imposed on the date of the Subsequent Consolidation; provided, however,
that this paragraph does not apply to the extent that, at the date of the
Subsequent Consolidation it was known or would have been known had professional
advice of a nationally recognized accounting firm in Bermuda or any Other
Relevant Jurisdiction been sought, that a Change in Tax Law in Bermuda or any
Other Relevant Jurisdiction was to occur after that date. We will also pay, or
make available for payment, to holders on the redemption date any Additional
Amounts (as described, but subject to the exceptions referred to, under
"Additional Amounts") resulting from the payment of the redemption price.

MANDATORY REDEMPTION AND REPURCHASE

We are not required to make mandatory redemption or sinking fund payments
with respect to the convertible notes. We are required to make a Change of
Control Offer with respect to a repurchase of the convertible notes under the
circumstances described under the caption "Repurchase at the Option of Holders."

REPURCHASE AT THE OPTION OF HOLDERS

If a Change of Control occurs, each holder of convertible notes has the
right to require us to repurchase all or any part of the holder's convertible
notes equal to $1,000 or an integral multiple of $1,000, under the Change of
Control Offer at a purchase price equal to 101% of the principal amount, plus
accrued and unpaid interest, if any, as of the date of purchase. We refer to the
payment as the Change of Control Payment. Within 40 days following any Change of
Control, we will mail a notice to each holder, stating:

(1) that the Change of Control Offer is being made under the covenant
entitled "Change of Control" and that all convertible notes tendered
will be accepted for payment;

(2) the purchase price and the purchase date, which will be no earlier than
30 days nor later than 40 days from the date the notice is mailed. This
date is referred to as the Change of Control Payment Date;

(3) that interest will continue to accrue on any convertible notes not
tendered, as provided in the convertible notes;

(4) that, unless we default in the payment of the Change of Control
Payment, with respect to all convertible notes accepted for payment
under the Change of Control Offer, interest will cease to accrue after
the Change of Control Payment Date;

(5) that holders electing to have any convertible notes purchased under a
Change of Control Offer will be required to surrender the convertible
notes, with the form entitled Option of Holder to Elect Purchase on the
reverse of the convertible notes completed, to the paying agent at the
address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date;

(6) that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of convertible notes delivered for
purchase, and a statement that the holder is withdrawing his election
to have the convertible notes purchased; and

(7) that holders whose convertible notes are being purchased only in part
will be issued new convertible notes equal in principal amount to the
unpurchased portion of the convertible notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount.

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We will comply with the requirements of Rules 13e-4 and 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent those
laws and regulations are applicable in connection with the repurchase of the
convertible notes in connection with a Change of Control.

On the Change of Control Payment Date, we will, to the extent lawful,

(1) accept for payment convertible notes or portions of convertible notes
tendered under the Change of Control Offer,

(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all convertible notes or portions of convertible
notes tendered and

(3) deliver or cause to be delivered to the trustee the convertible notes
accepted together with an Officers' Certificate stating the convertible
notes or portions of convertible notes tendered to us.

The paying agent will promptly mail to each holder of convertible notes
accepted, or, if the holder requests, wire transfer immediately available funds
to an account previously specified in writing by the holder to us and the paying
agent, payment in an amount equal to the purchase price for the convertible
notes. The trustee will promptly authenticate and mail to each holder a new
convertible note equal in principal amount to any unpurchased portion of the
convertible notes surrendered, if any; provided that each new convertible note
will be in a principal amount of $1,000 or an integral multiple of $1,000. We
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.

Except as described above with respect to a Change of Control, the
indenture does not contain any other provision that permits the holders of the
convertible notes to require that we repurchase or redeem the convertible notes
in the event of a takeover, recapitalization or similar restructuring. The
Change of Control Offer requirement of the convertible notes may, in certain
circumstances, make more difficult or discourage a takeover of us, and, thus,
the removal of incumbent management. Management has not entered into any
agreement or plan involving a Change of Control, although it is possible that we
would decide to do so in the future. Subject to the limitations discussed below,
we could, in the future, enter into various transactions including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the indenture, but that could increase the amount of indebtedness
outstanding at that time or otherwise affect our capital structure or credit
ratings.

Our ability to pay cash to the holders of convertible notes under a Change
of Control Offer may be limited by our then existing financial resources. See
"Risk Factors." Any future credit facilities or other agreements relating to our
or our subsidiaries' indebtedness may contain prohibitions or restrictions on
our ability to effect a Change of Control Payment. In the event a Change of
Control occurs at a time when such prohibitions or restrictions are in effect,
we could seek the consent of our lenders to the purchase of convertible notes
and other Indebtedness containing change of control provisions or could attempt
to refinance the borrowings that contain those prohibitions or restrictions. If
we do not obtain such consents or repay such borrowings, we will be effectively
prohibited from purchasing the convertible notes. In that case, our failure to
purchase tendered convertible notes would constitute an Event of Default under
the indenture. Moreover, the events that constitute a Change of Control under
the indenture may constitute events of default under our future debt instruments
or credit agreements of us or our subsidiaries. Those events of default may
permit the lenders under the debt instruments or credit agreements to accelerate
the debt and, if that debt is not paid or repurchased, to enforce their security
interests in what may be all or substantially all of the assets of our
Subsidiaries. Therefore, our ability to raise cash to repay or repurchase the
convertible notes may be limited.

We will not be required to make a Change of Control Offer in the event we
enter into a transaction with management or our affiliates who are Permitted
Holders. The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of our assets. Although there is a developing body of case law interpreting
the phrase substantially all, there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a holder of convertible
notes to require us to repurchase those convertible notes as a result of a sale,
lease,
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transfer, conveyance or other disposition of less than all of the assets of us
and our Subsidiaries to another Person may be uncertain.

ADDITIONAL AMOUNTS

All payments made by us on the convertible notes will be made without
deduction or withholding, for or on account of, any and all present or future
taxes, duties, assessments, or governmental charges of whatever nature unless
the deduction or withholding of the taxes, duties, assessments or governmental
charges is required by law. If any deduction or withholding for or on account of
any present or future taxes, assessments or other governmental charges of
Bermuda or any other jurisdiction (other than the United States) in which we or
a successor corporation is organized (or any political subdivision or taxing
authority thereof or therein) ("Other Relevant Jurisdiction") is at any time
required in respect of any amounts to be paid by us under the convertible notes,
we will pay or cause to be paid the additional amounts ("Additional Amounts") as
may be necessary in order that the net amounts received by a holder of a
convertible note after the deduction or withholding is not less than the amounts
specified in the convertible note to which the holder is entitled; provided,
however, that we are not required to make any payment of Additional Amounts for
or on account of:

(a) any tax, assessment or other governmental charge to the extent such
tax, assessment or other governmental charge would not have been
imposed but for (i) the existence of any present or former connection
between the holder (or between a fiduciary, settlor, beneficiary,
member or shareholder of, or possessor of a power over, the holder, if
the holder is an estate, nominee, trust, partnership or corporation),
other than the holding of a convertible note or the receipt of amounts
payable in respect of a convertible note and Bermuda or any Other
Relevant Jurisdiction or any political subdivision or taxing authority
thereof or therein, including, without limitation, the holder (or the
fiduciary, settlor, beneficiary, member, shareholder or possessor)
being or having been a citizen or resident thereof or being or having
been present or engaged in trade or business therein or having or
having had a permanent establishment therein or (ii) the presentation
of a convertible note (where presentation is required) for payment on
a date more than 30 days after the date on which the payment became
due and payable or the date on which payment thereof is duly provided
for, whichever occurs later, except to the extent that the holder
would have been entitled to Additional Amounts had the convertible
note been presented on the last day of that period of 30 days;

(b) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure to comply by the holder of a
convertible note, or, if different, the beneficial owner of the
interest payable on a convertible note, with a timely request of us
addressed to the holder or beneficial owner to provide information,
documents or other evidence concerning the nationality, residence,
identity or connection with the taxing or jurisdiction of the holder
or beneficial owner which is required or imposed by a statute,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of that tax, assessment or
governmental charge;

(c) any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;

(d) any tax, assessment or other governmental charge which is collectible
otherwise than by withholding from payments of principal amount at
maturity, redemption amount, Change of Control Payment, interest with
respect to a convertible note or withholding from the proceeds of a
sale or exchange of a convertible note;

(e) any tax, assessment or other governmental charge imposed on a holder
that is not the beneficial owner of a convertible note to the extent
that the beneficial owner would not have been entitled to the payment
of any Additional Amounts had the beneficial owner directly held the
convertible note;

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(f) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal amount at
maturity, redemption amount, Change of Control Payment or interest
with respect to a convertible note, if the payment can be made, and is
in fact made, without the withholding by any other paying agent
located inside the United States; and

(g) any combination of items (a), (b), (c), (d), (e) and (f) above.

If any deduction or withholding for or on account of any present or future
taxes, assessments or other governmental charges are imposed by any taxing
jurisdiction but that deduction or withholding could be reduced or eliminated
under a statute, regulation or administrative practice of the taxing
jurisdiction if certain information, document or other evidence is provided by
holders or beneficial owners of the convertible notes, we shall provide a timely
request addressed to the holders or beneficial owners to provide that
information, document or other evidence.

All references to interest on the convertible notes in the indenture or the
convertible notes include any Additional Amounts payable to us under this
paragraph.

SELECTION AND NOTICE

If less than all of the convertible notes are to be redeemed at any time,
selection of convertible notes for redemption will be made by the trustee in
compliance with the requirements of any securities exchange on which the
convertible notes are listed. In the absence of any requirements of any
securities exchange or if the convertible notes are not listed, selection of the
convertible note to be redeemed will be made on a pro rata basis, provided that
no convertible notes of $1,000 or less will be redeemed in part. Notice of
redemption will be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of convertible notes to be
redeemed at its registered address. If any convertible note is to be redeemed in
part only, the notice of redemption that relates to that convertible note will
state the portion of the principal amount to be redeemed. A new convertible note
in principal amount equal to the unredeemed portion will be issued in the name
of the holder upon cancellation of the original convertible note. On and after
the redemption date, interest ceases to accrue on convertible notes or portions
of them called for redemption.

COVENANTS

SALE OF ASSETS

The indenture provides that we may not sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of our properties or
assets in any one or more related transactions to another corporation, Person or
entity unless:

(1) The entity or Person to which that sale, assignment, transfer, lease,
conveyance or other disposition is made is a corporation organized or
existing under the laws of the United States, or any state, the
District of Columbia or the laws of the United Kingdom, the
Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands;

(2) The entity or Person to which that sale, assignment, transfer, lease,
conveyance or other disposition will have been made assumes all
Obligations pursuant to a supplemental indenture, in a form reasonably
satisfactory to the trustee, under the convertible notes and the
indenture; and

(3) Immediately after that transaction no Default or Event of Default
exists.

Limitation on Status as Investment Company

The indenture provides that we will not, and will not permit any Subsidiary
to, conduct its business in a fashion that would cause us to be required to
register as an "investment company" (as that term is defined in the Investment
Company Act of 1940.

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Reports

Whether or not required by the rules and regulations of the SEC, so long as
any convertible notes are outstanding, we will file with the SEC and furnish to
the holders of convertible notes all quarterly and annual financial information
required to be contained in a filing with the SEC on Forms 10-Q and 10-K,
including a "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and, with respect to the annual information only, a report
by our certified independent accountants, in each case, as required by the rules
and regulations of the SEC as in effect on the Issuance Date.

EVENTS OF DEFAULT AND REMEDIES

The indenture provides that each of the following constitutes an Event of
Default:

(1) default for 30 days in the payment when due of interest on the
convertible notes;

(2) a default in the payment of principal of any convertible note when due
at its stated maturity, upon optional redemption, in connection with a
Repurchase Offer, upon declaration, or otherwise;

(3) the failure by us to comply for 30 days after notice with any of our
obligations under the covenants described under "Repurchase at the
Option of Holders" and "Sale of Assets" (in each case, other than a
failure to purchase convertible notes in connection with a Repurchase
Offer);

(4) failure by us for 60 days after notice to comply with certain other
covenants and agreements contained in the indenture or the convertible
notes;

(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our Subsidiaries that
is a Significant Subsidiary or any group of two or more Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary, or
the payment of which is guaranteed by us or any of our Subsidiaries
that is a Significant Subsidiary or any group of two or more
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, whether such Indebtedness or guarantee now exists, or is
created after the Issuance Date, which default

(a) is caused by a failure to pay when due principal or interest on that
Indebtedness within the grace period provided in that Indebtedness,
which payment default continues beyond any applicable grace period
or

(b) results in the acceleration of that Indebtedness prior to its
express maturity and, in each case, the principal amount of that
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a payment default or the
maturity of which has been so accelerated, aggregates $20.0 million
or more;

(6) failure by us or any Subsidiary of us that is a Significant Subsidiary
or any group of two or more Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary to pay final judgments for the
payment of money (other than any judgment as to which a reputable
insurance company has accepted liability subject to customary terms)
aggregating in excess of $10.0 million, which judgments are not paid,
wired, discharged or stayed within 60 days after their entry; and

(7) certain events of bankruptcy or insolvency with respect to us or any of
our Subsidiaries that is a Significant Subsidiary or any group of two
or more Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary.

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(8) The approval by our shareholders of any merger, amalgamation or
consolidation by us (whether or not we are the surviving corporation)
and whether or not such merger, amalgamation or consolidation is in one
or more related transactions if:

- the successor corporation, Person or entity

(A) does not assume all the Obligations, under a supplemental
indenture in a form reasonably satisfactory to the trustee, under
the convertible notes and the indenture; and

(B) is not a corporation, Person or entity organized or existing
under the laws of the United States, any state, the District of
Columbia or the laws of the United Kingdom, the Netherlands, the
Netherlands Antilles, Bermuda or the Cayman Islands, or

- immediately after that transaction, any Default or Event of Default
exists.

If any Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding convertible
notes may declare all the convertible notes to be due and payable immediately,
subject to the provisions limiting payment described in "--Subordination."
Notwithstanding the foregoing, in the case of an Event of Default arising from
(i) the events described in clause (8) above or (ii) certain events of
bankruptcy or insolvency, with respect to us or any Significant Subsidiary, all
outstanding convertible notes will become due and payable without further action
or notice. Holders of the convertible notes may not enforce the indenture or the
convertible notes except as provided in the indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
convertible notes may direct the trustee in its exercise of any trust or power.
The trustee may withhold from holders of the convertible notes notice of any
continuing Default or Event of Default, except a Default or Event of Default
relating to the payment of principal or interest, if it determines that
withholding notice is in their interest.

In the event of a declaration of acceleration of the convertible notes
because an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in clause (5) above, the declaration
of acceleration of the convertible notes will be automatically annulled if:

(1) the holders of any Indebtedness described in such clause (5) have
rescinded the declaration of acceleration in respect of that
Indebtedness within 30 days after the date of the declaration,

(2) the annulment of the acceleration of the convertible notes would not
conflict with any judgment or decree of a court of competent
jurisdiction, and

(3) all existing Events of Default, except for nonpayment of principal of
or interest on the convertible notes that became due solely because of
the acceleration of the convertible notes, have been cured or waived.

The holders of a majority in aggregate principal amount of the then
outstanding convertible notes by notice to the trustee may on behalf of all of
the holders waive any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest on or the principal of the convertible notes.

We are required to deliver to the trustee annually a statement regarding
compliance with the indenture, and upon becoming aware of any Default or Event
of Default, to deliver to the trustee a statement specifying such Default or
Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS

None of our directors, officers, employees, incorporators or shareholders
has any liability for any of our Obligations under the convertible notes or the
indenture or for any claim based on, in respect of, or by reason of, such
Obligations or their creation. Each holder of the convertible notes by accepting
a convertible note waives and releases all such liability. The waiver and
release are part of the consideration

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for issuance of the convertible notes. Such waiver may not be effective to waive
liabilities under the federal securities laws, and it is the view of the SEC
that a waiver of such liabilities is against public policy.

UNCLAIMED MONEY; PRESCRIPTION

If money deposited with the trustee or paying agent for the payment of
principal or interest remains unclaimed for two years, the trustee and the
paying agent shall pay the money back to us at our written request. After that,
holders of convertible notes entitled to the money must look to us for payment
unless an abandoned property law designates another person and all liability of
the trustee and the paying agent will cease. Other than as set forth in this
paragraph, the indenture does not provide for any prescription period for the
payment of interest and principal on the convertible notes.

BOOK-ENTRY, DELIVERY AND FORM

We will issue the convertible notes in fully registered form, without
coupons, in integral multiples of $1,000.

The convertible notes that were sold to qualified institutional buyers are
evidenced by global notes and were deposited with, or on behalf of, DTC and
registered in the name of Cede & Co. as DTC's nominee. Except as set forth
below, a global note may be transferred, in whole or in part, only to another
DTC nominee or to a successor of DTC or its nominee.

Convertible notes that were sold to "accredited investors" (as defined in
Rule 501(a)(1), (2), (3), (4), (5), (6) and (7) under the Securities Act) were
initially issued in global form, but were promptly exchanged into registered,
certificated form without interest coupons.

After a sale of convertible notes under this shelf registration statement,
convertible notes that were held as global notes with DTC will remain as global
notes and convertible notes that were held in certificated form may either be
held as global notes with DTC or as notes in certificated form.

Persons may hold their interests in a global note directly through DTC if
they are participants in DTC, or indirectly through organizations that are
participants in DTC. Transfers between participants will be effected in
accordance with DTC rules and will be settled in clearing house funds.

Persons who are not DTC participants may own interests in global notes only
through DTC participants or certain banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial relationship with a DTC
participant. So long as Cede & Co., as the nominee of DTC, is the registered
owner of a global note, we will consider Cede & Co. for all purposes to be the
sole holder of the global note. Except as provided in this section or as
described in "Exchange of Global Notes for Certificated Notes," owners of
beneficial interests in a global note will not have certificates registered in
their names, will not receive physical delivery of certificates in definitive
registered form, and will not be considered the holders of the convertible
notes.

We will pay interest on and the redemption price or repurchase price of a
global note to Cede & Co., as the registered owner, by wire transfer of
immediately available funds on each interest payment, redemption or repurchase
date. We and the trustee have no responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a global note.

DTC has informed us that its practice is to credit participants' accounts
on the payment date with payments in amounts proportionate to their beneficial
interests in the global note, unless it has reason to believe that it will not
receive payment. Only the DTC participants are responsible for payments to
owners of beneficial interests held through them.

Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, a person having a beneficial
interest in the principal amount represented by a global note may be unable to
pledge its interest to persons or entities that do not participate in the DTC
system, due to the lack of a physical certificate evidencing its interest.

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We are not responsible for the performance by DTC or its participants or
indirect participants of their obligations. The trustee is also not responsible
for such performance. DTC has advised us that it will take any action permitted
to be taken by a holder of notes, only at the direction of one or more
participants with an interest in a global note, and only with respect to the
principal amount as to which the participants have given it a direction.

DTC has advised us that it is a limited purpose trust company organized
under the laws of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered under the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations such as the initial purchasers of
the convertible notes. Certain participants (or their representatives), together
with other entities, own DTC. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through,
or maintain a custodial relationship with, a participant, either directly or
indirectly.

Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in global notes among participants, it has no obligation to perform
or continue to perform these procedures. These procedures may be discontinued at
any time.

EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES

A global note is exchangeable for definitive convertible notes in
registered certificated form if:

(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the global notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under
the Exchange Act;

(2) we, at our option, notify the trustee in writing that we elect to cause
the issuance of the certificated notes; or

(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the convertible notes.

In addition, beneficial interests in a global note may be exchanged for
certificated notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any global note or beneficial interests in global
notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next succeeding paragraph, the indenture or the
convertible notes may be amended or supplemented with the consent of the holders
of at least a majority in aggregate principal amount of the outstanding
convertible notes, as applicable, including consents obtained in connection with
a tender offer or exchange offer for the convertible notes, and any existing
default or compliance with any provision of the indenture or the convertible
notes may be waived with the consent of the holders of a majority in aggregate
principal amount of then outstanding convertible notes, including consents
obtained in connection with a tender offer or exchange offer for the convertible
notes.

Without the consent of each holder affected, an amendment or waiver may
not:

(1) reduce the amount of convertible notes whose holders must consent to
an amendment, supplement or waiver,

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(2) reduce the principal of or change the fixed maturity of any
convertible note or alter the provisions with respect to the
redemption of the convertible notes, except for repurchases of the
convertible notes under the covenant described above under the caption
"-- Repurchase at the Option of Holders,"

(3) reduce the rate of or change the time for payment or accrual of
interest on any convertible note,

(4) waive a default in the payment of principal of or interest on any
convertible notes, except a rescission of acceleration of the
convertible notes by the holders of at least a majority in aggregate
principal amount of the convertible notes and a waiver of the payment
default that resulted from such acceleration,

(5) make any convertible note payable in money other than that stated in
the convertible notes,

(6) make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of holders of convertible notes to
receive payments of principal of or interest on the convertible notes,

(7) waive a redemption payment with respect to any convertible note,

(8) impair the right to convert the convertible notes into common stock,

(9) modify the conversion or subordination provision of the indenture in a
manner adverse to the holders of the convertible notes, or

(10) make any change in the foregoing amendment and waiver provisions.

Notwithstanding the foregoing, without the consent of any holder of
convertible notes, CoreComm and the trustee may amend or supplement the
indenture or the convertible notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated convertible notes in addition to or
in place of certificated convertible notes, to provide for the assumption of
CoreComm's obligations to holders of the convertible notes in the case of a
merger or consolidation or certain transfers or leases, to make any change that
would provide any additional rights or benefits to the holders of the
convertible notes or that does not adversely affect the legal rights under the
indenture of any such holder, or to comply with requirements of the SEC in order
to maintain the qualification of the indenture under the Trust Indenture Act.

GOVERNING LAW AND JUDGMENTS

The convertible notes and the indenture will be governed exclusively by and
construed in accordance with the laws of the State of New York without giving
effect to applicable principles of conflicts of laws to the extent that the
application of the law of another jurisdiction would be required thereby.

CoreComm will submit to the jurisdiction of the United States federal and
New York state courts located in the Borough of Manhattan, City and State of New
York for purposes of all legal actions and proceedings instituted in connection
with the convertible notes and the indenture. CoreComm has appointed National
Registered Agents, Inc. as its authorized agent upon which process may be served
in any such action.

CONCERNING THE TRUSTEE

The indenture contains limitations on the rights of the trustee, should it
become a creditor of CoreComm, to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such claim as security
or otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue or resign.

The holders of the majority in aggregate principal amount of the then
outstanding convertible notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any

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remedy available to the trustee under the indenture, subject to certain
exceptions. The indenture provides that if an Event of Default occurs, which is
not cured or waived, the trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to these provisions, the trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any holder of
convertible notes, unless such holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.

DEFINITIONS

Set forth below are selected defined terms used in the indenture. Reference
is made to the indenture for a full definition of all terms, as well as certain
other terms used in this description of the convertible notes for which no
definition is provided.

"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents, however designated, of corporate stock, including, without
limitation, partnership interests.

"Change of Control" means

(1) the sale, lease or transfer of all or substantially all of the assets
of CoreComm to any "Person" or "group," within the meaning of Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to
either of the foregoing, including any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning of
Rule 13D-5(b)(1) under the Exchange Act, other than any Permitted
Holder,

(2) the approval by the requisite stockholders of CoreComm of a plan of
liquidation or dissolution of CoreComm,

(3) any "Person" or "group," within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act, other than any Permitted Holder,
becomes the "beneficial owner", as defined in Rule 13d-3 under the
Exchange Act, of more than 50% of the total voting power of all classes
of the voting stock of CoreComm and/or warrants or options to acquire
such voting stock, calculated on a fully diluted basis, unless, as a
result of such transaction, the ultimate direct or indirect ownership
of CoreComm is substantially the same immediately after such
transaction as it was immediately prior to such transaction, or

(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted CoreComm's board of directors,
together with any new directors whose election or appointment by such
board or whose nomination for election by the shareholders of CoreComm
was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of CoreComm's board of
directors then in office.

"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any Indebtedness that is
convertible into, or exchangeable for, Capital Stock.

"Excess Payment" means the excess of (A) the aggregate of the cash and
value of other consideration paid by CoreComm or any of its Subsidiaries with
respect to shares acquired in a tender offer or other negotiated transaction
over (B) the market value of such acquired shares after giving effect to the
completion of a tender offer or other negotiated transaction.

"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange

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rate insurance and other agreements or arrangements, or combination thereof, the
principal purpose of which is to provide protection against fluctuations in
currency exchange rates. An Exchange Rate Contract may also include an Interest
Rate Agreement.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the Issuance Date and are applied on a consistent basis.

"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.

"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
reimbursement agreements in respect thereof, or representing the balance
deferred and unpaid of the purchase price of any property (which purchase price
is due more than six months after the placing into service or delivery of such
property) including pursuant to capital leases and sale-and-leaseback
transactions, or representing any hedging obligations under an Exchange Rate
Contract or an Interest Rate Agreement, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness, other than obligations under an Exchange Rate Contract or an
Interest Rate Agreement, would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, and also includes, to the extent
not otherwise included, the Guarantee of items which would be included within
this definition. The amount of any Indebtedness outstanding as of any date shall
be the accreted value thereof, in the case of any Indebtedness issued with
original issue discount. Indebtedness shall not include liabilities for taxes of
any kind.

"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement the principal purpose of which is to protect the
party indicated therein against fluctuations in interest rates.

"Issuance Date" means the date on which the convertible notes are first
authenticated and issued.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Designee" means

(1) a spouse or a child of a Permitted Holder,

(2) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder,

(3) in the event of the death or incompetence of a Permitted Holder, his
estate, heirs, executor, administrator, committee or other personal
representative or

(4) any Person so long as a Permitted Holder owns at least 50% of the
voting power of all classes of the voting stock of such Person.

"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.

"Repurchase Offer" means a Change of Control Offer.

"Senior Debt" means the principal of, interest on and other amounts due on

(1) our Indebtedness, whether outstanding on the date of the indenture or
thereafter created, incurred, assumed or guaranteed by us, for money
borrowed from banks or other financial institutions;

(2) our Indebtedness, whether outstanding on the date of the indenture or
thereafter created incurred, assumed or guaranteed by us; and
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(3) our indebtedness under interest rate swaps, caps or similar hedging
agreements and foreign exchange contracts, currency swaps or similar
agreements: unless, in the instrument creating or evidencing or under
which Indebtedness under (1) or (2) is outstanding, it is expressly
provided that such Indebtedness is not senior in right of payment to
the convertible notes.

Senior Debt includes, with respect to the obligations described in clauses
(1) and (2) above, interest accruing, pursuant to the terms of such Senior Debt,
on or after the filing of any petition in bankruptcy or for reorganization
relating to us, whether or not post-filing interest is allowed in such
proceeding, at the rate specified in the instrument governing the relevant
obligation. Notwithstanding anything to the contrary in the foregoing, Senior
Debt shall not include: (a) Indebtedness of or amounts owed by us for
compensation to employees, or for goods or materials purchased in the ordinary
course of business, or for services; and (b) Indebtedness of CoreComm to a
Subsidiary of CoreComm.

"Significant Subsidiary" means any Subsidiary of CoreComm which is a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act, as such Regulation is in effect on the date
of the indenture.

"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.

REGISTRATION RIGHTS

The following summary of certain provisions of the registration rights
agreement is not complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the registration rights agreement, which is
incorporated by reference into the registration statement of which this
prospectus forms a part.

We entered into the registration rights agreement under which we agreed, at
our expense, for the benefit of the holders of the offered securities, to file
with the SEC the registration statement covering resale of the offered
securities. We will use our best efforts to cause the registration statement to
become effective as promptly as is practicable, but in any event within 180
days, and to keep the registration statement effective until the earlier of

(1) the sale under the registration statement of all the offered securities
registered under the registration statement and

(2) subject to certain exceptions, the second anniversary of the issuance
of the convertible notes.

We will be permitted to suspend the use of this prospectus under certain
circumstances relating to pending corporate developments, public filings with
the SEC and similar events. We have agreed to pay predetermined special interest
as described in this prospectus with respect to each 90-day period, to holders
of offered securities if the registration statement is not timely filed or made
effective or if this prospectus is unavailable for periods in excess of those
described in the registration rights agreement. Special interest will accrue
until the failure to file or become effective or unavailability is cured in
respect of any convertible note, at a rate per annum equal to 0.25% for the
first 90 day period after the occurrence of the event and with respect to each
subsequent 90-day period an amount equal to an increase in the annual interest
rate on the convertible notes of 0.25% until all registration defaults have been
cured up to a maximum increase in the annual rate of interest on the convertible
notes equal to 1.0%.

Selling securityholders must complete and deliver to us a notice and
questionnaire, the form of which was sent to all holders of record known to us,
at least three business days prior to any intended distribution of offered
securities under the registration statement. Holders of offered securities are
required to complete and deliver the questionnaire prior to the effectiveness of
the registration statement so that holders may be named as selling
securityholders in this prospectus at the time of effectiveness. Upon receipt of
a

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completed questionnaire, together with other information as may be reasonably
requested by us, from a selling securityholder following the effectiveness of
the registration statement, we will, as promptly as practicable but in any event
within five business days of receipt, file such amendments to the registration
statement or supplements to this prospectus as are necessary to permit selling
securityholders to deliver this prospectus, including any supplements, to
purchasers of offered securities (subject to our right to suspend the use of
this prospectus as described above). We have agreed to pay special interest in
the amount set forth above to holders of offered securities if we fail to make a
filing in the time required.

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Our authorized capital stock consists of seventy-five million (75,000,000)
shares of common stock and one million (1,000,000) shares of Series A Junior
Participating Preferred Stock. On November 17, 1999, there were 25,516,030
shares of common stock outstanding. The following description is qualified in
all respects by reference to our Memorandum of Association and our by-laws.

COMMON STOCK

All shares of our common stock participate equally in dividends payable to
holders of our common stock when and as declared by the Board of Directors and
in net assets available for distribution to holders of our common stock on
liquidation or dissolution, have one vote per share on all matters submitted to
a vote of our shareholders and do not have cumulative rights in the decision of
directors. All issued and outstanding shares of common stock are fully paid and
nonassessable, and the holders of them do not have pre-emptive rights.

TRANSFER AGENT

Continental Stock Transfer & Trust Company is the transfer agent and
registrar for our common stock.

CERTAIN SPECIAL PROVISIONS OF THE BY-LAWS

Certain provisions contained in our by-laws could make the acquisition of
control of us by means of a tender offer, open market purchases, a proxy contest
or otherwise more difficult. Described below are these provisions. The
description is intended as a summary only and is qualified in its entirety by
reference to our by-laws.

Classified Board of Directors: The by-laws provide that the Board of
Directors will be divided into three classes of directors, with the classes to
be as nearly equal in number as possible. The Board of Directors consists of the
persons referred to as such in the section entitled "Management." At each annual
meeting of shareholders, one class of directors will be elected, each year for a
three-year term.

We believe that the classified board provision of the by-laws is
advantageous to us and our shareholders because, by providing that directors
will serve three-year terms rather than one-year terms, it will enhance the
likelihood of continuity and stability in the composition of the Board of
Directors and in the policies formulated by the Board of Directors. We believe
that this, in turn, will permit the Board to represent more effectively the
interests of all shareholders.

With a classified Board of Directors, it will generally take a majority
shareholder two annual meetings of shareholders to elect a majority of the Board
of Directors. As a result, a classified board may discourage proxy contests for
the election of directors or purchases of a substantial block of shares because
its provisions could operate to prevent obtaining control of the board in a
relatively short period of time. The classification provisions could also have
the effect of discouraging a third party from making a tender offer or otherwise
attempting to obtain control of us, even though such an attempt might be
beneficial to us and our shareholders. In addition, because under the by-laws
directors may be removed only for cause, a classified board would delay
shareholders who do not agree with the policies of the Board of Directors from
replacing a majority of the Board of Directors for two years, unless they can
demonstrate the directors should be removed for cause and obtain the requisite
vote.

Number of Directors; Removal; Filling Vacancies: The by-laws provide that
the number of directors shall consist of not more than fifteen nor less than
three directors. In addition, pursuant to authority conferred under a
shareholders resolution, and subject to any rights of holders of any shares of
preferred stock, if any, a majority of the Board of Directors then in office is
empowered to fill any vacancies on the Board of Directors. Accordingly, the
Board of Directors could temporarily prevent any shareholder from
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obtaining majority representation on the Board by enlarging the size of the
board and filling the new directorships with its own nominees.

Under the Bermuda Companies Act, 1981, as amended, (the "Companies Act") a
director serving on a classified board may be removed by the shareholders only
for cause. Moreover, our by-laws provide that directors may be removed only by
the affirmative vote of holders of at least a majority of the voting power of
all the then outstanding shares of shares entitled to vote generally in the
election of directors, voting together as a single class.

Advance Notice Provisions for Shareholder Nominations: The by-laws
establish an advance notice procedure with regard to the nomination, other than
by or at the direction of the Board of Directors, of candidates for election as
directors.

The nomination procedure provides that, subject to the rights of holders of
any series of preferred stock, if any, only persons who are nominated by or at
the direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary prior to the meeting at which directors are to
be elected, will be eligible for election as our directors. Under the nomination
procedure, to be timely, notice must be received by us at least 75 days, but not
more than 90 days, prior to the annual or special meeting of shareholders,
provided, however, that if less than 90 days' notice or prior public disclosure
of the meeting date is given or made to shareholders, notice by the shareholder
to be timely must be received within fifteen days following the day on which the
notice of the date of the meeting was mailed or public disclosure was made,
whichever first occurs.

Under the nomination procedure, a shareholder's notice to us proposing to
nominate a person for election as a director must contain certain information
(i) about each proposed nominee, including, without limitation, (a) the name,
age, business address and residence address of the nominee, (b) the principal
occupation or employment of the nominee, (c) the class, series and number of
shares of our capital stock which are beneficially owned by the nominee, and (d)
any other information relating to the nominee that is required to be disclosed
in solicitations of proxies for election of directors pursuant to the rules and
regulations of the Commission under the Exchange Act (including the person's
written consent to being named in the proxy statement as a nominee and to
serving as director if elected) and (ii) about the shareholder proposing to
nominate the person, including, without limitation, the name and record address
of the shareholder and the class, series and number of shares of our capital
shares which are beneficially owned by the shareholder. We may require any
proposed nominee to furnish any other information as we may reasonably require
to determine the eligibility of the proposed nominee to serve as our director.
If the officer presiding at a meeting determines that a person was not nominated
in accordance with the nomination procedure, the person will not be eligible for
election as a director and their nomination will be disregarded.

By requiring advance notice of nominations by shareholders, the nomination
procedure will afford the Board of Directors a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Board of Directors, to inform shareholders about
that qualification. Although the by-laws do not give the Board of Directors any
power to approve or disapprove shareholder nominations for the election of
directors or proposals for action, they may have the effect of precluding a
contest for the election of directors if the proper procedures are not followed,
and of discouraging or deterring a third party from conducting a solicitation of
procedures to elect its own slate of directors without regard to whether
consideration of its nominees might be harmful or beneficial to us and our
shareholders.

Preferred Stock: The by-laws authorize the Board of Directors to issue one
or more series of preferred stock and to determine, with respect to any series
rights, if any, and their qualifications, limitations or restrictions, as are
stated in resolutions adopted by the Board of Directors providing for the issue
of the series and as are permitted by the Companies Act.

We believe that the ability of the Board of Directors to issue one or more
series of preferred stock will provide increased flexibility in structuring
possible future financings and acquisitions and in meeting

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other corporate needs which might arise. The authorized shares of preferred
stock, as well as shares of our common stock, will be available for issuance
without further action by our shareholders, unless such action is required by
applicable law or the rules of any shares exchange on which our securities may
be listed or applicable rules of any self-regulatory organization. If the
approval of our shareholders is not required for the issuance of shares of
preferred stock or our common stock, the Board of Directors does not intend to
seek shareholder approval. The Board of Directors will make any determination to
issue the shares based on its judgment as to our best interests and the best
interests of our shareholders. The Board of Directors, in so acting, could issue
preferred stock having terms that could discourage an acquisition attempt or
other transaction that some or a majority of the shareholders might believe to
be in their best interests or in which shareholders might receive a premium for
their shares over the then current market price of such shares.

Voting Requirements of Certain Business Combinations: The by-laws also
provide that, in addition to any affirmative vote required by law, the
affirmative vote of holders of two-thirds of our voting power is necessary to
approve any "business combination" (as defined) proposed by an "interested
shareholder" (as defined). The additional voting requirements will not apply,
however, if: (a) the business combination was approved by not less than a
majority of the continuing directors or (ii) a series of conditions are
satisfied requiring (in summary) (a) that the consideration to be paid to our
shareholders in the business combination must be at least equal to the higher of
(i) the highest per-share price paid by the interested shareholder in acquiring
any of our common shares during the two years prior to the announcement date of
the business combination or in the transaction in which it becomes an interested
shareholder (the "determination date") whichever is higher or (ii) the fair
market value per share of common shares on the announcement date or
determination date, whichever is higher, in either case appropriately adjusted
for any stock dividend, stock split, combination of shares or similar event
(non-cash consideration is treated similarly) and (b) certain "procedural"
requirements are complied with, such as the solicitation of proxies under the
rules of the Commission and no decrease in regular dividends (if any) after the
interested shareholder becomes an interested shareholder (except as approved by
a majority of the continuing directors).

An "interested shareholder" is defined as anyone who is or has announced
the intention to become the beneficial owner of a 10% or more of the voting
shares and other than any employee share plan sponsored by us and includes any
person who is our affiliate and at any time within the prior two-year period
prior to the date in question and was the beneficial owner of 10% or more of the
voting shares. The term "beneficial owner" includes a person directly and
indirectly owning or having the right to acquire or vote the shares. Interested
shareholders participate fully in all shareholder voting.

A "business combination" includes the following transactions: (a) a merger
or consolidation or amalgamation of us or any subsidiary with an interested
shareholder or with any other corporation or entity which is, or after the
merger or consolidation or amalgamation would be, an affiliate of an interested
shareholder; (b) the sale or other disposition by us or a subsidiary of assets
having a fair market value of $5,000,000 or more if an interested shareholder
(or an affiliate of the interested shareholder) is a party to the transaction;
(c) the adoption of any plan or proposal for the liquidation or dissolution of
us or for amendment of the by-laws; or (d) any reclassification of securities,
recapitalization, merger with a subsidiary, or other transaction which has the
effect, directly or indirectly, of increasing the proportionate share of any
class of our outstanding stock (or securities convertible into stock) or the
stock of a subsidiary owned by an interested shareholder (or an affiliate of the
interested shareholder). Determinations of the fair market value of non-cash
consideration are made by a majority of the continuing directors.

The term "continuing directors" means any member of our Board of Directors
while that person is a member of the Board of Directors, who is not an affiliate
or associate or representative of the interested shareholder and was a member of
the Board of Directors prior to the time that the interested shareholder became
an interested shareholder, and any successor of a continuing director while that
successor is a member of the Board of Directors, who is not an affiliate or
associate or representative of the interested

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shareholder and is recommended or elected to succeed the continuing director by
a majority of continuing directors.

SHAREHOLDER PROPOSALS

Under the Companies Act we must circulate notice of a properly supported
shareholder requisition moving a resolution to be passed at our next annual
general meeting, together with a statement of up to 1,000 words about the
proposed resolution. The resolution must be supported by the lesser of: 100
shareholders or shareholders representing 5% of the total voting rights eligible
at the meeting at which the resolution is proposed to be passed. The resolution
and notice will be circulated at the expense of the shareholders making the
requisition, unless we otherwise resolve. The requisition proposing a resolution
must be deposited at our registered office of at least six weeks before the
general meeting.

AMENDMENT OF CERTAIN CHARTER AND BY-LAW PROVISIONS

Under the Companies Act, the directors may amend the by-laws of a company
subject to the approval of the company's shareholders. Our by-laws provide that
they may be amended in the manner provided under the Companies Act, provided
that the provisions contained in the by-laws relating to the election and term
of directors, the indemnification rights of directors, the amendment of the
by-laws and the restrictions on certain business combinations may be amended
only by the directors, with the approval by affirmative vote of the holders of
at least 66.667% of the voting shares.

SHAREHOLDER RIGHTS PLAN

The following description of our Rights Agreement is qualified in its
entirety by reference to the Rights Agreement.

The Rights Agreement provides that one right will be issued with each share
of the common stock issued (whether originally issued or from our treasury) on
or after the date of the distribution and prior to the rights distribution date
(as defined below). The rights are not exercisable until the rights distribution
date and will expire at the close of business on December 31, 2010 unless
previously redeemed by us as described below. When exercisable, each right
entitles the owner to purchase from us one-hundredth of a share of Series A
Junior Participating Preferred Stock.

Except as described below, the rights will be evidenced by all our common
stock certificates and will be transferred with the common stock certificates,
and no separate rights certificates will be distributed. The rights will
separate from the common stock and a "rights distribution date" will occur upon
the earlier of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "acquiring person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of the common stock (the "shares acquisition date") or (ii)
10 business days (or a later date determined by our Board of Directors)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an acquiring person.

After the rights distribution date, rights certificates will be mailed to
holders of record of the common stock as of the rights distribution date and,
thereafter the separate rights certificates alone will represent the rights.

The Series A Junior Participating Preferred Stock issuable upon exercise of
the rights will be entitled to a minimum preferential quarterly dividend payment
of $0.01 per share and will be entitled to an aggregate dividend of 100 times
the dividend, if any, declared per share of common stock. In the event of
liquidation, the holders of the Series A Junior Participating Preferred Stock
will be entitled to a minimum preferential liquidation payment of $100 per share
and will be entitled to an aggregate payment of 100 times the payment made per
share of the common stock. Each share of Series A Junior Participating Preferred
Stock will have 100 votes and will vote together with the common stock. In the
event of any merger, consolidation or other transaction in which shares of the
common stock are changed or exchanged, each share of Series A Junior
Participating Preferred Stock will be entitled to receive 100 times the

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amount received per share of the common stock. These rights are protected by
customary antidilution provisions. Because of the nature of the Series A Junior
Participating Preferred Stock's dividend, liquidation and voting rights, the
value of one-hundredth of a share of Series A Junior Participating Preferred
Stock purchasable upon exercise of each right approximate the value of one share
of the common stock.

In the event that a person becomes an acquiring person, each holder of a
right will thereafter have the right to receive, upon the exercise of the right
at the then current exercise price, the common stock (or, in certain
circumstances, cash, property or other of our securities) having a value equal
to two times the exercise price of the right. Notwithstanding any of the
foregoing, following the occurrence of any such event, all rights that are, or
(under certain circumstances specified in the Rights Agreement) were
beneficially owned by any acquiring person (or certain related parties) will be
null and void. However, rights are not exercisable following the occurrence of
the event described above until the rights are no longer redeemable by us as
described below.

In the event that, at any time following the shares acquisition date, (i)
we are acquired in a merger or other business combination transaction in which
we are not the surviving corporation or the common stock is changed or exchanged
(other than a merger which follows a qualifying offer and satisfies certain
other requirements) or (ii) 50% or more of our assets or earning power is sold
or transferred, each holder of a right (except rights which previously have been
voided as described above) shall then have the right to receive, upon the
exercise of them at the then current exercise price, common stock of the
acquiring company having a value equal to two times the exercise price of the
right.

At any time prior to the earlier of (i) until 10 days following the shares
acquisition date, or (ii) the final expiration date, we may redeem the rights in
whole, but not in part, at a price of $.01 per right. Immediately upon the
action of the Board of Directors ordering redemption of the rights, the rights
will terminate and the only right of the holders of the rights will be to
receive the $.01 redemption price.

Until a right is exercised, the holder of it, as such, will have no right
as our shareholder, including without limitation, the right to vote or to
receive dividends. While the distribution of the rights will not be taxable to
shareholders or to us, shareholders may, depending upon the circumstances,
recognize taxable income in the event that the rights become exercisable for the
common stock (or other consideration) or for common stock of the acquiring
company as described above.

Other than those provisions relating to the principal economic terms of the
rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors prior to the rights distribution date. After the rights
distribution date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of rights (excluding the interests of
any acquiring person) or to shorten or lengthen any time period under the Rights
Agreement, provided that no amendment to adjust the time period governing
redemption shall be made at such time as the rights are not redeemable.

The rights have certain anti-takeover effects as they will cause
substantial dilution to a person or group that acquires a substantial interest
in us without the prior approval for the Board of Directors. Among the effects
is that the rights could discourage a takeover attempt that might otherwise
allow the holders of common stock to sell their common stock at a premium to the
then current market price or which might otherwise be beneficial to
shareholders.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Companies Act permits us to indemnify our directors or officers in
their capacity as directors or officers in connection with any loss arising or
liability attaching to them by virtue of any rule of law in connection with any
negligence, default, breach of duty or breach of trust of which a director or
officer may be guilty in relation to us other than in connection with his own
fraud or dishonesty.

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The by-laws provide that every one of our directors, officers, committee
members and any of our resident representatives be indemnified against any
liabilities, loss, damage or expense incurred or suffered in that capacity,
subject to limitations imposed in the Companies Act.

The by-laws further provide that to the extent that any of our directors,
officers, committee members or resident representatives is successful in
defending any proceedings, whether civil or criminal, we will indemnify the
individual for all liabilities incurred in that capacity.

By-law 151 stipulates that we and each shareholder agree to waive any claim
or right of action against any director, officer, or committee member, in
connection with any failure to act or any action taken by that director, officer
or committee member in the performance of his duties with or for us. The waiver
does not extend to claims, rights of action arising from the fraud of the
director, officer, committee member or to recover any gain, personal profit or
advantage to which that individual is not legally entitled.

Our by-laws permit us to advance the expenses incurred in defending any
civil or criminal action for which indemnification is required against an
undertaking of the indemnified party to repay the amount advanced if it is
ultimately determined that the indemnified party is not entitled to be
indemnified under the by-laws and subject to a determination by the Board of
Directors or, in specified situations, independent legal counsel or a majority
vote of the shareholders, that indemnification would be proper in the
circumstances.

There has not been in the past and there is not presently pending any
litigation or proceeding involving any director, officer, employee or agent
which could give rise to an indemnification obligation on the part of us. In
addition, except as described in this Offering Memorandum, the Board of
Directors is not aware of any threatened litigation or proceeding which may
result in a claim for indemnification.

INTERESTED DIRECTORS

The by-laws provide that any transaction entered into by us in which a
director has an interest is not voidable by us nor can that director be liable
to us for any profit realized in connection with that transaction provided the
nature of the interest is disclosed at the first opportunity at a meeting of
directors, or in writing to the directors.

MERGERS AND SIMILAR ARRANGEMENTS

We may acquire the business of another Bermuda company similarly exempt
from Bermuda taxes or a company incorporated outside Bermuda and carry on their
business when it is within the objects of our Memorandum of Association. We may
also amalgamate with another Bermuda company or with a body incorporated outside
Bermuda upon the approval of the Board of Directors and the holders of a simple
majority of votes cast by the shareholders of our outstanding shares, including
any votes cast by the holders of shares that would otherwise be non-voting
shares. In the case of an amalgamation, a shareholder may apply to a Bermuda
court for a proper valuation of the shareholder's shares if the shareholder is
not satisfied that fair value has been paid for the shares. The court ordinarily
would not set aside the transaction on that ground absent evidence of fraud or
bad faith.

TAKEOVERS

Bermuda law provides that where an offer is made for shares of another
company and, within four months of the offer, the holders of not less than 90%
of the shares which are the subject of the offer accept, the offeror may by
notice require the non-tendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its discretion to stop the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out
minority shareholders.

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SHAREHOLDER'S SUIT

A shareholder who considers that our affairs are being conducted in a
manner which is unfairly prejudicial or oppressive to the interests of some of
the shareholders may apply to the Bermuda court for relief under the Companies
Act. The court may grant such relief as it considers fit. Class actions and
derivative actions are generally not available to shareholders under the laws of
Bermuda. However, the Bermuda courts ordinarily would be expected to follow
English case law precedent, which would permit a shareholder to commence an
action in the name of our company to remedy a wrong done to the company where
the act complained of is alleged to be beyond the corporate power of the company
or is illegal or would result in the violation of the Memorandum of Association
or By-laws. Furthermore, consideration would be given by the court to acts that
are alleged to constitute a fraud against the minority shareholders or where an
act requires the approval of a greater percentage of the company's shareholders
than actually approved it. The winning party in such an action generally would
be able to recover a portion of attorneys' fees incurred in connection with such
action.

INSPECTION OF CORPORATE RECORDS

Members of the general public have the right to inspect our public
documents available at the office of the Registrar of Companies in Bermuda,
which will include our Memorandum of Association (including its objects and
powers) and any alteration to the Memorandum of Association and documents
relating to any increase or reduction of authorized capital. The shareholders
have the additional right to inspect or obtain copies of our by-laws, minutes of
general meetings and audited financial statements, which must be presented to
the annual general meeting of shareholders. Our register of shareholders is also
open to inspection by shareholders without charge, and to members of the public
for a fee. We are required to keep at our registered office a register of our
directors and officers which is open for inspection by members of the public
without charge. Bermuda law does not, however, provide a general right for
shareholders to inspect or obtain copies of any other corporate records.

BERMUDA TAXATION

Under current Bermuda law, there is no Bermuda income tax, withholding tax,
capital gains tax or capital transfer tax levied on us or our shareholders.

We and our Bermuda subsidiaries have obtained a written undertaking from
the Minister of Finance of Bermuda under the Exempted Undertakings Tax
Protection Act 1996 (as amended) that, in the event of there being enacted in
Bermuda any legislation imposing tax computed on profits or income, or computed
on any capital asset, gain or appreciation, or any tax in the nature of estate
duty or inheritance tax such tax shall not, until March 28, 2016, be applicable
to us or any of our operations, or to our shares, debentures or other
obligations except insofar as the tax applied to persons ordinarily resident in
Bermuda and holding our shares, debentures or other obligations or to any land
leased or let to us.

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DESCRIPTION OF OUR OTHER INDEBTEDNESS

VENDOR FINANCING

We are currently negotiating with equipment manufacturers, including Cisco
Systems, Inc., Lucent Technologies, Inc. and Nortel Networks Corporation, to
provide us with vendor financing. The vendors would provide financing to our
indirect, wholly owned subsidiary, CoreComm Operating Company, Inc. or its
subsidiaries in connection with our purchase of certain equipment and services
generally utilized in the buildout of our voice data and networks. In the
aggregate, such financings are anticipated to be significant. We cannot assure
you that we will be successful in obtaining any vendor financing.

OTHER INDEBTEDNESS

Certain of our other indirect subsidiaries have $39.6 million of
indebtedness and capital lease obligations outstanding as of September 30, 1999.
For more information, see our historical financial statements and the related
notes. In addition, our subsidiaries may incur substantial indebtedness in the
future.

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of certain United States federal
income tax considerations that may be relevant to the purchase, ownership and
disposition of the convertible notes and our common stock by U.S. and non-U.S.
holders, each as defined below. This discussion does not purport to be a full
description of all United States federal income tax considerations that may be
relevant to the purchase, holding and disposition of the convertible notes or
our common stock and does not address any other taxes that might be applicable
to a holder of the convertible notes or our common stock, such as tax
consequences arising under the tax laws of any state, locality or foreign
jurisdiction. In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, our
special United States tax counsel, the discussion accurately reflects the
material United States federal income tax consequences to U.S. and non-U.S.
holders of the purchase, ownership and disposition of the convertible notes and
our common stock. We cannot assure you that the United States Internal Revenue
Service will take a similar view of these consequences. Further, this discussion
does not address all aspects of taxation that may be relevant to particular
holders of convertible notes or common stock in light of their personal
circumstances and does not deal with persons that are subject to special tax
rules, such as dealers in securities, financial institutions, insurance
companies, tax-exempt entities, persons holding the convertible notes as part of
a hedging or conversion transaction, a straddle or constructive sale and persons
whose functional currency is not the United States dollar or that own or are
treated as owning 10% or more of our voting shares. The discussion below assumes
that the convertible notes and our common stock are held as capital assets
within the meaning of section 1221 of the Internal Revenue Code.

The discussion of the United States federal income tax considerations below
is based on currently existing provisions of the Internal Revenue Code, the
applicable Treasury regulations promulgated and proposed under the Internal
Revenue Code, judicial decisions and administrative interpretations, all of
which are subject to change, possibly on a retroactive basis. Because individual
circumstances may differ, you are strongly urged to consult your tax advisor
with respect to your particular tax situation and the particular tax effects of
any state, local, non-United States or other tax laws and possible changes in
the tax laws.

As used herein, a U.S. holder means a beneficial owner of a convertible
note or common stock who is, for United States federal income tax purposes:

- a citizen or resident of the United States;

- a corporation or partnership created or organized in or under the laws of
the United States or of any political subdivision thereof;

- an estate the income of which is subject to United States federal income
taxation regardless of its source; or

- a trust if either (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and one
or more United States persons have the authority to control all
substantial decisions of the trust or (b) the trust has a valid election
in effect under applicable Treasury regulations to be treated as a United
States person.

As used herein, a non-U.S. holder means a beneficial holder who is not a
U.S. holder.

TAXATION OF OUR COMPANY AND ITS SUBSIDIARIES

Our company normally will be subject to United States federal income tax
only to the extent our company has income which has its source in the United
States or is effectively connected with the conduct of a United States trade or
business. We currently anticipate that most of our income will consist of
dividends received by our company from its United States subsidiaries, which
will constitute United States source income, and that our income will not be
effectively connected with the conduct of a United States trade or business. On
the other hand, the United States subsidiaries of our company are subject to
United

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States federal income tax on their worldwide income regardless of its source and
dividend distributions by such United States subsidiaries to our company will be
subject to United States withholding taxes.

TAXATION OF HOLDERS OF CONVERTIBLE NOTES

U.S. HOLDERS

STATED INTEREST. A U.S. holder will be required to include in gross income
the stated interest on a convertible note in accordance with the U.S. holder's
regular method of accounting for federal income tax purposes. With some
exceptions applicable if U.S. holders hold, or are treated as holding, 50
percent or more of our stock, this interest will be treated as foreign source
income for United States foreign tax credit purposes. In computing the separate
foreign tax credit limitations, the interest usually will be treated as passive
or financial services income.

MARKET DISCOUNT AND BOND PREMIUM. If a U.S. holder purchases a convertible
note for an amount that is less than its principal amount, the difference
normally will be treated as market discount. In that case, any partial principal
payment on, gain realized on the sale, exchange or retirement of the convertible
note and unrealized appreciation on some nontaxable dispositions of the
convertible note will be treated as ordinary income to the extent of the market
discount that has not previously been included in income and that is treated as
having accrued on the convertible note prior to the payment or disposition. The
U.S. holder also might be required to defer all or a portion of the interest
expense on any debt incurred or continued to purchase or carry the convertible
note. If the U.S. holder has made an election to include the market discount in
income as it accrues, the two preceding sentences will not apply. Unless the
U.S. holder elects to treat market discount as accruing on a constant yield
method, market discount will be treated as accruing on a straight-line basis
over the remaining term of the convertible note. An election made to include
market discount in income as it accrues will apply to all debt instruments
acquired by the U.S. holder on or after the first day of the first taxable year
to which the election applies and may be revoked only with the consent of the
Internal Revenue Service.

If a U.S. holder purchases a convertible note for an amount in excess of
all amounts payable on the convertible note after the purchase date, other than
payments of stated interest, such excess will be treated as bond premium. A U.S.
holder usually can elect to amortize bond premium over the remaining term of the
convertible note on a constant yield method. The amount of bond premium
allocable to any accrual period is offset against the stated interest allocable
to the period and, with certain limitations, any excess may be deducted. An
election to amortize bond premium applies to all debt instruments held at the
beginning of the first taxable year to which the election applies and acquired
after such date by the U.S. holder and may be revoked only with the consent of
the Internal Revenue Service.

DISPOSITION. A U.S. holder of a convertible note will recognize gain or
loss upon the sale, exchange, redemption or other taxable disposition of the
convertible note in an amount equal to the difference between (i) the amount of
cash plus the fair market value of any property received, other than an amount
received in respect of accrued interest, which will be taxable as interest if
not previously included in income and (ii) the U.S. holder's tax basis in the
convertible note. A U.S. holder's tax basis in a convertible note will be its
cost, increased by any accrued market discount included in income and reduced by
any amortized bond premium. Subject to the application of the "passive foreign
investment company" rules discussed below and the market discount rules
discussed above, gain or loss recognized on the taxable disposition of a
convertible note normally will be capital gain or loss. In the case of a
noncorporate U.S. holder, the federal tax rate applicable to capital gains will
depend upon the holder's holding period for the convertible notes, with a
preferential rate available for convertible notes held for more than one year,
and upon the holder's marginal tax rate for ordinary income. The deductibility
of capital losses is subject to limitations. Gain realized by a U.S. holder upon
the taxable disposition of a convertible note normally will be treated as from
sources within the United States. Under temporary Treasury regulations, loss
realized by a U.S. holder on a taxable disposition of a convertible note also
will be treated as from sources within the United States, with specified
exceptions relating to unamortized premium, accrued but unpaid interest,
offsetting positions and certain other situations.

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CONVERSION. A U.S. holder of a convertible note will not recognize gain or
loss on the conversion of a convertible note solely into our common stock except
with respect to cash in lieu of fractional shares and except to the extent that
the common stock issued upon conversion is treated as attributable to accrued
interest on the convertible note. To the extent that common stock is received by
a holder without recognition of gain or loss, the holding period of the common
stock received upon conversion will include the period during which the
convertible note was held, and the holder's aggregate tax basis in the common
stock received upon conversion of the convertible note will be equal to the
holder's aggregate tax basis in the convertible note at the time of conversion,
less any portion allocable to any fractional share. A U.S. holder of a
convertible note will recognize gain or loss for federal income tax purposes
upon the receipt of cash in lieu of a fractional share of our common stock in an
amount equal to the difference between the amount of cash received and the
holder's tax basis in such fractional share. This gain or loss should be capital
gain or loss, and should be taxable as described above under "Disposition." The
fair market value of shares of common stock received, which is attributable to
accrued interest, will be taxable as ordinary interest income.

The conversion price of the convertible notes is subject to adjustment
under specified circumstances. Under section 305 of the Internal Revenue Code
and applicable Treasury regulations, adjustments or the failure to make
adjustments to the conversion price of the convertible notes may result in a
taxable constructive distribution to U.S. holders of convertible notes,
resulting in ordinary income to the extent of our earnings and profits, as
determined in accordance with United States federal income tax principles, if,
and to the extent that, these adjustments in the conversion price increase the
proportionate interest of a U.S. holder of a convertible note in our fully
diluted common stock, whether or not the holder ever converts the convertible
notes into our common stock.

NON-U.S. HOLDERS

Subject to the discussion below concerning information reporting and backup
withholding, a non-U.S. holder will not be subject to United States federal
income tax on payments of interest on, or on any gain on the sale of, a
convertible note, unless the holder held the convertible note in connection with
a United States trade or business carried on by such holder, or in the case of a
sale of convertible notes by a non-U.S. holder who is an individual, or the
individual was present in the United States for 183 days or more during the
taxable year in which the gain is realized and other specified conditions are
met.

TAXATION OF HOLDERS OF COMMON SHARES

U.S. HOLDERS

DISTRIBUTIONS. Subject to the application of the "passive foreign
investment company" rules discussed below, a distribution by our company with
respect to our common stock will be treated for United States federal income tax
purposes as ordinary dividend income to the extent that such distributions do
not exceed our earnings and profits as determined under United States federal
income tax principles. To the extent a distribution exceeds our earnings and
profits, it will be treated first as a tax-free return of the U.S. holder's tax
basis in the common stock to the extent of the holder's tax basis, and then will
be treated as gain from the sale of a capital asset. With some exclusions based
on the United States source income of our company for any taxable year that
apply if U.S. holders hold, or are treated as holding, 50 percent or more of our
stock, dividends paid by our company normally will be treated as foreign source
dividend income and U.S. holders that are corporations will not be entitled to
the dividends received deduction available for dividends received from domestic
corporations. In computing the separate foreign tax credit limitations,
dividends from our company usually will be treated as passive or financial
services income. Our company presently does not anticipate paying cash dividends
in the foreseeable future.

DISPOSITION. Subject to the application of the "passive foreign investment
company" rules discussed below, a U.S. holder of our common stock will recognize
capital gain or loss upon the sale or other taxable disposition of the common
stock in an amount equal to the difference between the amount of cash plus the
fair market value of any property received and the U.S. holder's tax basis in
the common stock. The

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tax basis of a U.S. holder in shares of our common stock purchased from a
selling securityholder hereunder will be the amount paid for such shares. The
taxation of such capital gains and the deductibility of capital losses will be
as described above under "Taxation of Holders of Convertible Notes -- U.S.
Holders -- Disposition."

NON-U.S. HOLDERS

Subject to the discussion below concerning information reporting and backup
withholding, a non-U.S. holder normally will not be subject to United States
federal income tax on dividends on, or gain realized on the sale of, our common
shares, unless the holder held the common shares in connection with a United
States trade or business carried on by such holder, or in the case of a sale of
our common shares by a non-U.S. holder who is an individual, such individual was
present in the United States for 183 days or more during the taxable year in
which the gain is realized and certain other conditions are met.

PASSIVE FOREIGN INVESTMENT COMPANY

If either 75% or more of the gross income of our company for a taxable year
were passive income or the assets of our company that produced or were held for
the production of passive income were to equal or exceed 50% of our total
assets, we would be a passive foreign investment company for United States
federal income tax purposes. If our company were a passive foreign investment
company, U.S. holders of our convertible notes or common stock would be required
to pay a special tax and interest charge on gain recognized upon the disposition
of our convertible notes or common stock and U.S. holders of our common stock
would be required to pay the tax and interest charge upon the receipt of a
distribution that exceeded 125% of the average amount of our distributions in
the preceding three years.

A U.S. holder of shares of our common stock that are treated as "marketable
stock" under the passive foreign investment company rules may be able to avoid
the imposition of the special tax and interest charge by making a mark-to-market
election. Pursuant to this election, the holder would include in ordinary
income, for each taxable year during which the common stock was held, an amount
equal to the increase in value of the common stock, which will be determined by
reference to the value of such common stock at the end of the current taxable
year as compared with its value at the end of the prior taxable year. Although a
mark-to-market election is not currently permitted with respect to our
convertible notes, future regulations might permit this election, possibly on a
retroactive basis. Holders desiring to make the mark-to-market election should
consult their tax advisors with respect to the application and effect of making
the election for our common stock and convertible notes.

In the case of a U.S. holder who holds common stock and who does not make a
mark-to-market election, the holder may be able to avoid the imposition of the
special tax and interest charge by making a "qualified electing fund" election
to include in income currently the holder's pro rata share of the passive
foreign investment company earnings, whether or not such earnings are
distributed in any given year. Under current Treasury regulations, a qualified
electing fund election cannot be made with respect to our convertible notes.

The tests for determining whether our company would be a passive foreign
investment company for any taxable year are applied on an annual basis and it is
difficult to make accurate predictions relevant to this determination. Although
based on our current estimates we do not presently expect to be a passive
foreign investment company for our 1999 taxable year or for future taxable
years, the determination for any year will be made after the taxable year has
ended and will be based on a number of factors including the sources of our
income and the nature of our assets, the value and trading volume of our common
stock and the use of debt proceeds by our company and our subsidiaries. As a
result, there can be no assurance that our company will not be treated as a
passive foreign investment company.

In the event that our company is treated as a passive foreign investment
company, we will comply with applicable information reporting requirements for
U.S. holders to make a qualified electing fund election and will promptly supply
a passive foreign investment company annual information statement to any U.S.
holder that requests such statement, as well as any other requested information
that is required to
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give effect to a qualified electing fund election. Holders should consult their
tax advisors with respect to their eligibility for, and the manner and
advisability of making, a qualified electing fund election if our company is
treated as a passive foreign investment company.

UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING

Under current United States federal income tax law, payments of interest
and dividends made to, and the proceeds of sales by, specified U.S. holders
might be subject to information reporting and might be subject to a backup
withholding tax at the rate of 31%, if these persons fail to supply correct
taxpayer identification numbers and other required information in the specified
manner. Such payments made to and proceeds of sales by non-U.S. holders usually
will not be subject to these information reporting requirements or backup
withholding, provided that the non-U.S. holders comply with any certification
and identification procedures that may be required or otherwise establishes an
applicable exemption.

Any amounts withheld under the backup withholding rules from payment to a
holder of convertible notes or common stock will be refunded or credited against
the holder's United States federal income tax liability provided that the
required information is furnished to the United States Internal Revenue Service.

New Treasury regulations applicable to payments made after December 31,
2000 normally will not alter the treatment of non-U.S. holders who provide the
required information.

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PLAN OF DISTRIBUTION

The offered securities are being registered to permit public secondary
trading of them by the holders of them from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
securityholders of the offered securities. We will bear all fees and expenses
incident to our obligation to register the offered securities.

The selling securityholders or any decree or pledgee of them acting as
principals may sell all or a portion of the offered securities beneficially
owned by them and offered by this prospectus from time to time directly to
purchasers or through one or more underwriters, broker-dealers or agents. If the
offered securities are sold through underwriters or broker-dealers, the selling
securityholder will be responsible for underwriting discounts, concessions,
commissions or agent's commissions. Offered securities may be sold in one or
more transactions at fixed prices, at prevailing market prices at the time of
the sale, at prices related to the prevailing market prices, at varying prices
determined at the time of sale, or at negotiated prices. Sales may be effected
in transactions (which may involve crosses or block transactions)

(1) on any national securities exchange or quotation service on which the
offered securities may be listed or quoted at the time of sale
(including, without limitation, the Nasdaq National Market for the
common stock);

(2) in the over-the-counter market;

(3) otherwise than on those exchanges or services or in the
over-the-counter market;

(4) involving the lending of offered securities;

(5) through the writing of options (whether the options are listed on an
options exchange or otherwise) relating to the offered securities, the
short sale of offered securities;

(6) through the distribution of the offered securities by any selling
securityholder to its partners, members or shareholders;

(7) through gifting of the offered securities by any selling securityholder
to its family members; or

(8) through a combination of any of the above.

In connection with sales of the offered securities or otherwise, the
selling securityholder may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
offered securities in the course of hedging in positions they assume. The
selling securityholder may also sell offered securities short and deliver
offered securities to close out short positions, or loan or pledge offered
securities to broker-dealers that in turn may sell the offered securities. If
the selling securityholders effect such transactions by selling offered
securities to or through underwriters, broker-dealers or agents, such
underwriters, brokers, dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling securityholders or
commissions from purchasers of offered securities for whom they may act as agent
or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, brokers-dealers or agents may be in
excess of those customary in the types of transactions involved).

The outstanding common stock is listed for trading on the Nasdaq National
Market under the symbol "COMM." We do not intend to apply for listing of the
convertible notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Accordingly, we cannot assure you about the development of liquidity or any
trading market for the convertible notes. Please refer to the section entitled
"Risk Factors."

The selling securityholders and any broker-dealer participating in the
distribution of the offered securities may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commissions paid, or any discounts or
concessions allowed to any of the broker-dealers may be deemed to be
underwriting commissions or discounts under the Securities Act.

Under the securities laws of certain states, the offered securities may be
sold in those states only through registered or licensed brokers or dealers. In
addition, in certain states the offered securities may not be sold unless the
offered securities have been registered or qualified for sale in the state or an
exemption from registration or qualification is available and is complied with.

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We cannot assure you that any selling securityholder will sell any or all
of the convertible notes or offered securities registered under the shelf
registration statement, of which this prospectus forms a part. In addition, any
securities covered by this prospectus that qualify for sale under Rule 144 or
Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather
than under this prospectus.

The selling securityholders and any other person participating in the
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations under the Exchange Act, including, without limitation,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the offered securities by the selling securityholders and any
other relevant person. Furthermore, Regulation M may restrict the ability of any
person engaged in the distribution of the offered securities to engage in
market-making activities with respect to the particular offered securities being
distributed. All of the above may affect the marketability of the offered
securities and the ability of any person or entity to engage in market-making
activities with respect to the offered securities.

All expenses of the registration of the convertible notes and common stock
under the registration rights agreement will be paid by us, including, without
limitation, SEC filing fees and expenses of compliance with state securities or
"blue sky" laws; provided, however, that the selling securityholders will pay
all underwriting discounts and selling commissions, if any. The selling
securityholders will be indemnified by us against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities. We will be indemnified by the
selling securityholders against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection with those liabilities.

Upon sale under the shelf registration statement, of which this prospectus
forms a part, the offered securities will be freely tradable in the hands of
persons other than our affiliates.

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of Bermuda, so our corporate affairs are
governed by our memorandum of association and by-laws and by the laws governing
corporations incorporated in Bermuda. The rights of our shareholders and the
responsibilities of members of our board of directors under Bermuda law are
different from those applicable to a corporation incorporated in the United
States.

LEGAL MATTERS

The validity of the convertible notes will be passed upon for us by Paul,
Weiss, Rifkind, Wharton & Garrison, New York, New York. The validity of the
common stock issuable upon conversion of the convertible notes and certain other
legal matters relating to the offering will be passed upon for us by Appleby,
Spurling & Kempe. A member and an affiliate of Appleby, Spurling & Kempe acts as
our representatives in Bermuda. Please refer to the section entitled
"Management -- Bermuda Representative and Secretary."

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and for the period from April 1, 1998
(date operations commenced) to December 31, 1998, as set forth in their report.
We've included our financial statements in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.

Ernst & Young LLP, independent auditors, have audited our predecessor, OCOM
Corporation Telecoms Division, as of December 31, 1997 and for the period from
January 1, 1998 to May 31, 1998 and the years ended December 31, 1997 and 1996,
as set forth in their report. We've included our financial statements in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

KPMG LLP, independent auditors, have audited the consolidated financial
statements of MegsINet Inc. as of December 31, 1998 and 1997 and for the year
ended December 31, 1998, as set forth in their
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report. We've included these financial statements in the registration statement
in reliance on KPMG LLP's report, given on their authority as experts in
accounting and auditing.

Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of USN Communications, Inc. as of December 31, 1998 and for
the year then ended, as set forth in their report. We've included these
financial statements in the registration statement in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.

The consolidated balance sheet of USN Communications, Inc. and subsidiaries
as of December 31, 1997, and the related consolidated statements of operations,
redeemable preferred stock, common stockholders' deficit and cash flows for each
of the two years in the period ended December 31, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
in this prospectus, and are included in reliance upon the report of such firm
given their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-3 regarding the offering
with the Securities and Exchange Commission. We are currently subject to the
informational requirements of the Securities Exchange Act of 1934. This
prospectus, which is a part of the registration statement, does not contain all
of the information included in the registration statement, and you should refer
to the registration statement and its exhibits to read that information.
References in this prospectus to any of our contracts or other documents are not
necessarily complete, and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
read and copy the registration statement, the related exhibits and the other
materials we file with the SEC at the public reference facilities the SEC
maintains at:

Judiciary Plaza
Room 1024
450 Fifth Street, N.W.
Washington, D.C. 20549

Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661

Seven World Trade Center
13th Floor
New York, New York 10048

Our common stock is quoted on the Nasdaq National Market. Reports, proxy
statements and other information concerning us may also be inspected at:

The National Association of
Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006

Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding us. The address of the SEC website is http://www.sec.gov.

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In addition, in the indenture for the convertible notes we have agreed
that, whether or not we are required to do so by the rules and regulations of
the SEC, for so long as any of the convertible notes remain outstanding, we will
furnish the trustee and will, if permitted, file with the SEC:

- all quarterly and annual financial information that would be required to
be contained in a filing with the SEC on Forms 10-Q and 10-K if we were
required to file such forms;

- with respect to our annual financial information only, a report on the
information by our certified independent accountants; and

- all reports that would be required to be filed with the SEC on Form 8-K
if we were required to file such reports.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference some information about us
that we file with the SEC. This allows us to disclose important information to
you by referencing those filed documents. Any information that we reference this
way is considered part of this prospectus.

The following documents filed by us with the SEC are incorporated by
reference into this prospectus:

(a) our Annual Report on Form 10-K for the year ended December 31, 1998;

(b) our Quarterly Reports on Form 10-Q for the three months ended September
30, 1999, June 30, 1999 and March 31, 1999;

(c) our Current Reports on Form 8-K dated October 6, 1999 (filed October
12, 1999), October 1, 1999 (filed October 4, 1999), September 15, 1999
(filed September 29, 1999), August 18, 1999 (filed September 17, 1999),
May 26, 1999 (filed June 8, 1999) as amended by Form 8-K/A, dated May
26, 1999 (filed July 9, 1999) and February 17, 1999 (filed February 24,
1999);

(d) our Definitive Proxy Statement on Schedule 14A dated April 28, 1999;
and

(e) the description of our common stock contained in our Form 10-12G filed
on June 24, 1998, as amended on August 19, 1998 and August 31, 1998.

We incorporate by reference the documents listed above and any future
filings made by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act until selling securityholders sell all of the securities
covered by this prospectus. Any information incorporated by reference this way
will automatically be deemed to update and supersede earlier filed or
incorporated information.

We will provide you without charge on your oral or written request, a copy
of any or all documents which are incorporated by reference into this
prospectus, except for exhibits which are specifically incorporated by reference
into those documents. You should direct your request to:

CoreComm Limited
110 E. 59th Street
New York, NY 10022
Attention: Investor Relations

You should rely only on the information contained in this prospectus or any
prospectus supplement. We have not authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
of the convertible notes in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Any statements in this prospectus about our expectations, beliefs, plans,
objectives, assumptions or future events or performance are not historical facts
and are forward-looking statements. These statements are often, but not always,
made through the use of words or phrases such as "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," "outlook" and similar expressions. Accordingly, these
statements involve estimates, assumptions and uncertainties which could cause
our actual results to differ materially from those expressed in the statements.
Any forward-looking statements are qualified in their entirety by reference to
the factors discussed throughout this prospectus. The following cautionary
statements identify important factors that could cause our actual results to
differ materially from those projected in the forward-looking statements made in
this prospectus. Among the key factors that have a direct impact on our results
of operations are:

- the risks and other factors described under the caption "Risk Factors" in
this prospectus;

- general economic and business conditions;

- industry trends;

- our ability to continue to design network routes, install facilities,
obtain and maintain any required government licenses or approvals and
finance construction and development, all in a timely manner, at
reasonable costs and on satisfactory terms and conditions;

- our assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services;

- our actual funding requirements;

- Year 2000 readiness; and

- availability, terms and deployment of capital.

Because the risk factors referred to above could cause our actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for use to predict which will arise. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

118
<PAGE> 122

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
CORECOMM LIMITED
Report of Independent Auditors.............................. F-3
Report of Independent Auditors.............................. F-4
Consolidated Balance Sheets -- December 31, 1998 and 1997... F-5
Consolidated Statements of Operations -- For the Period from
April 1, 1998 (date operations commenced) to December 31,
1998, for the Period from January 1, 1998 to May 31, 1998
and for the Years Ended December 31, 1997 and 1996........ F-6
Consolidated Statement of Shareholders' Equity -- For the
Period from April 1, 1998 (date operations commenced) to
December 31, 1998......................................... F-7
Statement of Parent's Investment (Deficiency) -- For the
Period from January 1, 1998 through May 31, 1998 and for
the Years Ended December 31, 1997 and 1996................ F-8
Consolidated Statements of Cash Flows -- For the Period from
April 1, 1998 (date operations commenced) to December 31,
1998, for the Period from January 1, 1998 to May 31, 1998
and for the Years Ended December 31, 1997 and 1996........ F-9
Notes to Consolidated Financial Statements.................. F-10
Condensed Consolidated Balance Sheet -- September 30,
1999...................................................... F-21
Condensed Consolidated Statements of Operations -- For the
Nine Months Ended September 30, 1999, for the period from
April 1, 1998 (date operations commenced) to September 30,
1998 and for the period from January 1, 1998 to May 31,
1998...................................................... F-22
Condensed Consolidated Statement of Shareholders'
Equity -- For the Nine Months Ended September 30, 1999.... F-23
Condensed Consolidated Statements of Cash Flows -- For the
Nine Months Ended September 30, 1999, for the period from
April 1, 1998 (date operations commenced) to September 30,
1998 and for the period from January 1, 1998 to May 31,
1998...................................................... F-24
Notes to Condensed Consolidated Financial Statements........ F-25

MEGSINET INC.
Independent Auditors' Report................................ F-30
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-31
Consolidated Statement of Operations for the year ended
December 31, 1998......................................... F-32
Consolidated Statement of Stockholders' Deficit for the year
ended December 31, 1998................................... F-33
Consolidated Statement of Cash Flows for the year ended
December 31, 1998......................................... F-34
Notes to Consolidated Financial Statements.................. F-35
Consolidated Balance Sheet as of March 31, 1999............. F-41
Consolidated Statement of Operations for the three months
ended March 31, 1999 and 1998............................. F-42
Consolidated Statement of Stockholders' Deficit for the
three months ended March 31, 1999......................... F-43
Consolidated Statement of Cash Flows for the three months
ended March 31, 1999 and 1998............................. F-44
Notes to Consolidated Financial Statements.................. F-45

USN COMMUNICATIONS, INC.
Report of Independent Auditors.............................. F-47
Independent Auditors' Report................................ F-48
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-49
</TABLE>

F-1
<PAGE> 123

<TABLE>
<S> <C>
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996............................ F-50
Consolidated Statements of Redeemable Preferred Stock for
the years ended December 31, 1998, 1997 and 1996.......... F-51
Consolidated Statements of Common Stockholders' Deficit for
the years ended December 31, 1998, 1997 and 1996.......... F-52
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-53
Notes to Consolidated Financial Statements.................. F-54
Condensed Consolidated Balance Sheet as of March 31, 1999... F-66
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1999................ F-67
Condensed Consolidated Statement of Common Stockholders'
Deficit for the three months ended March 31, 1999......... F-68
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998................ F-69
Notes to Condensed Consolidated Financial Statements........ F-70
</TABLE>

F-2
<PAGE> 124

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
CoreComm Limited

We have audited the consolidated balance sheet of CoreComm Limited and
Subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for the period from April 1,
1998 (date operations commenced) to December 31, 1998. Our audit also included
the financial statement schedule listed in the Index at Item 14(a) for the
period from April 1, 1998 (date operations commenced) to December 31, 1998.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CoreComm Limited and Subsidiaries at December 31, 1998, and the consolidated
results of their operations and their cash flows for the period from April 1,
1998 (date operations commenced) to December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

ERNST & YOUNG LLP

New York, New York
February 26, 1999, except for note 16, as to
which the date is September 2, 1999

F-3
<PAGE> 125

REPORT OF INDEPENDENT AUDITORS

Shareholder
OCOM Corporation Telecoms Division

We have audited the accompanying balance sheet of OCOM Corporation Telecoms
Division ("OCOM") as of December 31, 1997, and the related statements of
operations, parent's investment (deficiency) and cash flows for the period from
January 1, 1998 to May 31, 1998 and the years ended December 31, 1997 and 1996.
Our audit also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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
misstatements. 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 financial position of OCOM Corporation Telecoms
Division at December 31, 1997, and the results of its operations and its cash
flows for the period from January 1, 1998 to May 31, 1998 and the years ended
December 31, 1997 and 1996 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

New York, New York
February 26, 1999

F-4
<PAGE> 126

CORECOMM LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
THE PREDECESSOR
(OCOM)
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 26,161,000 $ --
Marketable securities..................................... 110,718,000 --
Accounts receivable-trade, less allowance for doubtful
accounts of $742,000 (1998) and $46,000 (1997)......... 1,125,000 332,000
Due from affiliates....................................... 1,954,000 --
Inventory................................................. 150,000 80,000
Other..................................................... 519,000 48,000
------------ ----------
Total current assets.............................. 140,627,000 460,000
Fixed assets, net........................................... 3,582,000 1,269,000
Goodwill, net of accumulated amortization of $230,000....... 4,028,000 --
LMDS license costs.......................................... 25,366,000 --
Other, net of accumulated amortization of $1,000............ 2,923,000 2,000
------------ ----------
$176,526,000 $1,731,000
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,937,000 $ 348,000
Accrued expenses.......................................... 4,247,000 1,062,000
Current portion of note payable and capital lease
obligations............................................ 133,000 --
Deferred revenue.......................................... 411,000 --
------------ ----------
Total current liabilities......................... 6,728,000 1,410,000
Note payable................................................ 283,000 --
Capital lease obligations................................... 218,000 --
Commitments and contingent liabilities
Shareholders' equity:
Series preferred stock -- $.01 par value, authorized
1,000,000 shares; issued and outstanding none.......... -- --
Common stock -- $.01 par value; authorized 75,000,000
shares; issued and outstanding 19,798,000 shares....... 198,000 --
Additional paid-in capital.................................. 185,354,000 --
(Deficit)................................................... (16,255,000) --
Parent's investment......................................... -- 321,000
------------ ----------
169,297,000 321,000
------------ ----------
$176,526,000 $1,731,000
============ ==========
</TABLE>

See accompanying notes.

F-5
<PAGE> 127

CORECOMM LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THE PREDECESSOR (OCOM)
-------------------------------------------
FOR THE PERIOD FROM FOR THE
APRIL 1, 1998 PERIOD FROM
(DATE OPERATIONS JANUARY 1,
COMMENCED) TO 1998 YEAR ENDED DECEMBER 31,
DECEMBER 31, TO MAY 31, -------------------------
1998 1998 1997 1996
------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES........................... $ 6,713,000 $ 1,452,000 $ 3,579,000 $ 5,103,000
COSTS AND EXPENSES
Operating.......................... 5,584,000 772,000 1,581,000 3,065,000
Selling, general and
administrative................... 13,989,000 3,205,000 5,934,000 3,119,000
Compensation charge from the
issuance of stock options........ 4,586,000 -- -- --
Depreciation....................... 749,000 255,000 428,000 138,000
Amortization....................... 231,000 2,000 11,000 11,000
------------ ----------- ----------- -----------
25,139,000 4,234,000 7,954,000 6,333,000
------------ ----------- ----------- -----------
Operating (loss)................... (18,426,000) (2,782,000) (4,375,000) (1,230,000)
OTHER INCOME (EXPENSE)
Interest income and other, net..... 2,632,000 -- (4,000) 133,000
Interest expense................... (21,000) -- -- --
------------ ----------- ----------- -----------
(Loss) before income tax
provision........................ (15,815,000) (2,782,000) (4,379,000) (1,097,000)
Income tax provision............... (440,000) -- -- --
------------ ----------- ----------- -----------
Net (loss)......................... $(16,255,000) $(2,782,000) $(4,379,000) $(1,097,000)
============ =========== =========== ===========
Basic and diluted net (loss) per
share............................ $ (.82) $ (.14) $ (.22) $ (.06)
============ =========== =========== ===========
</TABLE>

See accompanying notes.
F-6
<PAGE> 128

CORECOMM LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 1, 1998 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL
SHARES PAR PAID-IN CAPITAL (DEFICIT)
---------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Initial contribution...................... 1,800,000 $ 18,000 $ 22,167,000
Capital contributions..................... 17,997,000 180,000 158,598,000
Issuance of stock options................. 4,586,000
Exercise of warrants...................... 1,000 3,000
Net (loss) for the period from April 1,
1998 (date operations commenced) to
December 31, 1998....................... $(16,255,000)
---------- -------- ------------ ------------
Balance, December 31, 1998................ 19,798,000 $198,000 $185,354,000 $(16,255,000)
========== ======== ============ ============
</TABLE>

See accompanying notes.
F-7
<PAGE> 129

CORECOMM LIMITED AND SUBSIDIARIES
OCOM CORPORATION TELECOMS DIVISION (THE PREDECESSOR)

STATEMENT OF PARENT'S INVESTMENT (DEFICIENCY)
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH MAY 31, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<S> <C>
Balance, December 31, 1995.................................. $ 207,000
Capital contributions....................................... 682,000
Net loss for the year ended December 31, 1996............... (1,097,000)
-----------
Balance, December 31, 1996.................................. (208,000)
Capital contributions....................................... 4,908,000
Net loss for the year ended December 31, 1997............... (4,379,000)
-----------
Balance, December 31, 1997.................................. 321,000
Capital contributions....................................... 4,261,000
Net loss for the period ended May 31, 1998.................. (2,782,000)
-----------
Balance, May 31, 1998....................................... $ 1,800,000
===========
</TABLE>

See accompanying notes.
F-8
<PAGE> 130

CORECOMM LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THE PREDECESSOR (OCOM)
-----------------------------------------
FOR THE
FOR THE PERIOD FROM PERIOD FROM
APRIL 1, 1998 (DATE JANUARY 1,
OPERATIONS 1998 TO YEAR ENDED DECEMBER 31,
COMMENCED) TO MAY 31, --------------------------
DECEMBER 31, 1998 1998 1997 1996
------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss)................................ $ (16,255,000) $(2,782,000) $(4,379,000) $(1,097,000)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization........... 980,000 257,000 439,000 149,000
Compensation charge from the issuance of
stock options......................... 4,586,000 -- -- --
(Gain) loss on disposal of fixed
assets................................ 2,000 -- 4,000 (1,000)
Inventory reserve....................... -- -- 78,000 --
Provision for losses on accounts
receivable............................ 501,000 92,000 46,000 --
Accretion of interest on marketable
securities............................ (639,000) -- -- --
Other................................... (121,000) -- -- --
Changes in operating assets and
liabilities, net of effect from
business acquisitions:
Accounts receivable................... (480,000) (262,000) 129,000 129,000
Due from affiliates................... (1,954,000) -- -- --
Inventory............................. (82,000) 20,000 (158,000) --
Other current assets.................. (205,000) (199,000) 79,000 7,000
Other assets.......................... (2,824,000) -- -- --
Accounts payable...................... 1,261,000 (311,000) 169,000 82,000
Accrued expenses...................... 2,814,000 (453,000) 116,000 230,000
Deferred revenue...................... 94,000
------------- ----------- ----------- -----------
Net cash (used in) operating activities... (12,322,000) (3,638,000) (3,477,000) (501,000)
INVESTING ACTIVITIES
Purchase of fixed assets.................. (2,344,000) (623,000) (1,435,000) (183,000)
Proceeds from disposal of fixed assets.... 3,000 -- 4,000 2,000
Purchase of marketable securities......... (110,079,000) -- -- --
------------- ----------- ----------- -----------
Net cash (used in) investing activities... (112,420,000) (623,000) (1,431,000) (181,000)
FINANCING ACTIVITIES
Capital contributions..................... 150,904,000 4,261,000 4,908,000 682,000
Exercise of warrants...................... 3,000 -- -- --
Principal payments of capital lease
obligations............................. (4,000) -- -- --
------------- ----------- ----------- -----------
Net cash provided by financing
activities.............................. 150,903,000 4,261,000 4,908,000 682,000
------------- ----------- ----------- -----------
Increase in cash and cash equivalents..... 26,161,000 -- -- --
Cash and cash equivalents at beginning of
period.................................. -- -- -- --
------------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.................................. $ 26,161,000 $ -- $ -- $ --
============= =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest.................... $ 4,000 $ -- $ -- $ --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES
Capital contributions of noncash net
assets.................................. $ 30,059,000 $ -- $ -- $ --
Liabilities incurred to acquire fixed
assets.................................. 175,000 -- -- --
</TABLE>

See accompanying notes.
F-9
<PAGE> 131

CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

CoreComm Limited (the "Company"), formerly a wholly-owned subsidiary of
Cellular Communications of Puerto Rico, Inc. ("CCPR"), was formed in March 1998
(operations commenced in April 1998) in order to succeed to the businesses and
assets that were operated by OCOM Corporation and as an appropriate vehicle to
pursue new telecommunications opportunities outside of Puerto Rico and the U.S.
Virgin Islands. In September 1998, CCPR made a cash contribution to the Company
of $150,000,000 and distributed 100% of the outstanding shares of the Company on
a one-for-one basis to CCPR's shareholders.

The Company's competitive local exchange carrier ("CLEC"), cellular long
distance, landline long distance and cellular resale businesses were formerly
owned and operated by OCOM Corporation Telecoms Division ("OCOM"). CCPR acquired
the operating assets and related liabilities of these businesses from OCOM on
June 1, 1998. OCOM is the predecessor business to the Company.

In addition to the businesses acquired from OCOM, the Company also sells
pre-paid cellular service through the sale of pre-paid cards, provides
centralized telecommunications services ("Centrex"), provides a full range of
Internet services for both home and business customers through its Internet
Service Provider ("ISP") subsidiary and provides paging service and pager
repairs. The Company's customers are located throughout the United States,
although much of the Company's business is conducted in Ohio. The Company does
not own any facilities, except for certain ISP facilities. Instead, it purchases
capacity on a wholesale basis pursuant to contracts and sells it at retail rates
to end users. The Company depends upon the facilities-based carriers to maintain
the quality of their service to the Company's customers. Also, except for
pre-paid cellular service, the Company depends upon the facilities-based
carriers for accurate and prompt billing information in order for the Company to
bill its customers. In addition, all of the Company's lines of business are
highly competitive which results in pricing pressure and increasing customer
acquisition costs, and primarily all are dependent upon trends in the use of
communications service.

The following are the revenues from external customers for each of the
Company's communications services:

<TABLE>
<CAPTION>
FOR THE THE PREDECESSOR (OCOM)
PERIOD FROM ---------------------------------------
APRIL 1, FOR THE
1998 (DATE PERIOD FROM
OPERATIONS JANUARY 1,
COMMENCED) TO 1998 YEAR ENDED DECEMBER 31,
DECEMBER 31, TO MAY 31, ------------------------
1998 1998 1997 1996
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
CLEC and landline long distance......... $1,976,000 $ 217,000 $ 167,000 $ 104,000
Cellular long distance.................. 1,035,000 1,034,000 3,352,000 4,999,000
Centrex................................. 1,017,000 -- -- --
Wireless (including pre-paid
cellular)............................. 2,530,000 201,000 60,000 --
ISP..................................... 155,000 -- -- --
---------- ---------- ---------- ----------
$6,713,000 $1,452,000 $3,579,000 $5,103,000
========== ========== ========== ==========
</TABLE>

In February 1999, the Company entered into an agreement to acquire MegsINet
Inc., a national Internet network and regional telecommunications provider. The
Company will purchase 100% of MegsINet's stock for a total consideration of
approximately $16.75 million in cash plus approximately 2.1 million shares of
the Company's common stock. This transaction is subject to certain conditions,
including the registration of the Company's stock to be issued.

F-10
<PAGE> 132
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Also in February 1999, the Company entered into an agreement to acquire
certain assets of USN Communications, Inc., a CLEC reseller. Completion of this
transaction is conditioned upon approval by the Bankruptcy Court presiding over
USN's Chapter 11 case, in which third parties may bid for the same assets.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Principles of Consolidation

The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and those entities where the Company's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.

Cash Equivalents

Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $20,995,000 at December
31, 1998 and consisted of corporate commercial paper.

Marketable Securities

Marketable securities are classified as available-for-sale, which are
carried at fair value. Unrealized holding gains and losses on securities, net of
tax, are carried as a separate component of shareholders' equity. The amortized
cost of debt securities is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in interest income.
Realized gains and losses and declines in value judged to be other than
temporary will be included in interest income. The cost of securities sold or
matured is based on the specific identification method. Interest on securities
is included in interest income.

Marketable securities at December 31, 1998 consisted of a certificate of
deposit and corporate commercial paper. During the period from April 1, 1998
(date operations commenced) to December 31, 1998, there were no realized gains
or losses on sales of securities. All of the marketable securities as of
December 31, 1998 had a contractual maturity of less than one year.

Inventory

Inventory consists principally of telephones, pagers and accessories and is
stated at the lower of cost or market. Cost is determined by specific
identification or the first-in, first-out method.

Financial Instruments

The carrying value of all financial instruments approximates their fair
value due to the short maturity of the respective instruments.

F-11
<PAGE> 133
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives are as follows: operating equipment--5 or 15 years, computer
hardware and software--3 or 5 years and other equipment--2 to 7 years, except
for leasehold improvements for which the estimated useful lives are the term of
the lease.

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and carrying value of the asset.

Goodwill

Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over the 10 year period benefited. The
Company continually reviews the recoverability of the carrying value of goodwill
using the same methodology that it uses for the evaluation of its other
long-lived assets.

LMDS License Costs

The costs incurred to acquire the Local Multipoint Distribution Service
("LMDS") licenses from the Federal Communications Commission (the "FCC") were
deferred and will be amortized on a straight-line basis over the term of the
licenses upon the commencement of operations. The Company continually reviews
the recoverability of the carrying value of LMDS licenses using the same
methodology that it uses for the evaluation of its other long-lived assets.

Noncompetition Agreements

Other assets include noncompetition agreements obtained in connection with
an acquisition which were valued at an aggregate of $100,000. The noncompetition
agreements are being charged to expense on a straight-line basis over the
noncompetition period of 5 years.

Net (Loss) Per Share

The Company reports its net (loss) per share in accordance with the
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share." The denominator for the basic
and diluted net loss per common share computations was 19,785,000, 19,776,000,
19,613,000 and 19,794,000 for the period from April 1, 1998 (date operations
commenced) to December 31, 1998, for the period from January 1, 1998 to May 31,
1998 and for the years ended December 31, 1997 and 1996, respectively (as
adjusted for the 3-for-2 stock split by way of stock dividend paid on September
2, 1999). These weighted average shares are equivalent to CCPR's historical
weighted average shares (since CCPR shareholders received one share of the
Company for each CCPR share owned), plus the Company's weighted average shares
in the 1998 period. The shares issuable upon the exercise of stock options and
warrants are excluded from the calculation of net loss per share as their effect
would be antidilutive.

Revenue Recognition

Telecommunications revenue is recognized at the time service is provided to
the customer. Charges for services that are billed in advance are deferred and
recognized when earned.

F-12
<PAGE> 134
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Advertising Expense

The Company charges the cost of advertising to expense as incurred.
Advertising expense for the period from April 1, 1998 (date operations
commenced) to December 31, 1998, for the period from January 1, 1998 to May 31,
1998 and for the years ended December 31, 1997 and 1996 were $812,000, $79,000,
$127,000 and $350,000, respectively.

Stock-Based Compensation

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS No. 130 in 1998, which had no
effect on the consolidated financial statements.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company adopted
SFAS No. 131 in 1998, which had no effect on the consolidated financial
statements since the Company operates in one business segment.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in fiscal
years beginning after June 15, 1999. Management does not anticipate that the
adoption of the new standard will have a significant effect on the results of
operations, financial condition or cash flows of the Company.

4. ACQUISITIONS

In April and June 1998, CCPR acquired the stock of Digicom, Inc. and
certain operating assets and related liabilities of JeffRand Corp. (known as the
Wireless Outlet) and OCOM Corporation. CCPR contributed these businesses to the
Company. These acquisitions were accounted for as purchases by CCPR, and,
accordingly, the net assets and results of operations of the acquired businesses
have been included in the consolidated financial statements from the dates of
acquisition. The contribution of the assets from CCPR to the Company was
accounted for at historical cost in a manner consistent with a transfer of
entities under common control which is similar to that used in a "pooling of
interests". The Company's financial statements include the results of the
contributed companies for all periods owned by CCPR. In November 1998, a
wholly-owned subsidiary of the Company acquired substantially all of the assets
and certain liabilities of Stratos Internet Group, Inc. ("Stratos"), an ISP in
the Cleveland-Akron, Ohio area. This acquisition has been accounted for as a
purchase, and, accordingly, the net assets and results of operations of Stratos
have been included in the consolidated financial statements from the date of
acquisition.

F-13
<PAGE> 135
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of the allocation of the aggregate purchase price is as follows:

<TABLE>
<S> <C>
Cash.................................................. $ 4,887,000
Note payable.......................................... 362,000
-----------
Aggregate purchase price.............................. 5,249,000
Net assets acquired:
Current assets........................................ 1,600,000
Fixed assets.......................................... 1,817,000
Current liabilities................................... (2,251,000)
Capital lease obligations............................. (275,000)
-----------
891,000
-----------
Excess purchase price................................. 4,358,000
Allocated to:
Noncompetition agreements............................. 100,000
-----------
Goodwill.............................................. $ 4,258,000
===========
</TABLE>

The pro forma unaudited consolidated results of operations for the years
ended December 31, 1998 and 1997 assuming consummation of the acquisitions and
receipt of the capital contributions from CCPR as of January 1, 1997 are as
follows. The pro forma net (loss) and basic and diluted net (loss) per share do
not give effect to interest income that may have been earned had the
$150,000,000 cash capital contribution from CCPR been made on January 1, 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Total revenue.................................... $ 11,499,000 $ 9,829,000
Net (loss)....................................... (19,132,000) (7,303,000)
Basic and diluted net (loss) per share........... (.97) (.37)
</TABLE>

5. LMDS LICENSE COSTS

A wholly-owned subsidiary of CCPR, Cortelyou Communications Corp.
("Cortelyou") was the successful bidder, for an aggregate of $25,241,000, for 15
Block A LMDS licenses in Ohio. LMDS frequencies are expected to be used for the
provision of voice, data, video and Internet services to businesses and homes in
competition with incumbent local exchange telephone companies and/or cable
television operators. The FCC has allocated two blocks of frequencies to be
licensed in each of the 493 Basic Trading Areas in the United States and its
territories based on an auction that commenced in February 1998 and ended in
March 1998. In June 1998, CCPR funded Cortelyou's payment of its bid and the FCC
issued the licenses. Costs of $125,000 were incurred in connection with the
auction and the license acquisition. CCPR contributed Cortelyou to the Company.

F-14
<PAGE> 136
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. FIXED ASSETS

Fixed assets consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Operating equipment................................. $ 720,000 $ --
Computer hardware and software...................... 2,450,000 1,640,000
Other equipment..................................... 987,000 566,000
Construction in progress............................ 5,000 --
---------- ----------
4,162,000 2,206,000
Accumulated depreciation............................ (580,000) (937,000)
---------- ----------
$3,582,000 $1,269,000
========== ==========
</TABLE>

7. ACCRUED EXPENSES

Accrued expenses consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Payroll and related................................. $1,263,000 $ 433,000
Professional fees................................... 527,000 204,000
Taxes excluding income taxes........................ 1,246,000 108,000
Advertising......................................... 175,000 115,000
Other............................................... 1,036,000 202,000
---------- ----------
$4,247,000 $1,062,000
========== ==========
</TABLE>

8. NOTE PAYABLE

The Company issued a note payable in the amount of $362,000 in connection
with the Stratos acquisition. Interest on the note accrues at 5.542% per annum.
The note is payable in twelve consecutive quarterly payments of principal and
interest of $33,000 commencing in May 1999 and is collateralized by the assets
acquired from Stratos. The Company recorded approximately $1,000 of interest
expense in 1998. As of December 31, 1998, $80,000 of the balance was included in
current liabilities and $283,000 was recorded as note payable.

F-15
<PAGE> 137
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. LEASES

The Company has capital leases for certain of its operating equipment. At
December 31, 1998, leased property included in operating equipment aggregated
$258,000 with accumulated depreciation of $7,000. Future minimum annual payments
under these leases at December 31, 1998 are as follows:

<TABLE>
<S> <C>
Year Ending December 31,
1999...................................................... $ 81,000
2000...................................................... 81,000
2001...................................................... 81,000
2002...................................................... 81,000
2003...................................................... 21,000
--------
345,000
Interest at 11.5%......................................... (74,000)
--------
Present value of minimum obligations...................... 271,000
Current portion........................................... (53,000)
--------
$218,000
========
</TABLE>

As of December 31, 1998, the Company had leases for office space and
equipment which extend through 2009. Total rent expense for the period from
April 1, 1998 (date operations commenced) to December 31, 1998, the period from
January 1, 1998 to May 31, 1998 and for the years ended December 31, 1997 and
1996 under operating leases was $354,000, $98,000, $131,000 and $60,000,
respectively.

Future minimum annual lease payments under noncancellable operating leases
at December 31, 1998 are: $1,559,000 (1999); $1,764,000 (2000); $1,740,000
(2001); $1,753,000 (2002); $1,467,000 (2003) and $5,909,000 thereafter.

10. COMPENSATION CHARGE

The compensation charge of $4,586,000 in 1998 is a non-cash charge recorded
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," as a one time charge related to the issuance of the Company's stock
options to holders of CCPR's stock options in connection with the Company's
distribution to CCPR's shareholders.

11. RELATED PARTY TRANSACTIONS

Certain officers and directors of the Company are also officers or
directors of NTL Incorporated ("NTL"). NTL provides certain corporate
management, financial, legal and technical services to the Company. Amounts
charged to the Company by NTL consist of salaries and direct costs where
identifiable and 30% of NTL's corporate overhead. It is not practicable to
determine the amount of expenses that would have been incurred had the Company
operated as an unaffiliated entity. In the opinion of management, this
allocation method is reasonable. In 1998, NTL charged the Company $313,000 which
is included in general and administrative expenses.

The Company's relationship with CCPR is governed by agreements entered into
in connection with the distribution, including a Tax Disaffiliation Agreement.
The Tax Disaffiliation Agreement details the respective obligations concerning
various tax liabilities and provides for cooperation with respect to certain tax
matters, the exchange of information and the retention of records.

F-16
<PAGE> 138
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

OCOM provided, and now a subsidiary of the Company provides, billing and
software development services to subsidiaries of CCPR and subsidiaries of NTL.
Certain officers and directors of the Company are officers and directors of
CCPR. Beginning in 1997, the Company charged amounts in excess of its costs to
provide these services. General and administrative expenses were reduced by
$275,000, $138,000, and $217,000 for the period from April 1, 1998 (date
operations commenced) to December 31, 1998, the period from January 1, 1998 to
May 31, 1998 and for the year ended December 31, 1997, respectively, as a result
of these charges.

At December 31, 1998, due from affiliates included $128,000 due from CCPR
and $1,826,000 due from NTL.

12. 401(k) PLAN

A subsidiary of the Company sponsors a 401(k) Plan in which all full-time
employees of that subsidiary who have completed 90 days of employment and are 21
years of age may participate. The Company's matching contribution is determined
annually by the Board of Directors. Participants may make salary deferral
contributions of 1% to 15% of their compensation not to exceed the maximum
allowed by law. The expense for the period from April 1, 1998 (date operations
commenced) to December 31, 1998, the period from January 1, 1998 to May 31, 1998
and for the years ended December 31, 1997 and 1996 was $103,000, $29,000,
$126,000 and $46,000, respectively.

13. SHAREHOLDERS' EQUITY

Shareholder Rights Plan

The Rights Agreement provides that one Right will be issued with each share
of common stock issued on or after the date of distribution. The Rights become
exercisable upon the occurrence of certain potential takeover events and will
expire in December 2010 unless previously redeemed by the Company. When
exercisable, each Right entitles the owner to purchase from the Company of a
share of Series A Junior Participating Preferred Stock ("Series A Preferred
Stock") at a purchase price of $100.

The Series A Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share and will be entitled to an
aggregate dividend of 100 times the dividend, if any, declared per share of
common stock. In the event of liquidation, the holders of Series A Preferred
Stock will be entitled to a minimum preferential liquidation payment of $100 per
share and will be entitled to an aggregate payment of 100 times the payment made
per share of the common stock. Each share of Series A Preferred Stock will have
100 votes and will vote together with the common stock. In the event of any
merger, consolidation or other transaction in which shares of common stock are
changed or exchanged, each share of Series A Preferred Stock will be entitled to
receive 100 times the amount received per share of common stock. The rights are
protected by customary antidilution provisions.

The 1,000,000 authorized shares of Series Preferred Stock are designated
Series A Preferred Stock. No shares of Series A Preferred Stock are issued or
outstanding.

Warrants and Stock Options

In connection with the distribution of the Company to CCPR's shareholders,
the Company issued warrants to purchase shares of common stock to holders of
CCPR stock options who elected to receive warrants as follows: (1) warrants to
purchase an aggregate of 2,870,000 shares of common stock at an exercise price
of $8.79 per share which expire in 2005, (2) warrants to purchase an aggregate
of 6,000 shares of common stock at an exercise price of $8.79 per share which
expire in 2003 and (3) warrants to purchase an aggregate of 1,229,000 shares of
common stock at an exercise price of $10.55 which expire in

F-17
<PAGE> 139
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2005. As of December 31, 1998, there were 4,103,000 shares of common stock
reserved for issuance upon the exercise of warrants.

There are 9,000,000 shares of common stock reserved for issuance under the
1998 Stock Option Plan (the "Plan"). The Plan provides that incentive stock
options be granted at the fair market value of the Company's common stock on the
date of grant, and nonqualified stock options be granted at a price determined
by the Compensation and Option Committee. Options are exercisable as to 20% of
the shares subject thereto on the date of grant and become exercisable as to an
additional 20% of the shares subject thereto on each January 1 thereafter, while
the optionee remains an employee of the Company. Options will expire ten years
after the date of the grant.

In connection with the distribution of the Company to CCPR's shareholders,
the Company issued approximately 1,251,000 options to purchase shares of the
Company's common stock to holders of CCPR stock options who elected to receive
options.

Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, and has been determined as if the Company had accounted for its
employee warrants and stock options under the fair value method of that
Statement. The fair value for these warrants and options was estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions for 1998: risk-free interest rate of 5.02%,
dividend yield of 0%, volatility factor of the expected market price of the
Company's common stock of .810, and a weighted-average expected life of the
warrants and options of 8.1 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's warrants and stock options have
characteristics significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its warrants and stock
options.

For purposes of pro forma disclosures, the estimated fair value of the
warrants and options is amortized to expense over the warrants and options'
vesting periods. Following is the Company's pro forma information for the period
from April 1, 1998 (date operations commenced) to December 31, 1998:

<TABLE>
<S> <C>
Pro forma net (loss)................................... $(48,015,000)
Pro forma net (loss) per share -- basic and
diluted................................................ $ (2.43)
</TABLE>

A summary of the Company's warrants and stock option activity and related
information for the period from April 1, 1998 (date operations commenced) to
December 31, 1998 follows:

<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
WARRANTS AND EXERCISE
OPTIONS PRICE
------------ ---------
<S> <C> <C>
Granted.............................................. 6,512,000 $ 8.26
Exercised............................................ (2,000) 8.79
Forfeited............................................ -- --
---------
Outstanding -- end of period......................... 6,510,000 $ 8.26
=========
Exercisable at end of period......................... 4,584,000 $ 9.01
=========
</TABLE>

F-18
<PAGE> 140
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Weighted-average fair value of warrants and options, calculated using the
Black-Scholes option pricing model, granted during 1998 is $6.49.

The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 1998:

<TABLE>
<CAPTION>
STOCK OPTIONS
STOCK OPTIONS OUTSTANDING EXERCISABLE
----------------------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
EXERCISE PRICE OPTIONS LIFE PRICE OPTIONS PRICE
- -------------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$0.03 to $0.44 621,000 9.7 Years $ 0.255 125,000 $ 0.255
$4.15 to $4.54 65,000 9.7 Years $ 4.44 12,000 $ 4.44
$7.92 to $8.79 1,722,000 9.7 Years $ 8.77 345,000 $ 8.77
--------- -------
Total 2,408,000 482,000
========= =======
</TABLE>

14. INCOME TAXES

The provision for income taxes for the period from April 1, 1998 (date
operations commenced) to December 31, 1998 consists of the following:

<TABLE>
<S> <C>
Current:
Federal................................................... $ --
State and local......................................... 440,000
--------
Total current............................................. 440,000
--------
Deferred:
Federal................................................. --
State and local......................................... --
--------
Total deferred............................................ --
--------
$440,000
========
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1998 are as
follows:

<TABLE>
<S> <C>
Deferred tax liabilities:
Tax over book depreciation and amortization............. $ 58,000
Deferred tax assets:
Net operating losses.................................. 5,419,000
Allowance for doubtful accounts....................... 301,000
Amortization of goodwill.............................. 24,000
-----------
5,744,000
Valuation allowance for deferred tax assets........... (5,686,000)
-----------
Net deferred tax assets................................. 58,000
-----------
Net deferred tax liabilities............................ $ --
===========
</TABLE>

F-19
<PAGE> 141
CORECOMM LIMITED AND SUBSIDIARIES
AND ITS PREDECESSOR OCOM CORPORATION TELECOMS DIVISION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1998, the Company had net operating loss carryforwards of
approximately $13,400,000 for federal income tax purposes that expire in 2018.
Since the Company cannot file a consolidated federal income tax return, the net
operating loss carryforward can only be utilized by the subsidiary that
generated the loss. The net deferred tax assets of $5,686,000 have been fully
offset by a valuation allowance due to the uncertainty of realizing such tax
benefit.

The reconciliation of income taxes computed at U.S. federal statutory rates
to income tax expense for the period from April 1, 1998 (date operations
commenced) to December 31, 1998 is as follows:

<TABLE>
<S> <C>
Benefit at federal statutory rate (35%)................. $ 5,689,000
State and local income taxes............................ 440,000
Expenses not deductible for tax purposes................ (1,623,000)
Foreign income not subject to U.S. tax.................. 846,000
U.S. losses with no benefit............................. (4,912,000)
-----------
$ 440,000
===========
</TABLE>

15. COMMITMENTS AND CONTINGENT LIABILITIES

As of December 31, 1998, the Company has purchase commitments of
approximately $2,200,000 outstanding.

The Company is involved in various disputes, arising in the ordinary course
of its business, which may result in pending or threatened litigation. None of
these matters are expected to have a material adverse effect on the Company's
financial position, results of operations or cash flows.

16. STOCK SPLIT

The Company declared a 3-for-2 stock split by way of a stock dividend,
which was paid on September 2, 1999. All common stock data in the consolidated
financial statements give effect to the stock split.

F-20
<PAGE> 142

CORECOMM LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 14,824,000
Marketable securities..................................... 23,582,000
Accounts receivable-trade, less allowance for doubtful
accounts of $6,797,000................................. 10,623,000
Due from NTL Incorporated................................. 6,331,000
Other..................................................... 3,652,000
------------
Total current assets.............................. 59,012,000
Fixed assets, net........................................... 78,100,000
Goodwill, net of accumulated amortization of $3,933,000..... 56,297,000
Customer lists, net of accumulated amortization of
$1,028,000................................................ 12,312,000
LMDS license costs.......................................... 25,366,000
Other, net of accumulated amortization of $385,000.......... 7,762,000
------------
$238,849,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 11,106,000
Accrued expenses.......................................... 17,561,000
Equipment payable......................................... 4,702,000
Current portion of notes payable and capital lease
obligations............................................ 16,604,000
Deferred revenue.......................................... 1,516,000
------------
Total current liabilities......................... 51,489,000
Notes payable............................................... 5,384,000
Capital lease obligations................................... 17,645,000
Commitments and contingent liabilities
Shareholders' equity:
Series preferred stock -- $.01 par value, authorized
1,000,000 shares; issued and outstanding none.......... --
Common stock -- $.01 par value; authorized 75,000,000
shares; issued and outstanding 25,443,000.............. 254,000
Additional paid-in capital................................ 242,658,000
(Deficit)................................................. (78,581,000)
------------
164,331,000
------------
$238,849,000
============
</TABLE>

See accompanying notes.

F-21
<PAGE> 143

CORECOMM LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM APRIL 1, THE PREDECESSOR
1998 (DATE (OCOM)
NINE MONTHS OPERATIONS FOR THE PERIOD
ENDED COMMENCED) TO FROM JANUARY 1,
SEPTEMBER 30, SEPTEMBER 30, 1998 TO MAY 31,
1999 1998 1998
------------- -------------- ---------------
<S> <C> <C> <C>
REVENUES............................................ $ 37,139,000 $ 3,812,000 $ 1,452,000
COSTS AND EXPENSES
Operating........................................... 37,524,000 3,173,000 772,000
Selling, general and administrative................. 43,725,000 5,777,000 3,205,000
Corporate........................................... 6,489,000 514,000 --
Stock option based compensation..................... 1,056,000 4,586,000 --
Depreciation........................................ 6,674,000 397,000 255,000
Amortization........................................ 5,005,000 120,000 2,000
------------ ------------ -----------
100,473,000 14,567,000 4,234,000
------------ ------------ -----------
Operating (loss).................................... (63,334,000) (10,755,000) (2,782,000)
OTHER INCOME (EXPENSE)
Interest income and other, net...................... 3,416,000 749,000 --
Interest expense.................................... (1,569,000) (1,000) --
------------ ------------ -----------
(Loss) before income tax provision.................. (61,487,000) (10,007,000) (2,782,000)
Income tax provision................................ (839,000) -- --
------------ ------------ -----------
Net (loss).......................................... $(62,326,000) $(10,007,000) $(2,782,000)
============ ============ ===========
Basic and diluted net (loss) per share.............. $ (2.85) $ (.51) $ (.14)
============ ============ ===========
Weighted average shares............................. 21,873,000 19,781,000 19,776,000
============ ============ ===========
</TABLE>

See accompanying notes.

F-22
<PAGE> 144

CORECOMM LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN
SHARES PAR CAPITAL (DEFICIT)
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998............. 19,798,000 $198,000 $185,354,000 $(16,255,000)
Exercise of stock options.............. 380,000 4,000 2,193,000
Exercise of warrants................... 3,154,000 31,000 10,873,000
Common stock issued for acquisition.... 2,111,000 21,000 30,055,000
Stock options issued for acquisition... 4,027,000
Warrants issued for acquisition........ 9,100,000
Stock option based compensation........ 1,056,000
Net (loss) for the nine months ended
September 30, 1999................... (62,326,000)
---------- -------- ------------ ------------
Balance, September 30, 1999............ 25,443,000 $254,000 $242,658,000 $(78,581,000)
========== ======== ============ ============
</TABLE>

See accompanying notes.

F-23
<PAGE> 145

CORECOMM LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
THE
FOR THE PREDECESSOR
PERIOD FROM (OCOM)
APRIL 1, 1998 FOR THE
NINE MONTHS (DATE OPERATIONS PERIOD FROM
ENDED COMMENCED) JANUARY 1, 1998
SEPTEMBER 30, TO SEPTEMBER 30, TO MAY 31,
1999 1998 1998
------------- ---------------- ---------------
<S> <C> <C> <C>
Net cash provided by (used in) operating
activities.................................... $(47,973,000) $ 3,340,000 $(3,638,000)
INVESTING ACTIVITIES
Purchase of fixed assets........................ (14,906,000) (1,821,000) (623,000)
Acquisitions, net of cash acquired.............. (47,056,000) -- --
Purchase of marketable securities............... (65,299,000) -- --
Proceeds from sale of marketable securities..... 154,544,000 -- --
------------ ------------ -----------
Net cash provided by (used in) investing
activities.................................... 27,283,000 (1,821,000) (623,000)
FINANCING ACTIVITIES
Capital contributions........................... -- 150,904,000 4,261,000
Principal payments.............................. (2,214,000) -- --
Principal payments of capital lease
obligations................................... (1,534,000) -- --
Proceeds from exercise of stock options and
warrants...................................... 13,101,000 -- --
------------ ------------ -----------
Net cash provided by financing activities....... 9,353,000 150,904,000 4,261,000
------------ ------------ -----------
Increase (decrease) in cash and cash
equivalents................................... (11,337,000) 152,423,000 --
Cash and cash equivalents at beginning of
period........................................ 26,161,000 -- --
------------ ------------ -----------
Cash and cash equivalents at end of period...... $ 14,824,000 $152,423,000 $ --
============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest.......................... $ 735,000 $ -- $ --
Income taxes paid............................... 1,209,000 -- --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES
Capital contributions of non-cash net assets.... $ -- $ 30,059,000 $ --
Liabilities incurred to acquire fixed assets.... 6,335,000 -- --
Common stock, stock options and warrants issued
for acquisitions.............................. 43,203,000 -- --
</TABLE>

See accompanying notes.

F-24
<PAGE> 146

CORECOMM LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine months
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included
herein.

The financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." All
balance sheet accounts have been translated using the current exchange rates at
the respective balance sheet dates. Statement of operations amounts have been
translated using the average exchange rates for the respective periods. The
gains or losses resulting from the change in exchange rates were not
significant.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in fiscal years beginning after June 15, 2000. Management
does not anticipate that the adoption of this standard will have a significant
effect on earnings or the financial position of the Company.

In August 1999, the Company declared a 3-for-2 stock split by way of stock
dividend, which was paid on September 2, 1999. All common stock and per share
amounts have been adjusted to reflect the stock split.

The shares issuable upon the exercise of stock options and warrants are
excluded from the calculation of net (loss) per share as their effect would be
antidilutive.

NOTE 2. ORGANIZATION AND BUSINESS

CoreComm Limited (the "Company"), formerly a wholly-owned subsidiary of
Cellular Communications of Puerto Rico, Inc. ("CCPR"), was formed in March 1998
(operations commenced in April 1998) in order to succeed to the businesses and
assets that were operated by OCOM Corporation and as an appropriate vehicle to
pursue new telecommunications opportunities outside of Puerto Rico and the U.S.
Virgin Islands. On June 1, 1998, CCPR acquired certain operating assets and
related liabilities from OCOM Corporation Telecoms Division ("OCOM"). OCOM is
the predecessor business to the Company. In September 1998, CCPR made a cash
contribution to the Company of $150,000,000 and distributed 100% of the
outstanding shares of the Company on a one-for-one basis to CCPR's shareholders.

NOTE 3. ACQUISITIONS

In May 1999, the Company acquired 100% of the stock of MegsINet Inc., a
national Internet service provider ("ISP") with a national Asynchronous Transfer
Mode network and local telecommunications facilities in Chicago for a total
consideration of $16.8 million in cash and 2.1 million shares of the Company's
common stock. In addition, the Company exchanged MegsINet stock options for
options to purchase 296,000 shares of the Company's common stock, repaid $2.0
million of MegsINet debt and incurred acquisition related costs of $1.2 million.
The common stock portion of the consideration was valued at $30.1 million, the
fair value on the date prior to the announcement. The stock options were valued
at $4.0 million using the Black-Scholes option pricing model.

F-25
<PAGE> 147

CORECOMM LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

Also in May 1999, the Company acquired the wireline assets of USN
Communications, Inc., which was a competitive local exchange carrier ("CLEC")
that operated on a resale basis, for a cash payment of $26.4 million, warrants
to purchase 375,000 shares of the Company's common stock at a price of $20 per
share and 150,000 shares at a price of $33.33 per share, and a potential
contingent cash payment to be paid in July 2000 which is capped at $58.6
million. The contingent payment is payable only if the USN assets meet or exceed
operating performance thresholds. The warrants were valued at $9.1 million based
on an appraisal as of the date of issuance. In addition, the Company incurred
acquisition related costs of $1.0 million.

In August 1999, the Company acquired a 53% interest in Q-east Holding
Limited, a Taiwan-based startup reseller of telephone services. To date,
CoreComm has invested approximately $2.4 million into Q-east Holding Limited.

These acquisitions have been accounted for as purchases, and accordingly,
the net assets and results of operations of the acquired businesses have been
included in the consolidated financial statements from the dates of acquisition.
The aggregate purchase price of $93.0 million exceeded the fair value of the net
tangible assets acquired by $70.7 million, which was allocated as follows: $13.3
million to customer lists, $1.5 million to other intangibles and $55.9 million
to goodwill.

This acquisition has been accounted for as a purchase, and, accordingly,
the net assets and results of operations of Stratos have been included in the
consolidated financial statements from the date of acquisition.

The pro forma unaudited consolidated results of operations for the nine
months ended September 30, 1999 and 1998 assuming consummation of the
acquisitions and receipt of the capital contributions from CCPR as of January 1,
1998 are as follows. The pro forma net (loss) and net (loss) per share do not
give effect to interest income that may have been earned had the $150,000,000
cash capital contribution from CCPR been made on January 1, 1998.

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Total revenue.......................... $ 76,843,000 $ 116,377,000
Net (loss)............................. (97,166,000) (152,424,000)
Basic and diluted net (loss) per
share................................ (4.09) (6.96)
</TABLE>

A significant component of the pro forma results is associated with the
acquisition of certain assets of USN. Although USN quickly developed a large
customer list and revenue base in 1997 and 1998, it had difficulties under its
previous management providing services, including billing, customer care and
other operational areas, and filed for bankruptcy in February 1999. Since the
acquisition, we have been focusing

F-26
<PAGE> 148

CORECOMM LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

on improving these operations, and have been successful in many areas. However,
we do not intend to actively sell additional lines in these markets until we are
fully satisfied with the quality of the operations. Consequently, and consistent
with our due diligence, transaction structure and purchase price, revenues
associated with the USN assets have declined significantly since our
acquisition, and additional declines may continue over the next several months
as customers leave or "churn" off the service.

NOTE 4. FIXED ASSETS

Fixed assets consist of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
Operating equipment..................................... $50,142,000
Computer hardware and software.......................... 15,414,000
Other equipment......................................... 8,986,000
Construction in progress................................ 10,786,000
-----------
85,328,000
Accumulated depreciation................................ (7,228,000)
-----------
$78,100,000
===========
</TABLE>

NOTE 5. ACCRUED EXPENSES

Accrued expenses consist of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
Payroll and related..................................... $ 3,069,000
Professional fees....................................... 1,484,000
Taxes, including income taxes........................... 5,631,000
Toll and interconnect................................... 1,411,000
Accrued equipment purchases............................. 2,218,000
Advertising............................................. 1,163,000
Other................................................... 2,585,000
-----------
$17,561,000
===========
</TABLE>

F-27
<PAGE> 149

CORECOMM LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

NOTE 6. LEASES

The Company has capital leases for certain of its operating equipment.
Future minimum lease payments under these capital leases as of September 30,
1999 are:

<TABLE>
<S> <C>
October 1 to December 31, 1999......................... $ 3,409,000
Year ending December 31:
2000................................................. 14,300,000
2001................................................. 13,053,000
2002................................................. 2,480,000
2003................................................. 19,000
------------
Total minimum lease payments........................... 33,261,000
Less amount representing interest (at rates ranging
from 8.5% to 26.44%)................................. (3,990,000)
------------
Present value of net minimum capital lease payments.... 29,271,000
Current portion........................................ (11,626,000)
------------
$ 17,645,000
============
</TABLE>

NOTE 7. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
Borrowing under Ascend working capital promissory
note, interest at 8.5%.............................. $ 3,451,000
Note payable to Cisco for equipment, interest at
12.75%................................................ 6,605,000
Other................................................. 306,000
-----------
10,362,000
Less current portion.................................. 4,978,000
-----------
$ 5,384,000
===========
</TABLE>

MegsINet originally borrowed $4 million from Ascend Communications, Inc.
("Ascend") under a working capital promissory note dated August 1998. MegsINet
is required to make monthly principal and interest payments of $148,000 through
January 2002. The Company has issued a warrant to Ascend to purchase
approximately 19,500 shares of the Company's common stock at $20.63 per share in
connection with the promissory note. The warrant expires in August 2008.

In 1998, MegsINet entered into an agreement with Cisco Systems Capital
Corporation ("Cisco"), whereby MegsINet can purchase operating equipment under a
promissory note. MegsINet is required to make monthly principal and interest
payments that decline each month from $348,000 beginning in July 1999 through
September 2001. The Company has guaranteed the obligations of MegsINet under the
promissory note.

In October 1999, the Company issued $175,000,000 principal amount of 6%
Convertible Subordinated Notes due 2006 (the "Convertible Notes"). Interest on
the Convertible Notes is payable semiannually on April 1 and October 1 of each
year, commencing April 1, 2000. The Convertible Notes are unsecured obligations
convertible into common stock prior to maturity at a conversion price of $41.09
per share,

F-28
<PAGE> 150

CORECOMM LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

subject to adjustment. There are approximately 4.26 million shares of common
stock reserved for issuance upon conversion of the Convertible Notes. The
Convertible Notes are redeemable, in whole or in part, at the option of the
Company, at any time on or after October 1, 2002, at a redemption price of
103.429% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the redemption date.

NOTE 8. RELATED PARTY TRANSACTIONS

Some of the officers and directors of the Company are also officers or
directors of NTL Incorporated ("NTL"). NTL provides the Company with management,
financial, legal and technical services, access to office space and equipment
and use of supplies. Amounts charged to the Company by NTL consist of salaries
and direct costs allocated to the Company where identifiable, and a percentage
of the portion of NTL's corporate overhead which cannot be specifically
allocated to NTL (which is agreed upon by the Boards of Directors of NTL and the
Company). NTL's charges to the Company commenced in October 1998. It is not
practicable to determine the amounts of these expenses that would have been
incurred had the Company operated as an unaffiliated entity. In our opinion,
this allocation method is reasonable. For the nine months ended September 30,
1999, NTL charged the Company $1,418,000, which is included in corporate
expenses.

A subsidiary of the Company provides billing and software development
services to subsidiaries of NTL. The Company charges an amount in excess of its
costs to provide these services. General and administrative expenses were
reduced by $619,000 and $142,000 in the nine months ended September 30, 1999 and
in the period from April 1, 1998 (date operations commenced) to September 30,
1998, respectively, as a result of these charges.

NOTE 9. COMMITMENTS AND CONTINGENT LIABILITIES

As of September 30, 1999, the Company had purchase commitments of
$36,400,000 outstanding.

F-29
<PAGE> 151

INDEPENDENT AUDITORS' REPORT

The Board of Directors
MegsINet Inc.:

We have audited the accompanying consolidated balance sheets of MegsINet
Inc. and subsidiary as of December 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the year ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in those financial
statements. An audit of financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MegsINet
Inc. and subsidiary as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.

KPMG LLP

St. Louis, Missouri
February 15, 1999

F-30
<PAGE> 152

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
Cash........................................................ $ 1,071,584 $ 284,041
Prepaid expenses and other current assets................... 544,112 53,623
----------- ----------
Total current assets.............................. 1,615,696 337,664
Property and equipment, net................................. 26,802,413 1,501,692
----------- ----------
Total assets...................................... $28,418,109 $1,839,356
=========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Equipment payable........................................... $ 9,964,881 $ --
Current portion of notes payable............................ 3,757,164 --
Current portion of capital lease obligations................ 2,096,865 356,871
Note payable to stockholder................................. 156,158 172,477
Accounts payable............................................ 1,465,367 171,482
Accrued liabilities......................................... 383,376 51,000
Deferred revenue............................................ 641,985 202,851
----------- ----------
Total current liabilities......................... 18,465,796 954,681
----------- ----------
Notes payable, less current portion......................... 6,956,178 --
Capital lease obligations, less current portion............. 5,084,112 1,013,160
Commitments and contingencies
Stockholders' deficit:
Preferred stock, no par value, 3,000,000 and no shares
authorized and 1,200 and no shares issued at December
31, 1998 and 1997, respectively........................ -- --
Common stock, no par value, 30,000,000 shares authorized
and 10,141,442 and 7,121,386 shares issued at December
31, 1998 and 1997, respectively........................ -- --
Paid-in capital........................................... 4,005,988 790,541
Retained deficit.......................................... (6,093,965) (919,026)
----------- ----------
Total stockholders' deficit....................... (2,087,977) (128,485)
----------- ----------
Total liabilities and stockholders' deficit....... $28,418,109 $1,839,356
=========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-31
<PAGE> 153

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
Revenues.................................................... $ 4,172,072
Cost of sales............................................... 4,866,702
-----------
Costs in excess of revenues............................... (694,630)
-----------
Operating expenses:
Salaries and compensation................................. 1,734,675
Other operating expense................................... 2,086,804
-----------
Total operating expenses.......................... 3,821,479
-----------
Loss from operations...................................... (4,516,109)
Interest expense............................................ 658,830
-----------
Net loss.................................................. $(5,174,939)
===========
</TABLE>

See accompanying notes to consolidated financial statements.
F-32
<PAGE> 154

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
TOTAL
PREFERRED COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT DEFICIT
--------- ------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997.............. $ -- -- 790,541 (919,026) (128,485)
Issuance of preferred stock, 1,200
shares.................................... -- -- 1,500,000 -- 1,500,000
Issuance of common stock, 2,527,199
shares, net of $63,110 issue costs...... -- -- 1,439,447 -- 1,439,447
Issuance of common stock, 492,857 shares,
in lieu of compensation................. -- -- 276,000 -- 276,000
Net loss.................................. -- -- -- (5,174,939) (5,174,939)
------- ------- --------- ---------- ----------
Balance at December 31, 1998.............. $ -- -- 4,005,988 (6,093,965) (2,087,977)
======= ======= ========= ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-33
<PAGE> 155

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................... $(5,174,939)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 1,082,032
Compensation paid through issuance of stock............ 276,000
Changes in operating working capital:
Prepaid expenses and other current assets............ (490,489)
Accounts payable..................................... 1,293,885
Accrued liabilities.................................. 332,376
Deferred revenue..................................... 439,134
-----------
Net cash used in operating activities............. (2,242,001)
-----------
Cash flows from investing activities -- capital
expenditures.............................................. (9,858,130)
-----------
Cash flows from financing activities:
Proceeds from notes payable............................... 10,713,342
Payments on note payable to stockholder................... (16,319)
Payments on capital lease obligations..................... (748,796)
Issuance of stock......................................... 2,939,447
-----------
Net cash provided by financing activities......... 12,887,674
-----------
Net increase in cash.............................. 787,543
Cash, beginning of year..................................... 284,041
-----------
Cash, end of year........................................... $ 1,071,584
===========
Supplemental disclosure of cash flow information -- cash
paid for interest......................................... $ 667,287
===========
Supplemental disclosure of non cash investing and financing
activities:
Capital lease obligations of $6,559,742 were incurred in
1998 when the Company entered into equipment leases.
Equipment payable of $9,964,881 was incurred in 1998 when
the Company purchased equipment.
The Company paid $19,817 of commissions through issuance
of common stock.
</TABLE>

See accompanying notes to consolidated financial statements.
F-34
<PAGE> 156

MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

(1) DESCRIPTION OF THE BUSINESS

MegsINet Inc. was formed to develop and operate a national packet based
data network and to provide a broad range of telecommunications services. At
December 31, 1998, the Company had constructed a network that served 50 markets
in the United States. From inception through the end of 1998, the Company
provided a variety of Internet connection and web hosting services to its
customer base.

During 1998, MegsINet formed a wholly owned subsidiary called
Megsinet-CLEC, Inc. (Megsinet-CLEC). This subsidiary will provide local exchange
telephone service and long distance telephone service in competition with
incumbent and competitive local exchange telephone companies and long distance
providers. Megsinet-CLEC has received authority to provide local telephone
service in seven states and has filed applications in two additional states as
of December 31, 1998. Megsinet-CLEC has received authority to provide long
distance service in 36 states and has filed applications in eight additional
states as of December 31, 1998.

MegsINet is an Illinois Corporation formed in 1995.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

All significant intercompany balances and transactions have been eliminated
in consolidation.

Property and Equipment

Property and equipment consist primarily of network communications
equipment, computer equipment, furniture and fixtures, and equipment being built
for use by Megsinet-CLEC, all of which are stated at cost. Property and
equipment under capital leases are stated at the present value of minimum lease
payments.

Depreciation on property and equipment is computed using the straight-line
method over estimated service lives of three to five years.

Equipment Payable

Equipment payable represents amounts due for equipment which has been
received by MegsINet, but which has not yet been installed. Upon installation,
MegsINet will enter into a capital lease under an arrangement with Ascend
Communications, Inc. (Ascend) as discussed in note 5. As no lease agreement has
been signed at December 31, 1998, the entire balance has been classified as
current.

Revenue Recognition and Deferred Revenue

MegsINet's customers generally pay for service in advance. Revenue is
recognized ratably over the service period. Deferred revenue represents the
unearned portion of customer payments.

F-35
<PAGE> 157
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating losses and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Stock-Based Compensation

MegsINet applies the intrinsic value-based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations, in accounting for its fixed
plan stock options. Pro forma information regarding net income as calculated
under the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," is disclosed in note 9.

(3) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Telecommunications equipment............................... $24,766,423 $1,496,862
Computer equipment......................................... 482,151 183,401
Telephone equipment........................................ 147,357 2,285
Furniture and fixtures..................................... 42,514 16,119
Leasehold improvements..................................... 127,213 15,563
Construction in progress................................... 2,531,325 --
----------- ----------
28,096,983 1,714,230
Less accumulated depreciation and amortization............. 1,294,570 212,538
----------- ----------
Net property and equipment............................... $26,802,413 $1,501,692
=========== ==========
</TABLE>

(4) LEASES

MegsINet is obligated under various capital leases for telecommunications
equipment that expires at various dates during the next five years. At December
31, 1998 and 1997, the gross amount of equipment and related accumulated
amortization recorded under capital leases was as follows:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Telecommunications equipment................................ $8,110,081 $1,496,862
Less accumulated amortization............................... 933,428 135,028
---------- ----------
$7,176,653 $1,361,834
========== ==========
</TABLE>

MegsINet also has several noncancelable operating leases for
telecommunications equipment that expire over the next three years. MegsINet is
required to pay all executory costs such as maintenance and insurance. Rental
expense for operating leases during 1998 totaled approximately $304,000.

F-36
<PAGE> 158
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1998 are:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
Year ending December 31:
1999........................................................ $2,864,659 $ 481,831
2000...................................................... 3,292,654 372,508
2001...................................................... 2,267,504 265,688
2002...................................................... 102,006 --
2003...................................................... 973 --
---------- ----------
Total minimum lease payments...................... 8,527,796 $1,120,027
==========
Less amount representing interest (at rates ranging from
8.5% to 26.44%)........................................... 1,346,819
----------
Present value of net minimum capital lease payments.... 7,180,977
Less current installments of obligations under capital
leases.................................................... 2,096,865
----------
Obligations under capital leases, excluding current
installments......................................... $5,084,112
==========
</TABLE>

(5) NOTES PAYABLE

Notes payable at December 31, 1998 consist of the following:

<TABLE>
<S> <C>
Borrowings under Ascend working capital promissory note,
interest at 8.5%.......................................... $2,000,000
Borrowings under Cisco working capital promissory note,
interest at 13.5%........................................... 2,021,885
Note payable to Cisco for equipment, interest at 12.75%..... 6,691,457
----------
Total notes payable............................... 10,713,342
Less current installments................................... 3,757,164
----------
Notes payable, less current installments.................... $6,956,178
==========
</TABLE>

In 1998, MegsINet entered into an agreement with Ascend to lease up to $16
million in telecommunications equipment under a capital lease agreement. In
addition, Ascend agreed to loan MegsINet up to $4.0 million in working capital
(the Ascend Note), limited by a ratio of $1 in working capital for each $4 in
equipment purchased or leased. At December 31, 1998, MegsINet was obligated
under capital leases with Ascend related to this agreement totaling
approximately $4.4 million and had received approximately $10.0 million in
equipment for which no formal lease agreement had been signed (see note 2). The
obligation related to this equipment is classified as equipment payable. As of
December 31, 1998, MegsINet had borrowed $2.0 million under the Ascend Note.

The terms of the Ascend Note require MegsINet to make monthly principal
payments beginning six months after a minimum draw of $500,000 is made. Interest
payments start in the month following the borrowing. Based on the timing of
borrowings on the Ascend Note, MegsINet will begin to make payments of $37,118
in April 1999, increasing to $74,236 in June 1999. The amount outstanding at
December 31, 1998 is scheduled to be repaid in November 2001.

The Ascend Note is secured by warrants to purchase MegsINet stock at $6.50
per share. The number of warrants held by Ascend at December 31, 1998 is
approximately 355,000. The terms of the warrants restrict Ascend's ability to
exercise the warrants unless the Company is in default. If MegsINet repays the
Ascend Note without default, 90% of these warrants expire.

F-37
<PAGE> 159
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In 1998, MegsINet also entered into an agreement with Cisco Systems Capital
Corporations (Cisco) whereby MegsINet can purchase up to $16 million in
telecommunications equipment under a promissory note (the Cisco Equipment Note).
In addition, Cisco has agreed to loan MegsINet up to $4.0 million in working
capital (the Cisco Note) limited by a ratio of $1 in working capital for each $4
in equipment purchases; however, the first $2.0 million in working capital is
subject to only a 1 to 2 ratio. At December 31, 1998, MegsINet was obligated
under the Cisco Equipment Note totaling $6,691,457 and had borrowed
approximately $2.0 million under the Cisco Note.

The terms of the Cisco Equipment Note require MegsINet to make monthly
principal and interest payments beginning in April 1999. MegsINet will make
payments of $261,655. The amount outstanding at December 31, 1998 is scheduled
to be repaid in September 2001. The Cisco Equipment Note is secured by the
telecommunications equipment being purchased.

The terms of the Cisco Note require MegsINet to make monthly principal and
interest payments beginning in April 1999. MegsINet will make payments of
$179,350. The amount outstanding at December 31, 1998 is scheduled to be repaid
in March 2000. The Cisco Note is secured by common stock held by the president
of MegsINet and a life insurance policy on the president equal to the
outstanding balance of the note. The Cisco Note also carries conversion rights.
These conversion rights allow Cisco to convert all or part of the Cisco Note
obligation to common stock at the market value determined on the date of
conversion.

The aggregate maturities of notes payable subsequent to December 31, 1998
are as follows: 1999, $3,757,164; 2000, $4,007,670; and 2001, $2,948,508.

The Company did not have any notes payable obligations outstanding at
December 31, 1997.

(6) RELATED-PARTY TRANSACTIONS

At December 31, 1998 and 1997, MegsINet had an unsecured note payable to a
stockholder in the amount of $156,158 and $172,477, respectively. The note
carries an interest rate of 8.5% and is due upon demand.

(7) CHANGES IN CAPITAL STRUCTURE

In July 1997, MegsINet's Board of Directors authorized a 477-to-1 split for
each share of common stock. All share data presented has been revised to reflect
this transaction.

In June 1998, MegsINet increased the authorized common shares to 30
million.

During 1998, MegsINet authorized 3 million shares of preferred stock, of
which 1,200 shares were issued as 1998 Series Convertible Preferred Stock. Such
stock has a liquidation value of $1,250 per share and is entitled to dividends
of $100 per share per year. As of December 31, 1998, MegsINet had not declared
the 1998 dividends, therefore no amount has been accrued. Unpaid dividends
totaled $60,000 at December 31, 1998.

F-38
<PAGE> 160
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) INCOME TAXES

No income tax benefit was recorded during 1998. The actual income tax
benefit for 1998 differs from the expected income tax benefit computed by
applying the U.S. federal corporate tax rate of 34% to loss before income taxes
as follows:

<TABLE>
<S> <C>
Computed "expected" income tax benefit...................... $(1,759,480)
State income taxes.......................................... (206,996)
Non-utilization of net operating loss....................... 1,966,476
-----------
Tax benefit....................................... $ --
===========
</TABLE>

The tax effects of temporary differences that give rise to deferred tax
assets at December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Net operating loss carryforwards........................... $ 2,008,196 $ 165,959
Start-up costs............................................. 124,239 --
Difference in depreciation on property, plant, and
equipment................................................ 89,606 89,606
----------- ---------
Gross deferred tax assets............................. 2,222,041 255,565
Less valuation allowance................................... (2,222,041) (255,565)
----------- ---------
Net deferred tax assets............................... $ -- $ --
=========== =========
</TABLE>

The valuation allowance for deferred tax assets as of December 31, 1998 and
1997 was $2,222,041 and $255,565, respectively. The net change in the valuation
allowance for the year ended December 31, 1998 was an increase of $1,966,476.

(9) STOCK-BASED COMPENSATION

In 1998, MegsINet adopted a stock option plan (the Plan) pursuant to which
the Company's Board of Directors may grant stock options to MegsINet employees.
The Plan authorizes grants of options to purchase up to 2,000,000 shares of
authorized but unissued common stock. Stock options are granted with an exercise
price equal to the stock's fair market value at the date of grant. All stock
options under this plan have five-year terms and vest 25% per year from the date
of grant. During the year ended December 31, 1998, 191,960 options were issued
under this plan.

MegsINet also has the right to issue options to officers and directors of
MegsINet. During 1998, the Company issued options to purchase 650,000 shares of
MegsINet's common stock to officers and directors with exercise prices ranging
from $.56 to $1.38 per share. These options vest at different rates over the
next three years.

The per share weighted-average fair value of stock options granted during
1998 was $0.36 on the date of grant using the Black-Scholes option-pricing model
(excluding a volatility assumption) with the following weighted-average
assumptions: no expected dividend yield, risk-free interest rate of 6.0%, and an
expected life equal to the term of the respective option.

MegsINet applies APB Opinion No. 25 in accounting for its stock options.
MegsINet has issued options which qualify for fixed plan treatment and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had MegsINet determined compensation cost
based on the fair value at the grant date for its stock options under SFAS No.
123, MegsINet's 1998 net loss would have been increased to the pro forma amount
of approximately $5,266,000.

F-39
<PAGE> 161
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock option activity during 1998 is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1997............................. 250,000 $0.36
Granted.................................................. 841,960 0.90
--------- -----
Balance at December 31, 1998............................. 1,091,960 0.78
========= =====
</TABLE>

At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was as follows:

<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE WEIGHTED-AVERAGE SHARES WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE
- --------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
150,000 $0.22 4.3 years 150,000 $0.22
550,000 0.56 5.5 63,000 0.56
241,960 1.25 5.0 28,430 1.25
150,000 1.38 5.0 -- --
</TABLE>

During 1997, MegsINet issued options to purchase 150,000 shares of
MegsINet's common stock to an officer with an exercise price of $.22 per share.
The agreement states that the options are 100% vested upon grant. At December
31, 1997, all options were still outstanding.

During 1997, MegsINet also issued options to purchase 100,000 shares of
MegsINet's common stock to a director of MegsINet with an exercise price of
$.56, which was equal to the market value of the stock at the date of issue. The
options, which were 100% vested upon grant, remained outstanding at December 31,
1997.

During 1998 and 1997, MegsINet issued 492,857 and 984,800 shares,
respectively, of common stock to employees in lieu of compensation.

(10) COMMITMENTS AND CONTINGENCIES

MegsINet is involved in certain litigation which occurs in the normal
course of business. In the opinion of management, the ultimate results of these
matters will not have a material impact on the financial position of MegsINet.

(11) CONTINUED OPERATIONS

In February 1999, the Company sold 2,000,000 shares of 1999A Series 10%
Senior Convertible Preferred Stock (the Preferred Stock Transaction) in the
amount of $5,000,000, less cost of issuance.

Also in February 1999, MegsINet entered into a definitive agreement whereby
all of MegsINet's outstanding stock will be acquired, and MegsINet will be
merged into the acquiring company (the Merger Transaction). At the close of the
Merger Transaction, MegsINet will cease to exist as a separate entity. This
agreement is subject to shareholder approval. At the close of the Merger
Transaction, the acquiring company will assume the obligations and liabilities
of MegsINet and be responsible for funding future operations. Management
believes the Preferred Stock Transaction will provide MegsINet adequate funding
through the close of the Merger Transaction.

(12) SUBSEQUENT EVENT (UNAUDITED)

On May 3, 1999, MegsINet entered into a revised agreement that changes
certain terms of the Merger Transaction (see note 11). The primary change in the
new agreement results in the survival of MegINet as a wholly-owned subsidiary of
the acquiring enterprise.

F-40
<PAGE> 162

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)

<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 3,381,580
Prepaid expenses and other current assets................... 1,594,341
-----------
Total current assets.............................. 4,975,921
Property and equipment, net................................. 45,518,521
-----------
Total assets...................................... $50,494,442
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Equipment payable........................................... $25,757,434
Current portion of notes payable............................ 6,043,139
Current portion of capital lease obligations................ 2,702,925
Accounts payable............................................ 2,152,894
Accrued liabilities......................................... 997,190
Deferred revenue............................................ 935,378
-----------
Total current liabilities......................... 38,588,960
Notes payable, less current portion......................... 7,885,422
Capital lease obligations, less current portion............. 4,691,112
Commitments and contingencies
Stockholders' deficit:
Preferred stock, no par value, 3,000,000 shares authorized
and 2,001,200 shares issued............................ --
Common stock, no par value, 30,000,000 shares authorized
and 10,200,632 shares issued........................... --
Paid-in capital........................................... 8,955,745
Retained deficit.......................................... (9,626,797)
-----------
Total stockholders' deficit....................... (671,052)
-----------
Total liabilities and stockholders' deficit....... $50,494,442
===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
F-41
<PAGE> 163

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 1998
----------- --------
<S> <C> <C>
Revenues.................................................... $ 1,602,729 $996,919
Cost of sales............................................... 2,675,431 476,368
----------- --------
Costs in excess of revenues............................... (1,072,702) 520,551
----------- --------
Operating expenses:
Salaries and compensation................................. 1,001,112 203,753
Other operating expense................................... 899,202 244,761
----------- --------
Total operating expenses.......................... 1,900,314 448,514
----------- --------
Income (loss) from operations.......................... (2,973,016) 72,037
Interest expense............................................ 559,816 85,642
----------- --------
Net (loss)............................................. $(3,532,832) $(13,605)
=========== ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
F-42
<PAGE> 164

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
TOTAL
PREFERRED COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT DEFICIT
--------- ------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998........... $-- -- 4,005,988 (6,093,965) (2,087,977)
Issuance of common stock, 59,160
shares................................. -- -- 66,287 -- 66,287
Issuance of preferred stock, 2,000,000
shares............................... -- -- 5,000,000 -- 5,000,000
Commission paid........................ -- -- (75,000) -- (75,000)
Merger related fees.................... -- -- (41,530) (41,530)
Net loss............................... -- -- -- (3,532,832) (3,532,832)
-- -- --------- ---------- ----------
BALANCE AT MARCH 31, 1999.............. $-- -- 8,955,745 (9,626,797) (671,052)
== == ========= ========== ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
F-43
<PAGE> 165

MEGSINET INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
-------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $ (3,532,832) $ (13,605)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 726,917 111,909
Changes in operating working capital:
Prepaid expenses and other current assets............ (1,050,229) (15,895)
Accounts payable..................................... 687,526 (171,482)
Accrued liabilities.................................. 613,814 69,860
Deferred revenue..................................... 293,393 (202,851)
------------ ---------
Net cash used in operating activities............. (2,261,411) (222,064)
------------ ---------
Cash flows from investing activities -- capital
expenditures.............................................. (18,976,005) (130,905)
------------ ---------
Cash flows from financing activities:
Proceeds from notes payable............................... 19,007,783 --
Payments on note payable to stockholder................... (156,158) (4,120)
Payments on capital lease obligations..................... (253,963) (114,903)
Issuance of stock......................................... 4,949,750 362,366
------------ ---------
Net cash provided by financing activities......... 23,547,412 243,343
------------ ---------
Net increase (decrease) in cash................... 2,309,996 (109,626)
Cash, beginning of period................................... 1,071,584 284,041
------------ ---------
Cash, end of period......................................... $ 3,381,580 $ 174,415
============ =========
Supplemental disclosure of cash flow information -- cash
paid for interest......................................... $ 566,747 $ 85,642
============ =========
</TABLE>

Supplemental disclosure of non cash investing and financing activities:

Capital lease obligations of $467,020 and $1,108,213 were incurred in the
three months ended March 31, 1999 and 1998, respectively, when the Company
entered into equipment leases.

Equipment payable of $15,792,553 and zero were incurred in the three months
ended March 31, 1999 and 1998, respectively, when the Company purchased
equipment.

The Company paid $75,000 and zero of commissions through issuance of common
stock in the three months ended March 31, 1999 and 1998, respectively.

See accompanying notes to condensed consolidated financial statements.
F-44
<PAGE> 166

MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1998.

NOTE 2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
--------------
<S> <C>
Telecommunications equipment................................ $42,305,441
Computer equipment.......................................... 643,492
Telephone equipment......................................... 178,096
Furniture and fixtures...................................... 61,245
Leasehold improvements...................................... 179,325
Construction in progress.................................... 4,172,407
-----------
47,540,006
Less accumulated depreciation and amortization.............. 2,021,485
-----------
Net property and equipment........................ $45,518,521
===========
</TABLE>

NOTE 3. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
--------------
<S> <C>
Borrowings under Ascend working capital promissory note,
interest at 8.5%.......................................... $ 4,000,000
Borrowings under Cisco working capital promissory note,
interest at 13.5%........................................... 2,021,885
Note payable to Cisco for equipment, interest at 12.75%..... 7,906,676
-----------
Total notes payable............................... 13,928,561
Less current installments................................... 6,043,139
-----------
Notes payable, less current installments.................... $ 7,885,422
===========
</TABLE>

NOTE 4. RELATED-PARTY TRANSACTIONS

At March 31, 1999 and 1998, MegsINet had an unsecured note payable to a
stockholder in the amount of zero and $156,158, respectively. The note had an
interest rate of 8.5% and was due upon demand.

F-45
<PAGE> 167
MEGSINET INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5. CHANGES IN CAPITAL STRUCTURE

During 1999, the Company issued 2,000,000 shares of 1999A Series
Convertible Preferred Stock. Such stock had a liquidation value of $2.50 per
share and was entitled to dividends of $0.25 per share per year. As of March 31,
1999, the Company had not declared the 1999 dividends; therefore, no amount had
been accrued. Unpaid dividends totaled $125,000 at March 31, 1999.

NOTE 6. COMMITMENTS AND CONTINGENCIES

NOTE 7. MERGER TRANSACTION

In May 1999, all of the outstanding stock of MegsINet was purchased by
CoreComm Limited for total consideration of approximately $16.8 million in cash
and 1.4 million shares of CoreComm Limited common stock. In addition, CoreComm
Limited repaid $2.5 million of MegsINet debt.

F-46
<PAGE> 168

REPORT OF INDEPENDENT AUDITORS

Board of Directors
USN Communications, Inc.

We have audited the accompanying consolidated balance sheet of USN
Communications, Inc. and subsidiaries (the "Company") as of December 31, 1998,
and the related consolidated statements of operations, redeemable preferred
stock, common stockholders' deficit and cash flows for the year then ended.
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 audits.

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
an assessment of the accounting principles used and significant estimates made
by management, as well as an evaluation of the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
report.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of USN
Communications, Inc. and subsidiaries at December 31, 1998, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1 of
the Notes to Consolidated Financial Statements, on February 18, 1999, the
Company filed voluntary petitions for reorganization under Chapter 11 of title
11 of the United States Code. This matter raises substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the future effects on the recoverability
and classification of assets or the amounts and classification of liabilities
that may result from the outcome of this uncertainty.

ERNST & YOUNG LLP

Chicago, Illinois
April 13, 1999

F-47
<PAGE> 169

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
USN Communications, Inc.
Chicago, Illinois

We have audited the accompanying consolidated balance sheet of USN
Communications, Inc. and subsidiaries (the "Company") as of December 31, 1997,
and the related consolidated statements of operations, redeemable preferred
stock, common stockholders' deficit and cash flows for each of the two years in
the period ended December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Chicago, Illinois
March 9, 1998

F-48
<PAGE> 170

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,767 $ 87,454
Marketable equity securities.............................. -- 8,181
Accounts receivable, net.................................. 24,902 23,917
Net assets of discontinued operations held for sale....... 19,250 --
Other current assets...................................... 2,270 1,444
--------- ---------
Total current assets.............................. 50,189 120,996
Property and equipment, net................................. 14,985 16,802
Other assets................................................ 34,162 33,402
--------- ---------
Total assets...................................... $ 99,336 $ 171,200
========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 53,145 $ 20,485
Accrued expenses and other current liabilities............ 12,981 7,179
17% Senior Secured Note................................... 10,000 --
Capital lease obligations and notes payable............... 607 559
--------- ---------
Total current liabilities......................... 76,733 28,223
14 5/8% Senior Discount Notes............................... 140,504 100,002
14% Senior Discount Notes................................... 13,877 34,580
9% Convertible Subordinated Discount Notes.................. 32,966 30,188
9% Consent Convertible Notes................................ 10,450 --
Accrued interest............................................ 9,385 7,374
Capital lease obligations and notes payable................. 628 556
--------- ---------
Total liabilities................................. 284,543 200,923
Commitments and contingent liabilities
REDEEMABLE PREFERRED STOCK:
9% Cumulative Convertible Pay-In-Kind Preferred Stock:
$1 par value; 30,000 shares authorized at 1997; 10,920
shares outstanding at December 31, 1997............... -- 11
9% Cumulative Convertible Pay-In-Kind Preferred Stock,
Series A: $1 par value; 150,000 shares authorized at
1997; 45,209 shares outstanding at December 31,
1997.................................................. -- 45
Accumulated unpaid dividends.............................. -- 1,516
Additional paid-in-capital................................ -- 55,705
--------- ---------
Total redeemable preferred stock.................. -- 57,277
COMMON STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value, 100,000,000 and 30,000,000
shares authorized at December 31, 1998 and 1997,
respectively; 23,585,741 and 7,282,511 shares issued at
December 31, 1998 and 1997, respectively............... 235 73
Additional paid-in capital................................ 260,227 74,642
Treasury stock, 10,000 shares............................. (1) (1)
Accumulated other comprehensive income.................... -- 8,181
Accumulated deficit....................................... (445,668) (169,895)
--------- ---------
Total common stockholders' deficit................ (185,207) (87,000)
--------- ---------
Total liabilities, redeemable preferred stock, and common
stockholders' deficit..................................... $ 99,336 $ 171,200
========= =========
</TABLE>

See Notes to Consolidated Financial Statements.
F-49
<PAGE> 171

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Net Service Revenue................................... $ 132,503 $ 47,200 $ 9,814
Cost of Services...................................... 117,957 41,272 9,256
----------- ---------- ----------
Gross profit........................................ 14,546 5,928 558
EXPENSES:
Sales and marketing................................. 82,134 62,375 12,612
General and administrative.......................... 110,635 41,538 20,665
Non-recurring charges............................... 28,987 -- --
----------- ---------- ----------
Operating Loss........................................ (207,210) (97,985) (32,719)
OTHER INCOME (EXPENSE):
Interest income..................................... 3,570 3,420 1,376
Interest expense.................................... (30,099) (15,333) (1,797)
Realized gain on sale of marketable securities...... 11,714 -- 8,079
Other income (expense).............................. (311) 6 14
----------- ---------- ----------
Other income (expense) -- net....................... (15,126) (11,907) 7,672
----------- ---------- ----------
Net Loss from Continuing Operations................... (222,336) (109,892) (25,047)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued division....... (4,919) -- --
Provision for estimated loss on disposal of
discontinued operations (including estimated
operating loss of $6.2 million during phase out
period).......................................... (47,939) -- --
----------- ---------- ----------
Total loss from discontinued operations..... (52,858) -- --
----------- ---------- ----------
Net Loss.............................................. $ (275,194) $ (109,892) $ (25,047)
=========== ========== ==========
Preferred Dividends................................... 579 2,211 3,691
=========== ========== ==========
Net Loss to Common Shareholders -- Basic and
Diluted............................................. $ (275,773) $ (112,103) $ (28,738)
=========== ========== ==========
Loss per Common Share -- Basic and Diluted
Net loss from continuing operations................. $ (10.51) $ (15.55) $ (5.65)
Discontinued operations............................. (2.49) -- --
----------- ---------- ----------
Net loss............................................ $ (13.00) $ (15.55) $ (5.65)
=========== ========== ==========
Weighted Average Common Shares Outstanding -- Basic
and Diluted......................................... 21,203,771 7,206,886 5,082,028
=========== ========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-50
<PAGE> 172

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SERIES A
9% PIK 9% PIK SERIES A-2 SERIES A ACCUMULATED ADDITIONAL
PREFERRED PREFERRED PREFERRED PREFERRED UNPAID PAID-IN
STOCK STOCK STOCK STOCK DIVIDENDS CAPITAL TOTAL
--------- --------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996............... $ 26 $ 16 $ 3,810 $ 40,544 $ 44,396
Accumulated dividends on Series A and
A-2 Preferred Stock.................... 3,466 3,466
Conversion of Series A and A-2
Preferred to Class A Common Stock.... (26) (16) (7,276) (40,544) (47,862)
Issuance of 10,000 shares of 9% PIK
Preferred Stock...................... $ 10 9,990 10,000
Costs incurred related to issuance of
9% PIK Preferred Stock............... (180) (180)
Accumulated dividends on Series A 9%
PIK Preferred Stock.................. 225 225
---- ---- ---- ---- ------- -------- --------
BALANCE, DECEMBER 31, 1996............. 10 -- -- -- 225 9,810 10,045
---- ---- ---- ---- ------- -------- --------
Issuance of 920 shares of 9% PIK
Preferred Stock as payment of
dividends............................ 1 (920) 919 --
Issuance of 45,209 shares of Series A
9% PIK Preferred Stock............... $ 45 45,164 45,209
Costs incurred related to issuance of
Series A 9% PIK Preferred Stock...... (188) (188)
Accumulated dividends on 9% PIK
Preferred Stock...................... 941 941
Accumulated dividends on Series A 9%
PIK Preferred Stock.................. 1,270 1,270
---- ---- ---- ---- ------- -------- --------
BALANCE, DECEMBER 31, 1997............. 11 45 -- -- 1,516 55,705 57,277
---- ---- ---- ---- ------- -------- --------
Accumulated dividends on 9% PIK
Preferred Stock...................... 114 114
Accumulated dividends on Series A 9%
PIK Preferred Stock.................. 465 465
Conversion of 9% PIK and Series A 9%
PIK Preferred Stock to Common
Stock................................ (11) (45) (2,095) (55,705) (57,856)
---- ---- ---- ---- ------- -------- --------
BALANCE, DECEMBER 31, 1998............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
==== ==== ==== ==== ======= ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

F-51
<PAGE> 173

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL COMMON STOCK OTHER
COMMON PAID-IN HELD IN COMPREHENSIVE ACCUMULATED
STOCK CAPITAL TREASURY INCOME DEFICIT TOTAL
------ ---------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.................... $ 31 $ 255 $ (29,054) $ (28,768)
Conversion of Series A and A-2 Preferred
Stock to Class A Common Stock............... 27 47,835 47,862
Issuance of 50,000 shares of common stock... 1 5 6
Compensation grants of 220,000 shares of
common stock.............................. 2 31 33
Repricing of common stock................... 11 (11)
Repurchase of 10,000 shares of common
stock..................................... $(1) (1)
Issuance of stock warrants.................. 6,000 6,000
Accumulated unpaid preferred dividends...... (3,691) (3,691)
Net loss.................................... (25,047) (25,047)
---- -------- --- -------- --------- ---------
BALANCE, DECEMBER 31, 1996.................. 72 54,115 (1) -- (57,791) (3,606)
---- -------- --- -------- --------- ---------
Issuance of 97,251 shares of common stock... 1 531 532
Compensation expense on stock options....... 644 644
Issuance of stock warrants.................. 19,352 19,352
Accumulated dividends on 9% PIK Preferred
Stock..................................... (941) (941)
Accumulated dividends on Series A 9% PIK
Preferred Stock........................... (1,271) (1,271)
Comprehensive income (loss):
Net loss.................................. (109,892) (109,892)
Unrealized gain of available-for-sale
securities.............................. $ 8,181 8,181
Comprehensive loss........................ (101,711)
---- -------- --- -------- --------- ---------
BALANCE, DECEMBER 31, 1997.................. 73 74,642 (1) 8,181 (169,895) (87,000)
---- -------- --- -------- --------- ---------
Issuance of 8,628,861 shares of common
stock..................................... 86 137,984 138,070
Costs incurred related to issuance of
stock..................................... (10,764) (10,764)
Accumulated dividends on 9% PIK Preferred
Stock..................................... (114) (114)
Accumulated dividends on Series A 9% PIK
Preferred Stock........................... (465) (465)
Conversion of 9% PIK and Series A 9% PIK to
6,130,175 shares of common stock.......... 61 57,795 57,856
Issuance of 1,544,194 shares of common stock
upon exercise of warrants and options..... 15 16 31
Compensation expense on stock options....... 554 554
Comprehensive income (loss):
Net loss.................................. (275,194) (275,194)
Unrealized gain on available-for-sale
securities.............................. 3,533 3,533
Realized gain on sale of marketable
securities.............................. (11,714) (11,714)
---------
Comprehensive loss........................ (283,375)
---- -------- --- -------- --------- ---------
BALANCE, DECEMBER 31, 1998.................. $235 $260,227 $(1) $ -- $(445,668) $(185,207)
==== ======== === ======== ========= =========
</TABLE>

See Notes to Consolidated Financial Statements.

F-52
<PAGE> 174

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(275,194) $(109,892) $(25,047)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation.............................................. 9,317 2,834 558
Amortization.............................................. 252 738 1,771
Non-cash interest on debt obligations..................... 29,726 15,179 1,654
Provision for losses on accounts receivable............... 33,964 4,314 30
Stock compensation award expense.......................... 554 645 33
Gain on sale of marketable securities..................... (11,714) -- --
(Gain)loss on disposal of property and equipment.......... 298 -- (8,079)
Non-recurring charges..................................... 25,980 -- --
Loss on discontinued operations........................... 52,858 -- --
Changes in:
Accounts receivable.................................... (34,949) (25,227) (1,850)
Other assets........................................... (492) (1,179) (226)
Accounts payable....................................... 32,597 12,577 4,820
Accrued expenses....................................... 2,643 4,002 2,425
--------- --------- --------
Net cash flows from operating activities.......... (134,160) (96,009) (23,911)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (29,910) (15,200) (2,259)
Proceeds from sale of marketable securities................. 11,714 -- --
Purchase of subsidiary, net of cash acquired................ (72,108) -- --
Deposits.................................................... (6,280) (959) (495)
Proceeds from sale of property and equipment................ 441 -- --
Proceeds from the sale of assets............................ -- -- 9,533
Purchase of licensing agreement............................. -- (900) --
--------- --------- --------
Net cash flows from investing activities.......... (96,143) (17,059) 6,779
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................... 138,101 532 6
Issuance of preferred stock................................. -- 45,209 10,000
Costs incurred related to issuance of stock................. (10,764) (485) (180)
Repurchase of common stock.................................. -- -- (1)
Proceeds from Consent Convertible Notes..................... 10,000 -- 27,644
Proceeds from Senior Notes.................................. 10,000 100,002 30,203
Debt acquisition costs...................................... -- (4,715) (2,920)
Repayment of capital lease obligations and notes payable.... (721) (839) (568)
--------- --------- --------
Net cash flows from financing activities.......... 146,616 139,704 64,184
--------- --------- --------
Net (Decrease) Increase in Cash............................. (83,687) 26,636 47,052
Cash and Cash Equivalents -- Beginning of period............ 87,454 60,818 13,766
--------- --------- --------
Cash and Cash Equivalents -- End of period.................. $ 3,767 $ 87,454 $ 60,818
========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Conversion of preferred stock to common stock............... $ 57,856 -- --
========= ========= ========
Declared dividends.......................................... $ 579 -- --
========= ========= ========
Capital lease obligations incurred.......................... $ 841 $ 928 $ 592
========= ========= ========
Issuance of stock warrants.................................. -- $ 19,352 $ 6,000
========= ========= ========
Dividends paid in kind...................................... -- $ 920 --
========= ========= ========
Cash paid for interest...................................... $ 173 $ 138 $ 32
========= ========= ========
</TABLE>

See Notes to Consolidated Financial Statements.
F-53
<PAGE> 175

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUBSEQUENT EVENT

On February 18, 1999, (the "Petition Date") USN Communications, Inc. (the
"Company") and certain of its subsidiaries filed voluntary petitions for
reorganization (the "Filing") under Chapter 11 ("Chapter 11") of Title 11 of the
United States Code ("Bankruptcy Code") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). In Chapter 11, the Company
will continue to manage its affairs and operate its business as a debtor in
possession while it develops a plan of reorganization. As a debtor in possession
in Chapter 11, the Company may not engage in transactions outside of the
ordinary course of business without approval, after notice and hearing, of the
Bankruptcy Court.

As a result of the Filing, the Company is currently in default under all of
its debt agreements in effect prior to the Petition Date. As a result, all
unpaid principal of, and accrued prepetition interest on, such debt became
immediately due and payable. The payment of such debt and accrued but unpaid
prepetition interest is prohibited during the pendency of the Company's Chapter
11 case without the approval of the Bankruptcy Court. The Bankruptcy Court has
authorized the payment, by the Company, of the Company's $15 million aggregate
principal amount of prepetition senior secured notes with a $20 million
debtor-in-possession financing facility.

In accordance with the Bankruptcy Code, the Company can seek court approval
for the rejection of executory contracts, including real property leases. Any
such rejection may give rise to a prepetition unsecured claim for breach of
contract. In connection with the Company's Chapter 11 case, a review is being
undertaken of all the Company's obligations under its executory contracts,
including real property leases.

On April 2, 1999, the Bankruptcy Court authorized the Company to (1) sell
substantially all of the Company's assets, excluding USN Wireless, Inc., to
CoreComm Limited for approximately $27 million in cash, warrants to purchase
350,000 shares of CoreComm Limited common stock and a contingent payment based
on future operating results that caps the total consideration at $85 million,
and (2) sell the capital stock of USN Wireless, Inc. to Unified Signal
Corporation.

The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments that might
result should the Company be unable to continue as a going concern. The
Company's recurring losses from operations and the related Chapter 11 filing
raise substantial doubt about its ability to continue as a going concern.

Because the Company has agreed to sell assets and as a result of the
Chapter 11 case, the Company may liquidate or settle liabilities for amounts
other than those reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts currently recorded in the
financial statements. The financial statements do not give effect to any
adjustments to the carrying value of assets, or amounts and classification of
liabilities that might be necessary as a consequence of these matters.

2. ORGANIZATION

USN Communications, Inc. ("USN"), was incorporated under the laws of the
State of Delaware on April 20, 1994 and completed an initial public offering in
February 1998. USN holds controlling investments in several other companies, of
which the active companies include: US Network Corporation, USN Communications
Northeast, Inc. ("USNCN"), USN Communications Midwest, Inc and USN Solutions,
Inc. Its continuing subsidiaries operate in a
F-54
<PAGE> 176
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

single business segment, primarily as a reseller of a broad range of
telecommunication services in various cities in the Midwest and the Northeast
regions of the United States.

3. SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation
of the accompanying consolidated financial statements follows:

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

Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of USN Communications, Inc. and its
subsidiaries. Significant intercompany balances and transactions have been
eliminated in consolidation.

Revenue Recognition--The Company recognizes revenues in the period in which
telephone services are provided. For the services provided in which the
Company has operated as a commission agent only, commission revenues are
recorded at the net commissions earned.

Cash and Cash Equivalents--Cash and cash equivalents are defined as cash in
banks, time deposits and highly liquid short-term investments with initial
maturities from dates of acquisition of three months or less.

Fair Value of Financial Instruments--The carrying values of financial
instruments included in current assets and liabilities approximate fair
values due to the short-term maturities of these instruments. At December
31, 1998 and 1997, the fair value of long-term liabilities was
approximately $77.5 and $186.3 million, respectively.

Marketable Equity Securities--All marketable securities are classified as
available-for-sale and are available to support current operations or to
take advantage of other investment opportunities. These securities are
stated at estimated fair value based upon market quotes. Unrealized gains
and losses are computed on the basis of specific identification and are
included in Common Stockholders' Deficit as a component of Comprehensive
Income.

Concentration of Credit Risk--Financial instruments which potentially
subject the Company to concentration of credit risk consist principally of
trade receivables. The Company's customers are concentrated in two specific
geographic regions, the Midwest and the Northeast. No single customer
accounted for a significant amount of the Company's sales in 1998, 1997, or
1996 and there were no significant accounts receivable from a single
customer at December 31, 1998 or 1997. The Company reviews a customer's
credit history before extending credit. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit
risk of specific customers, historical trends and other information.

Property and Equipment--Purchases of property and equipment are carried at
cost. Depreciation is provided on the straight-line basis. Furniture and
equipment are depreciated over five to ten years. Computer hardware and
software are depreciated over three to five years. Leasehold improvements
and assets leased under capital leases are amortized over the shorter of
the related lease term or the estimated useful life of the asset.

Intangible Assets and Deferred Charges--Debt acquisition costs are
amortized over the life of the related debt. The value of the warrants
issued with the Senior Notes is amortized

F-55
<PAGE> 177
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

over the life of those notes. The cost of a licensing agreement for billing
services is being amortized over three years.

Impairment of Long-Lived Assets--Management reviews long-lived assets and
the related intangible assets for impairment of value whenever events or
changes in circumstances indicate the carrying amount of such assets may
not be recoverable. If the Company determines it is unable to recover the
carrying value of the assets, the assets will be written down using an
appropriate method. During 1998, management determined that its property
and equipment was impaired based on undiscounted future cash flows.
Accordingly, the Company adjusted property and equipment to fair value
resulting in an impairment loss of approximately $9.2 million, which has
been included in Non-recurring Charges.

Stock-Based Compensation--During 1996, the Company implemented Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). In accordance with the provisions of SFAS
No. 123, the Company has elected to recognize compensation under the
"intrinsic value" method prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," which requires the
proforma disclosure of net income and earnings per share as if the fair
value method had been applied.

Earnings per Share Calculations--On December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings Per Share",
which requires the disclosure of two earnings per common share
computations; basic and diluted. Earnings per common share ("EPS") is
computed by dividing net income or loss by the weighted average number of
shares of common stock (basic) plus common stock equivalents (diluted)
outstanding during the year. As all of the Company's warrants and options
are antidilutive, they have been excluded from the calculation of diluted
EPS. Accordingly, basic EPS is equal to diluted EPS.

Comprehensive Income--On January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive
income and its components. Other comprehensive income consists solely of
unrealized gains on available-for-sale securities. The Company has chosen
to disclose comprehensive income in the Statements of Stockholders' Equity
for all periods presented.

Business Segments--On January 1, 1998, the Company adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information",
which requires reporting segment information consistent with the way
management internally utilizes information to assess performance and
allocate resources. The Company's continuing operations consist of one
business segment: competitive local exchange telecommunication services.

Reclassifications--Certain prior year amounts have been reclassified to
conform to the current year presentation.

4. ACQUISITION AND DISCONTINUED OPERATIONS

On February 20, 1998, the Company used a portion of the net proceeds from
its initial public offering to acquire all of the outstanding capital stock of
Hatten Communications Holding Company, Inc., a Connecticut corporation ("Hatten
Communications" now known as USN Wireless, Inc.), pursuant to a Stock Purchase
Agreement dated January 7, 1998, for approximately $69.1 million, net of cash
acquired, including the repayment of approximately

F-56
<PAGE> 178
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$14.0 million of existing indebtedness and the payment of certain fees and
expenses. The Company made additional investments of $3 million in Hatten
Communications during 1998.

In November 1998, the Company's Board of Directors approved the hiring of
an investment banking firm to solicit bids for the sale of USN Wireless, Inc.
The USN Wireless, Inc. business has been classified as discontinued operations
in the accompanying financial statements. On April 2, 1999, the Bankruptcy Court
approved the asset sale of USN Wireless, Inc. for approximately $19.25 million,
net of expected disposition costs.

The net assets and estimated loss on disposal of discontinued operations at
December 31, 1998 are summarized as follows (in thousands):

<TABLE>
<S> <C>
Current assets.............................................. $ 9,558
Fixed assets................................................ 1,634
Goodwill and other intangibles, net of amortization......... 61,484
Current liabilities......................................... (11,682)
Provision for estimated loss on sale of discontinued
operations................................................ (41,744)
--------
Net assets of discontinued operations....................... $ 19,250
========
Estimated loss on sale of discontinued operations........... $ 41,744
Operating losses from measurement date to December 31,
1998...................................................... 2,195
Estimated operating losses from January 1, 1999 to
anticipated disposal date................................. 4,000
--------
Estimated loss on disposal of discontinued operations....... $ 47,939
========
</TABLE>

The loss from discontinued operations through the measurement date is
summarized as follows (in thousands):

<TABLE>
<S> <C>
Revenues.................................................... $33,054
Cost of service............................................. 21,880
Selling, general and administrative......................... 16,077
-------
Operating loss.............................................. (4,903)
Other....................................................... (16)
-------
Net loss.................................................... $(4,919)
=======
</TABLE>

5. RESTRUCTURING

During 1998, the Company completed its restructuring plan to reduce its
headcount by 910 employees. The headcount reduction represented approximately
56% of its workforce. As a result, the Company eliminated its customer
acquisition sales force and consolidated its operations into 11 main facilities
located in cities serving over 80% of the Company's current customers. In
addition, the Company discontinued its telemarketing efforts. In connection with
these headcount reduction programs, a charge of approximately $19.8 million has
been recorded in Non-recurring Charges, comprised of $2.8 million for severance
and $17.0 million for facility closing costs and related fixed asset disposals
and reserves. A restructuring reserve of approximately $3.2 million remains at
December 31, 1998 for costs primarily associated with lease termination.

F-57
<PAGE> 179
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCOUNTS RECEIVABLE

Accounts receivable at December 31 consists of the following (in
thousands):

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Billed................................................ $ 29,369 $10,790
Unbilled.............................................. 13,735 17,664
-------- -------
Gross accounts receivable............................. 43,104 28,454
Allowance for doubtful accounts....................... (18,202) (4,537)
-------- -------
Net accounts receivable............................... $ 24,902 $23,917
======== =======
</TABLE>

Unbilled accounts receivable comprises access charges, features and usage
for revenue earned but not yet billed to customers. A majority of the unbilled
accounts receivable at December 31, 1998 and 1997 were billed within 30 and 90
days after year end, respectively.

7. PROPERTY AND EQUIPMENT

Property and equipment at December 31 consist of the following (in
thousands):

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Furniture and equipment............................... $ 9,365 $ 5,343
Computer hardware..................................... 13,172 6,710
Computer software..................................... 8,848 6,311
Leasehold improvements................................ 5,378 2,098
-------- -------
36,763 20,462
Less accumulated depreciation......................... (12,587) (3,660)
Less impairment reserve............................... (9,191) --
-------- -------
Total....................................... $ 14,985 $16,802
======== =======
</TABLE>

8. OTHER ASSETS

Other assets at December 31 consist of the following (in thousands):

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Debt acquisition costs (net of accumulated
amortization:
1998 -- $7,539; 1997 -- $2,851)........................ $25,448 $30,136
Deposits............................................... 8,283 2,003
Licensing agreement (net of accumulated amortization:
$1998--$178; 1997--$104)............................. 222 796
Other.................................................. 209 467
------- -------
Total........................................ $34,162 $33,402
======= =======
</TABLE>

9. ACCRUED EXPENSES

Accrued expenses at December 31 consist of the following (in thousands):

<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Excise taxes............................................ $ 3,340 $ 111
Restructuring reserves.................................. 3,159 --
</TABLE>

F-58
<PAGE> 180
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Payroll and benefits.................................... 3,151 5,534
Professional services................................... 1,524 946
Other................................................... 1,807 588
------- ------
Total......................................... $12,981 $7,179
======= ======
</TABLE>

10. OPERATING LEASES

The Company leases certain office space and equipment under operating
leases. Future minimum lease commitments under noncancelable operating leases as
of December 31, 1998 are approximately as follows (amounts in thousands):

<TABLE>
<S> <C>
1999........................................................ $ 9,106
2000........................................................ 8,645
2001........................................................ 7,622
2002........................................................ 6,140
2003........................................................ 5,282
Thereafter.................................................. 6,240
-------
Total............................................. $43,035
=======
</TABLE>

Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $9.5 million, $3.9 million and $1.0 million, respectively.

11. PRIVATE PLACEMENT OFFERINGS

14% Senior Notes and 9% Convertible Notes--In September 1996, the Company
received approximately $55 million in cash, net of commissions paid, in exchange
for 48,500 units consisting of $48.5 million aggregate principal amount at
maturity of 14% Senior Discount Notes ("14% Senior Notes") due 2003 and warrants
to purchase 790,780 shares of Common Stock, and 36,000 units consisting of $36
million aggregate principal amount at maturity of 9% Convertible Subordinated
Notes ("Convertible Notes") due 2004.

The 14% Senior Notes were sold at a unit price, before commissions, of
$622.75 per $1,000 face amount. These notes accrete interest at an annual rate
of 14% from September 30, 1996 to March 31, 2000. Thereafter, the notes bear
interest at an annual rate of 14%, semiannually in arrears in cash.

The Convertible Notes were sold at a unit price, before commissions, of
$767.90 per $1,000 face amount and are convertible into Common Stock at a
conversion price of $10.436 per share. These notes will accrete interest at an
annual rate of 9% from September 30, 1996 to September 30, 1999. Thereafter, the
notes will bear interest at an annual rate of 9%, and will be paid semiannually
in arrears in cash.

14 5/8% Senior Notes--In August 1997, the Company received approximately
$96.5 million in cash, net of commissions paid, in exchange for 152,725 units
consisting of $152.7 million aggregate principal amount at maturity of 14 5/8%
Senior Discount Notes due 2004 ("14 5/8% Senior Notes") and warrants to purchase
2,053,900 shares of Common Stock. In connection with this offering, the Company
paid a consent fee to the holders of the outstanding 14% Senior Notes and
Convertible Notes consisting of warrants to purchase 145,160 shares of Common
Stock at an exercise price of $.01 per share. The Company also granted those
holders

F-59
<PAGE> 181
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

an option, which was exercised in October 1997, to purchase up to $10.0 million
in aggregate proceeds to the Company of convertible notes of the Company
("Consent Convertible Notes") on terms substantially similar to the existing
Convertible Notes. Additionally, the Company granted to holders of the 14%
Senior Notes an option, for a specified period of time, to exchange all of the
14% Senior Notes for 14 5/8% Senior Notes having an accreted value equal to the
accreted value of such 14% Senior Notes at the time of such exchange. A portion
of this option was exercised in March 1998.

The 14 5/8% Senior Notes were sold at a unit price, before commissions, of
$654.78 per $1,000 face amount. These convertible notes accrete interest at an
annual rate of 14 5/8% from August 18, 1997 to August 15, 2000. Thereafter, the
convertible notes bear interest at an annual rate of 14 5/8% payable
semiannually in arrears in cash.

In March 1998, the holders of the 14% Senior Notes exchanged $31.5 million
aggregate principal amount at maturity of the Company's 14% Senior Notes for
$33.6 million aggregate principal amount at maturity of the Company's 14 5/8%
Senior Discount Notes due 2004 (the "14 5/8% Senior Notes").

9% Consent Convertible Notes--In August 1997, in connection with the 1997
private placement offering, the Company issued an option to the holders of the
14% Senior Notes to purchase $13.0 million aggregate principal amount at
maturity of the Company's 9% Consent Convertible Subordinated Discount Notes due
2006 ("Consent Notes") for an aggregate purchase price of $10 million and
convertible into common stock at a conversion price of $10.121 per share based
on accreted value at the time of conversion. Pursuant to the option, which was
exercised by the holders in October 1997, the Consent Notes were sold in January
1998 at a price of $767.90 per $1,000 face amount. These convertible notes
accrete interest at an annual rate of 9%, compounded semiannually, until January
13, 2001. Thereafter interest will bear interest at an annual rate of 9% payable
semiannually in arrears in cash.

17% Senior Secured Note--In November 18, 1998, the Company received
approximately $10 million in cash in exchange for the issuance and sale of a $10
million 17% Senior Secured Note ("17% Note") due January 15, 1999. Interest is
payable upon the maturity of the 17% Note. The 17% Note is secured by a first
priority lien on substantially all assets of the Company, including the
Company's accounts receivable and the stock of the Company's directly owned
subsidiaries.

On January 20, 1999, the 17% Note was cancelled in exchange for a
replacement $10.0 million 17% Senior Secured Note due February 15, 1999, and the
Company received an additional $2.5 million in cash in exchange for a new $2.5
million 17% Senior Secured Note due February 15, 1999 (collectively the "New 17%
Notes"). Interest on the New 17% Notes is payable in cash upon maturity. As was
the case with the 17% Note, the New 17% Notes are secured by a first priority
lien on substantially all assets of the Company, including the Company's
accounts receivable and the stock of the Company's directly owned subsidiaries.

On February 8, 1999, the Company received an additional $2.5 million in
cash under the provisions of the New 17% Notes, bringing the total amount due
under the New 17% Notes to $15 million. Also on February 8, 1999, the maturity
date for the New 17% Notes was changed from February 15, 1999 to February 16,
1999.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

June 30, 1999 (the "Class A Notes"). Interest on the Class A Notes and Class B
Notes is payable upon maturity. The Class A Notes and Class B Notes are secured
by a first priority lien on substantially all assets of the Company, including
the Company's accounts receivable and the stock of the Company's directly owned
subsidiaries.

12. REDEEMABLE PREFERRED STOCK

In August 1997, the Board of Directors authorized the issuance of up to
150,000 shares of $1 par value preferred stock designated as 9% Cumulative
Convertible Pay-In-Kind Preferred Stock, Series A ("Series A 9% Preferred
Stock"). In connection with the private placement offering in August 1997,
described in Note 11, the Company issued 30,209 shares of its Series A 9%
Preferred Stock to certain of its existing stockholders and their affiliates for
an aggregate purchase price of $30.2 million.

In October 1997, the Company issued an additional 15,000 shares of its
Series A 9% Preferred Stock for an aggregate purchase price of $15.0 million.

In February 1998, in conjunction with the initial public offering, all of
the Company's outstanding 9% Preferred Stock and Series A Preferred Stock,
including dividends accrued through the conversion date, were converted to
6,130,175 shares of Common Stock.

13. COMMON STOCK

In February 1998, the Company issued and sold 8,600,000 shares of Common
Stock (of which 600,000 shares were sold pursuant to the exercise of the
underwriters' over-allotment option) in its initial public offering for net
proceeds of approximately $127.0 million. In March 1998, the Company issued and
sold 28,861 additional shares pursuant to the exercise of the underwriters'
over-allotment option for net proceeds of $0.4 million.

In August 1998, the Company adopted a Stockholder Rights Plan pursuant to
which rights were distributed as a dividend at a rate of one Right for each
share of Common Stock held by stockholders of record on August 24, 1998. The
Rights are exercisable 10 days after certain events involving the acquisition of
15% or more of the Company's outstanding common stock or the commencement of a
tender or exchange offer for at least 15% of the common stock, subject to
certain exceptions. Upon the occurrence of such an event, each Right, unless
redeemed by the Company, entitles the holder to receive, upon exercise and
payment of the exercise price, common stock equal to twice the exercise price of
the Right. The initial exercise price of a Right is $50, subject to adjustment.
There are 1,000,000 shares of preferred stock reserved for issuance upon
exercise of the Rights.

14. STOCK WARRANTS

Pursuant to the 14% Senior Notes discussed in Note 11, the Company has
48,450 warrants outstanding at December 31, 1998. Each warrant can be exercised
for 12.69 shares of the Company's Common Stock at an exercise price of $0.01 per
share, expiring September 30, 2003. An additional 14,516 warrants outstanding at
December 31, 1998 can be exercised for 10 shares of the Company's Common Stock
at an exercise price of $0.01 per share, expiring August 15, 2004.

Pursuant to the 14 5/8% Senior Notes discussed in Note 11, the Company has
472,440 warrants outstanding at December 31, 1998. Each warrant can be exercised
for 1.34 shares of the Company's Common Stock at an exercise price of $0.01 per
share. The warrants expire August 15, 2004.
F-61
<PAGE> 183
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. STOCK OPTION PLAN

The Company has granted options to acquire shares of Common Stock to
certain officers and other employees under the 1994 Stock Option Plan. These
options generally become exercisable at a rate of 25% every six months over a
period of two years after the date of grant, although with respect to certain
grants no vesting occurs until twelve months after the grant date.

In connection with the financing described in Note 11 and the issuance of
the 9% Preferred Stock described in Note 12, the Company granted options to
purchase 319,610 shares of Common Stock at an exercise price of $0.15 per share.
These options were not issued under the 1994 Stock Option Plan, but rather, were
issued pursuant to separate stock option agreements between the Company and the
holders. Upon the conversion of the 9% Preferred Stock to Common Stock in 1998,
253,240 options became exercisable.

In 1998 and 1997, the Board of Directors authorized the grant of options to
purchase 1,248,900 and 993,400 shares, respectively, of Common Stock to
substantially all non-executive officer employees of the Company and 807,500 and
1,137,000 shares, respectively, of Common Stock to the Company's executive
officers and directors. These options have an exercise price ranging from $3.56
to $11.56. Options granted to directors vested 100% on the grant date. One third
of all other options vested on February 9, 1998 or a year after the employee's
hire date, whichever is later, with an additional one-third of the options
vesting on each of the two anniversaries following the initial vesting date.

Stock option transactions are summarized as follows:

<TABLE>
<CAPTION>
PRICE PRICE PRICE
PER PER PER
1998 SHARE 1997 SHARE 1996 SHARE
---------- ------------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
>Outstanding at January
1.................... 3,245,540 $ 0.11 - 8.80 1,108,990 $0.11 - 8.80 190,500 $ 0.11
Granted................ 1,056,400 3.56 - 11.56 2,355,400 0.15 - 8.80 1,033,240 0.11 - 8.80
Exercised.............. (115,970) 0.15 (37,250) 0.11 (50,000) 0.11
Canceled............... (1,753,650) 0.15 - 8.80 (181,600) 8.80 (64,750) 0.11
---------- ------------- --------- ------------ --------- ------------
Outstanding at December
31................... 2,432,320 0.11 - 11.56 3,245,540 0.11 - 8.80 1,108,990 0.11 - 8.80
---------- ------------- --------- ------------ --------- ------------
Options exercisable at
December 31.......... 1,452,288 0.11 - 11.56 557,190 0.11 - 8.80 106,620 0.11 - 8.80
========== ============= ========= ============ ========= ============
</TABLE>

The following table summarizes information about options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
WTD.
AVG. WTD. WTD.
RANGE OF REMAINING AVG. AVG.
EXERCISE NUMBER LIFE OF EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING CONTRACT PRICE EXERCISABLE PRICE
- -------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.11 to $4.80 819,520 7.64 yrs $ 0.15 809,520 $ 0.15
$4.81 to $8.80 1,575,300 5.96 yrs 8.78 605,268 8.80
$8.80 to $11.56 37,500 6.41 yrs 11.56 37,500 11.56
--------- ---------
2,432,320 1,452,288
========= =========
</TABLE>

F-62
<PAGE> 184
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For proforma information regarding net loss and loss per share, the fair
value for the options awarded in 1998 and 1997 was estimated as of the date of
the grant using the minimum value valuation model with the following weighted
average assumptions for 1998 and 1997, respectively: risk-free interest rates of
5.34% and 6.15%; dividend yields of 0%; and an expected life of the option of
ten years. The weighted average fair value per share of options granted in 1998
and 1997 was $2.12 and $3.64, respectively.

For purposes of proforma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. Therefore, in the year of
adoption and subsequently affected years, the effect of applying SFAS No. 123
for providing proforma loss and loss per share are not likely to be
representative of the effects on reported income or loss in future years.

Had compensation cost for these plans been determined based on the fair
value at the grant dates for awards as prescribed by SFAS No. 123, proforma net
loss to common shareholders (in thousands) and loss per common share for the
years ended December 31, 1998 and 1997 would have been:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Proforma net loss to common stockholders........... $(278,572) $(114,609)
Proforma net loss per common share -- basic and
diluted............................................ $ (13.14) $ (15.90)
</TABLE>

The effect on the Company's reported net loss, on a proforma basis, was not
material for 1996.

16. EMPLOYEE BENEFIT PLAN

On January 1, 1995, the Company adopted a qualified 401(k) plan covering
all eligible employees in which the Company contributions are discretionary.
Employees are permitted to make annual contributions through salary deductions
up to 15% of their annual salary. The plan can be amended or terminated at any
time by the Board of Directors. The Company made contributions to the plan of
approximately $414,000 in 1998 and made no contributions to the plan in 1997 or
1996.

17. INCOME TAXES

The Company incurred net losses of $275.2 million, $109.9 million and $25.0
in 1998, 1997 and 1996, respectively. Accordingly, no provision for current
federal or state income taxes has been made to the financial statements.

The Company's deferred tax asset components at December 31 comprise (in
thousands):

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Net operating loss carry-forwards................... $ 129,947 $ 57,977
Accrued liabilities and asset valuation reserves.... 15,349 1,715
Amortization of intangibles......................... 74 146
Subtotal............................................ 145,370 59,838
Valuation allowance................................. (145,370) (59,838)
--------- --------
Total..................................... $ -- $ --
========= ========
</TABLE>

As of December 31, 1998 and 1997, the Company had not recognized deferred
income tax assets related to deductible temporary differences and cumulative net
operating losses. The ability of the Company to fully realize deferred tax
assets in future years is contingent upon its

F-63
<PAGE> 185
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

success in generating sufficient levels of taxable income before the statutory
expiration periods for utilizing such net operating losses lapse. After an
assessment of all available evidence, including historical and projected
operating trends, the Company was unable to conclude that realization of such
deferred tax assets in the near future was more likely than not. Accordingly, a
valuation allowance was recorded to offset the full amount of such assets.

At December 31, 1998, the Company had net operating loss carry-forwards for
income tax purposes of approximately $351.2 million. The ability of the Company
or the Company's subsidiaries, as the case may be, to utilize their net
operating loss carry-forwards to offset future taxable income may be subject to
certain limitations contained in the Internal Revenue Code of 1986, as amended
(the "Code"). These operating losses begin to expire in 2009 for Federal income
tax purposes. Of the net operating loss carry-forwards remaining at December 31,
1998, $26.3 million can be applied only against future taxable income of the
Company's subsidiary, USNCN.

18. COMMITMENTS

In 1995 and 1996, the Company entered into agreements with two
non-affiliated telecommunications companies ("TelCos") to allow the Company to
resell the TelCos' local telephone service in various regional markets. The
agreements have terms of up to ten years and contain minimum purchase
commitments of local access lines, ranging from zero to 150,000 lines. These
commitments are measured by the number of lines in place on the last day of each
12-month period. The agreements allow for ramp-up periods and carryover pools
for shortfalls or excesses before any commitment levels are required to be met.
So long as the Company maintains cumulative net shortfalls lower than
established caps, no payments will be due to the TelCos other than for normal
usage, access and related charges. Even if no lines were sold by the Company,
the earliest required payment for any shortfall amount is in 2000.

In July 1996, the Company entered into an agreement with a third
telecommunications company to allow the Company to resell long-distance
telephone service. The agreement is for a term of 33 months and contains an
annual purchase commitment of $12 million, with a minimum monthly commitment of
$600,000 to qualify for the contract rates. This agreement was amended in 1998
to extend the term to 35 months, increase the revenue commitment for the last 12
months to $24 million and increase the minimum monthly commitment to $1.2
million to qualify for the contract rates. The agreement allows for a ramp-up
period before commitment levels are required to be met.

In 1994, USNCN executed an exclusive agreement with a non-affiliated
telecommunications company ("TelCo One"), whereby TelCo One allows USNCN to
establish a local private network on its infrastructure in which to provide
service to customers. Under this agreement, TelCo One provides network
maintenance and access to telephone switches. The initial term of the agreement
expires in 2004.

Although no measurement date for the purchase commitments has been reached,
the Company would not have met the minimum purchase levels at December 31, 1998.
No provisions have been made for potential losses which may be incurred due to
the Company's inability to fulfill any purchase commitments.

19. LEGAL MATTERS

The Company is defendant in a class action lawsuit alleging the violation
of state and federal securities laws in connection with the Company's initial
public offering and subsequent

F-64
<PAGE> 186
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

events. In addition, the Company is a defendant in various lawsuits arising out
of the ordinary course of business, as well as various collection lawsuits in
the period preceding the Filing. All of these lawsuits have been stayed as a
result of applicable provisions of the Bankruptcy Code by virtue of the Filing.

20. YEAR 2000 (UNAUDITED)

Although the Company is not aware of any material operational issues or
costs associated with preparing its internal systems for the Year 2000, there
can be no assurance that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technology used in its internal systems, which include third
party software and hardware technology.

F-65
<PAGE> 187

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 6,887
Accounts receivable, net.................................. 15,905
Net assets of discontinued operations held for sale....... 19,259
Other current assets...................................... 2,163
---------
Total current assets.............................. 44,214
Property and equipment, net................................. 10,640
Other assets................................................ 8,606
---------
Total assets...................................... $ 63,460
=========

LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES:
Accounts payable.......................................... $ 4,261
Accrued expenses and other current liabilities............ 1,257
Senior Secured Note....................................... 18,330
---------
Total current liabilities......................... 23,848
LIABILITIES SUBJECT TO COMPROMISE
Accounts payable and accrued expenses..................... 62,275
Capital lease obligations and notes payable............... 211,857
---------
Total liabilities subject to compromise........... 274,132
COMMON STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value, 100,000,000 shares
authorized, 23,585,741 shares issued................... 235
Additional paid-in capital................................ 260,253
Treasury stock, 10,000 shares............................. (1)
Accumulated deficit....................................... (495,007)
---------
Total common stockholders' deficit................ (234,520)
---------
Total liabilities and common stockholders' deficit.......... $ 63,460
=========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
F-66
<PAGE> 188

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net Service Revenue..................................... $ 24,496 $ 32,421
Cost of Services........................................ 22,458 26,637
----------- -----------
Gross profit.......................................... 2,038 5,784
EXPENSES:
Sales and marketing................................... 3,347 24,425
General and administrative............................ 15,822 20,088
----------- -----------
Operating Loss.......................................... (17,131) (38,729)
OTHER INCOME (EXPENSE):
Interest income....................................... -- 1,568
Interest expense...................................... (5,389) (7,062)
Other income (expense)................................ (547) 3
----------- -----------
Other income (expense)-- net.......................... (5,936) (5,491)
----------- -----------
Net Loss Before Reorganization Items.................... $ (23,067) $ (44,220)
=========== ===========
REORGANIZATION ITEMS:
Interest income....................................... $ 141 --
Professional fees..................................... (1,607) --
Write-off of debt acquisition costs................... (24,806) --
----------- -----------
Total reorganization expense.................. (26,272) --
----------- -----------
Net Loss................................................ $ (49,339) $ (44,220)
=========== ===========
Preferred Dividends..................................... -- $ 579
=========== ===========
Net Loss to Common Shareholders -- Basic and Diluted.... $ (49,339) $ (44,799)
=========== ===========
Net Loss Per Common Share -- Basic and Diluted.......... $ (2.09) $ (3.12)
=========== ===========
Weighted Average Common Shares Outstanding -- Basic and
Diluted............................................... 23,585,741 14,366,749
=========== ===========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
F-67
<PAGE> 189

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
ADDITIONAL STOCK HELD
COMMON PAID-IN IN ACCUMULATED
STOCK CAPITAL TREASURY DEFICIT TOTAL
------ ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998......... $235 $260,227 $(1) $(445,668) $(185,207)
Compensation expense on stock
options.......................... 26 26
Net loss........................... (49,339) (49,339)
---- -------- --- --------- ---------
Balance, March 31, 1999............ $235 $260,253 $(1) $(495,007) $(234,520)
==== ======== === ========= =========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
F-68
<PAGE> 190

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(49,339) $(44,220)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation.............................................. 2,880 2,152
Amortization.............................................. 50 63
Non-cash interest on debt obligations..................... 5,352 7,017
Provision for losses on accounts receivable............... 1,330 2,442
Stock compensation award expense.......................... 26 173
Loss on disposal of property and equipment................ 547 --
Changes in operating assets and liabilities:
Accounts receivable.................................... 7,667 (19,559)
Other assets........................................... 214 (269)
Accounts payable....................................... 3,640 2,868
Accrued expenses....................................... (858) 9,089
Changes in reorganization items:
Reorganization expense................................. 26,272 --
Payments of reorganization costs....................... (1,607) --
-------- --------
Net cash flows from operating activities.......... (3,826) (40,244)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits.................................................... 92 (1,390)
Purchase of property and equipment.......................... -- (5,763)
Purchase of subsidiary, net of cash acquired................ -- (69,054)
-------- --------
Net cash flows from investing activities.......... 92 (76,207)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Senior Notes.................................. 7,000 --
Issuance of common stock.................................... -- 138,068
Costs incurred related to issuance of stock................. -- (10,764)
Proceeds from Consent Convertible Notes..................... -- 10,000
Repayment of capital lease obligations and notes payable.... (146) (144)
-------- --------
Net cash flows from financing activities.......... 6,854 137,160
-------- --------
Net Increase in Cash........................................ 3,120 20,709
Cash and Cash Equivalents -- Beginning of Period............ 3,767 87,454
-------- --------
Cash and Cash Equivalents -- End of Period.................. $ 6,887 $108,163
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Conversion of preferred stock to common stock............... -- $ 57,856
======== ========
Dividends paid in kind...................................... -- $ 2,095
======== ========
Declared dividends.......................................... -- $ 579
======== ========
Capital lease obligations incurred.......................... -- $ 288
======== ========
Cash paid for interest...................................... $ 33 $ 45
======== ========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
F-69
<PAGE> 191

USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited, condensed consolidated financial statements of USN
Communications, Inc. (the "Company") included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information. The interim financial statements reflect all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. The condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements at
December 31, 1998 and the notes thereto. The results of operations for the
interim periods should not be considered indicative of results to be expected
for the full year.

2. CHAPTER 11 PROCEEDINGS

On February 18, 1999, (the "Petition Date") the Company and certain of its
subsidiaries filed voluntary petitions for reorganization (the "Filing") under
Chapter 11 ("Chapter 11") of Title 11 of the United States Code ("Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). In Chapter 11, the Company has continued to manage its
affairs and operate its business as a debtor in possession while it develops a
plan of reorganization. As a debtor in possession in Chapter 11, the Company may
not engage in transactions outside of the ordinary course of business without
approval, after notices and hearing, of the Bankruptcy Court.

On April 2, 1999, the Bankruptcy Court authorized the Company to (1) sell
substantially all of the Company's assets, excluding USN Wireless, Inc. to
CoreComm Limited for approximately $27 million in cash, warrants to purchase
350,000 shares of CoreComm Limited common stock and a contingent payment based
on future operating results that caps the total consideration at $85 million,
and (2) sell the capital stock of USN Wireless, Inc. The closing of the sale of
assets to CoreComm Limited occurred on May 26, 1999. The Company continues to
own the capital stock of USN Wireless, Inc.

As a result of the Filing, the Company is currently in default under of all
of its debt agreements in effect prior to the Petition Date. As a result, all
unpaid principal of, and accrued prepetition interest on, such debt became
immediately due and payable. The payment of such debt and accrued but unpaid
prepetition interest is prohibited during the pendency of the Company's Chapter
11 case without the approval of the Bankruptcy Court. The Bankruptcy Court has
authorized the payment, by the Company, of the Company's $15 million aggregate
principal amount of prepetition senior secured notes with a $20 million
debtor-in-possession financing facility. The debtor-in-possession financing
facility was discharged with a portion of the proceeds from the sale of assets
to CoreComm Limited.

The accompanying condensed consolidated financial statements have been
prepared on a going concern basis of accounting and do not reflect any
adjustments that might result should the Company be unable to continue as a
going concern, other than the discontinuation of interest expense subsequent to
the filing date of approximately $3.8 million. The Company's recurring losses
from operations and the related Chapter 11 filing raise substantial doubt about
its ability to continue as a going concern.

Because the Company sold assets and may sell additional assets, and as a
result of the Chapter 11 case, the Company may liquidate or settle liabilities
for amounts other than those

F-70
<PAGE> 192
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

reflected in the financial statements. Further, a plan of reorganization could
materially change the amounts currently recorded in the financial statements.
The financial statements do not give effect to any adjustments to the carrying
value of assets, or amounts and classification of liabilities that might be
necessary as a consequence of these matters.

3. FINANCIAL REPORTING FOR BANKRUPTCY PROCEEDINGS

The American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy code" ("SOP 90-7"), provides guidance for financial reporting by
entities that have filed petitions with the Bankruptcy Court and expect to
reorganize under Chapter 11 of the Bankruptcy Code.

Under SOP 90-7, the financial statements of an entity in a Chapter 11
reorganization proceeding should distinguish transactions and events that are
directly associated with the reorganization from those of the operations of the
ongoing business as it evolves. Accordingly, SOP 90-7 requires the following
financial reporting/accounting treatments in respect of each of the financial
statements.

Consolidated Balance Sheet

The balance sheet separately classifies pre-petition liabilities subject to
compromise (generally unsecured and undersecured claims) and post-petition
liabilities not subject to compromise (fully secured claims). The Senior Secured
Notes, of which $15.3 million is pre-petition, have been presented as not
subject to compromise (see Note 2). Pre-petition liabilities are reported on the
basis of the expected amount of such allowed claims, as opposed to the amounts
for which those allowed claims may be settled. Under an approved final plan of
reorganization, those claims may be settled at amounts substantially less than
their allowed amounts.

When a liability subject to settlement becomes an allowed claim and that
claim differs from the net carrying amount of the liability, the net carrying
amount is adjusted to the amount of the allowed claim. The resulting gain or
loss is classified as a reorganization item in the Consolidated Statement of
Operations.

Consolidated Statements of Operations

Pursuant to SOP 90-7, revenues and expenses, realized gains and losses, and
provisions for losses resulting from the reorganization of the business are
reported in the Consolidated Statement of Operations separately as
reorganization items. Professional fees are expensed as incurred. Interest
expense is reported only to the extent that it will be paid during the
proceeding or that it is probable that it will be an allowed claim.

Consolidated Statements of Cash Flows

Reorganization items are reported separately within the operating,
investing and financing categories of the Consolidated Statement of Cash Flows.

F-71
<PAGE> 193
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

4. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
1999
(UNAUDITED)
-----------
<S> <C>
Billed...................................................... $25,041
Unbilled.................................................... 8,768
-------
Gross accounts receivable................................... 33,809
Allowance for doubtful accounts............................. (17,904)
-------
Net accounts receivable..................................... $15,905
=======
</TABLE>

Unbilled accounts receivable comprises access charges, features and usage
for revenue earned but not yet billed to customers. A majority of the unbilled
accounts receivable were billed within 30 days after the March 31, 1999.

5. NET ASSETS OF DISCONTINUED OPERATIONS

The USN Wireless, Inc. business has been classified as discontinued
operations in the accompanying financial statements. On April 2, 1999, the
Bankruptcy Court approved the asset sale of USN Wireless, Inc.

The net assets of discontinued operations are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
--------------
<S> <C>
Current assets.............................................. $ 9,223
Fixed assets................................................ 1,521
Goodwill and other intangibles, net of amortization......... 59,681
Current liabilities......................................... (9,422)
Provision for estimated loss on sale of discontinued
operations................................................ (41,744)
--------
Net assets of discontinued operations....................... $ 19,259
========
</TABLE>

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
---------------
<S> <C>
Furniture and equipment..................................... $ 9,221
Computer hardware........................................... 11,476
Computer software........................................... 8,504
Leasehold improvements...................................... 5,755
--------
34,956
Less accumulated depreciation............................... (15,125)
Less impairment reserve..................................... (9,191)
--------
Total............................................. $ 10,640
========
</TABLE>

F-72
<PAGE> 194
USN COMMUNICATIONS, INC. AND SUBSIDIARIES

DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

7. OTHER ASSETS

Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
--------------
<S> <C>
Deposits.................................................... $8,191
Licensing agreement, net of accumulated amortization $211... 189
Other....................................................... 226
------
Total............................................. $8,606
======
</TABLE>

8. NOTES PAYABLE

On November 18, 1998, the Company received approximately $10 million in
cash in exchange for the issuance and sale of a $10 million 17% Senior Secured
Note ("17% Note") due January 15, 1999. Interest was payable upon the maturity
of the 17% Note. The 17% Note was secured by a first priority lien on
substantially all assets of the Company, including the Company's accounts
receivable and the stock of the Company's directly owned subsidiaries.

On January 20, 1999, the 17% Note was cancelled in exchange for a
replacement $10.0 million 17% Senior Secured Note due February 15, 1999, and the
Company received an additional $2.5 million in cash in exchange for a new $2.5
million 17% Senior Secured Note due February 15, 1999 (collectively the "New 17%
Notes"). Interest on the New 17% Notes was payable in cash upon maturity. As was
the case with the 17% Note, the New 17% Notes were secured by a first priority
lien on substantially all assets of the Company, including the Company's
accounts receivable and the stock of the Company's directly owned subsidiaries.

On February 23, 1999, the New 17% Notes, including accrued interest, were
exchanged for a replacement $16.3 million 14% Class B Senior Secured Note due
June 30, 1999 (the "Class B Notes"). On February 25, 1999, the Company received
$2.0 million in cash in exchange for the issuance and sale of a $2 million 14%
Class A Senior Secured Notes due June 30, 1999 (the "Class A Notes"). Interest
on the Class A Notes and Class B Notes is payable upon maturity. The Class A
Notes and Class B Notes are secured by a first priority lien on substantially
all assets of the Company, including the Company's accounts receivable and the
stock of the Company's directly owned subsidiaries.

9. LEGAL MATTERS

The Company is defendant in a class action lawsuit alleging the violation
of state and federal securities laws in connection with the Company's initial
public offering and subsequent events. In addition, the Company is a defendant
in various lawsuits arising out of the ordinary course of business, as well as
various collection lawsuits in the period preceding the Filing. All of these
lawsuits have been stayed as a result of applicable provisions of the Bankruptcy
Code by virtue of the Filing.

F-73
<PAGE> 195

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY
OTHER INFORMATION. THIS PROSPECTUS MAY BE DELIVERED TO YOU AFTER THE DATE OF
THIS PROSPECTUS. HOWEVER, YOU SHOULD REALIZE THAT THE AFFAIRS OF CORECOMM
LIMITED MAY HAVE CHANGED SINCE THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS WILL
NOT REFLECT SUCH CHANGES. YOU SHOULD NOT CONSIDER THIS PROSPECTUS TO BE AN OFFER
OR SOLICITATION RELATING TO THE NOTES IN ANY JURISDICTION IN WHICH SUCH AN OFFER
OR SOLICITATION IS NOT AUTHORIZED. FURTHERMORE, YOU SHOULD NOT CONSIDER THIS
PROSPECTUS TO BE AN OFFER OR SOLICITATION RELATING TO THE NOTES IF THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR IF IT IS UNLAWFUL
FOR YOU TO RECEIVE SUCH AN OFFER OR SOLICITATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 8
Use of Proceeds..................... 21
Price Range of Common Stock......... 21
Dividend Policy..................... 21
Capitalization...................... 22
Unaudited Pro Forma Financial
Information....................... 23
Selected Consolidated Financial
Data.............................. 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 29
Business............................ 37
Regulation.......................... 61
Management.......................... 69
Security Ownership.................. 75
Selling Securityholders............. 77
Certain Relationships and Related
Transactions...................... 81
Description of Convertible Notes.... 83
Description of Capital Stock........ 101
Description of Our Other
Indebtedness...................... 108
Certain United States Federal Income
Tax Considerations................ 109
Plan of Distribution................ 114
Enforceability of Civil
Liabilities....................... 115
Legal Matters....................... 115
Experts............................. 115
Where You Can Find More
Information....................... 116
Incorporation of Documents by
Reference......................... 117
Disclosure Regarding Forward-looking
Statements........................ 118
Index to Financial Statements....... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
6% CONVERTIBLE
SUBORDINATED
NOTES DUE 2006

AND SHARES OF
COMMON STOCK

CORECOMM LIMITED
--------------------

PROSPECTUS

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

NOVEMBER 19, 1999

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 196

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemization of all expenses (subject to future
contingencies), payable by the registrant in connection with the sale of the 6%
Convertible Subordinated Notes due 2006 being registered and the common stock
being registered. All amounts are estimates except the SEC registration fee and
the Nasdaq National Market additional listing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 48,650
Nasdaq National Market listing fee.......................... 17,500
Legal fees and expenses..................................... 150,000
Accounting fees and expenses................................ 175,000
Printing and engraving fees................................. 155,000
Miscellaneous expenses...................................... 78,850
--------
Total............................................. $625,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 98 of the Bermuda Act provides, in general, that a corporation
shall have the power to indemnify a director or officer of a company in respect
of any loss or liability incurred by the director or officer in relation to any
negligence, default, breach of duty or breach of trust in relation to the
company except where the loss or liability arises due to the fraud or dishonesty
of the director or officer.

Section 98A of the Bermuda Act provides, in general, that a corporation
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director or officer of the corporation against any liability
asserted against the person in any such capacity, or arising out of the person's
negligence, default, breach of duty or breach of trust.

CoreComm's by-laws 148 and 149 (incorporated by reference herein) provide
for indemnification of directors, officers and other persons as follows:

148. Subject to the proviso below, every director, officer of CoreComm and
member of a committee constituted under by-law 104 and any resident
representative shall be indemnified out of the funds of the company against
all liabilities, loss, damage or expense (including but not limited to
liabilities under contract, tort and statute or any applicable foreign law
or regulation and all reasonable legal and other costs and expenses
properly payable) incurred or suffered by him as such director, officer,
committee member or resident representative and the indemnity contained in
this by-law shall extend to any person acting as a director, officer,
committee member or resident representative in the reasonable belief that
he has been so appointed or elected notwithstanding any defect in such
appointment or election provided always that the indemnity contained in
this by-law shall not extend to any matter which would render it void
pursuant to the Bermuda Act.

149. Every director, officer, member of a committee duly constituted under
by-law 104 or resident representative of the company shall be indemnified
out of the funds of CoreComm against all liabilities incurred by him as
such director, officer, committee member or resident representative in
defending any proceedings, whether civil or criminal, in which judgement is
given in his favor, or in which he is acquitted, or in connection with any
application under the Bermuda Act in which relief from liability is granted
to him by the court.

By-law 152 of CoreComm's by-laws (incorporated by reference herein)
provides that:

152. Subject to the Bermuda Act, expenses incurred in defending any civil
or criminal action or proceeding for which indemnification is required
pursuant to by-laws 148 and 149 shall be paid by

II-1
<PAGE> 197

CoreComm in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of the indemnified party to
repay such amount if it shall ultimately be determined that the indemnified
party is not entitled to be indemnified pursuant to by-laws 148 and 149
provided that no monies shall be paid hereunder unless payment of the same
shall be authorized in the specific case upon a determination that
indemnification of the director or officer would be proper in the
circumstances because he has met the standard of conduct which would
entitle him to the indemnification thereby provided and such determination
shall be made:

(a) by the board, by a majority vote at a meeting duly constituted by a
quorum of directors not party to the proceedings or matter with regard
to which the indemnification is or would be, claimed; or

(b) in the case such a meeting cannot be constituted by lack of a
disinterested quorum, by independent legal counsel in a written
opinion; or

Each shareholder of the company, by virtue of its acquisition and continued
holding of a share, shall be deemed to have acknowledged and agreed that the
advances of funds may be made by CoreComm as aforesaid and when made by CoreComm
under this by-law 152 are made to meet expenditures incurred for the purpose of
enabling such director, officer, or member of a committee duly constituted under
by-law 104 in properly perform his or her duties as an officer of CoreComm.

The directors and officers of the CoreComm are covered by a policy of
liability insurance.

Pursuant to the registration rights agreement entered into in connection
with the issuance of the convertible notes, the selling securityholders have
agreed to indemnify CoreComm's directors and its officers who sign the
registration statement against certain civil liabilities, including certain
liabilities under the Securities Act. Alternatively, such directors and officers
may be entitled to contribution in connection with those liabilities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
3.1 Memorandum of Association of CoreComm Limited (incorporated
by reference to Exhibit 3.1 to CoreComm Limited's Form
10-12G, File No. 0-24521)
3.2 By-laws of CoreComm Limited (incorporated by reference to
Exhibit 3.2 to CoreComm Limited's Form 10-12G, File No.
0-24521)
4.1 Rights Agreement between CoreComm and Continental Stock
Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.2 to CoreComm Limited's Form 10-12G,
File No. 0-24521)
4.2 Form of Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to CoreComm Limited's Form 10-12G, File No.
0-24521)
4.3+ Indenture, dated October 6, 1999, between CoreComm Limited
and The Chase Manhattan Bank, as Trustee
4.4+ Registration Rights Agreement, dated October 6, 1999,
between CoreComm Limited and the initial purchasers of the
convertible notes
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of
the shares of CoreComm Limited common stock being registered
hereby
5.2 Opinion of Paul, Weiss, Rifkind, Wharton & Garrision as the
legality of the convertible notes of CoreComm Limited being
registered hereby
8.1+ Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
tax matters
12.1 Statement regarding computation of ratios
23.1 Consent of Ernst & Young LLP with respect to CoreComm
Limited
23.2 Consent of Ernst & Young LLP with respect to OCOM
Corporation Telecoms Division
23.3 Consent of Ernst & Young LLP with respect to USN
Communications, Inc.
23.4 Consent of KPMG LLP
</TABLE>

II-2
<PAGE> 198

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits 5.2 and 8.1 and incorporated herein by
reference)
23.7 Consent of Appleby, Spurling & Kempe (included in Exhibit
5.1 and incorporated herein by reference)
24.1+ Power of Attorney (included on the signature page hereto)
25.1+ Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule of CoreComm Limited
</TABLE>

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

+ Previously filed.

ITEM 17. UNDERTAKINGS

(a) The undersigned 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 of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the 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 the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of a prospectus pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offering 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.

(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
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.

II-3
<PAGE> 199

(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, 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 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 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 as to whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.

II-4
<PAGE> 200

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York, State of New York, on the 19th day of
November, 1999.

CORECOMM LIMITED

By: /s/ RICHARD J. LUBASCH
------------------------------------
Richard J. Lubasch
Senior Vice President --
General Counsel and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board November 19, 1999
- ---------------------------------------------------
George S. Blumenthal

* President, Chief Executive and November 19, 1999
- --------------------------------------------------- Financial Officer and
J. Barclay Knapp Director (principal
executive and financial
officer)

* Vice President -- Controller November 19, 1999
- --------------------------------------------------- and Treasurer (principal
Gregg Gorelick accounting officer)

* Director November 19, 1999
- ---------------------------------------------------
Sidney R. Knafel

* Director November 19, 1999
- ---------------------------------------------------
Ted H. McCourtney

* Director November 19, 1999
- ---------------------------------------------------
Del Mintz

* Director November 19, 1999
- ---------------------------------------------------
Warren Potash

* Director November 19, 1999
- ---------------------------------------------------
Alan J. Patricof

*By: /s/ RICHARD J. LUBASCH
---------------------------------------------
Richard J. Lubasch
Attorney-in-fact
</TABLE>

II-5
<PAGE> 201

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
3.1 Memorandum of Association of CoreComm Limited (incorporated
by reference to Exhibit 3.1 to CoreComm Limited's Form
10-12G, File No. 0-24521)
3.2 By-laws of CoreComm Limited (incorporated by reference to
Exhibit 3.2 to CoreComm Limited's Form 10-12G, File No.
0-24521)
4.1 Rights Agreement between CoreComm and Continental Stock
Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.2 to CoreComm Limited's Form 10-12G,
File No. 0-24521)
4.2 Form of Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to CoreComm Limited's Form 10-12G, File No.
0-24521)
4.3+ Indenture, dated October 6, 1999, between CoreComm Limited
and The Chase Manhattan Bank, as Trustee
4.4+ Registration Rights Agreement, dated October 6, 1999,
between CoreComm Limited and the initial purchasers of the
convertible notes
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of
the shares of CoreComm Limited common stock being registered
hereby
5.2 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
the legality of the convertible notes of CoreComm Limited
being registered hereby
8.1+ Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
tax matters
12.1 Statement regarding computation of ratios
23.1 Consent of Ernst & Young LLP with respect to CoreComm
Limited
23.2 Consent of Ernst & Young LLP with respect to OCOM
Corporation Telecoms Division
23.3 Consent of Ernst & Young LLP with respect to USN
Communications, Inc.
23.4 Consent of KPMG LLP
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits 5.2 and 8.1 and incorporated herein by
reference)
23.7 Consent of Appleby, Spurling & Kempe (included as part of
its opinion filed as Exhibit 5.1 and incorporated herein by
reference)
24.1+ Power of Attorney (included on the signature page hereto)
25.1+ Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule of CoreComm Limited
</TABLE>

- ---------------
+ Previously filed.

<PAGE> 1

DJP/HG/phw/101380.3
Direct Telephone:
+441 298 3218
Direct Fax: +441 298 3353
Direct e-mail: [email protected]

19 November 1999

CoreComm Limited
110 East 59th Street
New York, NY 10222
USA

Dear Sirs

CORECOMM LIMITED REGISTRATION STATEMENT ON FORM S-3

We have acted as attorneys in Bermuda for CoreComm Limited, a Bermuda limited
liability company ("CoreComm"), in connection with its filing with the United
States Securities and Exchange Commission of a Registration Statement on Form
S-3 under the United States Securities Act of 1933, as amended (the
"Registration Statement"), with respect to up to 5,000,000 of CoreComm's common
shares, US$0.01 par value per share (the "Shares"), to be issued to the holders
of CoreComm's 6% convertible notes due 2006 (the "Convertible Notes") upon
conversion of the Convertible Notes into Shares.

For the purposes of this opinion we have examined and relied upon the documents
listed which, in some cases, are also defined in the Schedule to this opinion,
(the "Documents").

Unless otherwise defined herein terms defined in the Registration Statement have
the same meanings when used in this opinion.

ASSUMPTIONS

We have assumed:

(i) that there is no provision of the law, regulation or public policy
of any jurisdiction, other than Bermuda, which would have a material
effect on any of the opinions herein expressed;

(ii) that all representations and factual statements appearing in the
Registration Statement and the Resolutions are true, accurate and
complete in all material respects;

(iii) the genuineness of all signatures on the Documents;
<PAGE> 2
CoreComm Limited - 2 - 19 November 1999

(iv) the authenticity, accuracy and completeness of all documents
submitted to us as originals and the conformity to authentic
original documents, of all documents produced to us as certified,
conformed, notarised or photostatic copies;

(v) that the information disclosed by the Searches has not been
materially altered and that the Searches did not fail to disclose
any material information which had been delivered for filing or
registration, but was not disclosed or did not appear on the public
file at the time of the Searches;

(vi) that the Signature Pages evidence the approval of all of the
Directors of CoreComm of all matters relating to CoreComm set out in
the Registration Statement; and

(vii) that the Resolutions are in full force and effect and have not been
rescinded, either in whole or in part and accurately record the
resolutions passed by the Board of Directors of CoreComm at a
meeting which was duly convened and at which a duly constituted
quorum was present and voting throughout.

OPINION

Based on and subject to the foregoing, subject to the reservations set out
below, and to any matters not disclosed to us, we are of the opinion that:

(1) CoreComm has been duly incorporated as a limited liability company and is
validly existing and in good standing under the laws of Bermuda and has
all requisite corporate power and authority to issue the Shares.

(2) CoreComm has all requisite corporate power and authority to enter into,
execute, deliver and perform its obligations under the Indenture and the
Registration Rights Agreement.

(3) CoreComm has all requisite corporate power and authority to issue the
Convertible Notes, to perform its obligations thereunder and to complete
the transactions contemplated by the terms thereof.

(4) The execution, delivery and performance by CoreComm of the Indenture and
the Registration Rights Agreement and the transactions contemplated
thereby, and the issue by CoreComm of the Convertible Notes, have been
duly authorised by all necessary corporate action on the part of CoreComm.

(5) The Indenture, The Registration Rights Agreement and the Convertible
Notes, have been duly executed by the Company

(6) The execution, delivery and performance by CoreComm of the Indenture, the
Registration Rights Agreement and the Convertible Notes, and the
transactions
<PAGE> 3
CoreComm Limited - 3 - 19 November 1999

contemplated thereby (including the issue of the Convertible Notes) do not
and will not violate, conflict or constitute a default under:

(i) any requirement of any law or regulation of Bermuda; or

(ii) the Constitutional Documents.

(7) When duly issued pursuant to the Resolutions all necessary action required
to be taken by CoreComm pursuant to Bermuda law for the issue by CoreComm
of the Shares will have been taken by or on behalf of CoreComm.

(8) All the necessary authorisations and approvals of Governmental authorities
in Bermuda have been obtained for the issue by CoreComm of the Shares.

(9) When duly issued pursuant to the Resolutions in the circumstances referred
to or summarised under the caption "Description of Convertible Notes -
Conversion" in the Registration Statement, the Shares will be validly
issued, fully paid and non-assessable shares in the capital of CoreComm.

(10) There are no taxes, duties or other charges payable to or chargeable by
the Government of Bermuda, or any authority or agency thereof, in respect
of the issue of the Convertible Notes or the Shares.

RESERVATIONS

We have the following reservations:-

(a) We express no opinion as to any other law other than Bermuda law and none
of the opinions expressed herein relates to compliance with or matters
governed by the laws of any jurisdiction except Bermuda. This opinion is
limited to Bermuda law as applied by the Courts of Bermuda as at the date
hereof.

(b) In paragraph (1) above, the term "good standing" means that the Company
has neither failed to make any filing with any Bermuda governmental
authority nor to pay any Bermuda government fee or tax, which might make
it liable to be struck off the Registrar of Companies and thereby cease to
exist under the laws of Bermuda.

(c) Any reference in this opinion to shares being "non-assessable" shall mean,
in relation to fully paid shares of CoreComm and subject to any contrary
provision in any agreement in writing between such company and the holder
of such shares, that no shareholder shall be bound by an alteration to the
Memorandum of Association or Bye-laws of CoreComm after the date on which
he became a shareholder, if and so far as the alteration requires him to
take, or subscribe for additional shares, or in any way increases his
liability to contribute to the share capital of, or otherwise to pay money
to, CoreComm.
<PAGE> 4

CoreComm Limited - 4 - 19 November 1999

DISCLOSURE

This opinion is addressed to you in connection with the registration of the
Shares with the Securities and Exchange Commission solely for your benefit and
is neither to be transmitted to any other person, nor relied upon by any other
person or for any other purpose nor quoted or referred to in any public document
nor filed with any governmental agency or person, without our prior written
consent, except as may be required by law or regulatory authority. Further, this
opinion speaks as of its date and is strictly limited to the matters stated
herein.

We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to our Firm under the
caption "Legal Matters " in the Prospectus included as part of the Registration
Statement.

This opinion is to be governed by and construed in accordance with the laws of
Bermuda. It is given on the basis that it will not give rise to any legal
proceedings with respect thereto in any jurisdiction other than Bermuda.

Yours faithfully

/s/ Appleby Spurling & Kempe

<PAGE> 5
Schedule

(1) A copy of the Minutes of the Meeting of the Board of Directors of CoreComm
held on 14 September 1999 (the "Resolutions").

(2) Certified copies of the Certificate of Incorporation, Memorandum of
Association and Bye-laws of CoreComm (collectively referred to as the
"Constitutional Documents").

(3) A certified copy of the Certificate of Deposit of Memorandum of Increase
of Share Capital for CoreComm filed with the Registrar of Companies in
Bermuda on 17 July 1998.

(4) A copy of the Registration Statement.

(5) A copy of the pages of the Registration Statement as filed signed by all
of the Directors of CoreComm (the "Signature Pages").

(6) A faxed copy of an executed indenture dated as of 6 October 1999 made
between CoreComm and The Chase Manhattan Bank (the "Indenture").

(7) A certified copy of an executed Registration Rights Agreement dated 6
October 1999 among CoreComm and Donaldson, Lufkin 7 Jenrette Securities
Corporation, Waserstein Perella Securities, Inc. Chase Securities Inc.
Bear, Stearns & Co. Inc. Goldman, Sachs & Co. Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc.

(8) A copy of the permission dated 24 August 1999 given by the Bermuda
Monetary Authority under the Exchange Control Act (1972) and related
regulations for the issue of up to 75,000,000 CoreComm Common Shares.

(9) The entries and filings shown in respect of CoreComm on the file of
CoreComm maintained in the Register of Companies at the office of the
Registrar of Companies in Hamilton, Bermuda, and the entries and filings
shown in the Supreme Court Causes Book maintained at the Registry of the
Supreme Court in Hamilton, Bermuda, as revealed by searches done on (12
November 1999)(collectively referred to as the "Searches").

<PAGE> 1
EXHIBIT 5.2

[PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD]

November 19, 1999

CoreComm Limited
Cedar House
41 Cedar Avenue
Hamilton, HM
12, Bermuda

Registration Statement on Form S-3

Ladies and Gentlemen:

In connection with the referenced Registration Statement on
Form S-3 (the "Registration Statement") filed today by CoreComm Limited (the
"Issuer"), a Bermuda corporation, with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations under the Act (the "Rules"), we have been requested to
render our opinion as to the legality of the securities being registered. The
Registration Statement registers under the Act $175 million aggregate principal
amount of the Issuer's 6% Convertible Subordinated Notes due 2006 (the
"Convertible Notes"). The Convertible Notes were issued under an Indenture (the
"Indenture"), dated as of October 6, 1999, between the Issuer, and The Chase
Manhattan Bank, as trustee (the "Trustee"). Capitalized terms used and not
<PAGE> 2
CoreComm Limited
November 19, 1999
Page -2-

otherwise defined in this letter have the respective meanings given those terms
in the Registration Statement.

In connection with this opinion, we have examined originals,
conformed copies or photocopies, certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):

(i) the Registration Statement (including its exhibits);

(ii) the Indenture included as Exhibit 4.3 to the
Registration Statement;

(iii) a form of the Convertible Notes; and

(iv) the Registration Rights Agreement, dated as of
October 6, 1999, among the Issuer and Donaldson,
Lufkin & Jenrette Securities Corporation, Wasserstein
Perella Securities, Inc., Chase Securities Inc.,
Bear, Stearns & Co. Inc., Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated and Salomon Smith
Barney Inc., as the initial purchasers (the "Initial
Purchasers") (the "Registration Rights Agreement").

In addition, we have examined: (i) those corporate records of the Issuer that we
have considered appropriate; and (ii) those other certificates, agreements and
documents that we deemed relevant and necessary as a basis for our opinion.

In our examination of the documents referred to above, and in
rendering our opinion, we have assumed, without independent investigation, (i)
the genuineness of all signatures, (ii) the authenticity of all documents
submitted to us as originals, (iii) the conformity to the original documents of
all documents submitted to us as certified,
<PAGE> 3
CoreComm Limited
November 19, 1999
Page -3-

photostatic, reproduced or conformed copies of validly existing agreements or
other documents and the authenticity of all the latter documents, (iv) that the
statements regarding matters of fact in the certificates, records, agreements,
instruments and documents that we have examined are accurate and complete and
(v) the legal capacity of all individuals who have executed any of the documents
which we examined.

We have also assumed that (i) the Issuer is validly existing
and in good standing under the laws of its jurisdiction of organization, (ii)
that the Issuer has all necessary corporate power and authority to execute,
deliver and perform its obligations under the Registration Rights Agreement, the
Indenture and the Convertible Notes, (iii) that the Indenture, the Registration
Rights Agreement and the Convertible Notes have been duly executed and
delivered, (iv) that the execution, delivery and performance of the Registration
Rights Agreement, the Indenture and the Convertible Notes have been duly
authorized by all necessary corporate action and do not violate the Issuer's
organizational documents or the laws of the Issuer's jurisdiction of
organization, (v) that the Indenture is a valid and binding agreement of the
Trustee; and (vi) that the Registration Rights Agreement is a valid and binding
agreement of the Initial Purchasers. We have also relied upon certificates of
officers of the Issuer.

Based on the above, and subject to the stated assumptions,
exceptions and qualifications, we are of the opinion that the Convertible Notes
are valid and binding obligations of the Issuer enforceable against it in
accordance with their terms.

Our opinion is subject to the qualification that the
enforceability of the Indenture and the Convertible Notes may be (i) subject to
bankruptcy, insolvency,
<PAGE> 4
CoreComm Limited
November 19, 1999
Page -4-

fraudulent conveyance or transfer, reorganization, moratorium and other similar
laws affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).

Our opinion is limited to matters of New York law. Our opinion
is rendered only with respect to the laws, and the rules, regulations and orders
under them, which are currently in effect.

We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus included in the Registration Statement. In giving
this consent, we do not admit that we come within the category of persons whose
consent is required by the Act or the Rules.

Very truly yours,

/s/ Paul, Weiss, Rifkind, Wharton & Garrison

PAUL, WEISS, RIFKIND, WHARTON & GARRISON

<PAGE> 1

CORECOMM LIMITED

Exhibit 12.1
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM APRIL 1, 1998 FROM APRIL 1, 1998 THE PREDECESSOR OCOM
(DATE OPERATIONS (DATE OPERATIONS ----------------------------------
COMMENCED) TO COMMENCED) TO FOR THE PERIOD DECEMBER 31
SEPTEMBER 30 SEPTEMBER 30, DECEMBER 31, FROM JANUARY 1, 1998 -----------
1999 1998 1998 TO MAY 31, 1998 1997
------------- ------------------ ------------------ -------------------- -----------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest............... $ 1,569,000 $ 1,000 $ 21,000 $ 0 $ 0
Amortization of debt
expense............ 0 0 0
Interest portion of
rental expense..... 326,000 236,000 354,000 98,000 131,000
------------ ------------ ------------ ----------- -----------
$ 1,895,000 $ 237,000 $ 375,000 $ 98,000 $ 131,000
Earnings:
Income (loss) from
operations......... $(61,487,000) $(10,007,000) $(15,815,000) $(2,782,000) $(4,379,000)
Fixed charges per
above.............. 1,895,000 237,000 375,000 98,000 131,000
Less: Capitalized
interest......... 0 0 0 0 0
------------ ------------ ------------ ----------- -----------
$(59,592,000) $ (9,770,000) $(15,440,000) $(2,684,000) $(4,248,000)
============ ============ ============ =========== ===========
Ratio of Earnings to
Fixed Charges(1)..... -- -- -- -- --

THE PREDECESSOR OCOM
-------------------------
DECEMBER 31
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Fixed charges:
Interest............... $ 0 $ 0
Amortization of debt
expense............ 0 0
Interest portion of
rental expense..... 60,000 60,000
----------- -----------
$ 60,000 $ 60,000
Earnings:
Income (loss) from
operations......... $(1,097,000) $(4,154,000)
Fixed charges per
above.............. 60,000 60,000
Less: Capitalized
interest......... 0 0
----------- -----------
$(1,037,000) $(4,094,000)
=========== ===========
Ratio of Earnings to
Fixed Charges(1)..... -- --
</TABLE>

- ---------------
The ratio of earnings to fixed charges is not meaningful for the periods that
result in a deficit.

(1) For the nine months ended September 30, 1999 and for the period from April
1, 1998 to September 30, 1998, and for the period from April 1, 1998 to
December 31, 1998 and for the period from January 1, 1998 to May 31, 1998,
and the years ended December 31, 1997, 1996, 1995 and 1994, the deficit of
earnings to fixed charges was $61,487,000, $10,007,000, $15,815,000,
$2,782,000, $4,379,000, $1,097,000 $4,154,000 and $1,048,000.

<PAGE> 1
Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
February 26, 1999 (except for Note 16 as to which the date is September 2, 1999)
in the Amendment No. 1 to the Registration Statement (Form S-3) of CoreComm
Limited for the registration of $175,000,000 in principal amount of 6%
Convertible Subordinated Notes due 2006.

/s/ Ernst & Young LLP

New York, New York
November 19, 1999

<PAGE> 1
Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
February 26, 1999 in the Amendment No. 1 to the Registration Statement (Form
S-3) of OCOM Corporation Telecoms Division for the registration of $175,000,000
in principal amount of 6% Convertible Subordinated Notes due 2006.

/s/ Ernst & Young LLP

New York, New York
November 19, 1999

<PAGE> 1
Exhibit 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 13, 1999, in the Amendment No. 1 to the
Registration Statement (Form S-3) of USN Communications Inc. for the
registration of $175,000,000 in principal amount of 6% Convertible Subordinated
Notes due 2006.

/s/ Ernst & Young LLP

Chicago, Illinois
November 19, 1999

<PAGE> 1
EXHIBIT 23.4

Independent Auditors' Consent

The Board of Directors
CoreComm Limited:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP

St. Louis, Missouri
November 19, 1999

<PAGE> 1
Exhibit 23.5

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Stockholders of USN Communications, Inc.:

We consent to the use in this Amendment No. 1 to Registration Statement No.
333-90113 of CoreComm Limited on Form S-3 of our report dated March 9, 1998
relating to the consolidated financial statements of USN Communications, Inc.
and subsidiaries for the years ended December 31, 1997 and 1996 appearing
elsewhere in the Prospectus, which is a part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Chicago, Illinois
November 19, 1999

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,824,000
<SECURITIES> 23,582,000
<RECEIVABLES> 17,420,000
<ALLOWANCES> (6,797,000)
<INVENTORY> 0
<CURRENT-ASSETS> 9,983,000
<PP&E> 85,328,000
<DEPRECIATION> (7,228,000)
<TOTAL-ASSETS> 238,849,000
<CURRENT-LIABILITIES> 51,489,000
<BONDS> 0
0
0
<COMMON> 254,000
<OTHER-SE> 164,077,000
<TOTAL-LIABILITY-AND-EQUITY> 238,849,000
<SALES> 0
<TOTAL-REVENUES> 37,139,000
<CGS> 0
<TOTAL-COSTS> 37,524,000
<OTHER-EXPENSES> 51,270,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,569,000
<INCOME-PRETAX> (61,487,000)
<INCOME-TAX> 839,000
<INCOME-CONTINUING> (62,326,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,326,000)
<EPS-BASIC> (2.85)
<EPS-DILUTED> (2.85)

</TABLE>