WINSTAR COMMUNICATIONS INC, S-3/A, 1996-07-05

WINSTAR COMMUNICATIONS INC
S-3/A, 1996-07-05
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1996.

REGISTRATION NO. 333-6073

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
-------------------
WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 4812 13-3585278
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification Number)
</TABLE>

230 PARK AVENUE
NEW YORK, NEW YORK 10169
(212) 687-7577
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
-------------------

WILLIAM J. ROUHANA, JR.
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
WINSTAR COMMUNICATIONS, INC.
230 PARK AVENUE
NEW YORK, NEW YORK 10169
(212) 687-7577
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------

COPIES TO:

DAVID ALAN MILLER, ESQ. JERRY V. ELLIOTT, ESQ.
GRAUBARD MOLLEN & MILLER SHEARMAN & STERLING
600 THIRD AVENUE 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10016 NEW YORK, NEW YORK 10022
TELEPHONE: (212) 818-8800 TELEPHONE: (212) 848-4000
FAX: (212) 818-8881 FAX: (212) 848-7179

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement become effective.

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. / /

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, AS AMENDED, 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>
EXPLANATORY NOTE

This registration statement contains two forms of prospectus: one to be used
in connection with a United States and Canadian offering of the registrant's
Common Stock (the "U.S. Prospectus") and one to be used in connection with a
concurrent international offering of the Common Stock (the "International
Prospectus" and, together with the U.S. Prospectus, the "Prospectuses"). The
International Prospectus will be identical to the U.S. Prospectus except that it
will have a different front cover page. The U.S. Prospectus is included herein
and is followed by the alternate front cover page to be used in the
International Prospectus. Such alternate page for the International Prospectus
included herein has been labeled "Alternate Page for International Prospectus."

If required pursuant to Rule 424(b) of the General Rules and Regulations
under the Securities Act of 1933, as amended, ten copies of each of the
Prospectuses in the forms in which they are used will be filed with the
Securities and Exchange Commission.

<PAGE>
PROSPECTUS (Subject to Completion)

Issued July 5, 1996

[WINSTART LOGO]

4,000,000 Shares
WinStar Communications, Inc.
COMMON STOCK
-------------------

ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
OF THE 4,000,000 SHARES BEING OFFERED, 3,200,000 SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 800,000
SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." THE COMMON STOCK OF THE COMPANY
IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "WCII." ON JULY 2,
1996, THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET WAS $27 5/8 PER SHARE.

CONCURRENTLY WITH THE STOCK OFFERING, THE COMPANY WILL MAKE A PUBLIC OFFERING OF
$100 MILLION OF % SENIOR NOTES DUE 2006 AND $100 MILLION OF SENIOR
SUBORDINATED NOTES DUE 2006.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

PRICE $ A SHARE
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<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING DISCOUNTS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
-------- ---------------------- ----------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
</TABLE>

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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriters."
(2) Before deducting estimated expenses of $425,000 payable by the Company.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
600,000 additional Shares of Common Stock at the price to public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions
and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriters."

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

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Shearman & Sterling, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1996 at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.

-------------------
MORGAN STANLEY & CO. CS FIRST BOSTON

Incorporated

, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE>

[WINSTAR COMMUNICATIONS, INC. LOGO]

[MAP]

WINSTAR WIRELESS 38 GHZ FOOTPRINT

- - Over 100 cities with populations over 100,000
- - Largest multiple channel holder with 4 or more channels in the top 30 markets
- - Over 400 million channel pops
- - FCC freeze in place while moving to possible auction or remaining unlicensed
channels

[MAP]

WINSTAR PLANNED SWITCH COVERAGE IN NEXT THREE YEARS

- - 10 Planned Switch Sites
* 31 Planned Remote Nodes
- -- Switch and Remote Node Groupings. WinStar intends to provide telecom
services to licensed cities within these circles, including more than
100 cities with populations exceeding 100,000.

<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
-------------------

NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR
ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY AND THE
UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO
THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS.
-------------------

TABLE OF CONTENTS

PAGE
----

Incorporation of Certain Documents by
Reference............................ 4
Prospectus Summary.................... 5
Risk Factors.......................... 15
Price Range of Common Stock........... 30
Dividend Policy....................... 30
Dilution.............................. 31
Use of Proceeds....................... 32
Capitalization........................ 34
Selected Financial Data............... 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 37
Business.............................. 45

PAGE
----
Management............................ 70
Principal Stockholders................ 74
Description of Certain Indebtedness... 76
Description of Capital Stock.......... 79
Shares Eligible for Future Sale....... 81
Certain Federal Income Tax
Consequences to Non-U.S. Holders...... 82
Underwriters.......................... 86
Legal Matters......................... 89
Experts............................... 89
Available Information................. 89
Index to Consolidated Financial
Statements........................... F-1

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITERS."

DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS IN THE COMMON STOCK FOR THEIR OWN
ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.

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

Concurrently with this offering of Common Stock (the "Stock Offering" or
"Offering"), the Company is making a public offering of certain senior notes and
senior subordinated notes (the "Debt Offering") as described herein under
"Prospectus Summary -- The Company -- Financing Plan." The closings of the Stock
Offering and Debt Offering are conditioned upon each other. The Stock Offering
and the Debt Offering are referred to herein together as the "Offerings."

WIRELESS FIBERSM IS A SERVICE MARK OF WINSTAR COMMUNICATIONS, INC.

3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents or information have been filed by the Company with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are
incorporated herein by reference:

(1) Transition Report on Form 10-KSB for the ten months ended December
31, 1995;

(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;

(3) Proxy Statement dated May 3, 1996; and

(4) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A under the Exchange Act (File
No. 1-10726).

All documents subsequently filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering covered by this
Prospectus shall be deemed incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL
REQUEST OF SUCH PERSON TO WINSTAR COMMUNICATIONS, INC., 230 PARK AVENUE, NEW
YORK, NEW YORK 10169 (TELEPHONE 212-687-7577), ATTENTION: INVESTOR RELATIONS
(EXTENSION 153), A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS) WHICH HAVE BEEN INCORPORATED BY REFERENCE IN
THIS PROSPECTUS.

4
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, (i) the
information in this Prospectus, other than the historical financial information,
assumes and gives effect to the Stock Offering and the Debt Offering; (ii) the
information in this Prospectus does not give effect to the exercise of the U.S.
Underwriters' over-allotment option; and (iii) references herein to the
"Company" or "WinStar" refer to WinStar Communications, Inc. and, where
appropriate, its subsidiaries. Certain of the information contained in this
summary and elsewhere in this Prospectus, including under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
information with respect to the Company's CAP and CLEC (as defined below)
businesses and related strategy and financing, are forward-looking statements.
For a discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Effective January 1, 1996, the Company changed its fiscal year end
from the last day in February to December 31.

THE COMPANY

The Company delivers telecommunications services in the United States as a
competitive access provider ("CAP"), competitive local exchange carrier
("CLEC"), and long distance and private network services provider. Beginning in
the third quarter of 1996, the Company also plans to offer Internet access
services. The Company utilizes its Wireless FiberSM services as a key component
of its transmission capabilities.

Wireless Fiber services deliver high quality transmission via digital,
wireless capacity in the 38.6 to 40 gigahertz portion of the radio spectrum ("38
GHz"), where the Company is the holder of the largest aggregate amount of
bandwidth in the United States pursuant to licenses ("Wireless Licenses")
granted by the Federal Communications Commission ("FCC"). The Wireless Licenses
enable the Company to provide Wireless Fiber services in the 31 most populated
Metropolitan Statistical Areas ("MSAs") in the United States, including Atlanta,
Boston, Chicago, Los Angeles, New York and San Francisco, among others, and 41
of the 45 most populated MSAs. The MSAs covered by the Wireless Licenses include
more than 100 cities with populations exceeding 100,000 and encompass an
aggregate population of almost 110 million. The Company recently has entered
into three agreements pursuant to which it has agreed to acquire a significant
number of additional 38 GHz licenses as described below under "--Pending
Acquisition of Milliwave" and "--Other Recent Developments--Pending Acquisition
of Locate" and "--Pending Acquisition of Pinnacle." By exploiting its Wireless
Fiber capabilities, the Company seeks to become a value-added, economical
provider of local telecommunications services and an attractive alternative to
the local exchange carriers ("LECs"), such as the regional Bell operating
companies ("RBOCs"), in substantially all of the metropolitan areas covered by
the Wireless Licenses.

The Company believes that its Wireless Fiber services provide it with
certain critical competitive advantages in the evolving telecommunications
market. The Company's Wireless Fiber services are engineered to provide 99.999%
reliability, with a 10-13 bit error rate (unfaded), performance equivalent to
that provided by fiber optic-based networks and exceeding that generally
provided by copper-based networks. Wireless Fiber services provide a high
capacity, cost-effective solution for voice and broadband applications,
providing data transfer rates equivalent to fiber-optic products and
significantly exceeding those provided by the fastest dial-up modems and
integrated services digital network ("ISDN") lines. The above-ground,
installation-to-meet-demand nature of the Company's Wireless Fiber services
enables the Company to provide services to a customer more quickly and less
expensively than telecommunications providers that rely on the installation of
fiber optic- or copper-based lines for connection to customer locations.

5
<PAGE>

As a CAP, the Company provides local access services that utilize the
Company's Wireless Fiber services on a point-to-point basis, primarily to other
telecommunications providers and large institutional end users. Since late 1994,
the Company has focused on the development and initial marketing of its Wireless
Fiber-based local access services. After an initial market-education phase, in
which the Company demonstrated the efficacy and reliability of its Wireless
Fiber services, principally though the use of field demonstrations and the
installation of trial-basis Wireless Fiber links, the Company began receiving
initial orders for Wireless Fiber service. Since October 1995, the number of
customers utilizing the Company's Wireless Fiber-based services has increased
significantly and include such companies as American Communications Services,
Inc., Ameritech Cellular, Cellular One, Geotek Communications Inc., IntelCom
Group (U.S.A.), Inc., ("IntelCom"), Reed Elsevier PLC, Siemens
Stromberg-Carlson, Teleport Communications Group, Inc. ("Teleport") and Western
Wireless Corporation. In addition, the Company has entered into master service
agreements with Electric Lightwave, Inc. (a subsidiary of Citizens Utilities
("Electric Lightwave")), MCImetro Access Transmission Services, Inc.
("MCImetro," a subsidiary of MCI Communications Corp. ("MCI")) and Century
Telephone Enterprises, Inc. ("Century Telephone"), under which such companies
are expected to utilize the Company's Wireless Fiber services as a component of
their own telecommunications networks. The Company is in the process of
negotiating additional master service agreements with other telecommunications
providers. Although the Company believes it has made substantial progress in the
initial rollout of its CAP business, the Company currently is generating only
nominal revenues from such business.

In addition to continuing the expansion of its CAP business, the Company is
implementing its CLEC business on an accelerated basis to exploit opportunities
emerging as a result of the Telecommunications Act of 1996 (the
"Telecommunications Act"), which was enacted in February 1996. The
Telecommunications Act provides for the removal of legal barriers to entering
the local exchange market on a nationwide basis and will permit CLECs, such as
the Company, to offer a full range of local exchange services, including local
dial tone, custom calling features and toll services within Local Access
Transport Areas ("LATAs"), to both business and residential customers.

The Company recently initiated its CLEC business, offering local exchange
services to end users on a retail basis. An integral part of the Company's CLEC
business strategy is the creation of a Wireless Fiber-based infrastructure on a
city-by-city basis that will allow the Company to provide a broad range of local
exchange services within cities covered by the Wireless Licenses. This
infrastructure will utilize the Company's Wireless Fiber capabilities, together
with switches that will be acquired by the Company and facilities leased or
purchased from other carriers, to originate and terminate local traffic. The
Company believes that its Wireless Fiber capabilities will provide it with a
critical economic advantage over many other service providers because of the
high costs such other service providers encounter in connecting end users to
fiber optic backbone. In building its infrastructure, the Company is following a
building-centric network plan, pursuant to which the Company is identifying
strategically-located buildings in areas covered by its Wireless Licenses that
can serve as hubs for its network in each city. These hub sites will be
connected via Wireless Fiber links to end user customers and fiber optic
facilities leased or purchased from other carriers. The Company believes that
the establishment of a limited number of hub buildings (generally less than a
dozen) in each metropolitan area where it has Wireless Licenses will allow it to
address the vast majority of all commercial buildings targeted by the Company in
that area. The buildings the Company is initially targeting each have more than
100,000 square feet of space and are not served by other CAPs or CLECs. The
Company estimates that there are more than 8,000 buildings in this target group,
populated by approximately 9.7 million people using more than 2.1 million phone
lines, and that these buildings represent an aggregate local exchange service
market exceeding $3.3 billion per annum. These estimates do not include
multi-dwelling residential buildings, universities, hospitals or buildings
occupied by a single tenant, and account only for voice lines and not data
lines. The Company expects to make capital expenditures of $34 million during
the last nine months of 1996 and $212 million during 1997 in connection with the
development of its CLEC business.

6
<PAGE>
STRATEGY

By exploiting its Wireless Fiber capabilities, the Company seeks to become a
leading provider of integrated telecommunications services in the United States.
Key elements of the Company's strategy include:

Accelerating Rollout of CLEC Services and Leveraging of Wireless Fiber
Capabilities. The Company has commenced offering local exchange services on a
limited, resale basis in New York City and it is anticipated that the Company
will begin offering such services in at least five additional cities during the
next nine months. As the Company commences its CLEC business in each city, in
order to gain initial market penetration in that city, it intends to initially
resell the local exchange services of other service providers, such as other
CLECs and the incumbent LECs, until it has established the Wireless Fiber and
switch-based infrastructure required to provide its own local exchange services
in that city. The Company currently intends to install 10 main switches and 31
remote nodes during the next three years and plans to install its first main
switch in New York City by October 1996. The Company is hiring sales and
marketing personnel to commence marketing efforts that will target businesses
located in those buildings in which the Company's Wireless Fiber services can be
utilized for rapid, cost-effective, high-capacity linkage to fiber-based
networks. By utilizing its Wireless Fiber services to originate and terminate
customer traffic without connecting to end users through the extension of costly
fiber-optic lines or using the facilities of the LECs, the Company believes that
it will be able to provide many types of bundled local exchange, long distance,
Internet access, enhanced communications and information services to its target
customers at lower cost than many of its competitors, with equal or better
quality.

Continuing to Market CAP Services to Other Telecommunications Providers. The
Company is continuing to target other telecommunications service providers in
marketing its Wireless Fiber-based local access services. The Company believes
that its Wireless Fiber services present an attractive, economical vehicle for
other telecommunications service providers to extend their own networks and
service territories, especially as they seek to rapidly penetrate new markets
opening up to them as a result of the Telecommunications Act. By having its
Wireless Fiber services packaged with the service offerings of other
telecommunications providers or utilized as a seamless component of such
providers' own telecommunications networks, the Company also hopes to leverage
the marketing and distribution capabilities of such providers. The Company
currently offers its Wireless Fiber services to long distance carriers; other
CAPs and CLECs; providers of personal communications services ("PCS") and
cellular and specialized mobile radio services (collectively "CMRS providers");
and LECs. The Company also offers its Wireless Fiber services to
telecommunications service providers as viable, cost-efficient alternate routes
for their telecommunications traffic in situations where primary routes are
incapacitated and/or network reliability concerns require alternate
telecommunications paths.

Providing Wireless Internet Access and Private Network Services. The Company
is marketing its Wireless Fiber services to take advantage of the
characteristics that make it an attractive solution for entities seeking
cost-effective, high capacity Internet access and private voice and data network
services. The total amount of bandwidth of each 38 GHz channel is 100 MHz, which
supports high broadband capability. One Wireless Fiber DS-3 link provides
transfer rates which are over 1,500 times the rate of the fastest dial-up modem
currently in use and over 350 times the rate of the fastest ISDN line currently
in use. In addition to accommodating standard voice and data requirements,
Wireless Fiber services can allow end users to receive real time, full motion
video and 3-D graphics and to utilize highly interactive applications on the
Internet and other networks. The Company offers its Wireless Fiber services to
businesses, government agencies and institutions with multiple locations that
seek to establish their own independent local telecommunications systems for
dedicated private line voice and data networks, including LAN and WAN
applications. The Company also recently established its first major relationship
with an Internet service provider (as described below under "-- Recent
Developments -- Agreement with Digex") and is actively pursuing relationships
with additional Internet service providers.

7
<PAGE>

Exploiting First to Market and Leading Spectrum Holder Advantages. The
Company currently enjoys a "first-to-market" advantage as one of the few holders
of 38 GHz licenses with an established operating and management infrastructure
and the capital necessary to rapidly exploit and roll out its 38 GHz services on
a commercial basis. The Company believes that its competitive advantage is
further strengthened by its position as the holder of the largest aggregate
amount of 38 GHz bandwidth capacity in the United States and by the broad
geographic scope allocated under its Wireless Licenses. The Company holds 43
Wireless Licenses, 30 of which provide for 400 MHz of bandwidth capacity per
licensed area and 13 of which provide for 100 MHz of bandwidth capacity per
licensed area, and which allow the Company to address an aggregate of more than
400 million channel pops (i.e, the aggregate population in the areas covered by
the Wireless Licenses multiplied by the aggregate number of 100 MHz channels
allocated under those licenses). Based on existing and proposed FCC regulations,
the Company believes that it will be difficult, in the near term, for other
entities seeking to provide wireless local telecommunications services similar
to those of the Company to obtain the aggregate bandwidth capacity and
widespread geographic coverage afforded to the Company under its Wireless
Licenses.

Expanding and Improving the Company's Long Distance Operations. The Company
is seeking to expand and improve its long distance operations by (i) bundling
its resale of long distance services with its local telecommunications services,
(ii) broadening its business customer base and increasing customer retention
rates, (iii) improving operating efficiencies by reducing costs associated with
the provision of its long distance services, (iv) differentiating its long
distance services, most notably, in the near term, through the use of less
complicated billing systems, (v) using intelligent network platforms for the
provision of enhanced telecommunications services, and (vi) acquiring and
integrating customer bases from other telecommunications providers. The Company
also anticipates that it will be able to leverage upon the billing systems and
intelligent network platforms developed in connection with its long distance
services to enhance the marketability of its local telecommunications services.

Acquiring Content to Complement Telecommunications Service Offerings. The
Company believes that, over time, participants in the telecommunications market
increasingly will seek to offer "content" -- from information programming,
sports, weather, business and stock market information to music, films and
literature -- to differentiate their services and attract traffic onto their
transmission networks and that the ability to deliver entertainment and
information content to consumers will play an increasingly important role in
consumers' choice of a telecommunications provider. Accordingly, as a complement
to its telecommunications service offerings, the Company produces and
distributes information and entertainment content, focusing on niche programming
such as documentaries, foreign films and multimedia sports programming. The
Company believes that, in the future, it will be able to bundle proprietary
content that it controls with various telecommunications services it offers to
provide higher-margin products and services.

PENDING ACQUISITION OF MILLIWAVE

In June 1996, the Company entered into certain agreements to acquire (the
"Milliwave Acquisition") all of the outstanding partnership interests in
Milliwave Limited Partnership ("Milliwave"), a holder of 38 GHz licenses (the
"Milliwave Licenses") that allow for the provision of services in more than 80
major markets, encompassing an aggregate population of greater than 160 million.
The purchase price for the Milliwave Acquisition will be $40 million in cash and
3.4 million shares of Common Stock (which had an aggregate market value of $85
million based on a $25 per share market price at the time the agreements were
executed). The number of shares to be issued in connection with the Milliwave
Acquisition is subject to upward or downward adjustment depending on the market
price of the Common Stock at the time the transaction is closed; provided,
however, that the Company may determine not to consummate the transaction if the
adjustment results in the Company being required to issue in excess of 4.5
million shares. The Milliwave Acquisition is subject to certain regulatory
approvals, but is expected to be consummated in the second quarter of 1997.
Milliwave has generated no

8
<PAGE>

revenues to date. The agreements provide for the Company to assist in the
development and management of the Milliwave Licenses during the interim period
prior to the consummation of the Milliwave Acquisition. Upon consummation of the
Milliwave Acquisition, Dennis Patrick, Chief Executive Officer of Milliwave and
former Chairman of the FCC, is expected to join the Company's Board of
Directors.

The Company expects that the Milliwave Acquisition will expand its
geographic coverage, provide additional capacity in existing markets, provide
economies of scale and permit the Company to achieve greater network efficiency.
The following chart sets forth the change in the Company's Wireless License
asset base after giving effect to the consummation of the Milliwave Acquisition:

<TABLE>
<CAPTION>
WINSTAR
WINSTAR MILLIWAVE PRO FORMA
------- --------- ---------
<S> <C> <C> <C>
Population Coverage (millions)................................. 109 160 170(1)
Channel Pops (millions)........................................ 413 160 573
Licensed Areas with Multiple Channels.......................... 30 0 39(2)
</TABLE>

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

(1) Pro forma population coverage is not additive because of overlapping
licensed areas.

(2) Milliwave has only one channel in each of its licensed areas; however, when
combined with WinStar, the overlapping single channel licensed areas
increase WinStar's pro forma multiple channel coverage by nine licensed
areas, bringing the aggregate population covered by multiple channels
to over 100 million.

OTHER RECENT DEVELOPMENTS

In furtherance of its strategy, the Company recently has accomplished the
following:

Commencement of Rollout of CLEC Services. In April 1996, the Company
commenced providing local exchange services to customers in New York City. The
Company also commenced a program designed to obtain, by the end of 1999,
authorization to operate as a CLEC in substantially all of the states where the
Company has Wireless Licenses. The Company currently is authorized to operate as
a CLEC in California, Connecticut, Florida, Georgia, Illinois, Massachusetts,
Michigan, New York, Tennessee, Texas and Washington; is in the process of
seeking authorization to operate as a CLEC in four additional states; and
intends to seek such authorization in nine additional states during 1996. It
also is in the process of negotiating interconnection agreements with various
local exchange service providers, including incumbent LECs, under which the
Company will obtain services on an unbundled basis. In June 1996, the Company
entered into its first interconnection agreement, a three-year agreement with
Ameritech Corp. ("Ameritech") covering the state of Illinois.

Prequalification of Wireless Fiber Link Sites. In connection with the
development of its Wireless Fiber capacity for both its CAP and CLEC businesses,
the Company has been following a plan pursuant to which it seeks to negotiate,
prior to receipt of actual service orders, roof rights ("Roof Rights") for the
installation of Wireless Fiber links on buildings specifically identified by
existing and potential customers in the metropolitan areas covered by the
Wireless Licenses, including buildings that can provide interconnection access
to long distance carriers' points of presence ("POPs"), switch locations and
local access nodes. As of May 31, 1996, the Company has secured Roof Rights on
more than 280 buildings. Further, the Company, in consultation with existing and
potential customers, has identified more than 2,200 additional buildings in the
metropolitan areas covered by the Wireless Licenses for which it is in the
process of seeking Roof Rights.

Establishment of New Relationships with Other Service Providers and
Customers. In addition to an existing master service agreement with Electric
Lightwave, the Company recently has entered into master service agreements with
each of MCImetro and Century Telephone. The master service agreements
contemplate that the carriers will utilize the Company's Wireless Fiber services
as a component of their own networks and set forth the general terms of the
relationship between the Company and each carrier, including the initial term of
the relationship, basic pricing schedules and service and installation
parameters. The Company also recently began to provide Wireless Fiber

9
<PAGE>
services to the City of New York as a back-up disaster recovery system for
certain of its facilities, providing it with redundancy in the event that the
city's land-based telecommunications service fails for any reason.

Agreement with Digex. In June 1996, the Company entered into a six-year
agreement ("Digex Agreement") with Digex, Inc. ("Digex"), a provider of Internet
access services that primarily serves commercial, governmental and institutional
end users as well as Internet access resellers. Pursuant to the Digex Agreement,
the Company has the right of first refusal to provide all of Digex's local
access and/or customer interconnection requirements through the use of the
Company's Wireless Fiber services or the resale of other facilities, as
appropriate. The Company also will purchase from Digex, during the next six
years, a minimum of $5 million of Internet access services with the right to
purchase additional amounts, in each case on a discounted basis. The Company
intends to resell these Internet access services under the Company's own brand
name, including through the bundling of such services with the Company's other
telecommunications services.

Pending Acquisition of Locate. In April 1996, the Company entered into an
agreement to acquire (the "Locate Acquisition") the assets of Local Area
Telecommunications, Inc. ("Locate") comprising its business as a CAP providing
microwave-based local access services to corporations and long distance and
other common carriers (the "Locate Business"), for a purchase price of $17.5
million. The Locate Acquisition is subject to certain regulatory approvals, but
is expected to be consummated in the last quarter of 1996. Among Locate's key
assets are two 38 GHz licenses, each providing 100 MHz of bandwidth, for the New
York City metropolitan area, including Long Island and Northern New Jersey. In
addition, Locate, together with its existing customers, has access to the roofs
of numerous buildings, including the World Trade Center and other key sites in
New York City, which the Company anticipates using in its CAP and CLEC
operations. As part of the Locate Acquisition, the Company also will acquire
from Locate certain link-specific licenses for the provision of point-to-point
services in other portions of the radio spectrum, including, among others, 12,
16 and 18 GHz.

Pending Acquisition of Pinnacle. In June 1996, the Company entered into an
agreement (the "Pinnacle Agreement") to acquire (the "Pinnacle Acquisition") the
outstanding membership interests of Pinnacle Nine Communications LLC
("Pinnacle") which is the holder of three 38 GHz licenses, providing for 100 MHz
of bandwidth in each of Baltimore, Dallas and Philadelphia. The Pinnacle
Acquisition is subject to certain regulatory approvals, but is expected to be
consummated in the last quarter of 1996.

Acquisition of Content and Information Providers. In April 1996, the Company
acquired an 80% equity interest in Fox/Lorber Associates, Inc. ("Fox/Lorber"),
an independent distributor of films, entertainment series and documentaries in
the television and home video markets. Also, in April 1996, the Company acquired
a 65% equity interest in The Winning Line, Inc. ("TWL"), which operates the
SportsFan Radio Network ("SportsFan"). SportsFan is a multimedia sports
programming and production company which provides live sports programming to
more than 200 sports and talk format radio stations across the United States, up
to 24 hours a day, including to stations in 90 of the top 100 United States
markets. SportsFan owns and operates The Pete Rose Show and The Bob Golic Show,
among others, and also has interests in television and on-line distribution
channels. In June 1996, the Company entered into an agreement with Source Media
Inc. ("Source Media"), a provider of interactive technology and programming.
Pursuant to this agreement, the Company has the exclusive right, in the 38 GHz
spectrum, to use Source Media's technology and programming in connection with
entertainment and information services the Company may offer.

OTHER BUSINESS

Prior to the Company's entry into the telecommunications industry, it
marketed and distributed consumer products, including personal care and bath and
beauty products, through a subsidiary acquired in 1992. The Company continues to
sell such products, primarily to large retailers, mass

10
<PAGE>
merchandisers, discount stores, department stores, national and regional drug
store chains and other regional chains.

FINANCING PLAN

In October 1995, to finance the initial rollout of its CAP business, the
Company raised net proceeds of $214.5 million from a private placement ("1995
Debt Placement") of units, each unit consisting of two 14% Senior Discount Notes
due 2005 ("Old Senior Notes") and one 14% Convertible Senior Subordinated
Discount Note due 2005 ("Old Convertible Notes," and together with the Old
Senior Notes, the "Old Notes").

Concurrently with this Stock Offering, the Company will consummate the Debt
Offering, consisting of $100 million of % Senior Notes Due 2006 (the "New
Senior Notes") and $100 million of % Senior Subordinated Notes Due 2006 (the
"New Senior Subordinated Notes" and, together with the New Senior Notes, the
"New Notes"). See "Description of Certain Indebtedness." The closings of the
Stock Offering and the Debt Offering are conditioned upon each other. Management
anticipates, based on current plans and assumptions relating to its operations,
that the net proceeds from the Stock Offering and Debt Offering, together with
existing financial resources (including proceeds raised in the 1995 Debt
Placement) and equipment financing arrangements which the Company intends to
seek, will be sufficient to fund the Company's growth and operations for
approximately 36 to 48 months following consummation of the Offerings. In the
event the Company's plans or assumptions change or prove to be inaccurate, or if
the Company consummates any acquisitions of businesses or assets (including
additional 38 GHz licenses, by auction or otherwise), or if the Company does not
generate substantial positive cash flows from operations, the Company may be
required to seek additional sources of capital sooner than currently
anticipated. See "Use of Proceeds" and "Risk Factors -- Significant Capital
Requirements" and " -- Risks Related to CLEC Strategy; Anticipated Initial
Negative Operating Margins in CLEC Business."

11
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering.............................. 3,200,000 shares
International Offering..................... 800,000 shares
Total................................ 4,000,000 shares
Common Stock to be outstanding immediately
following the Stock Offering................ 31,748,005 shares(1)
Use of Proceeds.............................. The Company intends to use the net proceeds
of the Offerings (together with funds raised
in the 1995 Debt Placement) for the expansion
of its telecommunications operations in
multiple markets, including the purchase of
switching equipment, customer site equipment
and related software, the acquisition of Roof
Rights, the hiring of sales, marketing,
engineering and customer service personnel,
the development of operating and management
systems, acquisitions of businesses or assets
(including additional 38 GHz licenses, by
auction or otherwise), other capital
expenditures and for working capital and
general corporate purposes, including the
funding of operating losses. As a complement
to its telecommunications service offerings,
the Company also may use a portion of the
proceeds of the Offerings to acquire rights
to, develop and control certain information
and entertainment content and services. The
Company intends to invest approximately $35
million of the proceeds from the Stock
Offering in Unrestricted Subsidiaries (as
defined in the Company's Indentures) promptly
upon consummation of the Offerings. Such $35
million subsequently may be utilized without
regard to the restrictions imposed by such
Indentures, including for investments in
highly leveraged subsidiaries, for minority
investments and for investments in assets
which are not "Telecommunications Assets" (as
defined in such Indentures). See "Use of
Proceeds."
Common Stock Nasdaq National Market
Symbol..................................... WCII
</TABLE>

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

(1) Does not include (i) an aggregate of 1,075,299 shares of Common Stock
issuable upon exercise of options granted or which may be granted under the
Company's 1992 Performance Equity Plan (the "1992 Plan"), (ii) an aggregate
of 3,500,000 shares of Common Stock issuable upon exercise of options
granted or which may be granted under the Company's 1995 Performance Equity
Plan (the "1995 Plan"), (iii) 6,026,250 shares of Common Stock issuable upon
exercise of other outstanding options and warrants, (iv) 4,699,211 shares
of Common Stock which may be issued upon conversion of the Old Convertible
Notes (assuming they are converted on October 23, 1996, the first date on
which conversion may occur) and certain other convertible debt and (v) up to
4,500,000 shares issuable in connection with the Milliwave Acquisition. See
"Description of Certain Indebtedness" and notes 17, 18 and 22 to
Consolidated Financial Statements. The exercise and conversion prices of the
foregoing outstanding securities are all below the current market price of
the Common Stock as of the date of this Prospectus.

12
<PAGE>
SUMMARY FINANCIAL DATA

The summary financial data presented below, as of and for the two years
ended February 28, 1994 and 1995 and for the ten months ended December 31, 1995,
have been derived from the Company's audited financial statements and the
summary financial data presented below as of and for the three months ended
March 31, 1995 and 1996 and the ten months ended December 31, 1994 have been
derived from unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus. In the opinion of management, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements and include all adjustments, which consist only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for these periods. This data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the pro forma and historical
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
TEN MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
YEAR ENDED PRO
FEBRUARY 28, ACTUAL PRO FORMA AS ACTUAL PRO
---------------- ----------------- FORMA ADJUSTED ---------------- FORMA
1994 1995 1994 1995 1995(1)(2) 1995(2)(3) 1995 1996(4) 1996(1)
------ ------- ------- ------- ---------- -------- ------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Telecommunications(5).......... $8,505 $14,909 $13,420 $13,136 $ 19,266 $19,266 $2,219 $10,217 $11,433
Information services........... -- 474 193 2,648 10,308 10,308 844 771 2,942
Merchandising.................. 7,120 10,182 8,405 13,987 13,987 13,987 3,095 3,521 3,521
------ ------- ------- ------- ---------- -------- ------ ------- -------
Total net sales.............. 15,625 25,565 22,018 29,771 43,561 43,561 6,158 14,509 17,896
Operating income (loss):
Telecommunications (744) (3,423) (2,067) (6,945) (10,599) (10,599) (1,381) (2,917) (3,626)
Information services........... -- (117) (115) 238 (1,154) (1,154) 66 (30) (452)
Merchandising.................. 223 307 329 756 756 756 79 100 100
General corporate.............. (1,547) (2,378) (1,609) (3,861) (3,861) (3,861) (1,033) (1,771) (1,771)
------ ------- ------- ------- ---------- -------- ------ ------- -------
Total operating loss......... (2,068) (5,611) (3,462) (9,812) (14,858) (14,858) (2,269) (4,618) (5,749)
Interest expense................ 744 637 505 7,630 30,645 54,853 184 8,815 8,966
Interest income................. (109) (385) (297) (2,890) (2,581) (2,581) (125) (3,057) (2,217)
Other expenses, net............. 5,687 1,367 948 1,305 988 988 599 194 318
Net loss........................ (8,195) (7,230) (4,618) (15,857) (43,910) (68,118) (2,927) (10,699) (12,944)
Net loss per common share....... $(1.06) $ (0.42) $ (0.28) $ (0.70) $ (1.64) $ (2.21) $(0.15) $ (0.39) $ (0.42)
Weighted average common shares
outstanding.................... 7,719 17,122 16,609 22,770 26,812 30,812 19,935 27,214 30,682

OTHER FINANCIAL DATA:
Capital expenditures............ $ 307 $ 1,816 $ 1,465 $ 8,652 $ 12,310 $12,310 $ 555 $ 2,588 $ 2,671
EBITDA(6)....................... (1,845) (5,179) (3,116) (8,952) (11,554) (11,554) (2,138) (3,771) (4,250)

<CAPTION>
PRO
FORMA AS
ADJUSTED
1996(3)
--------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Telecommunications(5).......... $11,433
Information services........... 2,942
Merchandising.................. 3,521
--------
Total net sales.............. 17,896
Operating income (loss):
Telecommunications (3,626)
Information services........... (452)
Merchandising.................. 100
General corporate.............. (1,771)
--------
Total operating loss......... (5,749)
Interest expense................ 16,039
Interest income................. (2,217)
Other expenses, net............. 318
Net loss........................ (20,017)
Net loss per common share....... $ (0.58)
Weighted average common shares
outstanding.................... 34,682
OTHER FINANCIAL DATA:
Capital expenditures............ $ 2,671
EBITDA(6)....................... (4,250)
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31,
1996
-------------------
PRO
ACTUAL FORMA(7)
-------- --------

(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term investments.......................................... $203,503 $163,866
Property and equipment, net................................................................ 18,089 27,861
Total assets............................................................................... 280,473 393,546
Current portion of long-term debt and capital lease obligations............................ 10,314 28,821
Long-term debt and capital lease obligations, less current portion and discount............ 248,037 248,441
Stockholders' equity....................................................................... 10,952 97,122

PRO
FORMA
AS
ADJUSTED(8)
--------
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and sh $461,064
Property and equipment, net.. 27,861
Total assets................. 698,670
Current portion of long-term 28,821
Long-term debt and capital le 448,441
Stockholders' equity......... 201,396
</TABLE>

(footnotes begin on next page)

13
<PAGE>
- ------------

(1) Gives effect to the acquisitions of Milliwave, Locate, Fox/Lorber, TWL and
Avant-Garde Telecommunications, Inc. ("Avant-Garde") and financings thereof,
a financing (the "Everest Financing") provided to the Company by Everest
Capital Limited and certain of its affiliates (as described under
"Description of Certain Indebtedness") and the issuance of the Old Notes as
if they occurred as of the beginning of the respective periods. See notes 2,
8, 17, 18 and 28 to the Consolidated Financial Statements. Excludes the
Pinnacle Acquisition because of its immaterial effect on the pro forma
amounts. Milliwave, Locate, Pinnacle and Avant-Garde have not generated
material revenues to date. Assumes the issuance of 3.4 million shares of
Common Stock in connection with the Milliwave Acquisition.

(2) On a pro forma basis giving effect to the acquisitions and financings
described in footnote (1) above, pro forma sales, operating loss, interest
expense, net loss and negative EBITDA for the twelve months ended December
31, 1995 amounted to $49.4 million, $16.1 million, $37.3 million, $51.5
million and $12.2 million, respectively. On a pro forma as adjusted basis
giving effect to the acquisitions and financings described in footnote (1)
above, and the issuance of the New Notes, interest expense and net loss for
the twelve months ended December 31, 1995 amounted to approximately $66.5
million and $80.7 million, respectively.

(3) Adjusted to reflect the acquisitions and financings referred to in footnote
(1) above and the Stock Offering and Debt Offering (collectively, the
"Transactions") as if they occurred as of the beginning of the respective
periods. Interest expense has been adjusted to include approximately $24.2
million and $7.1 million consisting of (i) interest on the New Notes for the
ten months ended December 31, 1995 and the three months ended March 31,
1996, respectively, at an assumed interest rate of 13.5% on the New Senior
Notes and 14% on the New Senior Subordinated Notes and (ii) amortization of
the $7.9 million of debt offering costs and other related fees using an
amortization period of ten years, but not to include interest income earned
on additional available cash. If the interest rate on the New Notes changed
by 0.5%, interest expense would change by approximately $0.9 million and
$0.3 million for the ten months ended December 31, 1995 and the three months
ended March 31, 1996, respectively. Assumes the issuance of 3.4 million
shares of Common Stock in connection with the Milliwave Acquisition.

(4) In the first quarter of 1996, the Company settled a dispute with another
carrier regarding the unauthorized switching of the Company's customers to
the other carrier. The Company recognized revenue of approximately $1.5
million and cost of sales of approximately $850,000 in connection with this
settlement, the majority of which related to minutes of use during that
quarter.

(5) The Company has generated nominal revenues from its Wireless Fiber services.

(6) EBITDA consists of loss before interest, income taxes, depreciation and
amortization and other income and expense (see footnote (3) to "Selected
Financial Data"). EBITDA is provided because it is a measure commonly used
in the telecommunications industry. It is presented to enhance an
understanding of the Company's operating results and is not intended to
represent cash flow or results of operations in accordance with generally
accepted accounting principles for the periods indicated. See the Company's
consolidated financial statements contained elsewhere in this Prospectus.

(7) Gives effect to the acquisitions of Milliwave, Locate, Fox/Lorber and TWL
and financings thereof as if they occurred on March 31, 1996. Excludes the
Pinnacle Acquisition because of its immaterial effect on the pro forma
amounts.

(8) Adjusted to reflect the acquisitions referred to in footnote (7) above and
financings thereof, and the Stock Offering (at an assumed offering price of
$27.625 per share) and Debt Offering as if they occurred on March 31, 1996.

14
<PAGE>
RISK FACTORS

An investment in the Common Stock involves a significant degree of risk. In
determining whether to make an investment in the Common Stock, prospective
investors should consider carefully all of the information set forth in this
Prospectus and, in particular, the following risk factors.

HISTORICAL AND ANTICIPATED FUTURE NET AND OPERATING LOSSES AND NEGATIVE EBITDA

The Company has incurred significant operating and net losses attributable
in substantial part to the development of its telecommunications businesses. The
Company historically has had net losses and negative EBITDA, including a net
loss and negative EBITDA of approximately $15.9 million and $9.0 million,
respectively, for the ten months ended December 31, 1995, and $10.7 million and
$3.8 million, respectively, for the three months ended March 31, 1996. The
Company has been offering local access services as a CAP only since December
1994, and local exchange services as a CLEC only since April 1996, and has made
and is making significant expenditures in the development of its wireless local
telecommunications services operations, including expenditures associated with
establishing an operating infrastructure and introducing and marketing its
telecommunications services. The Company expects to continue to incur
significant and increasing operating and net losses and to generate increasingly
negative EBITDA while it develops and expands its telecommunications businesses
and until such time that it establishes a sufficient revenue-generating customer
base. As a result of expenses, principally relating to an increase in the number
of employees, in connection with the rollout of CLEC services, there will be
substantial increases in the Company's net loss, operating loss and negative
EBITDA in the second quarter of 1996 as compared to prior quarters. There can be
no assurance that the Company will achieve or sustain positive EBITDA or
profitability or at any time have sufficient financial resources to make
principal and interest payments on its outstanding debt. In addition, if the
Company does not achieve and sustain positive EBITDA and profitability, the
value of the Common Stock may be adversely affected. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

RISKS RELATED TO CLEC STRATEGY; ANTICIPATED INITIAL NEGATIVE OPERATING MARGINS
IN CLEC BUSINESS

The Company is pursuing an aggressive strategy to enter the local exchange
services market as a CLEC in the metropolitan areas in which it has Wireless
Licenses and to develop and obtain the facilities necessary to provide its own
local exchange services. The Company has virtually no experience providing local
exchange services and there can be no assurance that the Company's CLEC strategy
will be successful. In addition, local exchange service providers have never
utilized 38 GHz wireless-based systems as a significant segment of their local
exchange services facilities and there can be no assurance that the Company will
be successful in implementing its Wireless Fiber-based system. The Company's
CLEC strategy is subject to risks relating to: the receipt of necessary
regulatory approvals; the negotiation of resale agreements with LECs and other
CLECs; the negotiation of interconnection agreements with RBOCs and other
incumbent LECs; the ability of third-party equipment providers and installation
and maintenance contractors to meet the Company's accelerated switch and remote
node rollout schedule; the recruitment of additional personnel in a timely
manner, so as to be able to attract and service new customers but not incur
excessive personnel costs in advance of the rollout; the Company's ability to
attract and retain new customers and to deliver high quality services; the
potential adverse reaction to the Company's services by the Company's carrier
customers, who may view the Company as a competitor; and the Company's ability
to manage the simultaneous implementation of its plan in multiple markets. The
Company currently does not have any local exchange services facilities in place,
but plans to install its first main switch by October 1996. The Company
commenced marketing of its local exchange services in April 1996 and currently
offers such services only in New York City and only on a resale basis. As a new
participant in the CLEC business, without an existing infrastructure or
recognized brand name, the Company may need to offer lower prices than its
competitors to attract customers.

Although the Company's initial implementation of its CLEC strategy often
will entail the resale of the facilities and services of other service
providers, which itself is dependent on the negotiation and

15
<PAGE>
availability of satisfactory resale arrangements, the principal component of the
Company's CLEC strategy will require significant capital investment related to
the purchase and installation of numerous main switches and remote nodes and the
interconnection of these facilities to customers' buildings and leased local
networks, including through the installation of Wireless Fiber links and build
out of other facility infrastructure, in advance of generating material
revenues. The Company has budgeted $34 million for the last nine months of 1996
and $212 million for 1997 for capital expenditures for the development of its
CLEC business.

Given the opportunities arising from recent procompetitive legislative and
regulatory initiatives, numerous other companies are entering the CLEC business.
The Company believes that successful CLECs will need to establish their
infrastructure and commence operations over a limited period of time.
Accordingly, the Company is subject to the risk that its competitors will
establish their CLEC businesses before the Company and will have substantial
"first to market" advantages.

As the Company rolls out its CLEC operations, it anticipates experiencing
negative operating margins while it develops its facilities. After initial
rollout of its CLEC services in a particular city, the Company expects operating
margins for such operations to improve only when and if (i) sales efforts result
in sufficiently increased volumes of traffic originated and terminated over the
Company's Wireless Fiber facilities instead of LEC or other CLEC facilities and
(ii) higher margin-enhanced services are provided to and accepted by customers.
While the Company believes that the unbundling and resale of LEC services and
the implementation of local telephone number portability, which are mandated by
the Telecommunications Act, will reduce the Company's costs of providing local
exchange services and facilitate the marketing of such services, there can be no
assurance that the Company's CLEC operations will become profitable due to,
among other factors, lack of customer demand, competition from other CLECs and
pricing pressure from the LECs and other CLECs. The Company does not expect to
generate significant revenues from its CLEC business during 1996. The Company's
failure to implement its CLEC strategy successfully would have an adverse effect
on the value of the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Strategy for
Telecommunications Business Growth" and "-- Telecommunications Services -- CLEC
Services."

NEGATIVE OPERATING MARGINS IN THE INITIAL PROVISION OF WIRELESS FIBER-BASED CAP
SERVICES

The Company has experienced negative operating margins in connection with
the development and initial provision of its Wireless Fiber-based CAP services
and expects to continue to experience negative operating margins until it
develops a revenue-generating customer base sufficient to fund operating
expenses attributable to the provision of such services. In order to demonstrate
the efficacy of Wireless Fiber, the Company occasionally has provided
complementary service on a trial basis. The Company expects to improve operating
margins in the provision of its CAP services over time by (i) obtaining
appropriate sites for its operations, (ii) acquiring and retaining an adequate
customer base, (iii) placing telecommunications traffic of new customers and
additional telecommunications traffic of existing customers across Wireless
Fiber links, (iv) inducing providers of telecommunications services to utilize
and market the Company's Wireless Fiber services as part of their own networks,
systems and services, thereby reducing the Company's related marketing costs and
(v) taking advantage of recent procompetitive regulatory initiatives and changes
that permit the Company to provide additional local telecommunications services,
thereby facilitating the marketability of higher-margin enhanced and premium
services utilizing the Company's Wireless Fiber capabilities. If the Company
fails to accomplish any of the foregoing, particularly acquiring and retaining
an adequate customer base, it will not be able to improve the operating margins
of its CAP business. There can be no assurance that the Company will be able to
achieve or sustain positive operating margins. Failure to achieve positive
operating margins would have an adverse effect on the value of the Common Stock.
For a discussion of factors that affect results described in the forward-looking
statements contained in this paragraph, see "-- Competition," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Competition in the Telecommunications Industry" and "--
Telecommunications Services -- CAP Services -- Marketing."

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RISKS ASSOCIATED WITH RAPID EXPANSION AND ACQUISITIONS

The Company intends to pursue a strategy of aggressive and rapid growth,
including the accelerated rollout of its CLEC services, acquisitions of
businesses and assets, continued aggressive marketing of its CAP services and
the hiring of additional management, technical and marketing personnel, all of
which will result in significantly higher operating expenses. Rapid expansion of
the Company's operations may place a significant strain on the Company's
management, financial and other resources. The Company's ability to manage
future growth, should it occur, will depend upon its ability to monitor
operations, control costs, maintain effective quality controls and significantly
expand the Company's internal management, technical and accounting systems. Any
failure to expand these areas and to implement and improve such systems,
procedures and controls in an efficient manner at a pace consistent with the
growth of the Company's business could have a material adverse effect on the
Company's business, financial condition and results of operations and the value
of the Common Stock. As part of its strategy, the Company may acquire
complementary assets or businesses and may use a portion of the proceeds from
the Offerings for such acquisitions. The pursuit of acquisition opportunities
will place significant demands on the time and attention of the Company's senior
management and will involve considerable financial and other costs with respect
to identifying and investigating acquisition candidates, negotiating acquisition
agreements and integrating the acquired businesses with the Company's existing
operations. Employees and customers of acquired businesses may sever their
relationship with such businesses during or after the acquisition. There can be
no assurance that the Company will be able to successfully consummate any
acquisitions or integrate any business or assets which it may acquire into its
operations. See "Use of Proceeds" and "Business -- Strategy for
Telecommunications Business Growth."

SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS

At March 31, 1996, on a pro forma as adjusted basis giving effect to the
Transactions, the Company would have had, on a consolidated basis, approximately
$477.6 million of indebtedness, including capitalized lease obligations. The
accrual of interest on the New Notes and the accretion of original issue
discount on the Old Notes will significantly increase the Company's liabilities
(except to the extent that the Old Convertible Notes are converted to Common
Stock). Although the net proceeds from the Offerings are expected to further
enhance liquidity and improve the Company's financial flexibility in the near
term, the Company has significant indebtedness and interest expense as a result
of the 1995 Debt Placement, which will be substantially increased as a result of
the Debt Offering. The Old Note Indentures limit, but do not prohibit, and the
New Note Indentures will limit, but will not prohibit, the incurrence of
additional indebtedness by the Company and subsidiaries. Additionally, the Old
Note Indentures do not, and the New Note Indentures will not, limit the amount
of indebtedness that may be incurred by the Company's new media and consumer
products subsidiaries.

The level of the Company's indebtedness could have important consequences,
including the following: (i) the combined debt service requirements of the Old
Notes and the New Notes (collectively, the "Notes") could make it more difficult
for the Company to make payments on the Notes; (ii) the ability of the Company
to obtain any necessary financing in the future for working capital, capital
expenditures, debt service requirements or other purposes may be limited; (iii)
a substantial portion of the Company's cash flow from operations, if any, must
be dedicated to the payment of principal and interest on its indebtedness and
other obligations and will not be available for use in the Company's business;
(iv) the Company's level of indebtedness could limit its flexibility in planning
for, or reacting to changes in, its business; (v) the Company is more highly
leveraged than many of its competitors, which may place it at a competitive
disadvantage; and (vi) the Company's high degree of indebtedness could make it
more vulnerable in the event of a downturn in its business or if operating cash
flow does not significantly increase.

The Company had net losses and negative EBITDA during the ten months ended
December 31, 1995 (and prior fiscal years) and the first three months of 1996
and management anticipates that such net losses and negative EBITDA will
continue (and increase) in the foreseeable future. For the same periods, on a
pro forma as adjusted basis after giving effect to the Transactions, the
Company's earnings

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<PAGE>

before fixed charges would have been insufficient to cover fixed charges by
approximately $68.1 million and $19.9 million, respectively. In addition, for
the same periods on the same pro forma as adjusted basis, the Company's EBITDA
minus capital expenditures and interest expense would have been negative $78.7
million and negative $23.0 million, respectively. As the Company expands its
operations, it expects to continue to experience increasing net and operating
losses and negative EBITDA. There can be no assurance that the Company will be
able to attain profitability or positive EBITDA or that the Company will be able
to meet its debt service obligations. If the Company's cash flow is inadequate
to meet its obligations or fund its operations, the Company could face
substantial liquidity problems. If the Company is unable to generate sufficient
cash flow or otherwise obtain funds necessary to make required payments or, if
the Company otherwise fails to comply with the material terms of its
indebtedness, it would be in default thereunder, which would permit the holders
of such indebtedness to accelerate the maturity of such indebtedness and could
cause defaults under other indebtedness of the Company, including the Notes.
Such defaults would adversely affect the market price of the Common Stock. The
ability of the Company to meet its obligations will be dependent upon the future
performance of the Company, which will be affected by prevailing economic
conditions and to financial, business and other factors, including factors
beyond the control of the Company. See "Description of Certain Indebtedness."

COMPETITION

The Company is subject to intense competition in each of the areas in which
it operates. Many of the Company's competitors have longer-standing
relationships with customers and suppliers in their respective industries,
greater name recognition and significantly greater financial, technical and
marketing resources than the Company.

Local Telecommunications Market. The local telecommunications market is
intensely competitive and currently is dominated by the RBOCs and LECs. The
Company has been marketing local access services as a CAP only since December
1994 and local exchange services as a CLEC only since April 1996, and the
Company has not obtained a significant market share in any of the areas where it
offers such services, nor does it expect to do so given the size of the local
telecommunications services market, the intense competition and the diversity of
customer requirements. In each area covered by the Wireless Licenses, the
services offered by the Company compete with those offered by the LECs, such as
the RBOCs, which currently dominate the provision of local services in their
markets. The LECs have long-standing relationships with their customers, have
the ability to subsidize competitive services with revenues from a variety of
other services and benefit from existing state and federal regulations that
currently favor the LECs over the Company in certain respects. While legislative
and regulatory changes have provided increased business opportunities for
competitive telecommunications providers such as the Company, these same
decisions have given the LECs increased flexibility in their pricing of
services. This may allow the LECs to offer special discounts to the Company's
(and other CLECs') customers and potential customers. Further, as competition
increases in the local telecommunications market, the Company anticipates that
general pricing competition and pressures will increase significantly. As LECs
lower their rates, other telecommunications providers will be forced by market
conditions to charge less for their services in order to compete, which could
have an adverse effect on the Company and on the value of the Common Stock.

In addition to competition from the LECs, the Company also faces competition
from a growing number of new market entrants, such as other CAPs and CLECs,
competitors offering wireless telecommunications services, including leading
telecommunications companies, such as AT&T Wireless, and other entities that
hold or have applied for 38 GHz licenses or which may acquire such licenses or
other wireless licenses from others or the FCC. There is at least one other CAP
and/or CLEC in each metropolitan area covered by the Company's Wireless
Licenses, including, in many such areas, companies such as IntelCom, MCImetro,
MFS Communications Company, Inc. ("MFS"), Teleport and Time Warner, Inc. ("Time
Warner"). Many of these entities (and the LECs) already have existing
infrastructure which allows them to provide local telecommunications services
with lower marginal costs than the Company can currently attain and which could
allow them to exert significant pricing pressure in the markets where the
Company provides or seeks to provide telecommunications services.

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<PAGE>
In addition, many CAPs and CLECs have acquired or plan to acquire switches in
order to offer a broad range of local telecommunications services.

The Company currently faces competition from other entities which offer, or
are licensed to offer, 38 GHz services, such as Advanced Radio Telecom Corp.
("ART") and BizTel Communications, Inc. ("BizTel"), and could face competition
in certain aspects of its existing and proposed businesses from competitors
providing wireless services in other portions of the radio spectrum, such as CAI
Wireless Systems, Inc. ("CAI"), a provider of wireless Internet access services,
and CellularVision USA, Inc. ("CellularVision"), a provider of wireless
television services which, in the future, also may provide wireless Internet
access and other local telecommunications services. In many instances, these
service providers hold 38 GHz licenses or licenses for other frequencies in
geographic areas which encompass or overlap the Company's market areas.
Additionally, some of these entities enjoy the substantial backing of, or
include among their stockholders, major telecommunications entities, such as
Ameritech with respect to ART, Teleport with respect to BizTel, and NYNEX and
Bell Atlantic with respect to CAI. Due to the relative ease and speed of
deployment of 38 GHz and some other wireless-based technologies, the Company
could face intense price competition from these and other wireless-based service
providers. Furthermore, a notice of proposed rulemaking ("NPRM") issued by the
FCC contemplates an auction of the lower 16 channels in the 38 GHz spectrum
band, which have not been previously available for commercial use. The grant of
additional licenses by the FCC in the 38 GHz band, or other portions of the
spectrum with similar characteristics, as well as the development of new
technologies, could result in increased competition. The Company believes that,
assuming the adoption of the NPRM as currently proposed, entities having greater
resources than the Company could acquire licenses to provide 38 GHz services.

The Company also may face competition in the provision of local
telecommunications services from cable companies, electric utilities, LECs
operating outside their current local service areas and long distance carriers.
The great majority of these entities provide transmission services primarily
over fiber optic-, copper-based and/or microwave networks, which, unlike the
Company's Wireless Fiber services, enjoy proven market acceptance for the
transmission of telecommunications traffic. Moreover, the consolidation of
telecommunications companies and the formation of strategic alliances within the
telecommunications industry, which are expected to accelerate as a result of the
passage of the Telecommunications Act, could give rise to significant new or
stronger competitors. For example, Time Warner recently entered into a
nine-state interconnection agreement with Bell South. There can be no assurance
that the Company will be able to compete effectively in any of its markets.

The Company's Internet access services also are likely to face competition
from cable television operators deploying cable modems, which provide high speed
data capability over existing coaxial cable television networks. Although cable
modems currently are not widely available and do not provide for two-way data
transfer rates that are as rapid as those which can be provided by Wireless
Fiber services, the Company believes that the cable industry may support the
deployment of cable modems to residential cable customers through methods such
as price subsidies. Notwithstanding the cable industry's interest in rapid
deployment of cable modems, the Company believes that in order to provide
broadband capacity to a significant number of business and government users,
cable operators will be required to spend significant time and capital in order
to upgrade their existing networks to a more advanced hybrid fiber coaxial
network architecture. However, there can be no assurance that cable modems will
not emerge as a source of competition to the Company's Internet access business.
Further, Internet access services based on existing technologies such as ISDN
and, in the future, on such technologies as asymmetrical digital subscriber loop
("ADSL") and high speed digital subscriber loop ("HDSL") will likely provide
additional sources of competition to the Company's Internet access services.
Additionally, the Company believes that many LECs and CLECs already are
promoting other Internet access services. See "Business -- Competition in the
Telecommunications Industry -- Local Telecommunications Market" and "--
Government Regulation of Telecommunications Operations."

Long Distance Market. The long distance market has relatively insignificant
barriers to entry, numerous entities competing for the same customers and a high
(and increasing) average churn rate (especially among residential customers,
which the Company historically has emphasized in its long

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<PAGE>

distance reselling business, and customers acquired in mergers and acquisitions,
which are part of the Company's business strategy), as customers frequently
change long distance providers in response to the offering of lower rates or
promotional incentives by competitors. The Company recently has terminated
several "contest" marketing programs conducted by marketing agents, which were
responsible for generating a substantial majority of the Company's
telecommunications revenues during the 12 months ended March 31, 1996. These
programs had been extremely successful in generating new long distance business
primarily from consumers and were instrumental in allowing the Company to
rapidly expand its customer base. However, the Company recently experienced a
significant increase in consumer and regulatory complaints arising from these
programs. As a result, on May 10, 1996, the Company adopted a policy of
mandatory independent verification of all written letters of authorization
("LOAs") arising from these programs and, effective as of June 10, 1996, no
longer accepts LOAs submitted from these programs. Although the Company is
considering several alternative marketing programs, it does not expect that such
alternative programs will, individually or in the aggregate, be as successful as
the contest programs in the short term in attracting and retaining customers.
Accordingly, the Company expects to experience lower (and potentially negative)
rates of growth in its long distance business in the near term and expects a
reduction in long distance revenues in the third quarter of 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Revenues." The Company competes with major carriers such as AT&T
Corp. ("AT&T"), MCI and Sprint, as well as other national and regional long
distance carriers and resellers, many of whom own substantially all of their
own facilities and are able to provide services at costs lower than the
Company's current costs since the Company generally leases its access
facilities. The Company believes that the RBOCs also will become significant
competitors in the long distance telecommunications industry. The Company
believes that the principal competitive factors affecting its market share are
sales and marketing programs, pricing, customer service, accurate billing,
clear pricing policies and, to a lesser extent, variety of services. The ability
of the Company to compete effectively will depend upon its ability to maintain
high quality, market-driven services at prices generally perceived to be equal
to or below those charged by its competitors. In 1995, the FCC announced a
decision pursuant to which AT&T no longer will be regulated as a dominant long
distance carrier. This decision is expected to increase AT&T's flexibility in
competing in the long distance telecommunications services market and, in
particular, will eliminate the longer advance tariff notice requirements
previously applicable only to AT&T. To maintain its competitive posture, the
Company believes that it must be in a position to reduce its prices in order to
meet reductions in rates, if any, by others. Any such reductions could adversely
affect the Company. In addition, LECs have been obtaining additional pricing
flexibility. This may enable LECs to grant volume discounts to larger long
distance companies, which also could put the Company's long distance business at
a disadvantage in competing with larger providers. See "Business -- Competition
in the Telecommunications Industry -- Long Distance Market."

New Media Business. The industry in which the Company's new media subsidiary
competes consists of a very large number of entities producing, owning or
controlling news, sports, entertainment, educational and informational content
and services, including telecommunications companies, television broadcast
companies, sports franchises, film and television studios, record companies,
newspaper and magazine publishing companies, universities and on-line computer
services. Competition is intense for timely and highly marketable or usable
information and entertainment content. Almost all of the entities with which the
Company's new media subsidiary competes have significantly greater presence in
the various media markets and greater resources than the Company, including
existing content libraries, financial resources, personnel and existing
distribution channels. There can be no assurance that the Company will be able
to compete successfully in the emerging new media industry. See "Business -- New
Media Business."

Consumer Products Business. The consumer products industry is subject to
changes in styles and consumer tastes. An unanticipated change in consumer
preferences inconsistent with the Company's merchandise lines could have a
serious and adverse effect upon its operations. The Company's product lines are
subject to intense competition with numerous manufacturers and distributors of
hair, beauty and bath products. Mass merchandisers, drug store chains, and other
mass volume retailers typically utilize freestanding pegboard fixtures or
pegboard wall fixtures, as well as in-line shelving and end-cap displays, to
display their products. Competition for shelf and wall space for product
placement is

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<PAGE>
intense, as many companies seek to have their products strategically placed
within the store. Competition also exists with respect to product name
recognition and pricing, since retailers and consumers often choose products on
the basis of name brand, cost and value. Many of the Company's competitors have
greater product and name recognition than it does, as well as much larger and
more sophisticated sales forces, product development, marketing and advertising
programs and facilities. The Company generally competes by attempting to offer
retail customers quality, service and products at reasonable prices. See
"Business -- Consumer Products -- Competition."

LIMITED OPERATING HISTORY IN TELECOMMUNICATIONS INDUSTRY

The Company shifted its business focus in 1992 from marketing consumer
products to providing telecommunications services in order to capitalize on
emerging opportunities in the evolving telecommunications industry. The Company
began reselling long distance telecommunications services in 1993. The Company
began marketing its local access services as a CAP in December 1994 and offering
local exchange services as a CLEC in April 1996 and currently offers such CLEC
services only in New York City and only on a resale basis. To date, the
Company's CAP and CLEC operations have generated only nominal revenues. Although
a number of persons comprising the Company's senior management team have
extensive experience in the telecommunications industry, the Company has a
limited operating history in the telecommunications industry. The Company's
prospects, therefore, must be considered in light of the risks, expenses,
delays, problems and difficulties frequently encountered in the establishment of
a new business in an evolving industry characterized by intense competition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

SIGNIFICANT CAPITAL REQUIREMENTS

The expansion of the Company's telecommunications operations and the
continued funding of operating expenses will require substantial capital
investment. Additionally, as part of its strategy, the Company may seek to
acquire complementary assets or businesses (including additional 38 GHz
licenses, by auction or otherwise), which also could require substantial capital
investment. The Company's decision to accelerate the development of its CLEC
operations in response to the Telecommunications Act has substantially increased
the Company's capital requirements and the Company has undertaken the Stock
Offering and Debt Offering to address these increased requirements. Management
anticipates, based on current plans and assumptions relating to its operations,
that the net proceeds from the Stock Offering and Debt Offering, together with
existing financial resources (including proceeds raised in the 1995 Debt
Placement) and equipment financing arrangements which the Company intends to
seek, will be sufficient to fund the Company's growth and operations for
approximately 36 to 48 months following consummation of the Offerings.
Management believes that the Company's capital needs at the end of such period
will continue to be significant and the Company will continue to seek additional
sources of capital. Further, in the event the Company's plans or assumptions
change or prove to be inaccurate, or if the Company consummates any acquisitions
of businesses or assets (including additional 38 GHz licenses, by auction or
otherwise), or, if the Company does not generate substantial positive cash flows
from operations, the Company may be required to seek additional sources of
capital sooner than currently anticipated. Sources of additional capital may
include public and private equity and debt financings, sales of nonstrategic
assets and other financing arrangements. There can be no assurance that the
Company will be able to obtain additional financing, or, if such financing is
available, that the Company will be able to obtain it on acceptable terms.
Failure to obtain additional financing, if needed, could result in the delay or
abandonment of some or all of the Company's development and expansion plans,
which would have a material adverse effect on the Company's business and could
adversely affect the Company's ability to service its existing debt and the
value of the Common Stock. For a discussion of other factors that could affect
the forward-looking statements contained in this paragraph, see the other risk
factors and "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Company Overview" and "--
Liquidity and Capital Resources."

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<PAGE>
GOVERNMENT REGULATION

The Company's telecommunications services are subject to varying degrees of
federal, state and local regulation. The FCC exercises jurisdiction over all
telecommunications services providers to the extent such services involve the
provision of jurisdictionally interstate or international telecommunications,
including the resale of long distance services, the provision of local access
services necessary to connect callers to long distance carriers, and the use of
electromagnetic spectrum (i.e., wireless services). The state regulatory
commissions retain nonexclusive jurisdiction over the provision of
telecommunications services to the extent such services involve the provision of
jurisdictionally intrastate telecommunications. Municipalities also may regulate
limited aspects of the Company's business by, for example, imposing zoning
requirements or right-of-way permit procedures, certain taxes or franchise fees.

The Telecommunications Act is intended to remove the formal barriers between
the long distance and local telecommunications services markets, allowing
service providers from each market (as well as providers of cable television and
other services) to compete in all communications markets. The Telecommunications
Act will permit the RBOCs to compete in the provision of interLATA long distance
services. Additionally, the FCC must promulgate new regulations over the next
several years to address mandates contained in the Telecommunications Act, which
may change the regulatory environment significantly. The Telecommunications Act
generally requires LECs to provide competitors with interconnection and
nondiscriminatory access to the LEC network on more favorable terms than have
been available in the past. However, such interconnection and the terms thereof
are subject to negotiations with each LEC, which may involve considerable
delays, and may not necessarily be obtained on terms and conditions that are
acceptable to the Company. In such instances, although the Company may petition
the proper regulatory agency to arbitrate disputed issues, there can be no
assurance that the Company will be able to obtain acceptable interconnection
agreements.

The Company is unable to predict what effect the Telecommunications Act will
have on the telecommunications industry in general and on the Company in
particular. No assurance can be given that any regulation will broaden the
opportunities available to the Company or will not have a material adverse
effect on the Company and its operations. Further, there can be no assurance
that the Company will be able to comply with additional applicable laws,
regulations and licensing requirements or have sufficient resources to take
advantage of the opportunities which may arise from this dynamic regulatory
environment.

Although the Company believes that it is in substantial compliance with all
material laws, rules and regulations governing its operations and has obtained,
or is in the process of obtaining, all licenses and approvals necessary and
appropriate to conduct its operations, changes in existing laws and regulations,
including those relating to the provision of wireless local telecommunications
services via 38 GHz and/or the future granting of 38 GHz licenses, or any
failure or significant delay in obtaining necessary regulatory approvals, could
have a material adverse effect on the Company. On November 13, 1995, the FCC
released an order freezing the acceptance for filing of new applications for 38
GHz frequency licenses. On December 15, 1995, the FCC announced the issuance of
an NPRM, pursuant to which it proposed to amend its current rules relating to 38
GHz, including, among other items, the imposition of minimum construction and
usage requirements and an auction procedure for issuance of licenses in the
37-40 GHz band where mutually exclusive applications have been filed. In
addition, the FCC ordered that those applications that are subject to mutual
exclusivity with other applicants or that were placed on public notice by the
FCC after September 13, 1995 would be held in abeyance and not processed by the
FCC pending the outcome of the proceeding initiated by the NPRM. Final rules
with respect to the changes proposed by the NPRM have not been adopted and the
changes proposed by the NPRM have been, and are expected to continue to be, the
subject of numerous comments by members of the telecommunications industry and
others. Consequently, there can be no assurance that the NPRM will result in the
issuance of rules consistent with the rules initially proposed in the NPRM, or

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<PAGE>
that any rules will be adopted. Until final rules are adopted, the rules
currently in existence remain in effect with respect to outstanding licenses.

Additionally, providers of long distance services, including the major
interexchange carriers, as well as resellers, such as the Company, are coming
under intensified scrutiny for marketing activities by them or their agents that
result in alleged unauthorized switching of customers from one long distance
provider to another. The FCC and a number of state authorities are seeking to
introduce more stringent regulations to curtail the intentional or erroneous
switching of customers, which could include the imposition of fines, penalties
and possible operating restrictions on entities which engage in unauthorized
switching activities. In addition, the Telecommunications Act requires the FCC
to prescribe regulations imposing procedures for verifying the switching of
customers and additional remedies on behalf of carriers for unauthorized
switching of their customers. The effect, if any, of the adoption of any such
proposed regulations on the long distance industry and the manner of doing
business therein, cannot be anticipated. Statutes and regulations which are or
may become applicable to the Company as it expands could require the Company to
alter methods of operations, at costs which could be substantial, or otherwise
limit the types of services offered by the Company.

The Company plans to operate as a CLEC in numerous states and to offer a
full range of local exchange services. However, the Company must obtain the
approval of state regulatory authorities prior to offering CLEC services in each
state. The Company currently is authorized to operate as a CLEC in California,
Connecticut, Florida, Georgia, Illinois, Massachusetts, Michigan, New York,
Tennessee, Texas and Washington, and is seeking or intends to seek authorization
in numerous other states. However, there can be no assurance that the Company
will obtain or retain such state authorization. Further, as a CLEC, the Company
will be subject to additional state regulatory and service parameters, including
those relating to quality control and the adequate provision of customer
service. The FCC is considering substantial mandatory reductions in the rates
charged by LECs to long distance service providers for local "access" (i.e., the
transmission of a long distance call from the caller's location to the long
distance provider's POP and from the terminating POP to the recipient of the
call). CAPs, such as the Company, provide local access at rates that are
discounted from the rates charged by LECs. If the FCC were to mandate reductions
in LECs' local access charges, CAPs might be forced to substantially reduce the
rates they charge long distance providers, resulting in lower gross margins
(which, in the case of the Company, are currently negative). This could have a
material adverse effect on the Company and its prospects, as well as the value
of the Common Stock. See "Business -- Telecommunications Industry Overview," "--
Government Regulation of Telecommunications Operations" and "-- Competition in
the Telecommunications Industry."

FINITE INITIAL TERM OF WIRELESS LICENSES; POTENTIAL LICENSE RENEWAL COSTS;
FLUCTUATIONS IN THE VALUE OF WIRELESS LICENSES; BUILDOUT REQUIREMENTS FOR
MILLIWAVE AND OTHER NEW LICENSES; TRANSFER OF CONTROL

The FCC's current policy is to align the expiration dates of all 38 GHz
licenses such that all such licenses mature concurrently and then to renew all
such licenses for ten years. The initial term of all currently outstanding 38
GHz licenses, including the Company's licenses, expires in February 2001. While
the Company believes that all of its Wireless Licenses will be renewed based
upon FCC custom and practice establishing a presumption in favor of licensees
that have complied with their regulatory obligations during the initial license
period, there can be no assurance that any Wireless License will be renewed upon
expiration of its initial term.

In the NPRM, the FCC proposed auctioning licenses for currently unallocated
38 GHz channels. Given the current political climate with respect to balancing
the federal budget, there is a risk that the FCC will require significant
payments upon renewal of the Company's Wireless Licenses. The FCC's failure to
renew, or imposition of significant charges for renewal of, one or more Wireless
Licenses could

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<PAGE>
have a material adverse effect on the Company and could adversely affect the
value of the Common Stock.

The Wireless Licenses are a significant asset of the Company, the value of
which will depend significantly upon the success of the Company's wireless
telecommunications operations and the future direction of the wireless
telecommunications segment of the telecommunications industry. The value of
licenses to provide wireless services also may be affected by fluctuations in
the level of supply and demand for such licenses. Any assignment of a license or
transfer of control by an entity holding a license is subject to certain
limitations relating to the identity and status of the transferee and prior FCC
approval (and in some instances state regulatory approval as it relates to the
provision of telecommunications services in that state), thereby possibly
diminishing the value of the Wireless Licenses. A holder of a 38 GHz license is
required to satisfy the FCC's rules and regulations relating to construction
within 18 months from the license's date of grant in order to prevent revocation
of the license. Of the Milliwave Licenses, 34 require such buildout prior to
October 1996. The Company currently is providing construction and support
services to Milliwave in connection with its buildout of the Milliwave Licenses
under the terms of a services agreement between the Company and Milliwave. As
the Company has secured Roof Rights in many of the cities covered by the
Milliwave Licenses and anticipates securing Roof Rights in the other remaining
cities, it is anticipated that all buildout requirements relating to the
Milliwave Licenses will be met. There can be no assurance, however, that this
will be the case.

The Company has entered into acquisition and related agreements with each of
Milliwave, Locate and Pinnacle. The transfer of licenses issued by the FCC,
including 38 GHz licenses (as well as a change of control of entities holding
licenses), is subject to the prior consent of the FCC, which consent generally
turns on a number of factors including the identity, background and
qualifications of the transferee and the satisfaction of certain other
regulatory requirements. In addition, the existence of proposed channel
limitations in the NPRM, which in at least one licensed area may result in the
Company exceeding the proposed maximum number of licenses for that area, may
result in the FCC denying consent for one or more license transfers. In light of
the foregoing, there can be no assurance that the FCC will approve all or any of
the proposed acquisitions or, if approved, that the FCC will not impose
limitations on the ultimate number of licenses held in any particular licensed
area. See "Business -- Telecommunications Services -- Wireless Fiber -- Wireless
Licenses" and "-- Government Regulation of Telecommunications Operations."

CHANGES IN TECHNOLOGY, SERVICES AND INDUSTRY STANDARDS

The telecommunications industry has been characterized by rapid
technological change, changing end-user requirements, frequent new service
introductions and evolving industry standards. The Company believes that its
future success will depend on its ability to anticipate or adapt to such changes
and to offer, on a timely basis, services that meet these evolving industry
standards. The extent to which competitors using existing or currently
undeployed methods of delivery of local telecommunications services will compete
with the Company's Wireless Fiber services cannot be anticipated. There can be
no assurance that existing, proposed or as yet undeveloped technologies will not
become dominant in the future and render 38 GHz-based systems less profitable or
less viable. For example, there are several existing technologies that may be
able to allow the transmission of high bandwidth traffic over existing copper
lines. There can be no assurance that the Company will have sufficient resources
to make the investments necessary to acquire new technologies or to introduce
new services that could compete with future technologies or that equipment held
by the Company in inventory will not be rendered obsolete, any of which would
have an adverse effect on the value of the Common Stock. See "Business --
Telecommunications Industry Overview."

24
<PAGE>
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS

The indebtedness of the Company imposes significant operating and financial
restrictions on the Company, affecting, and in certain cases limiting, among
other things, the ability of the Company to incur additional indebtedness or
create liens on its assets, pay dividends, sell assets, engage in mergers or
acquisitions or make investments. Failure to comply with any such restrictions
could limit the availability of borrowings or result in a default under the
terms of any such indebtedness, and there can be no assurance that the Company
will be able to comply with such restrictions. Moreover, these restrictions
could limit the Company's ability to engage in certain business transactions
which the Company may desire to consummate. The Company's inability to
consummate any such transaction could have an adverse effect on the Company's
operations and the value of the Common Stock. See "Description of Certain
Indebtedness."

DEPENDENCE ON THIRD PARTIES FOR SERVICE AND MARKETING; POSSIBLE SERVICE
INTERRUPTIONS AND EQUIPMENT FAILURES

The Company's long distance resale business is dependent on utilizing the
facilities of major long distance carriers to carry its customers' long distance
telephone calls and, in many instances, especially during initial market
penetrations, the Company's CLEC business will be dependent on the facilities of
the LECs and other local exchange service providers to carry its customers'
local telephone calls. The Company has agreements with long distance carriers
that provide it with access to such carriers' networks and has entered or is
entering into interconnect agreements with various LECs, and other CLECs, to
access their local exchange facilities. Although the Company believes that it
currently has sufficient access to long distance networks and will be able to
obtain sufficient access to local exchange facilities, any increase in the rates
or access fees charged by the owners of such facilities or their unwillingness
to provide access to such facilities to the Company, as well as potential
reticence of the LECs to honor appropriate provisioning and service intervals
with respect to interconnection arrangements, could materially adversely affect
the Company's operations. Failure to obtain continuing access to such networks
and facilities also would have a material adverse effect on the Company, and
could require the Company to significantly curtail or cease its operations.
Further, the Company's CLEC operations will rely on leasing transmission
facilities from LECs to some extent. These facilities often use copper wire for
"last mile" access to end users. To the extent that the Company leases LEC
facilities that use copper wire, the Company will not be able to offer potential
customers the benefits of Wireless Fiber with respect to high transmission
capacity. In addition, the Company's operations require that the networks leased
by it, and any facilities which may be developed by the Company, operate on a
continuous basis. It is not atypical for networks and switching facilities to
experience periodic service interruptions and equipment failures. It is
therefore possible that the networks and facilities utilized by the Company may
from time to time experience service interruptions or equipment failures
resulting in material delays which would adversely affect consumer confidence as
well as the Company's business operations and reputation and the value of the
Common Stock. See "Business -- Telecommunications Services -- Long Distance
Services."

The Company utilizes, in certain cases, third parties for marketing its
Wireless Fiber services and maintaining its operational systems. The Company has
entered into master service agreements with each of Electric Lightwave, MCImetro
and Century Telephone, which allow those companies to utilize and resell the
Company's Wireless Fiber services to their own customers. The Company also has
an agreement with Lucent Technologies, Inc. ("Lucent") to provide field service
for and network monitoring of the Company's Wireless Fiber facilities. The
failure of any of these third parties to perform under their respective
agreements or the loss of any of these agreements could have a material adverse
effect on the Company's results of operations or its ability to service its
customers. The Company plans to enter into master service agreements with other
telecommunications service providers, and the failure to do so could have an
adverse effect on the Company's development and results of operations and the

25
<PAGE>
value of the Common Stock. See "Business -- Telecommunications Services -- CAP
Services -- Marketing."

RELIANCE ON EQUIPMENT SUPPLIER

The Company currently purchases substantially all of its wireless
telecommunications equipment, including transceivers and network monitoring
equipment, from a single supplier even though there are other manufacturers of
such equipment. Any reduction or interruption in supply from this supplier could
have a material adverse effect on the Company until sufficient alternative
supply sources are established. The Company does not manufacture, nor does it
have the capability to manufacture, any of its telecommunications equipment.
Although there are other manufacturers who have, or are developing, equipment
that would satisfy the Company's needs, there can be no assurance that the
Company would be able to replace its current primary supplier on commercially
reasonable terms. In addition, no industry standard or uniform protocol
currently exists for 38 GHz equipment. Consequently, a single manufacturer's
equipment must be used in establishing each link. See "Business --
Telecommunications Services -- Wireless Fiber -- Wireless Fiber Links."

LINE OF SIGHT; DISTANCE LIMITATIONS IMPOSED BY RAINFALL CONDITIONS IN CERTAIN
GEOGRAPHIC AREAS; ROOF RIGHTS

In order to provide quality transmission, Wireless Fiber services require an
unobstructed line of sight between two transceivers comprising a link, with a
maximum distance between any two corresponding transceivers of five miles (or
shorter distances in certain areas; weather conditions may necessitate distances
as short as 1.1 miles between transceivers to maintain desired transmission
quality). The areas in which such shorter distances are required are those where
rainfall intensity and the size of the raindrops adversely impact transmission
quality at longer distances. Other weather conditions, such as snow, electrical
storms and high winds, have not, in the Company's experience, affected Wireless
Fiber services. The establishment of Wireless Fiber services may require
additional transceivers to triangulate around obstacles (such as buildings).
Similarly, to establish Wireless Fiber services covering a distance in excess of
five miles, additional transceivers are required to establish a chain with links
no more than five miles apart. The cost of additional transceivers where
required by weather, physical obstacles or distance may render Wireless Fiber
uneconomical in certain instances. The Company must obtain Roof Rights (or
rights to access other locations where lines of sight are available) in each
building where a transceiver will be placed. The Company seeks to prequalify and
obtain Roof Rights at buildings targeted by potential customers in its licensed
areas in advance of anticipated orders. There can be no assurance, however, that
the Company will be successful in obtaining Roof Rights necessary to establish
its Wireless Fiber services in its potential markets. The Company's
prequalification activities often require the payment of option fees to the
owners of buildings that are being prequalified. Notwithstanding its
prequalification activities, there can be no assurance that the Company will
receive orders for Wireless Fiber services which allow the Company to utilize
Roof Rights it obtains. See "Business -- Telecommunications Services -- Wireless
Fiber -- Wireless Fiber Links."

UNCERTAINTY OF MARKET ACCEPTANCE OF WIRELESS FIBER SERVICES

The Company has been marketing its Wireless Fiber services since December
1994 and such services currently are generating revenues that are insignificant.
The Company has not obtained a significant market share in any of the licensed
areas where it offers Wireless Fiber services. The provision of wireless local
telecommunications services over 38 GHz represents an emerging sector of the
telecommunications industry and the demand for and acceptance of Wireless Fiber
services are subject to a high level of uncertainty. Despite the Company's
initial success in attracting customers, there can be no assurance that
substantial markets will develop for wireless local telecommunications

26
<PAGE>
services delivered over 38 GHz, or that, even if such markets develop, the
Company will be able to succeed in positioning itself as a provider of such
services or provide such services profitably. The Company's success in providing
wireless broadband services is subject to a number of factors beyond the
Company's control. These factors include, without limitation, historical
perceptions of the unreliability and lack of security of previous microwave
radio technologies, changes in general and local economic conditions,
availability of equipment, changes in telecommunications service rates charged
by other service providers, changes in the supply and demand for wireless
broadband services, competition from wireline and wireless operators in the same
market area, changes in the federal and state regulatory schemes affecting the
operations of telecommunications service providers in general and wireless
broadband systems in particular (including the enactment of new statutes and the
promulgation of changes in the interpretation or enforcement of existing or new
rules and regulations). In addition, the extent of the potential demand for
wireless broadband services in the Company's market areas cannot be estimated
with certainty. There can be no assurance that one or more of these factors will
not have an adverse effect on the Company's financial condition and results of
operations and the value of the Common Stock. See "Business --
Telecommunications Services."

RELIANCE ON KEY PERSONNEL

The efforts of a small number of key management and operating personnel will
largely determine the Company's success. The loss of any of such personnel could
adversely affect the Company. The Company's success also depends in part upon
its ability to hire and retain highly skilled and qualified operating,
marketing, financial and technical personnel. The competition for qualified
personnel in the telecommunications industry is intense and, accordingly, there
can be no assurance that the Company will be able to hire or retain necessary
personnel. See "Management."

VOLATILITY OF MARKET PRICE OF COMMON STOCK

Since the Common Stock has been publicly traded, the market price of the
Common Stock has fluctuated over a wide range and may continue to do so in the
future. The market price of the Common Stock could be subject to significant
fluctuations in response to various factors and events, including, among other
things, the depth and liquidity of the trading market of the Common Stock,
variations in the Company's operating results, press reports, including with
respect to regulation and industry trends, and the difference between actual
results and the results expected by investors and analysts. In addition, the
stock market in recent years has experienced broad price and volume fluctuations
that have often been unrelated to the operating performance of companies,
particularly telecommunications companies. These broad market fluctuations also
may adversely affect the market price of the Common Stock. See "Price Range of
Common Stock."

SHARES ELIGIBLE FOR FUTURE SALE

As of May 31, 1996, giving effect to the Stock Offering, the Company had
31,748,005 shares of Common Stock outstanding. Although a significant number of
the outstanding shares of Common Stock are "restricted securities," as that term
is defined in Rule 144 under the Securities Act ("Restricted Shares"), and may
not be sold unless such sale is registered under the Securities Act or is made
pursuant to an exemption from registration under the Securities Act, including
the exemption provided by Rule 144, substantially all of such Restricted Shares
either have been registered for resale under the Securities Act or are
currently, or will soon become, available for sale pursuant to Rule 144.
In addition, the Company may issue a substantial number of shares of Common
Stock in connection with the Milliwave Acquisition and Locate Acquisition,
all of which would be subject to registration rights requiring the
Company to register them for resale. Sales or the expectation of sales of a
substantial number of shares of Common Stock in the public market could
adversely affect the prevailing market price of the Common Stock. The Company's
directors and executive officers and certain other officers of the Company and
the Company's subsidiaries have agreed that, except in certain limited
circumstances, they will not sell any of their shares of Common Stock for a
period of 120 days after the date of this Prospectus without the prior written
consent of Morgan

27
<PAGE>
Stanley & Co. Incorporated on behalf of the Underwriters. See "Shares Eligible
for Future Sale" and "Underwriters."

EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND OTHER CONVERTIBLE SECURITIES

As of May 31, 1996, there were outstanding options and warrants with respect
to an aggregate of 8,145,699 shares of Common Stock at per-share exercise prices
ranging from $1.06 to $20.42. Additionally, the Old Convertible Notes (assuming
the Old Convertible Notes are converted on October 23, 1996, the first possible
date of conversion) and certain other convertible debt are convertible into an
aggregate of 4,699,211 shares (with no additional cash payment to the Company).
Moreover, substantially all of the shares underlying such securities have been
or will be registered for resale under the Securities Act. The Company has two
existing stock option plans under which options to purchase up to an additional
2,455,850 shares of Common Stock may be granted. The exercise of outstanding
stock options, warrants and other convertible securities will dilute the
percentage ownership of the Company's stockholders, and any sales in the public
market of shares of Common Stock issuable upon the exercise of such stock
options, warrants and convertible securities may adversely affect prevailing
market prices for the Common Stock. Further, the Company may issue additional
shares (up to 4.5 million shares) in connection with the Milliwave Acquisition
and may, at its election, convert the $17.5 million promissory note to be issued
in the Locate Acquisition into that number of shares of Common Stock equal to
(a) the principal and interest due on such note divided by (b) the average
closing price of the Common Stock for the five days ending on the date the
Company gives notice of its intention to convert such note. See "Description of
Certain Indebtedness," "Description of Capital Stock" and "Shares Eligible for
Future Sale."

ANTI-TAKEOVER PROVISIONS

The Company's corporate charter provides that directors serve staggered
three-year terms and authorizes the issuance of up to 15,000,000 preferred
shares with such designations, rights and preferences as may be determined from
time to time by the Company's Board of Directors. The affirmative vote of the
holders of at least two-thirds of the capital stock of the Company is required
to amend the provisions of the charter relating to the classification of the
Board. The staggered board provision could increase the likelihood that, in the
event of a possible takeover of the Company, incumbent directors would retain
their positions and, consequently, may have the effect of discouraging, delaying
or preventing a change in control or management of the Company. While the
Company has no present intention to issue Preferred Stock, the authorization of
preferred shares empowers the Board of Directors, without further stockholder
approval, to issue preferred shares with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of issuance, the
preferred shares could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change of control of the Company.
Additionally, certain of the Company's indebtedness (including the Notes)
contains provisions which would allow holders, at their election, to require
prepayment in the event of a change in control of the Company, which could also
serve to delay or prevent such a change in control from occurring. Moreover, the
Company's By-Laws provide that a stockholder entitled to vote for the election
of directors at a meeting may nominate a person or persons for election as
director only if written notice of such stockholder's intent to make such
nomination is given to the Company's Secretary not later than sixty days in
advance of such meeting, and the Company's stock option plans contain a
provision which accelerates the vesting of outstanding options in the event of
certain changes in control of the Company, both of which could serve to delay or
prevent a change in control from occurring. In addition, the Company is and,
subject to certain conditions, will continue to be, subject to the anti-takeover
provisions of the Delaware General Corporation Law, which could have the effect
of delaying or preventing a change of control of the Company. Furthermore,
transfers of control and/or certain assets of telecommunications entities, such
as the Company, may require the approval of the FCC and/or state

28
<PAGE>
regulatory commissions. With respect to 38 GHz licenses such as the Company's
Wireless Licenses, assignments of such licenses and changes of control involving
entities holding licenses require prior FCC and state regulatory approval and
are subject to restrictions and limitations on the identity and status of the
assignee or successor. See "Description of Capital Stock."

IMMEDIATE AND SUBSTANTIAL DILUTION

This Offering involves an immediate and substantial dilution of $25.22 per
share between the pro forma as adjusted net tangible book value per share after
this Offering and the assumed public offering price of $27.625 per share. See
"Dilution."

29
<PAGE>
PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been quoted on the Nasdaq National Market
since June 27, 1994, under the symbol "WCII" and prior thereto was quoted on the
Nasdaq SmallCap Market under the symbol "WCII" from April 4, 1991 to June 26,
1994.

The following table sets forth, for the fiscal periods indicated, the high
and low last sale prices of the Common Stock as reported on the Nasdaq National
Market or the Nasdaq SmallCap Market, as the case may be. The quotes represent
"inter-dealer" prices without adjustment or mark-ups, mark-downs or commissions
and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
COMMON STOCK PRICE
--------------------------------
PERIOD ENDED HIGH LOW
- --------------------------------------------------------- --------------- --------------
<S> <C> <C> <C> <C>
May 31, 1994............................................. $ 6 9/16 $ 3 3/4
August 31, 1994.......................................... 6 11/16 4
November 30, 1994........................................ 9 11/16 6
February 28, 1995........................................ 9 1/8 5 1/32
May 31, 1995............................................. 7 1/32 5
August 31, 1995.......................................... 13 3/8 5
November 30, 1995........................................ 21 13/16 13 1/2
December 31, 1995 (commencing December 1, 1995).......... 17 3/8 14
March 31, 1996........................................... 18 1/2 13 3/8
June 30, 1996 ........................................... 32 1/4 16
</TABLE>

See the cover page of this Prospectus for a recent reported last sale price
of the Common Stock on the Nasdaq National Market. As of June 30, 1996, there
were 321 holders of record of the Common Stock. The Company believes that there
are more than 1,000 beneficial holders of the Common Stock.

DIVIDEND POLICY

The Company has not declared or paid any dividends on the Common Stock and
does not intend to pay dividends on the Common Stock in the foreseeable future.
The Company intends to retain future earnings, if any, to finance the
development and expansion of its business. Certain covenants in the Old Note
Indentures and New Note Indentures currently effectively prohibit the Company
from declaring or paying cash dividends. See "Description of Certain
Indebtedness."

30
<PAGE>
DILUTION

The net tangible book value deficiency of the Company at March 31, 1996 was
approximately $(15,079,000) or $(0.55) per share of Common Stock. The net
tangible book value deficiency of the Company at March 31, 1996, after giving
effect to the acquisitions of Fox/Lorber and TWL (but not Milliwave or Locate),
was approximately $(21,022,000) or $(0.77) per share of Common Stock. Net
tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the total number of
outstanding shares of Common Stock. After giving effect to the sale by the
Company of the Common Stock offered hereby at an assumed public offering price
of $27.625 per share (after deduction of underwriting discounts and commissions
and estimated offering expenses and assuming no exercise of the U.S.
Underwriters' over-allotment option) and the receipt of the net proceeds
therefrom, the pro forma as adjusted net tangible book value of the Company at
March 31, 1996 would have been approximately $75,327,000, or $2.41 per share.
This represents an immediate increase in net tangible book value of $3.18 per
share attributable to new investors purchasing shares of Common Stock in this
Offering. The following table illustrates this per share dilution:

Assumed public offering price per share................... $27.63
Pro forma net tangible book value deficiency per share
at March 31, 1996(1).................................. $(0.77)
Increase in net tangible book value attributable to new
investors.............................................. 3.18
------
Pro forma as adjusted net tangible book value per share
after this Offering(1).................................. 2.41
------
Dilution of net tangible book value per share to new
investors................................................ $25.22
------
------

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

(1) The Company's Wireless Licenses, having an aggregate book value of
$12,443,000 (or $0.46 per share), are treated as intangible assets and
accordingly, have been excluded from the calculation of tangible book value.

31
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company of the Stock Offering are estimated to be
approximately $104.3 million (approximately $120.0 million if the U.S.
Underwriters' over-allotment option is exercised in full) after deducting
estimated underwriting discounts and commissions and other expenses payable by
the Company. The net proceeds to the Company of the Debt Offering are estimated
to be approximately $192.1 million, after deducting estimated underwriting
discounts and commissions and other expenses payable by the Company.

The passage of the Telecommunications Act has resulted in opportunities that
have caused the Company to accelerate the development and expansion of its
telecommunications businesses. To capitalize on these opportunities, the Company
has undertaken an expanded capital expenditure program. Prior to the enactment
of the Telecommunications Act, the Company's planned capital expenditures for
1996 and 1997 were $36 million and $52 million, respectively. As a result of the
Company's accelerated strategy, the Company now plans capital expenditures of
$50 million and $280 million for 1996 and 1997, respectively. In addition to
fueling the growth of the Company's businesses, the Company believes that its
existing capital resources, which will be enhanced substantially by the proceeds
of the Offerings, will allow it to negotiate more effectively with equipment
suppliers and attract talented telecommunications personnel, while also
providing assurance to potential customers.

The Company intends to use the net proceeds of the Offerings (together with
funds raised in the 1995 Debt Placement) for the expansion of its
telecommunications operations in multiple markets, including the purchase of
switching equipment, customer site equipment and related software, the
acquisition of Roof Rights, the hiring of sales, marketing, engineering and
customer service personnel, the development of operating and management systems,
acquisitions of businesses or assets (including additional 38 GHz licenses, by
auction or otherwise), other capital expenditures, and for working capital and
general corporate purposes, including the funding of operating losses. As a
complement to its telecommunications services, the Company may also use a
portion of the proceeds to acquire rights to, develop and control certain
information and entertainment content and services. The Company intends to
invest approximately $35 million of the proceeds from the Stock Offering in
Unrestricted Subsidiaries promptly after consummation of the Offerings. Such $35
million subsequently may be utilized without regard to the restrictions imposed
by the Indentures, including for investments in highly leveraged subsidiaries,
for minority investments and for investments in assets which are not
"Telecommunications Assets" (as defined in the Indentures). A portion of the
Company's expansion may occur through acquisitions (utilizing cash or securities
of the Company) as an alternative to direct investment in the assets required to
facilitate the Company's growth strategy and a portion of the net proceeds of
the Offerings may be used in connection with such acquisitions. The businesses
that the Company may acquire would likely consist of entities that own or
control existing telecommunications facilities or entertainment and information
content and services, customers or licenses to provide telecommunications
services. Under agreements relating to the Milliwave and Pinnacle Acquisitions,
the Company is committed to pay an aggregate of approximately $41 million in
cash upon consummation of such acquisitions. Further, if the Locate Acquisition
is consummated, the Company may use a portion of the proceeds of the Offerings
to pay the $17.5 million promissory note to be issued to the seller (if the
Company does not elect to convert the note into Common Stock). As of the date of
this Prospectus, the Company has no agreement with any person to acquire or
effect any acquisition of a material business or assets, except as relating to
the Milliwave, Locate and Pinnacle Acquisitions.

Management anticipates, based on current plans and assumptions relating to
its operations, that the net proceeds from the Stock Offering and Debt Offering,
together with existing financial resources (including proceeds raised in the
1995 Debt Placement and equipment financing arrangements which the Company
intends to seek), will be sufficient to fund the Company's growth and operations
for approximately 36 to 48 months following consummation of the Offerings.
Management believes that the Company's capital needs at the end of such period
will continue to be significant and the Company will

32
<PAGE>
continue to seek additional sources of capital. See "Risk Factors -- Significant
Capital Requirements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Company Overview" and "-- Liquidity and
Capital Resources."

The following table sets forth (in millions) the estimated sources and uses
of funds from the Offerings:

SOURCES OF FUNDS:

Gross proceeds from the Stock Offering.............................. $111
Gross proceeds from the Debt Offering............................... 200
----
Total sources of funds........................................ $311
----
----

USES OF FUNDS:

Expansion of its telecommunications operations in multiple markets,
acquisitions (including additional 38 GHz licenses, by auction or
otherwise) other capital expenditures and for working capital and
general corporate purposes, including the funding of operating
losses, and, in certain instances, for the acquisition of rights
to, development and control of certain information and
entertainment content and services................................ $221
Acquisition commitments............................................. 41
Investment in Unrestricted Subsidiaries............................. 35
Transaction fees and expenses....................................... 14
----
Total uses of funds........................................... $311
----
----

33
<PAGE>
CAPITALIZATION

The following table sets forth the cash and capitalization of the Company as
of March 31, 1996: (i) on a historical basis, (ii) on a pro forma basis that
gives effect to the acquisitions of Milliwave, Locate, Fox/Lorber and TWL as if
they occurred on March 31, 1996 (assuming that the Company does not elect to
convert the $17.5 million note to the sellers of Locate into Common Stock) and
(iii) on a pro forma as adjusted basis that gives effect to the Offerings
(assuming no exercise of the U.S. Underwriters' over-allotment option) as if
they occurred on March 31, 1996 (and assuming an offering price of $27.625 per
share of Common Stock). This table should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus.

MARCH 31, 1996
------------------------------------

PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents and short term investments.......... $203,503 $ 163,866 $ 461,064
-------- --------- -----------
-------- --------- -----------
Current portion of long-term debt and capital lease
obligations............................................... $ 10,314 $ 28,821 $ 28,821
-------- --------- -----------
-------- --------- -----------
Long-term debt and capital lease obligations:
Old Senior Notes......................................... $159,194 $ 159,194 $ 159,194
New Senior Notes......................................... -- -- 100,000
New Senior Subordinated Notes............................ -- -- 100,000
Old Convertible Notes.................................... 79,597 79,597 79,597
Other notes.............................................. 3,436 3,603 3,603
Capital lease obligations, net of current portion........ 5,810 6,047 6,047
-------- --------- -----------
Total long-term debt and capital lease obligations..... 248,037 248,441 448,441
-------- --------- -----------
Stockholders' equity:
Preferred stock of the Company, 15,000,000 shares
authorized, 689 shares issued and held in treasury, 0
outstanding............................................ 689 689 689
Common Stock, $.01 par value, 75,000,000 shares
authorized, 29,740,306 shares issued and 27,233,543
shares outstanding, 33,207,739 shares issued and
30,700,976 shares outstanding on a pro forma basis,
37,207,739 shares issued and 34,700,976 shares
outstanding on an as adjusted basis (1)................ 297 332 372
Additional paid-in capital............................... 103,989 190,124 294,358
Accumulated deficit...................................... (52,010) (52,010) (52,010)
-------- --------- -----------
52,965 139,135 243,409
Less: treasury stock..................................... (39,677) (39,677) (39,677)
Deferred compensation............................... (997) (997) (997)
Unrealized loss on long term investments............ (1,339) (1,339) (1,339)
-------- --------- -----------
Total stockholders' equity............................... 10,952 97,122 201,396
-------- --------- -----------
Total capitalization................................... $258,989 $ 345,563 $ 649,837
-------- --------- -----------
-------- --------- -----------

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

(1) Does not include (i) an aggregate of 1,075,299 shares of Common Stock
issuable upon exercise of options granted or which may be granted under the
1992 Plan, (ii) an aggregate of 3,500,000 shares of Common Stock issuable
upon exercise of options granted or which may be granted under the 1995
Plan, (iii) 6,026,250 shares of Common Stock issuable upon exercise of other
outstanding options and warrants and (iv) 4,699,211 shares of Common Stock
which may be issued upon conversion of the Old Convertible Notes (assuming
they are converted on October 23, 1996, the first date on which conversion
may occur) and certain other convertible debt. See "Description of Certain
Indebtedness" and notes 17, 18 and 22 to the Consolidated Financial
Statements. The exercise and conversion prices of the foregoing securities
are all below the current market price of the Common Stock as of the date
of this Prospectus. Assumes the issuance of 3,400,000 shares of Common Stock
in connection with the Milliwave Acquisition.

34
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data presented below, as of and for the two years
ended February 28, 1994 and 1995 and for the ten months ended December 31, 1995,
have been derived from the Company's consolidated financial statements which
have been audited by Grant Thornton LLP, independent certified public
accountants. The selected financial data presented below as of and for the three
months ended March 31, 1995 and 1996 and the ten months ended December 31, 1994
have been derived from unaudited consolidated financial statements of the
Company. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, which consist only of normal recurring adjustments, necessary
for a fair presentation of the financial position and the results of operations
for these periods. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the pro forma and historical consolidated financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.

</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED THREE MONTHS ENDED
FEBRUARY 28, DECEMBER 31, MARCH 31,
------------------ ------------------- -------------------
1994 1995 1994 1995 1995 1996(1)
------- ------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Telecommunications(2).................. $ 8,505 $14,909 $13,420 $ 13,136 $ 2,219 $ 10,217
Information services................... -- 474 193 2,648 844 771
Merchandising.......................... 7,120 10,182 8,405 13,987 3,095 3,521
------- ------- ------- -------- ------- --------
Total net sales.................... 15,625 25,565 22,018 29,771 6,158 14,509
Operating income (loss):
Telecommunications..................... (744) (3,423) (2,067) (6,945) (1,381) (2,917)
Information services................... -- (117) (115) 238 66 (30)
Merchandising.......................... 223 307 329 756 79 100
General corporate...................... (1,547) (2,378) (1,609) (3,861) (1,033) (1,771)
------- ------- ------- -------- ------- --------
Total operating loss............... (2,068) (5,611) (3,462) (9,812) (2,269) (4,618)
Interest expense........................ 744 637 505 7,630 184 8,815
Interest income......................... (109) (385) (297) (2,890) (125) (3,057)
Other expenses, net(3).................. 5,687 1,367 948 1,305 599 194
Net loss(4)............................. (8,195) (7,230) (4,618) (15,857) (2,927) (10,699)
Net loss per common share(4)............ $ (1.06) $ (0.42) $ (0.28) $ (0.70) $ (0.15) $ (0.39)
Weighted average common shares
outstanding............................ 7,719 17,122 16,609 22,770 19,935 27,214

OTHER FINANCIAL DATA:
Capital expenditures.................... $ 307 $ 1,816 $ 1,465 $ 8,652 $ 555 $ 2,588
EBITDA(5)(6)............................ (1,845) (5,179) (3,116) (8,952) (2,138) (3,771)
Ratio of earnings to fixed charges(7)... -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28, AS OF AS OF
------------------ DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------- ------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term investments..... $ 719 $ 3,156 $211,701 $ 203,503
Property and equipment, net........................... 1,301 2,663 15,898 18,089
Total assets.......................................... 14,610 29,509 285,363 280,473
Current portion of long-term debt and capital lease
obligations.......................................... 2,851 332 9,643 10,314
Long-term debt and capital lease obligations, less
current portion and discount......................... 3,084 5,165 240,455 248,037
Stockholders' equity.................................. 4,719 18,280 21,752 10,952
</TABLE>

(footnotes begin on next page)

35
<PAGE>
- ------------

(1) In the first quarter of 1996, the Company settled a dispute with another
carrier regarding the unauthorized switching of the Company's customers to
the other carrier. The Company recognized revenue of approximately $1.5
million and cost of sales of approximately $850,000 in connection with this
settlement, the majority of which related to minutes of use during that
quarter.

(2) The Company has generated nominal revenues from its Wireless Fiber services.

(3) For the year ended February 28, 1994, principally represents noncash expense
of $5.3 million consisting of the difference between the exercise prices of
certain options granted in connection with the Company's initial public
offering in April 1991 and the market value of the underlying shares of
Common Stock on the date such options became exercisable.

(4) For the year ended February 28, 1994, net loss includes an extraordinary
gain of approximately $0.2 million from the extinguishment of debt ($.03 per
share).

(5) EBITDA consists of loss before interest, income taxes, depreciation and
amortization and other income and expense (see footnote (3) above). EBITDA
is provided because it is a measure commonly used in the telecommunications
industry. It is presented to enhance an understanding of the Company's
operating results and is not intended to represent cash flow or results of
operations in accordance with generally accepted accounting principles for
the periods indicated. See the Company's Consolidated Financial Statements
contained elsewhere in this Prospectus.

(6) EBITDA was insufficient to cover interest expense for the years ended
February 28, 1994 and 1995, the ten months ended December 31, 1994 and 1995
and the three months ended March 31, 1995 and 1996.

(7) For the years ended February 28, 1994 and 1995, the ten months ended
December 31, 1994 and 1995 and the three months ended March 31, 1995 and
1996, earnings were insufficient to cover fixed charges by $8.5 million,
$7.2 million, $4.6 million, $15.9 million, $2.9 million and $10.6 million,
respectively. On a pro forma basis, giving effect to the acquisitions of
Milliwave, Locate, Fox/Lorber, TWL and Avant-Garde, the Everest Financing
and the issuance of the Old Notes, as if they occurred at the beginning of
the respective periods, earnings were insufficient to cover fixed charges by
$43.9 million and $12.8 million for the ten months ended December 31, 1995
and the three months ended March 31, 1996, respectively, and $68.1 million
and $19.9 million on a pro forma as adjusted basis giving effect to the
Transactions for the ten months ended December 31, 1995 and the three months
ended March 31, 1996, respectively. Fixed charges consist of interest
charges and amortization of debt expense and discount or premium related to
indebtedness, whether expensed or capitalized, and that portion of rental
expense (one-third) that the Company believes to be representative of
interest. For the twelve months ended December 31, 1995 on a pro forma basis
and a pro forma as adjusted basis giving effect to the Transactions,
earnings were insufficient to cover fixed charges by $51.5 million and $80.7
million, respectively.

36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion includes certain forward-looking statements. For a
discussion of important factors, including, but not limited to, continued
development of the Company's businesses, actions of regulatory authorities and
competitors, and other factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors" and the
Company's periodic reports incorporated herein by reference.

COMPANY OVERVIEW

The Company provides local and long distance telecommunication services in
the United States. As a complement to its telecommunications operations, the
Company produces and distributes information and entertainment content. The
Company also maintains a consumer products company with distribution through
national retailers in the United States and Canada.

The Company operates its businesses through its wholly-owned subsidiaries as
follows:

. WinStar Wireless, Inc. ("WinStar Wireless") is a CAP that provides
Wireless Fiber-based local access services in many major metropolitan areas
via the Company's digital wireless capacity in the 38 GHz portion of the
radio spectrum. Wireless Fiber services currently are marketed to long
distance carriers, CAPs, CLECs, CMRS service providers and LECs, as well as
businesses, government agencies and institutions.

. WinStar Telecommunications, Inc. ("WinStar Telecom") is a CLEC that
recently commenced providing local exchange services and seeks to become a
value-added, economical alternative to the LECs, particularly through the
exploitation of the Company's Wireless Fiber capabilities, in substantially
all of the metropolitan areas covered by the Company's Wireless Licenses.
WinStar Telecom markets its services primarily to small- and medium-sized
businesses.

. WinStar Gateway Network, Inc. ("WinStar Gateway") is a long distance
telecommunications services reseller that provides service primarily to
residential customers.

. WinStar New Media Company, Inc. ("WinStar New Media") produces and
distributes, domestically and abroad, information and entertainment content,
principally nonfiction and international programming and nationally
syndicated sports radio programming.

. WinStar Global Products, Inc. ("WinStar Global Products"), which was
acquired by the Company prior to its entry into the telecommunications
industry, designs, manufactures, markets and distributes personal care
products, principally bath and hair care products, and sells primarily
through large retailers, including mass merchandisers, discount stores,
department stores and national and regional drug store chains.

Perceiving emerging opportunities in an increasingly procompetitive
telecommunications industry, the Company shifted its focus in 1992 from
marketing consumer products to providing telecommunications services, and
entered the telecommunications business in 1993 with its acquisition of WinStar
Gateway. Substantially all of the Company's revenues have historically been
generated through its long distance telecommunications, information and
entertainment, and consumer products businesses. In 1994, the Company positioned
itself for entrance into the local telecommunications market with the
acquisition of Avant-Garde, the original holder of many of the Wireless
Licenses. Utilizing the Wireless Licenses, the Company (through WinStar
Wireless) entered the local access services market as a CAP in December 1994 and
currently provides Wireless Fiber-based local access services to a limited
number of customers, generating nominal revenues to date. In April 1996, the
Company (through WinStar Telecom) entered the local exchange services market as
a CLEC, and currently provides such services only on a resale basis in New York
City.

The passage of the Telecommunications Act of 1996 has resulted in
opportunities that have caused the Company to accelerate the development and
expansion of its telecommunications businesses. The Company's entry into the
local exchange services market, along with the continued development and

37
<PAGE>
expansion of the Company's local access business, will require significantly
larger amounts of capital expenditures for the construction of Wireless Fiber
and switch-based infrastructure on a city-by-city basis, for working capital and
for funding of operating losses during the next several years. In connection
with its CLEC business, the Company will seek to install its own switches and
remote nodes and utilize its Wireless Fiber capacity, together with facilities
leased or purchased from other carriers, to originate and terminate local
traffic. The faster the Company's rollout of its CLEC business, the greater the
near term operating losses and capital expenditures will be. In addition, the
Company intends to expand its Wireless Fiber-based CAP business because its CAP
business will serve a significant portion of the local access needs of the
Company's CLEC business, including for backbone interconnections of hub, main
switch and local nodes sites to be created by the Company in connection with its
CLEC operations, and for the origination and termination of local traffic
generated by the Company's local exchange customers.

REVENUES

The Company anticipates that the revenues generated by the operations of its
telecommunications businesses will represent an increasingly larger percentage
of the Company's consolidated revenue as the Company expands into the local
telecommunications services market. Factors driving the mix of revenues are as
follows:

. CLEC revenues will be driven primarily by the number of local exchange
circuits installed and in service. Customers generally are billed a flat
monthly fee plus a per-minute usage charge or fraction thereof. Revenue
growth depends on the introduction of local exchange services in new cities,
the purchase and installation of switches to service those areas, and the
addition of new customers. Additionally, if bundled services, such as long
distance and Internet access, are purchased by the Company's customers,
revenue per circuit will increase. Other anticipated sources of revenue
include resale agreements for CMRS services, advanced data services,
broadband data transmission services and video conferencing. The Company
believes that as its local exchange services business grows, it will become
the most significant component of the Company's revenues. The Company
currently is generating revenues from this business that are insignificant.
The Company does not expect significant revenues from its CLEC business
during 1996. Local exchange services that are offered by the Company on a
resale basis can be provided, and revenues generated thereby, shortly after
receipt of customer orders. Currently, the sales cycle for the resale of
local exchange services is approximately one to three weeks in duration. The
Company anticipates that the sales cycle for local exchange services
provided using its Wireless Fiber capabilities and its own switches will be
approximately the same duration as that experienced in the resale of local
exchange services. CLECs, including the Company, currently set prices at a
discount to those charged by LECs. The Company anticipates significant
ongoing price reductions for provision of local exchange services, including
those provided by the Company, in the future.

. CAP revenues are driven primarily by the number of Wireless Fiber
links in service and the capacity of each link (i.e., T-1s or DS-3s).
Customers generally are billed at a fixed monthly rate per unit of capacity.
Since the Company's local access customers have been, and will likely
continue to be, predominantly telecommunications service providers, the
addition or loss of several major customers would have a material impact on
this business. The Company currently is generating revenues from this
business that are insignificant. The Company does not expect significant
revenues from its CAP business during 1996. The Company's local access
services are sold through a sales cycle that has averaged 9 to 12 months in
duration because of the need to (i) demonstrate the efficacy and reliability
of Wireless Fiber-based services to potential customers, as such services
involve technology that is relatively new to the United States
telecommunications industry and (ii) acquire the Roof Rights to install the
Wireless Fiber links necessary to address the specific requirements of a
customer. The Company believes that this sales cycle will become shorter
going forward as (i) the efficacy and reliability of Wireless Fiber services
become more widely accepted in the industry (thereby shortening or
eliminating the customer education phase of the

38
<PAGE>

sales cycle), (ii) the Company's strategy of prequalifying buildings for
Roof Rights results in the acquisition of key locations that will enable the
Company to more rapidly address the specific requirements of many potential
customers and (iii) existing customers broaden their use of the Company's
Wireless Fiber services, especially those which have entered into master
service agreements with the Company. CAPs, including the Company, currently
set prices at a discount to those charged by LECs. The Company anticipates
significant ongoing price reductions for CAP services, including those
provided by the Company, in the future. See "Risk Factors--Uncertainty of
Market Acceptance of Wireless Fiber Services."

. Long distance telecommunications services revenues are driven
principally by the size and type of the customer base, with the largest
percentage of the Company's long distance telecommunications services
revenues currently derived from residential customers. Customers are billed
on the basis of minutes or fractions thereof. New customers are generated
through agent programs, affinity group programs and direct marketing. It is
expected that in the future, larger percentages of the Company's long
distance telecommunications service revenues will be derived from direct
sales efforts to smaller- and medium-sized businesses as well as from
customers which are purchasing local exchange services through the Company's
CLEC business. In addition, the Company has established strict guidelines on
agent marketing programs which it anticipates may make it less attractive as
an underlying carrier to those independent marketing companies which
primarily rely on contests and similar programs in marketing to long
distance service customers. These programs in the past year have been
responsible for providing the substantial majority of the Company's long
distance revenues. Therefore, the discontinuance of these programs will make
it substantially more difficult to replace lost customers and to generate
new customers until the Company has developed and implemented satisfactory
replacement programs. The Company expects that long distance
telecommunications revenues will decrease in the third quarter of 1996.
See "Risk Factors - Competition."

. Information and entertainment content revenues are generated
principally by (i) sales of content, such as documentaries and foreign
films, to traditional content customers, such as cable networks, (ii) sales
of content to new media distribution channels, such as on-line services,
(iii) sales of advertising and (iv) the bundling of content with the
Company's telecommunications services. Revenues also are driven by the size
and quality of the Company's programming library and the release of new
programs, which affects quarter to quarter comparability.

. Consumer products revenues are driven principally by the number of
national retailers in the Company's customer base. The Company obtains shelf
space through such large retailers, and the addition or loss of several
large retailers can have a significant effect on the revenues of the
Company's consumer products business. Product sell-through and new product
introductions also play an important role in the Company's relationships
with its customers.

COSTS

Factors relating to costs are as follows:

. Costs associated with the Company's CLEC business will include
significant up-front capital expenditures for the development of the
infrastructure required to provide the Company's own local exchange
services, including expenditures relating to interconnection (i.e., the use
of LEC facilities to terminate calls), purchases of switching equipment, 38
GHz radios and site acquisition fees and expenses (including option fees for
the prequalification of buildings for Roof Rights). In addition, the Company
will have substantial start-up costs related to its CLEC business that will
not be capitalized, including costs of engineering, marketing,
administrative and other personnel, who will be needed in advance of related
revenues. When the Company commences operations in a city, it will initially
resell the local exchange services of LECs or other CLECs. The Company will
carry more of its traffic on its own facilities as it develops and installs
the switches, radios and interconnections required to provide services in a
particular city. However, the Company always will carry significant amounts
of its traffic over leased facilities at lower margins. The resale of local
exchange services typically will result in greater operating costs than the
provision of services over

39
<PAGE>

the Company's own facilities and such costs will therefore decrease as a
percentage of total CLEC operating costs as the Company begins to provide
more services over its own facilities. Additionally, site acquisition and
switch costs will become a lower percentage of cost per minute of service as
more buildings are connected and as the Company increases the number of
customers and lines per building. The Company is following a city-by-city,
building-centric network plan to establish its own local exchange services
facilities. The up-front capital costs of establishing the initial
infrastructure required for the Company to provide its own local exchange
services are substantial and much greater than those relating to the
Company's CAP business.

. Costs associated with the Company's CAP business include site
acquisition (including option fees for the prequalification of buildings for
Roof Rights) and equipment related fees and expenses, including costs
incurred in connection with the acquisition of Roof Rights and the purchase
of 38 GHz radios. In addition, the Company will continue to incur
substantial start-up costs related to its CAP business that will not be
capitalized, including costs of engineering, marketing, administrative and
other personnel who will be needed in advance of related revenues. The
Company anticipates that the cost per Wireless Fiber link will be reduced as
increased traffic is generated in buildings in which the Company already has
established service and the Company qualifies for volume discounts from its
principal equipment vendors. The Company also expects that equipment costs
will continue to drop as technological improvements are made and more
vendors begin to offer 38 GHz radios and other equipment. The initial costs
to complete a Wireless Fiber link and initiate services across that link are
much less than those required by the Company's CLEC business because of the
additional costs related to establishing CLEC services, such as those
related to the purchasing of switches and customer-site equipment.

. Costs associated with the Company's long distance business include
expenses related to resalable minutes purchased from major carriers, and
accordingly fluctuate with revenue. Typically, reductions of such costs are
achieved through negotiated volume rebates and competitive contract pricing.
Generally, the Company is obligated to generate certain minimum monthly
usage with its long distance carriers and may be required to pay an
underutilization fee in addition to its monthly bill equal to a certain
percentage of the difference between such minimum commitments and the
traffic actually generated by the Company. The Company has never paid or
been required to pay any underutilization charges.

. The Company's information services businesses have both production and
distribution costs. Film production costs include those related to producing
original products and licensing third-party products and are capitalized as
incurred and are expensed as productions are completed. Overhead costs in
the production division are also capitalized and allocated to films in
progress, and are subsequently expensed as such films are completed. The
distribution divisions incur royalty costs payable to third-party producers
and selling costs, both of which vary directly with sales of acquired
product, as well as administrative costs, substantially personnel related
costs, which are primarily fixed in nature and which are expensed as
incurred.

. Costs associated with the Company's consumer product business
fluctuate with material and labor component pricing. A large percentage of
material components are sourced overseas, and are purchased in United States
dollars. The Company seeks to lower product costs through improved material
sourcing. See "-- Liquidity and Capital Resources."

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995

Net sales for the three months ended March 31, 1996 increased by $8,351,000,
or 136%, to $14,509,000, from $6,158,000 for the three months ended March 31,
1995. This increase was principally attributable to increased revenues generated
by the Company's telecommunications businesses, which had revenues of
approximately $10.2 million during the three months ended March 31, 1996,
compared with $2.2 million for the three months ended March 31, 1995. In the
first quarter of 1996, the

40
<PAGE>
Company settled a dispute with another carrier regarding the unauthorized
switching of the Company's customers to the other carrier. The Company
recognized revenue of approximately $1.5 million and cost of sales of
approximately $850,000 in connection with the settlement, the majority of which
related to minutes of use during that quarter.

Cost of sales for the three months ended March 31, 1996 increased by
$3,975,000, or 86%, to $8,573,000, from $4,599,000 for the first three months
ended March 31, 1995. The increase is principally attributable to costs of
purchasing additional long distance minutes from third-party carriers to support
increased telecommunications traffic.

Gross profit for the three months ended March 31, 1996 increased by
$4,376,000, or 280%, to $5,936,000, from $1,559,000 for the three months ended
March 31, 1995. Gross profit as a percentage of net sales increased to 40.9% for
the three months ended March 31, 1996, from 25.3% for the three months ended
March 31, 1995. The increase was primarily attributable to improving margins in
the Company's telecommunications businesses, which was positively impacted
during the first quarter by lower cost of sales for its long distance business
achieved through reduced carrier costs and volume rebates resulting from
renegotiated contracts with long distance service carriers.

Selling, general and administrative expenses increased by $6,422,000 to
$10,192,000 or 70.2% of net sales, for the three months ended March 31, 1996,
from $3,770,000, or 61.2% of net sales, for the comparable period of the prior
year. The increase in personnel employed in the telecommunications businesses,
along with selling costs associated with increased revenues in the long distance
telephone business, accounted for approximately 86% of the increase. Corporate
general and administrative expenses accounted for approximately 11% of the total
increase, reflecting the expense of continued expansion of the Company's
executive, finance, information and human resource personnel and systems. For
the reasons noted above, the operating loss for the three months ended March 31,
1996 was $4,618,000, compared with $2,269,000 for the three months ended March
31, 1995.

Interest expense for the three months ended March 31, 1996 was $8,815,000,
compared with $184,000 for the three months ended March 31, 1995. The increase
was primarily attributable to $7,834,000 in interest accreted on the Old Notes
but not payable in cash during the current quarter.

Interest income for the three months ended March 31, 1996 increased by
$2,932,000, to $3,057,000, from $125,000 for the three months ended March
31, 1995. The increase is attributable to earnings on the proceeds of the 1995
Debt Placement, which raised net proceeds of $214.5 million.

Other expense generally consists of amortization of intangibles, equity in
income (loss) of unconsolidated subsidiaries and various other items. Other
expense, net, for the three months ended March 31, 1996 decreased by $405,000,
to $195,000, from $599,000 for the three months ended March 31, 1995. During the
three months ended March 31, 1995, the Company recorded an expense of $537,000
representing its equity interest in the losses of Avant-Garde. As a result of
the merger of Avant-Garde into a subsidiary of the Company, the Company began to
include all of Avant-Garde's revenues and expenses in its consolidated statement
of operations effective July 17, 1995, and therefore this expense does not
appear in the statement of operations for the quarter ended March 31, 1996. In
addition, the cost of the acquisition of Avant-Garde has been allocated
primarily to licenses, and the amortization of this asset caused an increase in
amortization expense from $63,000 for the three months ended March 31, 1995 to
$195,000 for the three months ended March 31, 1996.

For the reasons noted above, the net loss for the three months ended March
31, 1996 was $10,699,000, compared with a net loss of $2,927,000 for the first
three months of 1995.

TEN MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE TEN MONTHS ENDED DECEMBER
31, 1994

Net sales for the ten months ended December 31, 1995 increased by
$7,753,366, or 35.2%, to $29,771,472, from $22,018,106 in the comparable period
of the prior year. This increase was attributable to increased revenues in the
Company's information and entertainment services and consumer products
merchandising subsidiaries. During the ten months ended December 31, 1995,
WinStar

41
<PAGE>
Wireless had only nominal revenues. WinStar New Media, which reported nominal
revenues in the prior year, had revenues of approximately $2,648,000 for the ten
months ended December 31, 1995, related primarily to the completion of certain
documentary television products. WinStar Global Products also experienced an
increase in revenue of approximately $5,664,000, primarily due to the growth in
sales volume of its bath and body product lines.

Cost of sales for the ten months ended December 31, 1995 increased by
$4,785,000, or 32%, to $19,546,000, from $14,761,000 for the ten months ended
December 31, 1994. The increase was principally attributable to the growth in
the Company's information services and consumer products businesses.

Gross profit for the ten month ended December 31, 1995 increased by
$2,968,000, or 41%, to $10,225,000, from $7,257,000 for the ten months ended
December 31, 1994. Gross profit as a percentage of sales increased to 34.3% for
the ten months ended December 31, 1995, compared to 33.0% in the comparable
period of the prior year. The increase was principally attributable to an
increase in gross margins at WinStar Global Products resulting from sales price
increases and product cost decreases relating to better material pricing and
factory efficiencies.

Selling, general and administrative expenses increased by $9,292,277 to
$19,266,466, or 64.7% of net sales, for the ten months ended December 31, 1995,
from $9,974,189, or 45.3% of net sales, in the comparable period of the prior
year. The acquisition of Avant-Garde and the consolidation of that entity's
results of operations into the Company's financial statements from July 17, 1995
onward, as well as the growth in the administrative infrastructure at WinStar
Wireless, accounted for approximately 36% of the total increase. In particular,
expenses were incurred to develop operating systems, to market services to
targeted customers and to prepare for future growth in the wireless business.
Corporate general and administrative expenses accounted for approximately 23% of
the total increase because of the hiring of additional personnel and the
expansion of the Company's infrastructure to manage future growth in the
wireless business. Selling and marketing expenses incurred by WinStar Global
Products to service increased revenues accounted for approximately 22% of the
total increase.

For the reasons noted above, the operating loss for the ten months ended
December 31, 1995, was $9,811,629, compared to an operating loss of $3,462,037
in the comparable period of the prior year.

Interest expense increased by $7,125,000 to $7,630,000 for the ten months
ended December 31, 1995, from $505,000 for the ten months ended December 31,
1994, reflecting principally the non-cash accretion of interest to the Old
Notes.

Interest income for the ten months ended December 31, 1995 increased by
$2,593,000, to $2,890,000, compared with $297,000 for the same period during the
prior year. The increase was attributable to earnings on the 1995 Debt
Placement, which raised net proceeds of $214.5 million.

Other expense, net, for the ten months ended December 31, 1995 increased by
$357,000, to $1,306,000, compared with $949,000 for the same period of the prior
year. The cost of the acquisition of Avant-Garde has been allocated primarily to
the 38 GHz licenses held by Avant-Garde at the time of the acquisition, and the
amortization of this asset beginning in June 1995, when such licenses were
placed into service, caused an increase in amortization expense of $258,000.

For the reasons noted above, the Company reported a net loss of $15,857,459
for the ten months ended December 31, 1995, compared to a net loss of $4,618,358
in the comparable period of the prior year.

YEAR ENDED FEBRUARY 28, 1995 COMPARED TO YEAR ENDED FEBRUARY 28, 1994

Net sales for the year ended February 28, 1995, were $25,564,760, up 63.6%
from the prior year's sales of $15,625,019. During the year ended February 28,
1995, WinStar Gateway reported net sales of $14,909,225, compared to net sales
of $8,505,282 in the year ended February 28, 1994, an increase of 75.3%. Sales
growth resulted primarily from growth in the customer base at WinStar Gateway.
WinStar Global Products also experienced substantial sales growth, from
$7,119,737 in the year ended

42
<PAGE>
February 28, 1994, to $10,182,143 in the year ended February 28, 1995, an
increase of 43%. This increase was attributable to approximately $3,600,000 in
additional sales from the bath and body product line acquired in the year ended
February 28, 1994, as well as growth in the personal care products line. These
sales increases were offset by a reduction of approximately $1,200,000 in sales
from discontinued business lines. WinStar New Media generated $473,392 in sales
in the year ended February 28, 1995, its first year of operation.

Cost of sales for the year ended February 28, 1995 increased by $6,990,000,
or 65%, to $17,703,000, from $10,712,000 for the year ended February 28, 1994.
The increase is principally attributable to the growth in the Company's long
distance telephone and consumer products businesses.

Gross profit for the year ended February 28, 1995 increased by $2,949,000,
or 60%, to $7,862,000, from $4,913,000 for the year ended February 28, 1994.
Gross profit as a percentage of sales was 30.8% in the year ended February 28,
1995, compared to 31.4% in the prior year. The slight decrease is attributable
to certain one-time charges recorded at WinStar Gateway relating to contractual
payments due to the Company's telecommunications providers.

Selling, general and administrative expenses increased by $5,800,946 to
$12,688,859, or 49.6% of net sales, for the year ended February 28, 1995, from
$6,887,913, or 44.1% of net sales, for the prior year. The increase was
attributable to increased operating expenses related to the growth of WinStar
Gateway and WinStar Global Products, the build up of the corporate
infrastructure to identify, acquire and manage opportunities for the Company's
continued telecommunications growth, and start-up expenses associated with
WinStar Wireless, offset by a reduction of expenses related to discontinued
business lines. The Company also recorded a restructuring charge of $607,609 and
other non-recurring charges of $481,872 in the year ended February 28, 1995,
related to its WinStar Gateway subsidiary. These charges include termination
costs for previous executive, management, and staff personnel as well as other
charges taken in connection with sales programs and other initiatives
implemented by previous management. For the reasons noted above, the operating
loss for the year ended February 28, 1995, was $5,611,436, compared to an
operating loss of $2,067,521 in the prior year.

Interest expense decreased to $637,000 in the year ended February 28, 1995
from $744,000 in the prior year. This improvement was due to the use of
approximately $2,000,000 in promissory notes by the holders thereof for the
payment of the exercise price of certain warrants.

Other expense, net, for the year ended February 28, 1995 decreased by
$4,321,000, to $1,366,000, from $5,687,000 for the year ended February 28, 1994.
In the year ended February 28, 1994, the Company recorded a non-cash expense of
$5,316,667 related to certain stock options issued in connection with the
Company's initial public offering in 1991, and an expense of $292,376 related to
discontinued business lines. The Company also recorded an extraordinary gain of
$194,154 resulting from the settlement of debt at a discount. These situations
did not recur in the year ended February 28, 1995. This decrease in other
expense was offset in part by the Company's proportionate share of expenses
incurred by Avant-Garde, aggregating $1.1 million.

For the reasons noted above, the Company reported a net loss of $7,230,195
for the year ended February 28, 1995, compared to a net loss of $8,195,468 for
the year ended February 28, 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company has incurred significant operating and net losses due in large
part to the development of its telecommunications services business, and
anticipates that such losses will increase as the Company accelerates its growth
strategy. Historically, the Company has funded its operating losses and capital
expenditures through public and private offerings of debt and equity securities
and from credit facilities. Cash used to fund negative EBITDA during the three
months ended March 31, 1996, the ten months ended December 31, 1995 and the
fiscal years ended February 28, 1995 and 1994 was $3.7 million, $9.0 million,
$5.2 million and $1.8 million, respectively. The Company raised net proceeds of
approximately $214.5 million from the 1995 Debt Placement to fund the expansion
of its CAP business. Interest expense on that debt does not require payments of
cash for the first five years. At March 31,

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1996 and December 31, 1995, working capital was $209 million and $215 million,
respectively, including cash, cash equivalents and short term investments of
$204 million and $212 million, respectively.

The passage of the Telecommunications Act has resulted in opportunities that
have caused the Company to accelerate the development and expansion of its
telecommunications businesses. To capitalize on these opportunities, the Company
has undertaken a plan to expand and accelerate its capital expenditure program.
Capital expenditures for the three months ended March 31, 1996, the ten months
ended December 31, 1995 and the fiscal years ended February 28, 1995 and 1994
were $2.6 million, $8.7 million, $1.8 million and $0.3 million, respectively,
and, prior to the enactment of the Telecommunications Act, the Company's planned
capital expenditures for 1996 and 1997 were estimated at $36 million and $52
million, respectively. As a result of the acceleration of the development and
expansion of the Company's telecommunications businesses, the Company now plans
capital expenditures of $50 million and $280 million for 1996 and 1997,
respectively.

A significant portion of the Company's increased capital requirements will
result from the rollout of the Company's CLEC business on a nationwide basis.
The Company has begun to build a direct sales force, has opened its first sales
office in New York City and is in the process of expanding into other
metropolitan areas. Additionally, the Company is in the process of ordering
switching and other network equipment to be placed in key markets. Accordingly,
the Company expects that its working capital, capital expenditure needs and
selling, general and administrative expenses will continue to increase as this
expansion takes place, which will accelerate the Company's need for additional
capital.

The Company has two credit facilities and an equipment lease financing
facility, with a total of $14.6 million outstanding thereunder as of March 31,
1996. Management believes that upon expiration in 1996, these facilities will be
either renewed or replaced. In the event that they are not renewed or replaced,
the Company will repay amounts outstanding with cash on hand.

The Company also has commitments (i) to purchase $15.6 million of 38 GHz
radios from P-Com (as defined below), (ii) to purchase up to $5 million of
Internet access services from Digex, (iii) to pay an aggregate of approximately
$41 million upon consummation of the Milliwave Acquisition and Pinnacle
Acquisition and (iv) to pay $17.5 million upon consummation of the Locate
Acquisition.

The proceeds of the Offerings will be used principally to fund the capital
expenditures and operating losses resulting from the accelerated development and
expansion of the Company's telecommunications businesses and for investments in
Unrestricted Subsidiaries. In addition to enabling the growth of the Company's
businesses, the Company believes that its existing capital resources, which will
be enhanced substantially by the proceeds of the Offerings, will allow it to
negotiate more effectively with equipment suppliers and attract talented
telecommunications personnel, while also providing assurance to potential
customers. Management anticipates, based on current plans and assumptions
relating to its operations, that the net proceeds from the Stock Offering and
Debt Offering, together with existing financial resources (including proceeds
raised in the 1995 Debt Placement) and equipment financing arrangements which
the Company intends to seek, will be sufficient to fund the Company's growth and
operations for approximately 36 to 48 months following the consummation of the
Offerings. Management believes that the Company's capital needs at the end of
such period will continue to be significant and the Company will continue to
seek additional sources of capital. The Company anticipates that it will be able
to raise sufficient capital to implement its accelerated plan. Further, in the
event the Company's plans or assumptions change or prove to be inaccurate, or if
the Company successfully consummates any acquisitions of businesses or assets
(including additional 38 GHz licenses, by auction or otherwise), the Company may
be required to seek additional sources of capital sooner than currently
anticipated. Sources of additional capital may include public and private equity
and debt financings, sales of nonstrategic assets and other financing
arrangements. There can be no assurance that the Company will be able to obtain
financing, or, if such financing is available, that the Company will be able to
obtain it on acceptable terms. Failure to obtain additional financing, if
needed, could result in the delay or abandonment of some or all of the Company's
development and expansion plans, which would have a material adverse effect on
the Company's business and could adversely affect the Company's ability to
service its debt and the value of the Common Stock.

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BUSINESS

GENERAL

The Company delivers telecommunications services in the United States as a
CAP, CLEC, and long distance and private network services provider. Beginning in
the third quarter of 1996, the Company also plans to offer Internet access
services. The Company utilizes its Wireless Fiber services as a key component of
its transmission capabilities. As a complement to its telecommunications
operations, the Company produces and distributes information and entertainment
content.

Wireless Fiber services deliver high quality transmission via digital,
wireless capacity in the 38 GHz portion of the radio spectrum, where the Company
is the holder of the largest aggregate amount of 38 GHz bandwidth in the United
States pursuant to Wireless Licenses granted by the FCC. The Wireless Licenses
enable the Company to provide Wireless Fiber services in the 31 most populated
MSAs in the United States, including Atlanta, Boston, Chicago, Los Angeles, New
York and San Francisco, among others, and 41 of the 45 most populated MSAs. The
MSAs covered by the Wireless Licenses include more than 100 cities with
populations exceeding 100,000, and encompass an aggregate population of almost
110 million. By exploiting its Wireless Fiber capabilities, the Company seeks to
become a value-added, economical provider of local telecommunications services
and an attractive alternative to the LECs, such as the RBOCs, in substantially
all of the metropolitan areas covered by the Wireless Licenses.

The Company believes that its Wireless Fiber services provide it with
certain critical competitive advantages in the evolving telecommunications
market. The Company's Wireless Fiber services are engineered to provide 99.999%
reliability, with a 10-13 bit error rate (unfaded), performance equivalent to
that provided by fiber optic-based networks and exceeding that generally
provided by copper-based networks. The Company's Wireless Fiber services provide
a high capacity, cost-effective solution for voice and broadband applications,
providing data transfer rates equivalent to fiber-optic products and
significantly exceeding those provided by the fastest dial-up modems and ISDN
lines. The above-ground, installation-to-meet-demand nature of the Company's
Wireless Fiber services enables the Company to provide services to a customer
more quickly and less expensively than telecommunications providers that rely on
the installation of fiber optic- or copper-based lines for connection to
customer locations.

TELECOMMUNICATIONS INDUSTRY OVERVIEW

The telecommunications industry is being reshaped by the deregulation of
telecommunications markets, growing demand for high speed, high capacity digital
telecommunications services and rapid advances in wireless technologies,
including 38 GHz-based technology. The long distance market has been opened to
competition for more than a decade and current deregulation is now allowing new
competitors to enter into the local telecommunications markets to compete with
the incumbent LECs in all aspects of local telecommunications services. The
accelerating growth of LANs, WANs, Internet services and video teleconferencing,
and the ongoing revolution in microprocessor power, are significantly increasing
the volume of broadband telecommunications traffic. The convergence of these
factors is creating significant opportunities for competitive telecommunications
service providers such as the Company.

GENERAL

The present structure of the telecommunications marketplace was shaped
principally by the court-directed divestiture ("Divestiture") of the Bell System
in 1984. In connection with the Divestiture, the United States was divided into
194 local regions known as LATAs and the Bell System was separated into a long
distance carrier, AT&T, to provide long distance services between LATAs, and
seven RBOCs, including, for example, Bell Atlantic and NYNEX, to provide local
telecommunications services. Long distance services involve the carriage of
telecommunications traffic between LATAs. Local telecommunications services
involve the provision of switched local traffic (local exchange services) and
short-haul (or intraLATA) toll service and the provision of local network access
to long

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distance carriers by the LECs, including the RBOCs, and independent long
distance carriers and resellers, thereby allowing long distance traffic to reach
end users in a different LATA (local access).

While the Divestiture facilitated competition in the long distance segment
of the telecommunications market, each LEC initially continued to enjoy a
monopoly in the provision of local telecommunications services in its respective
geographic service area. Beginning in the mid-1980s, however, certain entities
began constructing their own local networks and providing local access and
dedicated services designed to allow users to bypass a portion of a particular
LEC's local network. CAPs were the first alternative providers of these types of
services and the first competitors in the local telecommunications services
market. The demand for alternative local telecommunications services providers
in the past has been driven in large part by the significant charges levied by
the LECs on the long distance carriers for access to such LECs' local networks
(access charges), which have represented approximately 45% of such carriers'
long distance revenues. The CAPs' local networks typically consist of fiber
optic-based facilities connecting long distance carriers' POPs within a
metropolitan area, connecting end users (primarily large businesses and
government agencies) with long distance carriers' POPs and connecting different
locations of a particular customer. CAPs take advantage of the digital
technology employed by fiber optics and the substantial capacity and economies
of scale inherent in their networks to offer customers service that is generally
less expensive and of higher quality than that obtained from the LECs.

The Telecommunications Act opens the local exchange services market to
competition on a nationwide basis. The Telecommunications Act provides for the
removal of legal barriers to competition in the local exchange market and will
permit CLECs, such as the Company, to offer a full range of local exchange
services, including local dial tone, custom calling features and intraLATA toll
services, to both business and residential customers. It requires LECs to allow
alternate carriers, such as the Company, to interconnect with their networks and
establishes additional procompetitive obligations upon the incumbent LECs. These
obligations include allowing unbundled access to the incumbent LECs' networks,
resale of local exchange services, number portability, dialing parity, access to
rights-of-way and mutual compensation for the termination of switched local
traffic. In addition, the legislation codifies the LECs' equal access and
nondiscrimination obligations and preempts inconsistent state regulation. The
Telecommunications Act also contains certain provisions that ultimately will
eliminate the restrictions that currently prohibit the RBOCs from providing
interLATA services.

The full extent of the effects of the Telecommunications Act on the Company
and other telecommunications companies is as of yet unknown, particularly
because it contains many provisions that require enabling regulations, the vast
majority of which have not yet been promulgated. However, the Company believes
that both competition and opportunity in the telecommunications industry will be
increased by the Telecommunications Act, as telecommunications providers seek to
enter quickly into newly-opened markets. The Company believes that such
opportunity is amplified by (i) growing consumer interest, especially among
business users, in alternatives to their existing carriers for more capacity in
the form of broader bandwidth channels to customer premises, better pricing
terms and route diversity, (ii) long distance carriers' desire to connect their
long distance networks to local origination and termination points at rates
lower than the incumbent LECs' local access charges, (iii) a monopoly position
and pricing structure in the local exchange services market which historically
has provided little economic incentive for the incumbent LECs to upgrade their
existing networks or to provide specialized services, (iv) technological
advances in data and video services and products requiring greater transmission
capacity and reliability and (v) ongoing regulatory initiatives to allow other
providers of local telecommunications services to interconnect their networks
with those owned by the incumbent LECs.

38 GHZ TECHNOLOGY

An aggregate of fourteen 100 MHz channels in 38 GHz currently are allocated
by the FCC in each 38 GHz licensed area with certain additional 100 MHz channels
available for future licensing. Although FCC rules specify that 38 GHz be used
for point-to-point transmissions, it has not mandated

46
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any particular commercial services for such frequency. Prior to 1993, the 38 GHz
portion of the radio spectrum remained largely unassigned for commercial use in
the United States due to, among other factors, the lack of available technology
to efficiently utilize 38 GHz for commercial purposes. In the early 1990s,
however, technology became available which allowed for the provision of
non-switched wireless telecommunications links between two fixed points for the
carriage of telecommunications traffic. 38 GHz technology was first employed in
Europe on a commercial basis by PCS providers for the interconnection of their
cell sites.

By early 1994, technological advances combined with growing use in Europe
led to increasing awareness of and interest in the potential uses of 38 GHz in
the United States. After Avant-Garde (which was acquired by the Company in July
1995 and which was the original recipient of many of the Company's Wireless
Licenses) received its initial 30 multiple-channel 38 GHz licenses in September
1993 (each license providing for four channels for an aggregate of 400 MHz of
bandwidth capacity), other entities, including several large telecommunications
companies such as Pacific Telesis, Inc., GTE Telecommunication Services, Inc.
and MCI, sought similar multiple-channel 38 GHz licenses for the provision of
wireless local telecommunications services. However, in September 1994, the FCC
began to follow new procedures with respect to the granting of 38 GHz licenses,
including limiting bandwidth capacity to a single 100 MHz channel per licensee
in a particular licensed geographic area. See "-- Government Regulation of
Telecommunications Operations."

Point-to-point wireless local telecommunications services can be offered in
many portions of the radio spectrum. However, 38 GHz has several characteristics
that make it particularly well suited for the provision of such services,
including:

Efficient Channel Reuse Allowing for Dense and Controlled Network
Designs. Certain characteristics of 38 GHz, including the small amount of
dispersion (i.e., scattering) of the radio beam as compared to the more
dispersed radio beams produced in lower frequencies, allow for the reuse of
bandwidth capacity in a licensed area. The ability to reuse capacity allows the
38 GHz license holder to densely deploy its 38 GHz services in a given
geographic area, providing services to multiple customers over the same 38 GHz
channel and conserving bandwidth capacity, thereby enhancing the types of
services that can be provided and increasing the number of customers to which
such services can be provided. Due to the limited dispersion characteristics of
38 GHz, numerous T-1s can be placed in close proximity without interfering with
each other. The Company believes that the use of multiple 100 MHz channels
allows, and in many instances is required, for dense reuse where multiple DS-3
are being deployed in a given area.

38 GHz licenses have been granted by the FCC on a geographic basis and cover
areas originally defined by the applicant, allowing the license holder to
install and operate as many transmission links as can be engineered in the
entire licensed area without obtaining further approval from the FCC. This is a
significant difference from most other comparable portions of the radio spectrum
(i.e., those that are used for other commercial point-to-point applications),
which are typically licensed on a link-by-link basis following frequency
coordination. Frequency coordination is often time consuming and problematic at
frequencies lower than 38 GHz because such frequencies are widely used and
signals at such frequencies are more dispersed. The exclusive right to use a
particular channel or channels within a broad geographic area gives the licensee
much greater control and flexibility over its network design. A 38 GHz licensee
can save costs, ensure interference-free operations and increase quality and
reliability by designing efficient 38 GHz networks in advance of their
deployment.

Higher Data Transfer Rates. The total amount of bandwidth for each 38 GHz
channel is 100 MHz, which exceeds the bandwidth of any other present terrestrial
wireless channel allotment and supports full broadband capability. For example,
one 38 GHz DS-3 channel at 45 Mbps today can transfer data at a rate which is
over 1,500 times the rate of the fastest dial-up modem currently in use (28.8
Kbps) and over 350 times the rate of the fastest ISDN line currently in use (128
Kbps). Data transfer rates of a 38 GHz DS-3 channel even exceed the data
transfer rates of cable modems (30 Mbps). The broadband capacity of 38 GHz
transmission provides improved speed and quality in

47
<PAGE>
transmissions, as compared to transmissions that are carried over a "last mile"
consisting of copper wire. In addition to accommodating standard voice and data
requirements, 45 Mbps data transmission rates allow end users to receive full
motion video and 3-D graphics and to utilize highly interactive applications on
the Internet and other networks.

Rapid Deployment. 38 GHz technology generally can be deployed considerably
more rapidly than wireline (because of permit procedures and construction time
required for wireline buildout) and many other wireless technologies (because of
the need to follow FCC frequency coordination procedures in connection with the
installation of most wireless facilities).

Ease of Installation. The equipment used for point-to-point applications in
38 GHz (i.e., antennae, transceivers and digital interface units) is typically
smaller, less obtrusive, less expensive and uses less power than equipment used
for similar applications at lower frequencies, making it often relatively easier
to obtain the Roof Rights required to install transceivers and less costly to
initiate 38 GHz-based services.

Additional Advantages Over Other Portions of Radio Spectrum. At frequencies
above 38 GHz, point-to-point applications become less practical because the
maximum distance between transceivers continually decreases as attenuation
increases. Additionally, the FCC has specified the use of many portions of the
spectrum for applications other than point-to-point, such as satellite and
wireless cable services, and, accordingly, these portions of the radio spectrum
often are not available for point-to-point applications. Finally, 38 GHz has
characteristics which provide better signal quality and performance in inclement
weather than those offered in the immediately surrounding portions of the radio
spectrum.

STRATEGY FOR TELECOMMUNICATIONS BUSINESS GROWTH

Accelerating Rollout of CLEC Services and Leveraging of Wireless Fiber
Capabilities. In response to the Telecommunications Act, the Company is
accelerating the rollout of its local exchange CLEC services. The Company has
commenced offering local exchange services on a limited, resale basis in New
York City and it is anticipated that the Company will begin offering such
services in at least five additional cities during the next nine months. As the
Company commences its CLEC business in each city, in order to gain initial
market penetration in that city, it intends to initially resell the local
exchange services of other service providers, such as other CLECs and the
incumbent LECs, until it has established the Wireless Fiber and switch-based
infrastructure required to provide its own local exchange services in that city.
In June 1996, the Company entered into a three-year interconnection agreement
with Ameritech which enables the Company to utilize Ameritech's network and to
resell Ameritech's services on an unbundled basis to customers in Illinois. This
agreement also will enable the Company to mutually exchange local and intraLATA
toll traffic with Ameritech in Illinois. The Company is following a
city-by-city, building-centric network plan to establish its own local exchange
services facilities which will utilize the Company's own switches and Wireless
Fiber services to link end user customers and fiber optic facilities leased or
purchased from service providers. By utilizing its Wireless Fiber services to
originate and terminate customer traffic without connecting to end users through
the extension of costly fiber-optic lines or using the facilities of the LECs,
the Company believes that it will be able to provide many types of bundled local
exchange, long distance, Internet access, enhanced communications and
information services to its target customers at lower cost than many of its
competitors, with equal or better quality. See "-- Telecommunications Services
- -- CLEC Services."

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result of the Telecommunications Act. By having its Wireless Fiber services
packaged with the service offerings of other telecommunications providers or
utilized as a seamless component of such providers' own telecommunications
networks, the Company also hopes to leverage the marketing and distribution
capabilities of such providers. The Company currently offers its Wireless Fiber
services to long distance carriers; other CAPs and CLECs; CMRS providers; and
LECs. The Company also offers its Wireless Fiber services to all types of
telecommunications service providers as viable, cost-efficient alternate routes
for their telecommunications traffic in situations where primary routes are
incapacitated and/or network reliability concerns require alternate
telecommunications paths. See "-- Telecommunications Services -- CAP Services."

Providing Wireless Internet Access and Private Network Services. The Company
is marketing its Wireless Fiber services to take advantage of the
characteristics that make it an attractive solution for entities seeking
cost-effective, high capacity Internet access and private voice and data network
services. The total amount of bandwidth of each 38 GHz channel is 100 MHz, which
supports high broadband capability. One Wireless Fiber DS-3 link provides
transfer rates which are over 1,500 times the rate of the fastest dial-up modem
currently in use and over 350 times the rate of the fastest ISDN line currently
in use. In addition to accommodating standard voice and data requirements,
Wireless Fiber services can allow end users to receive real time, full motion
video and 3-D graphics and to utilize highly interactive applications on the
Internet and other networks. The Company offers its Wireless Fiber services to
businesses, government agencies and institutions with multiple locations that
seek to establish their own independent local telecommunications systems for
dedicated private line voice and data networks, including LAN and WAN
applications. The Company also recently established its first major relationship
with an Internet service provider and is actively pursuing relationships with
additional Internet service providers. See "-- Telecommunications Services --
CAP Services."

Exploiting First to Market and Leading Spectrum Holder Advantages. The
Company currently enjoys a first-to-market advantage as one of the few holders
of 38 GHz licenses with an established operating and management infrastructure
and the capital necessary to rapidly exploit and roll out its 38 GHz services on
a commercial basis. The Company believes that its competitive advantage is
further strengthened by its position as the holder of the largest aggregate
amount of 38 GHz bandwidth capacity in the United States and by the broad
geographic scope allocated under its Wireless Licenses. The Company holds 43
Wireless Licenses, 30 of which provide for 400 MHz of bandwidth capacity per
licensed area and 13 of which provide for 100 MHz of bandwidth capacity per
licensed area, and which allow the Company to address an aggregate of more than
400 million channel pops. The Company will acquire a significant number of
additional 38 GHz licenses upon consummation of the Milliwave, Locate and
Pinnacle Acquisitions, which will enable the Company to address more than
175 million additional channel pops. Based on existing and proposed FCC
regulations, the Company believes that it will be difficult, in the near term,
for other entities seeking to provide wireless local telecommunications
services similar to those of the Company to obtain the aggregate bandwidth
capacity and widespread geographic coverage afforded to the Company under its
Wireless Licenses. The Company seeks to acquire other 38 GHz licenses as
opportunities arise, which may include the acquisition of interests in other
licensees and participation in any auction procedure for 38 GHz licenses that
the FCC establishes. See "-- Telecommunications Services -- Wireless Fiber --
Wireless Licenses."

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<PAGE>
long distance services to enhance the marketability of its local
telecommunications services. See "-- Telecommunications Services -- Long
Distance Services."

TELECOMMUNICATIONS SERVICES

Since late 1994, the Company has focused primarily on the development and
initial marketing of its Wireless Fiber-based local access services. After an
initial market-education phase, in which the Company demonstrated the efficacy
and reliability of its Wireless Fiber services, principally though the use of
field demonstrations and the installation of trial-basis Wireless Fiber links,
the Company began receiving initial orders for Wireless Fiber services. In
addition to continuing the expansion of its CAP business, the Company is
implementing its CLEC business on an accelerated basis. The Company seeks to
develop its CLEC business into a value-added, economical alternative to the
LECs, particularly through the exploitation of the Company's Wireless Fiber
capabilities.

WIRELESS FIBER

The Company utilizes its Wireless Fiber capacity in connection with its CAP
business. The Company also will employ its Wireless Fiber capacity as an
integral component of its planned CLEC facilities to originate and terminate
local traffic and to interconnect hub, switch and local node sites constructed
by the Company.

Wireless Fiber Links. Each Wireless Fiber link currently provides up to four
T-1s of capacity (equivalent to 96 voice lines) or one DS-3 of capacity
(equivalent to 672 voice lines). The Company believes that with future
developments in 38 GHz technology there will be substantial increases in the
capacity of each Wireless Fiber link. The Company's Wireless Fiber links meet or
exceed general telephone industry standards, provide transmission quality
equivalent to that produced by fiber optic-based facilities, and address the
growing demand for high speed, high capacity, digital telecommunications
services for voice, data and video applications, including traditional local
access, Internet access and network interconnection services. Accordingly, the
Company believes that its Wireless Fiber capacity meets or exceeds the majority
of potential customers' requirements in the Company's present and future target
markets.

Each Wireless Fiber path consists of transmission links, which are paired
digital millimeter wave radio transceivers placed at a distance of up to five
miles from one another within a direct, unobstructed line of sight. The
transceivers currently used by the Company to create its Wireless Fiber paths
are primarily the Tel-Link 38 Radio Systems supplied by P-Com, Inc. ("P-Com")
pursuant to a four-year nonexclusive supply agreement ("Tel-Link Agreement")
executed in November 1994, which may be terminated by the Company upon 90 days'
notice to P-Com (subject to certain liquidated damages provisions if certain
purchase minimums are not met). The transceivers are installed where lines of
sight can be established between transceivers, such as on rooftops or towers or
in windows. The Tel-Link Agreement includes provisions whereby the Company pays
a higher price per link at the beginning of the contract period, with the excess
recoverable by the Company in the form of significantly discounted links once
certain volume levels have been achieved. The contract also stipulates certain
minimum

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annual volume levels which must be met in order to maintain the agreed upon
pricing structure. The Company has entered into an amendment to the Tel-Link
Agreement with P-Com, pursuant to which the requirements for volume discount
pricing were revised. The Company has not yet qualified for significant volume
discounts. The amendment also added another year to such term, reduced the
purchase commitment provisions upon termination, and revised the type of
Tel-Links to be provided by P-Com such that a greater proportion of higher
capacity transceivers (including DS-3 capable transceivers), will be delivered
under the agreement. As of March 31, 1996, the Company's noncancellable purchase
commitment under the Tel-Link Agreement was approximately $15.6 million.

The Company's Wireless Fiber services are reliable and cost-efficient.
Significant features of the Company's Wireless Fiber services include: (i) 38
GHz digital millimeter wave transmissions having narrow beam width, reducing the
potential of channel interference; (ii) at least 100 MHz bandwidth in each
channel, allowing for high subdivision of voice and data traffic; (iii) a range
of up to five miles between transmission links; (iv) performance engineered to
provide 99.999% reliability, as tested; (v) transmission accuracy engineered to
provide bit error rates of 10-13 (unfaded); (vi) 24-hour network monitoring by
the Company's and Lucent's System Operations Control Centers ("SOCCs"); (vii)
optional safeguards from link outages by installation of hot standbys that
remain powered up and switch "on line" if the primary link fails; (viii)
optional forward error correction ensuring the integrity of transmitted data
over Wireless Fiber paths; and (ix) relatively low cost (installed) for each
pair of transceivers comprising a transmission link.

In August 1995, the Company entered into a three-year service contract with
Lucent, pursuant to which Lucent has agreed to provide site survey,
installation, maintenance and network management services for the Company's
Wireless Fiber services 24-hours a day, 365 days a year, as required. The
Company also is in the process of expanding its own installation, maintenance
and network management capabilities, which expansion includes the development of
management and operating systems and the hiring of qualified personnel.

Transmission links in the Company's Wireless Fiber paths are connected via
dial-up modems to both the Company-maintained SOCC in Virginia and Lucent's SOCC
in Maryland. The SOCCs provide the Company with points of contact for network
monitoring, troubleshooting and dispatching repair personnel in each MSA. The
SOCCs provide a wide range of network surveillance functions for each Wireless
Fiber path, providing the Company with the ability to remotely receive data
regarding the diagnostics, status and performance of its transmission links.

The Company must obtain Roof Rights (or rights to access other similar
locations where unobstructed lines of sight are available) on each building
where a transceiver will be placed. The Company's prequalification activities
often require the payment of option fees for the buildings that are being
prequalified. In connection with the development of its Wireless Fiber capacity
for both its CAP and CLEC businesses, the Company has been following a plan
pursuant to which it seeks to negotiate, prior to receipt of actual service
orders, Roof Rights for the installation of Wireless Fiber links on buildings

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specifically identified by existing and potential customers in the metropolitan
areas covered by the Wireless Licenses, including buildings that can provide
interconnection access to long distance carriers' points of presence, switch
locations and local access nodes. As of May 31, 1996, the Company has secured
Roof Rights on more than 280 buildings. Further, the Company, in consultation
with existing and potential customers, has identified more than 2,200 additional
buildings in the metropolitan areas covered by the Wireless Licenses for which
it is in the process of seeking Roof Rights. In addition, upon consummation of
the Locate Acquisition, it is anticipated that the Company will gain roof access
to a number of buildings, including the World Trade Center and other key sites
in New York City, which the Company anticipates using in its CAP and CLEC
operations.

Wireless Licenses. The Wireless Licenses allow the Company to provide
Wireless Fiber services in the 31 most populated MSAs in the United States and
41 of the 45 most populated MSAs, which include more than 100 cities with
populations exceeding 100,000 and encompasses an aggregate population of almost
110 million people. The Company has the largest aggregate amount of 38 GHz
bandwidth capacity in the United States, holding 43 Wireless Licenses, 30 of
which provide for 400 MHz of bandwidth capacity per licensed area ("400 MHz
Wireless Licenses"). The 400 MHz Wireless Licenses allow for the provision of
wireless local telecommunications services over four of the fourteen 38 GHz
channels allocated in each of the following metropolitan areas: Atlanta,
Baltimore, Boston, Buffalo, Chicago, Cincinnati, Cleveland, Dallas, Denver,
Detroit, Houston, Kansas City, Los Angeles, Miami, Milwaukee,
Minneapolis/St.Paul, New York (Long Island), New York City, New York West
(Newark and Northern New Jersey), Oakland, Philadelphia, Phoenix, Pittsburgh,
San Diego, San Francisco, Seattle, Spokane, St. Louis, Tacoma, Tampa Bay and
Washington, D.C. The Company's remaining 13 Wireless Licenses, providing for 100
MHz of bandwidth capacity per licensed area ("100 MHz Wireless Licenses"), were
issued under FCC procedures adopted in September 1994 which have limited recent
grants of 38 GHz licenses to 100 MHz of bandwidth capacity per licensee in a
particular licensed area. The 100 MHz Wireless Licenses allow for the provision
of wireless local telecommunications services over one of the fourteen 38 GHz
channels in each of the following metropolitan areas: Austin-San Marcos, Boise,
Charlotte, Indianapolis, Jacksonville, Memphis, New Orleans, Norfolk, Oklahoma
City, Omaha, Portland (Oregon), San Antonio and Stamford.

Upon consummation of the Milliwave Acquisition, the Company will obtain 88
additional 38 GHz licenses, each providing for 100 MHz of bandwidth. The
Milliwave Licenses allow for the provision of service in more than 80 major
markets, encompasing an aggregate population of greater than 160 million.
The cities covered by the Milliwave Licenses include many already serviceable by
the Company under its existing Wireless Licenses, such as Boston, Chicago,
Dallas, Los Angeles and New York, among others, which will increase the
Company's aggregate bandwidth capacity in each such city. The Milliwave Licenses
also cover many cities which currently are not serviceable by the Company under
its existing Wireless Licenses, including, among others, Honolulu, Nashville,
Orlando, Raleigh/Durham and Rochester (New York). The Company also has entered
into a (i) services agreement with Milliwave pursuant to which it has agreed to
provide services to Milliwave in connection with the buildout by Milliwave of
its licensed areas in consideration for payment of monthly site access and
management fees, as well as installation fees, and (ii) a two-year transmission
path lease agreement with Milliwave permitting the Company to use up to 488
radio links in Milliwave's licensed areas.

Upon the consummation of the Locate Acquisition, the Company will acquire
two additional 38 GHz licenses, each providing 100 MHz of bandwidth, for the New
York City metropolitan area, including portions of Long Island and northern New
Jersey. Additionally, upon consummation of the Pinnacle Acquisition, the Company
will acquire three additional 38 GHz licenses, each providing 100 MHz of
bandwidth, in the Baltimore, Dallas and Philadelphia areas.

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The 400 MHz Wireless Licenses were granted in September 1993. Under each 400
MHz Wireless License, Avant-Garde, the original licensee, was required to
construct a Wireless Fiber link in each geographic area covered by a Wireless
License by March 15, 1995 in order to prevent possible revocation of the
license. On or before March 15, 1995, Avant-Garde was operational in each of the
areas covered by the 400 MHz Licenses and it filed a certificate of completion
(FCC Form 494A) for each 400 MHz Wireless License with the FCC on March 15,
1995. The 100 MHz Wireless Licenses have been granted since June 1995. Under
each 100 MHz Wireless License, WinStar Wireless is required to construct a
Wireless Fiber link in each geographic area covered by a Wireless License within
18 months from its date of grant in order to prevent possible revocation of the
license. This has occurred for all but the most recently granted Wireless
License, which covers an area that includes Boise, Idaho.

The FCC's current policy is to align the expiration dates of all outstanding
38 GHz licenses such that all such licenses mature concurrently and then to
renew all such licenses for a matching ten-year period. The initial term of all
currently outstanding 38 GHz licenses, including the Wireless Licenses, expires
in February 2001. While the Company believes that all of its Wireless Licenses
will be renewed based upon FCC custom and practice establishing a presumption in
favor of licensees that have complied with their regulatory obligations during
the initial license period, there can be no assurance that any Wireless License
will be renewed upon expiration of its initial term. See "Risk Factors -- Finite
Initial Term of Wireless Licenses; Potential License Renewal Costs; Fluctuations
in the Value of Wireless Licenses; Buildout Requirements for Milliwave and Other
New Licenses; Transfer of Control."

CAP SERVICES

The Company markets and provides wireless local access CAP services.
Utilizing its Wireless Licenses, the Company offers numerous wireless
telecommunications services to support a wide range of local access and
dedicated service needs with a high degree of reliability. The technology and
service applications in this field are evolving rapidly, and the Company
believes that its Wireless Fiber service offerings will expand over time to
include a broad range of voice, data and video applications. The Company
currently offers Wireless Fiber services for the following applications, among
others:

Local By-Pass for Long Distance Carriers. Long distance carriers can utilize
the Company's Wireless Fiber services to connect certain call termination or
origination points in a particular licensed area to such carriers' POPs in the
licensed area (see diagram on next page) at more economical rates than those
generally charged by LECs and to connect two or more of their respective POPs in
a single licensed area. Long distance carriers using Wireless Fiber services may
benefit from both the lower cost afforded by such services and the wide-band
capacity compared to LEC facilities, which, in many instances, are based in part
on copper infrastructure and are, therefore, narrow-band. By utilizing the
Company's Wireless Fiber services, long distance carriers can avoid the capacity
barrier inherent in copper wire connections that typically has prevented them
from providing their customers with end-to-end, full digital service available
under a fiber optic- or wireless-based system. Wireless Fiber services also may
be utilized to provide such carriers with viable, cost-efficient paths to serve
as physically diverse routes (redundant and back-up capacity) for traffic in
situations where primary routes are incapacitated and/or network reliability
concerns demand alternate telecommunications paths.

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LOCAL BYPASS FOR THE LONG DISTANCE INDUSTRY

[ARTWORK]

Wireless Complement to CAP and LEC Networks. Currently, CAPs typically
compete with LECs by utilizing their own fiber optic cable rings and lease the
other facilities necessary to complete their networks from the LECs. Due to the
large capital investment required to construct such networks, CAPs generally
build their networks in limited, densely populated areas and offer services
primarily to large customers such as long distance carriers, medium- to
large-size businesses, government agencies and institutions. CAPs can utilize
Wireless Fiber services to bypass facilities typically leased by them from the
LECs (see diagram on next page). CAPs also can utilize the Company's Wireless
Fiber services to facilitate the build out and enhance the reliability of their
own local telecommunications networks and expand their marketing opportunities.
The Company believes that the relative ease and low cost of installation of
Wireless Fiber services in comparison to fiber optic-based facilities can
provide CAPs with the ability to expand their networks to reach some customers
in areas where demand levels are insufficient to justify the cost and time
involved in constructing fiber optic capacity. CAPs, as well as LECs, also can
utilize the Company's Wireless Fiber services to extend their own networks to
provide services to areas within a licensed area to which it is not
cost-efficient to run fiber optic cable or to which such cable simply has not
yet been run. CAPs and LECs also may utilize the Company's Wireless Fiber
services to provide redundant and back-up capacity to their own existing
networks.

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WIRELESS COMPLEMENT TO FIBER NETWORK

[ARTWORK]

Backbone Interconnection and Redundancy for CMRS Service Providers. Wireless
Fiber services can be utilized by providers of mobile telecommunications
services, such as PCS, cellular and specialized mobile radio carriers, for
interconnecting traffic (backbone network traffic) between and among cell sites,
repeaters, MTSOs and the wired local networks (see diagram on next page). The
Company also anticipates that entities that acquired licenses in the PCS
auctions, or which will acquire licenses in subsequent PCS auctions conducted by
the FCC, also will find Wireless Fiber services attractive to carry their
backbone network traffic. By utilizing Wireless Fiber services for their
backbone network needs, CMRS carriers can maintain greater control over their
systems by monitoring traffic carried over the Wireless Fiber services component
of their systems, reduce costs of construction of their networks, increase the
flexibility of their services and reduce the lead time involved in the provision
of services in their respective licensed areas. Wireless Fiber services also can
be used by CMRS carriers to provide redundant and back-up capacity for the fiber
optic and/or copper wire portions of their backbone networks.

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CELLULAR/PCS SITE INTERCONNECT

[ARTWORK]

Dedicated Private Network Services. The Company also markets its Wireless
Fiber services to businesses, government agencies and institutions with multiple
locations within the Company's licensed areas and which generate heavy
telecommunications traffic between such locations. These entities can utilize
Wireless Fiber services to establish their own independent telecommunications
systems for dedicated private network services (see diagram below). Wireless
Fiber services present entities with (i) a method for providing
telecommunications connections between their buildings on a cost-effective
basis, (ii) a viable alternative to the LECs' networks that frequently use
low-capacity copper wire for "last mile" delivery, generally allowing for
faster, more reliable data transmissions, (iii) greater control over their local
telecommunications traffic and costs and (iv) greater security because of the
private line nature of the Company's Wireless Fiber services.

END USER PRIVATE NETWORK

[ARTWORK]

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Network and Internet Access. The ability to access and distribute
information quickly has become critical to business and government end users.
Data traffic is becoming an increasing portion of overall telecommunications
traffic because of the proliferation of LANs, WANs, Internet services and video
teleconferencing. The Company's Wireless Fiber capacity enables it to provide
high-speed data transmission services to end users.

The Company recently introduced dedicated WAN services. The Company's
high-speed data telecommunications services permit businesses to transport data
between buildings and between personal computers or workstations. These
dedicated services allow personal computers and workstations on one LAN to
communicate with personal computers and workstations on another LAN at the same
speed at which these LANs operate. The Company's WAN services are offered at a
variety of capacities to allow customers to choose the level which meets their
needs.

The expanding demand for Internet access and the growing importance of
audio, video and graphic Internet applications to both businesses and consumers
also has created a growing market opportunity for the Company. The Company can
offer Internet service providers timely, reliable and affordable access at high
speed data rates. The Company can provide wireless broadband links between
customers and their Internet service providers and between Internet service
providers' POPs and the Internet backbone. In addition to accommodating standard
voice and data requirements, 45 Mbps data transmission rates can allow end users
to receive real time, full motion video and 3-D graphics and to utilize highly
interactive applications on the Internet and other networks. The Company is
actively pursuing relationships with Internet service providers. In June 1996,
the Company entered into an agreement with Digex, a provider of Internet access
services that primarily serves other Internet access providers, as well as
commercial, governmental and institutional end users. Pursuant to the Digex
Agreement, the Company has the right of first refusal to provide all of Digex's
local access and/or customer interconnection requirements through the use of the
Company's Wireless Fiber services or the resale of other facilities, as
appropriate.

Potential Interactive Video Applications. The inherent qualities of 38 GHz
also may offer substantial opportunities for broadband interactive video
applications appropriate for highly customized commercial demands. While the
specific service offerings utilizing 38 GHz for video applications are still in
development, the ability to commercially utilize certain aspects of this
technology appears to be possible. The narrow-beam characteristics of 38 GHz,
allowing for frequency reuse within a small area, coupled with its broadband
capacity and multichannel capabilities may offer a significant market
opportunity in the future as the appropriate technologies emerge, although there
can be no assurance of
the consumer acceptance or commercial viability of such video services. In June
1996, the Company entered into an agreement with Source Media, a provider of
interactive technology and programming. Pursuant to this agreement, the Company
has the exclusive right, in the 38 GHz spectrum, to use Source Media's
technology and programming in connection with entertainment and information
services the Company may offer.

Marketing. The Company began marketing its Wireless Fiber services in
December 1994. Wireless Fiber services currently are marketed by the Company
primarily to long distance carriers, CAPs, CMRS service providers and LECs, as
well as businesses, government agencies and institutions. The Company has
entered into master service agreements with each of Electric Lightwave, MCImetro
and Century Telephone. The master service agreements contemplate that the
carriers will utilize the Company's Wireless Fiber services as a component of
their own networks and set forth the general terms of the relationship between
the Company and each carrier, including the initial term of the relationship,
basic pricing schedules and service and installation parameters. The Company
also recently began to provide Wireless Fiber services to the City of New York
as a back-up disaster recovery system for certain of its facilities, providing
the city with redundancy in the event that its land-based telecommunications
service fails for any reason.

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The Company currently markets its CAP services (i) by performing field
demonstrations and testing of Wireless Fiber services, (ii) by providing
potential customers with Wireless Fiber services at reduced rates, in order to
educate such customers about the efficacy and reliability of such services,
(iii) by appearing at trade shows and advertising in trade publications, (iv)
through national sales agents and direct sales and (v) directly to WinStar
Gateway's existing long distance customers.

CLEC SERVICES

An integral part of the Company's CLEC business strategy is the creation of
a Wireless Fiber-based infrastructure on a city-by-city basis that will allow
the Company to provide a broad range of local exchange services within cities
covered by the Wireless Licenses. This infrastructure will utilize the Company's
Wireless Fiber capabilities, together with switches that will be acquired by the
Company and facilities leased or purchased from other carriers, to originate and
terminate local traffic. The Company believes that its Wireless Fiber
capabilities will provide it with a critical economic advantage over many other
service providers because of the high costs such service providers encounter in
connecting fiber-optic lines to end users. In building its infrastructure, the
Company is following a building-centric network plan, pursuant to which the
Company is identifying strategically-located buildings in areas covered by its
Wireless Licenses that can serve as hubs for its network in each city. These hub
sites will be connected via Wireless Fiber links to end user customers and fiber
optic facilities leased or purchased from other carriers. The Company believes
that the establishment of a limited number of hub buildings (generally less than
a dozen) in each metropolitan area where it has Wireless Licenses will allow it
to address the vast majority of all commercial buildings targeted by the Company
in that area.

The Company intends to install 10 main switches and 31 remote nodes during
the next three years and plans to install its first main switch in New York City
by October 1996. The Company intends to have at least five additional major
metropolitan areas serviced by its own switches or remote nodes by the first
quarter of 1997.

The Company has commenced a program designed to obtain, by the end of 1999,
authorization to operate as a CLEC in virtually every state where the Company
has Wireless Licenses, which will allow the Company to file tariffs and provide
local exchange services in such states once authorization is granted. The
Company currently is authorized to operate as a CLEC in California, Connecticut,
Florida, Georgia, Illinois, Massachusetts, Michigan, New York, Tennessee, Texas
and Washington, is in the process of seeking authorization to operate as a CLEC
in four additional states, and intends to seek such authorization in nine
additional states during 1996. It also is in the process of negotiating
interconnection agreements with various local exchange providers, including
incumbent LECs and certain other local carriers, which will allow the Company to
offer local exchange services on an unbundled basis to its customers.

Implementation of the Company's CLEC strategy requires significant up-front
capital expenditures to obtain necessary Roof Rights for hub buildings, to
purchase 38 GHz radios and install Wireless Fiber links on hub buildings and to
purchase and install main switches and remote nodes in up to 41 cities through
1999. See "Risk Factors -- Risks Related to CLEC Strategy; Anticipated Initial
Negative Operating Margins in CLEC Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Marketing. The Company plans to offer a broad range of communications and
information services including local, long distance, enhanced, frame relay,
mobile, Internet access and targeted information services.

The Company has commenced offering local exchange services on a limited,
resale basis in New York City to various customers and it is anticipated that
the Company will begin offering such services

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in at least five additional cities during the next nine months. As the Company
commences its CLEC business in each city, in order to gain initial market
penetration in that city, it initially intends to resell the local exchange
services of other service providers, such as fiber carriers and the incumbent
LECs, until such time that it has established the Wireless Fiber and
switch-based infrastructure required to provide its own local exchange services
in that city. Over the next three years, the Company intends to commence
marketing its local exchange services in substantially all markets covered by
its Wireless Licenses.

The Company is targeting small and medium-sized businesses, especially those
in buildings in which the Company's Wireless Fiber capacity can be utilized, for
economic competitive advantage, to originate and/or terminate customers local
telecommunications traffic. The buildings the Company is initially targeting
each have more than 100,000 square feet of space and are not currently served by
other CAPs or CLECs. The Company estimates that there are more than 8,000
buildings in this target group, populated by approximately 9.7 million people
using more than 2.1 million phone lines, and that these buildings represent an
aggregate local exchange service market of greater than $3.3 billion per annum.
These estimates do not include multi-dwelling residential buildings,
universities, hospitals or buildings occupied by a single tenant, and account
only for voice lines and not data lines.

The Company also intends to market its services to residences in multiple
dwelling units, such as apartment buildings. The Company intends to enter into
the residential segment of the local exchange services market primarily by
entering into partnerships and agency arrangements with shared tenant services
providers and possibly partnerships or alliances with other telecommunications
services providers.

In coordination with the plan to build its CLEC networks on a city-by-city
basis, the Company is hiring numerous engineering, installation, maintenance,
customer service personnel, and marketing and sales personnel in order to create
a direct sales force which will provide a high level of service to the business
and multi-dwelling residential markets. A sales force has been deployed in New
York and the Company is in the process of developing sales forces in five
additional cities during the next nine months and currently plans to have a
sales force in all metropolitan areas covered by the Wireless Licenses by the
end of 1999. The Company also is developing joint marketing, reselling and
agency relationships. For example, pursuant to the Digex Agreement, the Company
will purchase from Digex, during the next six years, a minimum of $5 million of
Internet access services with the right to purchase additional amounts, in each
case on a discounted basis. The Company will resell these Internet access
services under the Company's own brand name, including through the bundling of
such services with the Company's other telecommunications services.

The Company seeks to make its CLEC business an attractive choice for
potential customers by (i) offering a broad range of telecommunications services
that specifically address its target customers' needs, while providing levels of
customer satisfaction that exceed those provided by larger competitors and (ii)
exploiting the Company's Wireless Fiber service whenever feasible for economical
origination and termination of customer traffic, thereby allowing for attractive
pricing of services.

LONG DISTANCE SERVICES

The Company resells long distance services through its wholly-owned
subsidiary, WinStar Gateway, which has its own tariffs with the FCC and
agreements with major long distance carriers (AT&T, MCI, WorldCom, Inc. and U.S.
Long Distance, Inc.), which allow it to utilize their networks. The Company's
current customer base encompasses primarily residential customers and small- and
medium-sized businesses. The Company has been able to sell Wireless Fiber
services to a limited number of its long distance customers and expects to be
able to sell its Wireless Fiber services to a greater percentage of such
customers in the future. In addition to providing basic long distance services,

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the Company provides toll-free services, international call-back, prepaid phone
cards and certain enhanced services.

The Company's agreements with certain major long distance carriers are for
between one- and four-year terms and provide the Company with access to long
distance carriers' networks at rates which are typically discounted, varying
with monthly traffic generated by the Company through each carrier. Generally,
the Company is obligated to generate certain minimum monthly usage through each
network and, if such traffic is less than the minimum monthly usage commitment,
may be required to pay an underutilization fee in addition to its monthly bill
equal to a certain percentage of the difference between such minimum commitments
and the traffic actually generated by the Company. The Company has never paid or
been required to pay any underutilization charges. During 1995, the Company
established a reserve for possible underutilization charges.

Marketing. The Company, like many long distance carriers, historically has
experienced high customer turnover rates, primarily because a large portion of
its customer base consists of residential customers who, as a group, are
generally less loyal to telecommunications providers than larger customers, such
as businesses. The Company believes customer turnover rates have recently
increased (and will continue to increase) in the long distance industry
generally, as well as for the Company. In order to reduce customer turnover
rates, the Company is increasing its direct sales force and expanded its
marketing focus, which had been primarily on residential customers, to emphasize
small- to medium-sized businesses through the introduction of products and
services readily marketable to business customers, including prepaid phone card
services and a broad array of toll-free services, including services which allow
toll-free calls to be originated nationwide. The Company also offers business
customers several flexible billing services such as master account billing
(which enables customers to aggregate billing for several locations for
management and accounting purposes and to qualify for volume discounts), project
accounting codes (which reflect accounting codes of the customer on the billing
statement) and computerized call detail reports (which provide call detail to
customers on computer disks or tape for direct input into the customer's
computer for accounting or rebilling). The Company recently has increased its
customer service staff and will be seeking to reduce the turnover rate of its
residential customers through improved customer service and more diverse service
offerings.

The Company markets its telecommunications services primarily through
independent sales representatives and resellers, and to a lesser extent, through
direct marketing to resellers and commercial accounts. Independent sales
representatives typically enter into agreements with the Company providing for
payments of commissions on business generated. The use of independent sales
representatives entails the risk that such representatives will engage in
unauthorized switching of long distance carriers. See "-- Government Regulation
of Telecommunications Operations." The Company also markets its services to end
users through print advertising and direct mail advertising in selected markets.

COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY

LOCAL TELECOMMUNICATIONS MARKET

The local telecommunications market is intensely competitive and currently
is dominated by the RBOCs and LECs. The Company has been marketing local access
services as a CAP only since December 1994 and local exchange services as a CLEC
only since April 1996, and the Company has not obtained a significant market
share in any of the areas where it offers such services, nor does it expect to
do so given the size of the local telecommunications services market, the
intense competition and the diversity of customer requirements. In each area
covered by the Wireless Licenses, the services offered by the Company compete
with those offered by the LECs, such as the RBOCs, which currently dominate the
provision of local services in their markets. The LECs have long-standing
relationships

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with their customers, have the potential to subsidize competitive services with
revenues from a variety of business services and benefit from existing state and
federal regulations that currently favor the LECs over the Company in certain
respects. While legislative and regulatory changes have provided increased
business opportunities for competitive telecommunications providers such as the
Company, these same decisions have given the LECs increased flexibility in their
pricing of services. This may allow the LECs to offer special discounts to the
Company's (and other CLECs') customers and potential customers. Further, as
competition increases in the local telecommunications market, general pricing
competition and pressures will increase significantly. As LECs lower their
rates, other telecommunications providers will be forced by market conditions to
charge less for their services in order to compete.

In addition to competition from the LECs, the Company also faces competition
from a growing number of new market entrants, such as other CAPs and CLECs,
competitors offering wireless telecommunications services, including leading
telecommunications companies, such as AT&T Wireless, and other entities that
hold or have applied for 38 GHz licenses or which may acquire such licenses or
other wireless licenses from others or the FCC. There is at least one other CAP
and/or CLEC in each metropolitan area covered by the Company's Wireless
Licenses, including, in many such areas, companies such as IntelCom, MCImetro,
MFS, Teleport and Time Warner. Many of these entities (and the LECs) already
have existing infrastructure which allows them to provide local
telecommunications services at potentially lower marginal costs than the Company
currently can attain and which could allow them to exert significant pricing
pressure in the markets where the Company provides or seeks to provide
telecommunications services. In addition, many CAPs and CLECs have acquired or
plan to acquire switches so that they can offer a broad range of local
telecommunications services.

The Company currently faces competition from other entities which offer, or
are licensed to offer, 38 GHz services, such as ART and BizTel, and could face
competition in certain aspects of its existing and proposed businesses from
competitors providing wireless services in other portions of the radio spectrum,
such as CAI, a provider of wireless Internet access services, and
CellularVision, a provider of wireless television services which, in the future,
also may provide wireless Internet access and other local telecommunications
services. In many instances, these service providers hold 38 GHz licenses or
licenses for other frequencies in geographic areas which encompass or overlap
the Company's market areas. Additionally, some of these entities enjoy the
substantial backing of, or include among their stockholders, major
telecommunications entities, such as Ameritech with respect to ART, Teleport
with respect to BizTel, and NYNEX and Bell Atlantic with respect to CAI. Due to
the relative ease and speed of deployment of 38 GHz and some other
wireless-based technologies, the Company could face intense price competition
from these and other wireless-based service providers. Furthermore, a NPRM
issued by the FCC contemplates an auction of the lower 16 channels in the 38 GHz
spectrum band, which have not been previously available for commercial use. The
grant of additional licenses by the FCC in the 38 GHz band, or other portions of
the spectrum with similar characteristics, as well as the development of new
technologies, could result in increased competition. The Company believes that,
assuming the adoption of the NPRM as currently proposed, additional entities
having greater resources than the Company could acquire licenses to provide 38
GHz services.

The Company also may face competition from cable companies, electric
utilities, LECs operating outside their current local service areas and long
distance carriers in the provision of local telecommunications services. The
great majority of these entities provide transmission services primarily over
fiber optic-, copper-based and/or microwave networks, which, unlike the
Company's Wireless Fiber services, enjoy proven market acceptance for the
carriage of telecommunications traffic. Moreover, the consolidation of
telecommunications companies and the formation of strategic alliances within the
telecommunications industry, which are expected to accelerate as a result of the
passage of the Telecommunications Act, could give rise to significant new or
stronger competitors to the Company. For example, Time Warner recently entered
into a nine-state interconnection agreement with Bell South. There can be no
assurance that the Company will be able to compete effectively in any of its
markets.

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The Company's Internet access services also are likely to face competition
from cable television operators deploying cable modems, which provide high speed
data capability over installed coaxial cable television networks. Although cable
modems currently are not widely available and do not provide for data transfer
rates that are as rapid as those which can be provided by Wireless Fiber
services, the Company believes that the cable industry may support the
deployment of cable modems to residential cable customers through methods such
as price subsidies. Notwithstanding the cable industry's interest in rapid
deployment of cable modems, the Company believes that in order to provide
broadband capacity to a significant number of business and government users,
cable operators will be required to spend significant time and capital in order
to upgrade their existing networks to a more advanced hybrid fiber coaxial
network architecture. However, there can be no assurance that cable modems will
not emerge as a source of competition to the Company's Internet access business.
Further, Internet access services based on existing technologies such as ISDN
and, in the future, on such technologies as ADSL and HDSL will likely provide
additional sources of competition to the Company's Internet access services.
Additionally, the Company believes that many LECs and CLECs already are
promoting other Internet access services.

LONG DISTANCE MARKET

The long distance market has relatively insignificant barriers to entry,
numerous entities competing for the same customers and a high (and increasing)
average churn rate (especially among residential customers, which the Company
historically has emphasized in its long distance reselling business, and
customers acquired from other service providers, which acquisitions are part of
the Company's ongoing long distance business strategy), as customers frequently
change long distance providers in response to the offering of lower rates or
promotional incentives by competitors. The Company competes with major carriers
such as AT&T, MCI and Sprint, as well as other national and regional long
distance carriers and resellers, many of whom own substantially all of their own
facilities and are able to provide services at costs lower than the Company's
current costs since the Company generally leases its access facilities. The
Company believes that the RBOCs also will become significant competitors in the
long distance telecommunications industry. The Company believes that the
principal competitive factors affecting its market share are pricing, customer
service, accurate billing, clear pricing policies and, to a lesser extent,
variety of services. The ability of the Company to compete effectively will
depend upon its ability to maintain high quality, market-driven services at
prices generally perceived to be equal to or below those charged by its
competitors. In 1995, the FCC announced a decision pursuant to which AT&T no
longer will be regulated as a dominant long distance carrier. This decision is
expected to increase AT&T's flexibility in competing in the long distance
telecommunications services market and, in particular, will eliminate the longer
advance tariff notice requirements previously applicable only to AT&T. To
maintain its competitive posture, the Company believes that it must be in a
position to reduce its prices in order to meet reductions in rates, if any, by
others. Any such reductions could adversely affect the Company. In addition,
LECs have been obtaining additional pricing flexibility. This may enable LECs to
grant volume discounts to larger long distance companies, which also would put
the Company's long distance business at a disadvantage in competing with larger
providers.

GOVERNMENT REGULATION OF TELECOMMUNICATIONS OPERATIONS

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by, for example, imposing zoning requirements or permit right-of-way procedures,
and certain taxes or franchise fees.

The allocation of jurisdiction between federal and state regulators over
dedicated circuits that carry both interstate and intrastate traffic (including
private line and special access services) poses jurisdictional questions.
Although the FCC does not generally rule on the jurisdictional nature of a
carrier's traffic, under current FCC practice, non-switched telecommunications
services are considered jurisdictionally interstate (subject to FCC
jurisdiction) unless more than 90% of the traffic is intrastate in nature.
Currently, the Company's dedicated service offerings are primarily
jurisdictionally interstate in nature. The Company believes that these services
include virtually all service between a long distance carrier's POP and a POP of
that long distance carrier or another long distance carrier, and between an end
user and a long distance carrier's POP.

Under the FCC's streamlined regulation of non-dominant carriers, the Company
must file tariffs with the FCC for certain interstate services on an ongoing
basis, although the Telecommunications Act provides the FCC with the statutory
authority to forbear from filing tariffs and the FCC is considering whether to
do so. The Company currently is not subject to price-cap or rate-of-return
regulation and it may install and operate non-radio facilities for the
transmission of interstate communications without prior FCC authorization.

The Company, as an operator of millimeter wave radio facilities, also is
subject to ongoing semi-annual reporting requirements to the FCC with respect to
the deployment of its wireless local telecommunications services in its licensed
areas during the license period. In addition, the Company has filed tariffs with
the FCC as required with respect to its provision of interstate service and
recently has filed for certification (or similar authority for purposes of
providing intrastate service) in a number of the states where it is licensed by
the FCC. The Company has received certification or other appropriate regulatory
authority to provide intrastate non-switched service in 22 states and has
applied for authority in nine additional states.

Certain decisions by the FCC (the "Local Network Interconnect Decisions")
restructured the interstate competitive access services market. The FCC ordered
the RBOCs and all but one of the LECs having in excess of $100 million in gross
annual revenue for regulated services to provide expanded

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interconnection and collocation with, or virtual collocation to, their central
offices and serving wire centers to any CAP, long distance carrier or end user
seeking such interconnection for the provision of interstate access services.
Subject to few exceptions, LECs must offer interconnection in their central
offices at cost-based rates. Consequently, the Company can reach most business
customers in its MSAs via LEC facilities, and thereby significantly expand its
customer base.

In conjunction with its decision to require interconnection, the FCC
provided LECs with a degree of increased pricing flexibility for special access
and switched access services. Some forms of pricing flexibility apply on a
geographic-specific basis or on a central office-by-central office basis. The
Company anticipates that this pricing flexibility will result in LECs lowering
their prices in high density zones, the probable arena of competition with the
Company. To the extent that LECs are provided increased flexibility to lower
their rates, the Company's ability to compete for certain services and its
operating results may be adversely affected.

In a concurrent proceeding on transport rate structure and pricing, the FCC
adopted interim pricing rules that restructure local telephone company switched
transport rates in order to facilitate competition for switched services. No
assurance can be given that any benefits expected to be realized by the Company
as a result of the Local Network Interconnect Decisions will in fact be
realized, nor may the timing of any such benefits be predicted.

Some of the Company's services may be classified as intrastate and therefore
subject to state regulation. In all states where the Company is offering CAP or
CLEC service, the Company (through its state-specific operating subsidiaries) is
certified or otherwise operating with appropriate state authorization. The
Company, through WinStar Gateway, provides intrastate long distance service
pursuant to certification, registration or (where appropriate) on a deregulated
basis in 42 states and is currently seeking intrastate authority in the
remaining continental states. The Company expects that as its business and
product lines expand and as more procompetitive regulation of the local
telecommunications industry is implemented, it will offer additional intrastate
service. The Company is seeking to expand the scope of its intrastate service in
various jurisdictions, a process which depends upon regulatory action and, in
some cases, legislative action in the individual states. Interstate and
intrastate regulatory requirements are changing rapidly and will continue to
change.

Under current regulatory schemes, entities can compete with LECs in almost
all states for the provision of (i) local access services, (ii) dedicated access
services, (iii) private network services, including WAN services, for businesses
and other entities and (iv) long distance toll services. The remaining local
telecommunications services are either not currently subject to competition or
only recently have been opened to competition in most states. Accordingly, the
widespread provision of basic local exchange services to customers by entities
other than the incumbent LECs generally will require significant regulatory
changes.

Many states already have instituted regulatory changes encouraging increased
competition in various aspects of the local exchange services market, while
other states are considering such changes. A number of state legislatures and
regulatory bodies recently have enacted legislation and regulations to enhance
competition in the local exchange markets. The Company anticipates that this
trend will continue and will provide opportunities for broader entrance into the
local exchange markets for the Company and others. The Company currently is
authorized to operate as a CLEC in California, Connecticut, Florida, Georgia,
Illinois, Massachusetts, Michigan, New York, Tennessee, Texas and Washington; is
in the process of seeking authorization to operate as a CLEC in four additional
states; and intends to seek such authorization in nine additional states during
1996. It also is in the process of negotiating interconnection agreements with
various local exchange service providers, including incumbent LECs, under which
the Company will be able to obtain services on an unbundled basis.

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and approvals necessary and appropriate to conduct its operations, changes in
existing laws and regulations, including those relating to the provision of
wireless local telecommunications services via 38 GHz and/or the future granting
of 38 GHz licenses, or any failure or significant delay in obtaining necessary
regulatory approvals, could have a material adverse effect on the Company. On
November 13, 1995, the FCC released an order freezing the acceptance for filing
of new applications for 38 GHz frequency licenses. On December 15, 1995, the FCC
announced the issuance of an NPRM, pursuant to which it proposed to amend its
current rules relating to 38 GHz, including, among other items, the imposition
of minimum construction and usage requirements and an auction procedure for
issuance of licenses in the 37-40 GHz band where mutually exclusive applications
have been filed. In addition, the FCC ordered that those applications that are
subject to mutual exclusivity with other applicants or that were placed on
public notice by the FCC after September 13, 1995 would be held in abeyance and
not processed by the FCC pending the outcome of the proceeding initiated by the
NPRM.

Pursuant to an international treaty to which the United States is a
signatory, the 38.6-40.0 GHz band is allocated on a co-primary basis to the
Fixed Satellite Services ("FSS") and the 37.5-40.5 GHz band is allocated on a
co-primary basis to the Mobile Satellite Services ("MSS"). The FCC has not
proposed rules to implement the treaty provisions, although comments and a
petition for rule making recently have been filed with the FCC by Motorola
Satellite Communications Inc. ("Motorola") requesting that such rules be
considered and, in particular, power flux density limits. On May 21, 1996, the
FCC placed on public notice for comment the petition to allocate the 37.5-38.6
GHz bands to the FSS and to establish Technical Rules for the 37.5-38.6 GHz
band. In addition, Motorola requested the FCC to adopt the power flux density
limitations of the ITU Radio Regulations for the 37.5 to 40.5 GHz band in order
to allow FSS systems and terrestrial microwave operators to co-exist on a
co-primary basis. There can be no assurance that any proposed or final rules
will not have a material adverse effect on the Company.

The FCC is considering substantial mandatory reductions in the rates charged
by LECs to long distance service providers for local "access" (i.e., the
transmission of a long distance call from the caller's location to the long
distance provider's POP and from the terminating POP to the recipient of the
call). CAPs, such as the Company, provide local access at rates that are
discounted from the rates charged by LECs. If the FCC were to mandate reductions
in LECs' local access charges, CAPs might be forced to substantially reduce the
rates they charge long distance providers, resulting in lower gross margins
(which, in the case of the Company, are currently negative).

Additionally, providers of long distance services, including the major
interexchange carriers as well as resellers, such as the Company, are coming
under intensified regulatory scrutiny for marketing activities by them or their
agents that result in alleged unauthorized switching of customers from one long
distance service provider to another. The FCC and a number of state authorities
are seeking to introduce more stringent regulations or take other actions to
curtail the intentional or erroneous switching of customers, which could
include, among other things, the imposition of fines, penalties and possible
operating restrictions on entities which engage or have engaged in unauthorized
switching activities. In addition, the Telecommunications Act requires the FCC
to prescribe regulations imposing procedures for verifying the switching of
customers and additional remedies on behalf of carriers for unauthorized
switching of their customers. The effect, if any, of the adoption of any such
proposed regulations or other actions on the long distance industry and the
manner of doing business therein, cannot be anticipated. Statutes and
regulations which are or may become applicable to the Company as it expands
could require the Company to alter methods of operations, at costs which could
be substantial, or otherwise limit the types of services offered by the Company.

NEW MEDIA BUSINESS

The Company formed WinStar New Media based on its belief that the ability to
deliver entertainment and information content to consumers will play an
increasingly important role in

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consumers' choice of a telecommunications provider. The Company actively seeks
opportunities to acquire the rights or means to market and distribute
information and entertainment content and services that are marketable to
traditional markets and which also can enhance the marketability of the
Company's telecommunications services. The Company believes that in the future,
it will be able to bundle content that it controls with various
telecommunications services its offers to provide higher-margin products and
services.

In December 1994, the Company consummated the acquisition of Non Fiction
Films, Inc. ("NFF"), a producer of documentary programming. NFF's productions to
date include ten hours of programming for the Arts and Entertainment Network's
award winning Biography(R) series and "Divine MagicTM: The World of the
Supernatural," a ten-part series that traces ancient beliefs, miracles and
mysticism from their early beginnings.

In April 1996, NFF acquired an 80% equity interest in Fox/Lorber, an
independent distributor of films, entertainment series and documentaries.
Fox/Lorber distributes its content to television and home video markets
domestically and abroad. Its home video division emphasizes the distribution of
foreign and art films and has a home video library of over 100 titles. Its
television division emphasizes the distribution of educational and entertainment
program series, sports-related programs and documentaries to broadcast and cable
stations abroad and in the United States and Canada. Under the terms of an
agreement between NFF and the holder of the remaining 20% equity interest in
Fox/Lorber, NFF has the right to require such holder to sell, and such holder
has the right to require NFF to purchase, the remaining 20% equity interest
based upon certain criteria.

In April 1996, WinStar New Media acquired a 65% equity interest in TWL.
Under the agreement, WinStar New Media has the right to require the stockholders
of TWL who own the remaining 35% equity interest in TWL to sell, and such
stockholders have the right to require WinStar New Media to purchase, the
remaining 35 percent equity interest based upon certain criteria. TWL operates
the SportsFan. SportsFan is a multimedia sports programming and production
company which provides live sports programming to more than 200 sports and talk
format radio stations across the United States, up to 24 hours a day, including
to stations in 90 of the top 100 United States markets. SportsFan owns and
operates The Pete Rose Show and the Bob Golic Show, among others, and also has
developing interests in television and on-line distribution channels.

The industry in which the Company's new media subsidiary competes consists
of a very large number of entities producing, owning or controlling news,
sports, entertainment, educational and informational content and services,
including telecommunications companies, television broadcast companies, sports
franchises, film and television studios, record companies, newspaper and
magazine publishing companies, universities and on-line computer services.
Competition is intense for timely and highly marketable or usable information
and entertainment content. Almost all of the entities with which the Company's
new media subsidiary competes have significantly greater presence in the various
media markets and greater resources than the Company, including existing content
libraries, financial resources, personnel and existing distribution channels.
There can be no assurance that the Company will be able to successfully compete
in the emerging new media industry.

CONSUMER PRODUCTS

The Company's consumer products business is operated through its subsidiary,
WinStar Global Products. WinStar Global Products designs, markets and
distributes personal care products, including hair brushes and certain hair
accessories, and bath products, including gels, lotions, bath oils and home
fragrance products including potpourri and candles.

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MARKETING AND DISTRIBUTION

WinStar Global Products' customers are primarily large retailers, including
mass merchandisers, discount stores, department stores, national and regional
drug store chains and other regional chains. WinStar Global Products' customers
sell through more than 20,000 individual retail outlets. Its current customer
list includes the following national and regional chain stores: Walmart, Revco
Drug Stores, CVS, Mervyn's, Target, Ames, Marshalls, Eckerd Drug, Family Dollar
Stores, Sally Beauty Supply, Fay Drug, Arbor Drug and American Drug Stores.

A significant portion of WinStar Global Products' sales is made by its
in-house sales force. The remainder of WinStar Global Products' sales typically
are made by independent sales representatives who receive a commission from
WinStar Global Products on all orders generated by them. Independent sales
representatives generally carry the product lines of several noncompeting
manufacturers and distributors, many of whom are much larger than WinStar Global
Products.

SOURCING

WinStar Global Products currently utilizes a combination of domestic and
foreign suppliers and contract manufacturers and internal assembling for its
consumer product lines. WinStar Global Products generally purchases its hair
brushes and combs from foreign manufacturers, and packages these products in its
Fairfield, New Jersey facility. WinStar Global Products purchases components for
its bath and body product line from both foreign and domestic sources, and
assembles and packages products in its Fairfield, New Jersey facility. WinStar
Global Products does not have any binding agreements with any of its
manufacturers or suppliers. Therefore, any of such entities can terminate their
relationship with WinStar Global Products at any time. WinStar Global Products
does not believe that the termination of any such relationship or relationships
would have a material adverse impact on its operations since management believes
it would have alternative sources for its products and components at comparable
prices. There can be no assurance of this, however, or that, in the event that
WinStar Global Products were to experience difficulties with its present
manufacturers, suppliers and subassemblers, it would not experience a temporary
delay in obtaining the products or components it needs elsewhere.

COMPETITION

The consumer products industry is subject to changes in styles and consumer
tastes. An unanticipated change in consumer preferences inconsistent with
WinStar Global Products' merchandise lines could have a serious and adverse
effect upon its operations. WinStar Global Products' product lines are subject
to intense competition with numerous manufacturers and distributors of hair,
beauty and bath products. Mass merchandisers, drug store chains, and other mass
volume retailers typically utilize freestanding pegboard fixtures or pegboard
wall fixtures, as well as in-line shelving and end-cap displays, to display
their products. Competition for shelf and wall space for product placement is
intense, as many companies seek to have their products strategically placed
within the store. Competition also exists with respect to product name
recognition and pricing, since retailers and consumers often choose products on
the basis of name brand, cost and value. Many of WinStar Global Products'
competitors have greater product and name recognition than it does, as well as
much larger and more sophisticated sales forces, product development, marketing
and advertising programs and facilities. WinStar Global Products generally
competes by attempting to offer quality, service and products to its customers
at reasonable prices.

EMPLOYEES

As of May 31, 1996 the Company had approximately 390 full-time and 130
part-time employees. The Company is not a party to any collective bargaining
agreements and never has experienced a strike or work stoppage. The Company
considers its relations with its employees to be good.

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PROPERTIES

The Company's corporate headquarters are located at 230 Park Avenue, Suite
3126, New York, New York 10169. These headquarters are situated in approximately
11,500 square feet of space which the Company subleases for an average rent of
approximately $304,000 per annum under a sublease which expires in April 2000.
The Company has executed a lease for additional space of approximately 6,000
square feet at 230 Park Avenue for a rent of $188,176 per annum, which lease
becomes effective June 1, 1996 and expires in April 2000. The Company maintains
leases on other properties used in the operations of its subsidiaries. The
Company believes that its insurance coverage on its properties is adequate and
that the Company, and each of its subsidiaries, as the case may be, is in
compliance with the related leases.

LEGAL PROCEEDINGS

In January 1995, the Company's directors, certain other persons and the
Company (as a nominal defendant) were named in one or more of four actions
brought by various stockholders of the Company in the Court of Chancery of the
State of Delaware in and for New Castle County. These actions subsequently were
consolidated into a single lawsuit. The complaint alleges that certain
transactions including (i) the payment of consideration to certain directors and
others in connection with the Company's acquisition of WinStar Gateway and (ii)
the payment of compensation (including the granting of options and the issuance
of warrants) to certain directors and others involved self dealing, waste of
corporate assets, or otherwise were unfair to the Company and, in each case,
were in violation of the fiduciary obligations of the directors to the Company.
The Company believes that the allegations set forth in the complaints are based
on misstatements of fact and misunderstandings of relevant facts, and further
believes that there are meritorious defenses to all of the allegations. In order
to halt the expense, inconvenience and distraction of continued litigation
regarding this action, the Company recently entered into a settlement agreement
with the plaintiffs pursuant to which the Company has agreed to amend its bylaws
to formalize certain corporate governance changes and to pay certain legal fees
of plaintiffs' counsel. The final settlement agreement is subject to approval of
the Delaware Chancery Court, which has scheduled a settlement hearing for August
5, 1996.

In April 1996, an action was commenced against WinStar Gateway in the
Circuit Court of Jefferson County, Alabama (Civil Action No. CV9602367). The
plaintiffs, James Schaffer and Linda Kelly, on behalf of themselves and other
Alabama residents similarly situated, allege that their long distance service
was switched to WinStar Gateway and away from their previous providers without
their consent and through misleading practices. The plaintiffs seek monetary
relief, the exact amount of which cannot be determined. WinStar Gateway has
removed the action to federal court in Alabama and also has moved to have the
complaint dismissed. In the event the action is not disposed of by motion, the
Company intends to resolve the action as expeditiously and economically as
possible, which may include the diligent defense of the action or settlement.
The Company believes that it has meritorious defenses to the allegations raised
in the action. In the event WinStar Gateway is not successful in the defense of
the action, or if WinStar Gateway elects to settle the action, the Company
believes that any judgment against WinStar Gateway, or settlement entered into
by it, will not have a material adverse effect on the Company, its financial
condition or its results of operations.

WinStar Gateway occasionally receives inquiries from state authorities
arising with respect to consumer complaints concerning the provision of
telecommunications services, including allegations of unauthorized switching of
long distance carriers and misleading marketing. The Company believes such
inquiries are common in the long distance industry and addresses such inquiries
in the ordinary course of business. WinStar Gateway recently has experienced an
increased level of consumer and regulatory complaints, a substantial majority of
which arose from the activities of several independent marketing companies
involving contest programs and the use of executed LOAs to switch long distance
carriers. The inquiries primarily arose from allegations of unauthorized or
misleading switching of long distance

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carriers. In order to eliminate further complaints from these programs, on May
10, 1996, WinStar Gateway adopted a policy of mandatory independent verification
for 100% of LOAs received from these programs and, effective as of June 10,
1996, no longer accepts LOAs from these programs. WinStar Gateway also has
initiated discussions with the FCC and a number of state regulatory authorities
with respect to the resolution of any issues arising from the terminated
programs. The Company does not believe that resolution of these issues will have
a material adverse effect on the Company, its financial condition or its results
of operations.

In June 1996, the Company, as plaintiff, commenced an action for declaratory
judgment against Nelson Thibodeaux, a former officer of WinStar Gateway, in the
Federal District Court for the Southern District of New York. The Company
decided to commence this action after Mr. Thibodeaux notified the Company of his
belief that he was entitled to the issuance of certain shares of Common Stock
(or payment of the cash value thereof) having an aggregate market value in
excess of $27 million under the terms of stock options granted to him during his
employment with WinStar Gateway. Specifically, Mr. Thibodeaux has based his
beliefs on standard anti-dilution language contained in his stock option
agreements which was designed and intended to adjust the number of shares
purchasable thereunder in the event of a merger or capital restructuring of the
Company. As the Company has never been the subject of a merger or capital
restructuring, Mr. Thibodeaux was immediately notified of the Company's belief
that his claim was without merit in law or fact. To expedite resolution of these
issues, the Company currently is seeking declaratory judgment that it has no
obligation to Mr. Thibodeaux. Further, because the Company believes that any and
all claims that may be advanced by Mr. Thibodeaux with regard to the foregoing
issue would be frivolous, the Company has notified Mr. Thibodeaux and his
counsel of its intention to seek sanctions and such other remedies as may be
available against Mr. Thibodeaux and his counsel in the event that Mr.
Thibodeaux and his counsel seek to assert any defense to the Company's action
for declaratory judgment or otherwise proceed with respect to the issue.

CORPORATE INFORMATION

The Company was incorporated under the laws of the State of Delaware in
September 1990 and its principal offices are located at 230 Park Avenue, New
York, New York 10169. The Company's phone number is (212) 687-7577. The Company
is a holding company and provides its products and services through its
wholly-owned subsidiaries WinStar Wireless (incorporated in Delaware in February
1994), WinStar Wireless Fiber Corp. ("Wireless Fiber Corp.") (incorporated in
Delaware in March 1995), WinStar Telecom (incorporated in Delaware in February
1996), WinStar Gateway (incorporated in Delaware in May 1992), WinStar New Media
(incorporated in Delaware in March 1994), NFF (incorporated in Delaware in July
1994) and WinStar Global Products (incorporated in Delaware in February 1987).

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MANAGEMENT

The following table sets forth certain information with respect to the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE
--- ------------------------------------------
<S> <C> <C>
William J. Rouhana, Jr.(1)(2)(3)(4)........... 44 Chairman of the Board of Directors and
Chief Executive Officer
Nathan Kantor(5).............................. 53 President, Chief Operating Officer and
Director
Steven G. Chrust(6)........................... 46 Vice Chairman of the Board of Directors
Fredric E. von Stange(6)...................... 41 Executive Vice President, Chief Financial
Officer and Director
Bert Wasserman(2)(5).......................... 62 Director
William J. vanden Heuvel(1)(3)(4)............. 65 Director
William Harvey(3)(6).......................... 53 Director
Steven B. Magyar(1)(2)(3)(4).................. 46 Director
Timothy R. Graham............................. 46 Executive Vice President and Secretary
</TABLE>

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

(1) Term expires at annual meeting of stockholders in 1997

(2) Member of Audit Committee

(3) Member of Compensation Committee

(4) Member of Nominating Committee

(5) Term expires at annual meeting of stockholders in 1996

(6) Term expires at annual meeting of stockholders in 1998

Mr. Rouhana has been a director of the Company since its inception, its
Chairman of the Board since February 1991, and its Chief Executive Officer since
May 1994. Mr. Rouhana was President and Chief Executive Officer of WinStar
Companies, Inc. ("WinStar Companies") from 1983 until November 1995. Through
WinStar Companies, he served, from August 1987 to February 1989, as Vice
Chairman of the Board and Chief Operating Officer of Management Company
Entertainment Group, Inc., a diversified distributor of entertainment products
and, thereafter, as its Vice Chairman of the Board until May 1990. Since August
1992, Mr. Rouhana has been a director of TII Industries, Inc. ("TII
Industries"), a telecommunications equipment manufacturing company. From May
1991 through September 1994, he was director of Lancit Media Productions, Ltd.,
a creator of children's television programming. Mr. Rouhana was in private legal
practice from 1977 to 1984, specializing in the financing of entities involved
in the development of entertainment products and information services. Mr.
Rouhana is Vice Chairman of the Board of Governors of the United Nations
Association and is a member of certain other associations, including Business
Executives for National Security. He is a Phi Beta Kappa graduate of Colby
College, a Thomas J. Watson Fellow (1972-1973) and a graduate of Georgetown
University School of Law. Mr. Rouhana is the brother-in-law of Fredric E. von
Stange.

Mr. Kantor has been a director of the Company since October 1994 and
President and Chief Operating Officer of the Company since September 1995. Since
its formation in November 1990, Mr. Kantor had been the President of ITC Group,
Inc. ("ITC"), a company which specializes in the development of emerging
competitive telecommunications companies. Mr. Kantor, through ITC, coordinated
all of the Company's telecommunications operations from June 1994 to September
1995 when he became President and Chief Operating Officer of the Company, at
which time services provided by ITC to the Company ceased. Mr. Kantor also is
currently the Chairman of the Board and Chief Executive Officer of Image
Telecommunications Corp. ("Image Telecom"), a company involved

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in the development of information and video servers. From January 1985 to
December 1990, he was President of MCI Telecommunications Corporation (Northeast
Division). Mr. Kantor was a founder of MCI International, Inc., and served as
its President and Chief Operating Officer from its founding in July 1982 to
December 1984. Mr. Kantor is a graduate of Florida State University and the
United States Military Academy at West Point.

Mr. Chrust has been a director of the Company since January 1994 and has
been employed by the Company as its Vice Chairman of the Board since January
1995, in which capacity he is responsible for strategic planning, financing and
corporate development. He has been the President of SGC Advisory Services, Inc.
("SGC"), a discretionary money-management services firm specializing in the
telecommunications and technology sector, since he founded it in October 1992.
From August 1987 to September 1992, Mr. Chrust was a director of AMNEX, Inc., an
operator services long distance company, and served as its Chairman of the
Board, Chief Executive Officer and President between October 1990 and October
1992. From August 1985 through December 1989, Mr. Chrust was the Executive Vice
President of Executone Information Systems, Inc., a telecommunications equipment
company. Mr. Chrust was Director of Technology Research and a stockholder of
Sanford C. Bernstein & Co., Inc., a Wall Street investment firm, where he was
ranked in the top tier of telecommunications analysts for more than ten years
and as the first-ranked analyst in that sector for five consecutive years. He
was associated with Sanford C. Bernstein & Co., Inc., from 1970 through 1985.
From November 1993 until February 1996, Mr. Chrust was a director of American
Communications Services, Inc., a fiber optic-based competitive access provider.
Mr. Chrust is a graduate of Baruch College.

Mr. von Stange has been a director of the Company since its inception, its
Executive Vice President since January 1993, and its Chief Financial Officer
since March 1994. Mr. von Stange was Executive Vice President of WinStar
Companies, a merchant bank and a principal stockholder of the Company from 1983
until November 1995. From December 1988 to October 1989, Mr. von Stange was
Chairman of the Board of Yankee Bargain Stores, Inc. ("Yankee"), and resumed
that position from July 1991 to December 1991. Mr. von Stange was a director of
Yankee from December 1988 until December 1991. Mr. von Stange is a graduate of
The Wharton School, University of Pennsylvania. He is the brother-in-law of
William J. Rouhana, Jr.

Mr. Wasserman has been a director of the Company since June 1995. Mr.
Wasserman was Executive Vice President and Chief Financial Officer of Time
Warner from January 1990 to December 1994 and was also a director of Time Warner
from January 1990 to March 1993. Mr. Wasserman was a member of the Office of the
President and was also a director of Warner Communications, Inc. ("Warner
Communications"), from 1981 to 1990, when that company merged with Time Warner,
and had served Warner Communications in various capacities beginning in 1966.
Mr. Wasserman serves as a member of various boards, including: several
investment companies in the Dreyfus Family of Funds; Lillian Vernon Corp., a
catalog seller of home products; Mountasia Entertainment International, Inc., an
operator of family recreation centers; The New German Fund, a New York Stock
Exchange listed mutual fund operated by Deutsche Bank AG; and IDT Corp., a
provider of telecommunications services, including Internet access and long
distance services. Mr. Wasserman also served as a director on the Chemical Bank
National Advisory Board until Chemical Bank merged with Chase Manhattan Bank in
March 1996. He is a graduate of Baruch College and Brooklyn Law School.

Mr. vanden Heuvel has been a director of the Company since June 1995. Since
1984, Ambassador vanden Heuvel has served as Senior Advisor to Allen & Co., an
investment banking firm, as well as counsel to the law firm Stroock & Stroock &
Lavan. He served as a director of Time Warner from 1981 to 1993 and currently is
a director of Zemex Corp., a New York Stock Exchange listed company engaged in
the mining and exploitation of industrial minerals. Ambassador vanden Heuvel
also has been a member of the IRC Group, a Washington D.C. based consulting
group comprised of former United States ambassadors, since 1981. He has been
Chairman of the Board of Governors of the United Nations Association since 1993.
From 1979 to 1981, Ambassador vanden Heuvel served as United

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States Deputy Permanent Representative to the United Nations. From 1977 to 1979,
he served as United States Ambassador to the European Office of the United
Nations and various other international organizations. He was Special Assistant
to United States Attorney General Robert F. Kennedy from 1961 to 1964.
Ambassador vanden Heuvel is a graduate of Deep Springs College, Cornell
University and Cornell Law School.

Mr. Harvey has been a director of the Company since June 1994. In 1972 and
1991, respectively, Mr. Harvey founded New Electronic Media Science, Inc.
("NEMS"), and Next Century Media, Inc. ("Next Century"), marketing, media and
research consulting companies specializing in the marketing, entertainment and
interactive media industries. Mr. Harvey has served as Chief Executive Officer
and President of both NEMS and Next Century since their respective inceptions.
Through NEMS and Next Century, Mr. Harvey has worked with major television and
cable networks, several RBOCs, major film studios, IBM, AT&T, advertising
agencies, videotex companies and advertisers on the integration of advertising
into various new media. Mr. Harvey invented the marketing tool known as the Area
Dominant Influence ("ADI") for Arbitron and co-founded International Ratings
Services, Inc., the first company to provide United States movie studios,
including Warner Brothers, Columbia and CBS International, with ratings for
their television programs broadcast in foreign countries. Since 1979, Mr. Harvey
has also been the publisher of "The Marketing Pulse," a monthly advertising and
media trade newsletter.

Mr. Magyar has been a director of the Company since June 1993. Since May
1994, Mr. Magyar has been operating a private business he owns which specializes
in financial services for high net worth individuals and business owners. From
1989 to May 1994, Mr. Magyar was a regional vice president of CIGNA and during
the preceding fifteen years held various sales and sales management positions
with CIGNA. Mr. Magyar has served on CIGNA's strategic business development
committee and has been a guest lecturer at New York University. Mr. Magyar also
is a Certified Life Underwriter and Chartered Financial Consultant with the
American College of Insurance. Mr. Magyar is a member of the General Agents and
Managers Association, the National Association of Underwriters and the American
Society of CLU and ChFC. Mr. Magyar is a graduate of Colby College.

Mr. Graham has served as Executive Vice President of the Company since
October 1994. From October 1990 through September 1994, Mr. Graham was engaged
in the private practice of law and served in various capacities with National
Capital Management Corporation, a company engaged through its subsidiaries in
various businesses, such as the ownership of real estate rental properties,
industrial manufacturing and insurance matters, including as Corporate Secretary
and as President of its primary real estate and insurance subsidiaries. During
that period, Mr. Graham also acted in various capacities for WinStar Services,
Inc. ("WinStar Services"), a wholly-owned subsidiary of WinStar Companies. Prior
to 1990, Mr. Graham was a partner in the law firm of Nixon, Hargrave, Devans &
Doyle, specializing in corporate finance, regulatory and business law. Mr.
Graham was a Securities Law Editor of Barrister Magazine, an American Bar
Association publication, from 1985 to 1986 and has authored a number of
publications, including "Public Offerings in the United States by Foreign
Companies" and "Financing of Foreign Companies through United States Securities
Markets." Mr. Graham is a director of TII Industries and National Capital
Management Corporation. Mr. Graham also is a member of the Board of Advisors of
the Instructional Television Station of the Archdiocese of New York. Mr. Graham
is a graduate of Fordham Law School and the Georgetown University School of
Foreign Service.

The Board of Directors of the Company is divided into three classes, each of
which generally serves for a term of three years, with only one class of
directors being elected in each year. The term of office of the first class of
directors (Class I), currently consisting of Steven G. Chrust, Fredric E. von
Stange and William Harvey, will expire in 1998, the term of office of the second
class of directors (Class II), currently consisting of Bert W. Wasserman and
Nathan Kantor, will expire in 1999, and the term of office of the third class of
directors (Class III), currently consisting of William J. Rouhana, Jr., William

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J. vanden Heuvel and Steven B. Magyar, will expire in 1997. In each case, each
director will hold office until the next annual meeting of stockholders at which
his class of directors is to be elected, or until his successor is duly
qualified and appointed.

The responsibilities of the Audit Committee, which currently is composed of
William J. Rouhana, Jr., Bert Wasserman and Steven B. Magyar, include, in
addition to such other duties as the Board may specify, (i) recommending to the
Board the appointment of independent accountants; (ii) reviewing the timing,
scope and results of the independent accountant's audit examination and the
related fees; (iii) reviewing periodic comments and recommendations by the
Company's independent accountants and the Company's response thereto;
(iv) reviewing the scope and adequacy of internal accounting controls and
internal auditing activities; and (v) making recommendations to the Board with
respect to significant changes in accounting policies and procedures.

The responsibilities of the Compensation Committee, which currently is
composed of William J. Rouhana, Jr., Steven B. Magyar, William Harvey and
William J. vanden Heuvel, include, in addition to such other duties as the Board
may specify, (i) reviewing and recommending to the Board the salaries,
compensation and benefits of the executive officers and key employees of the
Company, (ii) reviewing any related party transactions on an ongoing basis for
potential conflicts of interest and (iii) administering the Company's stock
option plans.

The responsibilities of the Nominating Committee, which currently is
composed of William J. Rouhana, Jr., William J. vanden Heuvel and Steven B.
Magyar, include, in addition to such other duties as the Board may specify,
considering and recommending to the Board nominees for directors.

DIRECTOR COMPENSATION

The Company pays each outside director $500 for attendance at each meeting
of a committee of which such director is a member and $1,000 for attendance at
each meeting of the Board of Directors. On January 13th of each year, persons
who are directors at such date are granted options to purchase 10,000 shares of
Common Stock at a per-share exercise price equal to the last sale price of a
share of Common Stock on the last trading day prior to such grant.

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PRINCIPAL STOCKHOLDERS

The table and accompanying footnotes set forth certain information as of
June 30, 1996 with respect to the stock ownership of (i) those persons or groups
who beneficially own more than 5% of the Company's Common Stock, (ii) each
director of the Company, (iii) the Company's Chief Executive Officer and each of
the Company's next four most highly compensated executive officers and (iv) all
directors and executive officers of the Company as a group (based upon
information furnished by such persons). Shares of Common Stock issuable upon
exercise of options which currently are exercisable or exercisable within 60
days of the date of this Prospectus are considered outstanding for the purpose
of calculating the percentage of Common Stock owned by such person, but not for
the purpose of calculating the percentage of Common Stock owned by any other
person. Unless otherwise indicated, the address for the persons listed below is
c/o WinStar Communications, Inc., 230 Park Avenue, Suite 3126, New York, New
York 10169.

<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ----------------------------------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
William J. Rouhana, Jr..................................... 2,064,669(1) 7.3% 6.4%
Nathan Kantor.............................................. 765,600(2) 2.7 2.4
Steven G. Chrust........................................... 419,000(3) 1.5 1.3
Fredric E. von Stange...................................... 830,833(4) 3.0 2.6
Steven B. Magyar........................................... 50,706(5) * *
Two Pine Point
Lloyd Harbor, New York 11742
William J. vanden Heuvel................................... 60,000(6) * *
812 Park Avenue
New York, New York 10021
Bert W. Wasserman.......................................... 60,000(7) * *
126 East 56th Street
New York, New York 10022
William Harvey............................................. 20,000(8) * *
c/o Next Century Media, Inc.
11 North Chestnut Street
New Paltz, New York 12561
Timothy R. Graham.......................................... 385,852(9) 1.4 1.2
Keystone Investment Management Company..................... 2,166,800 7.9 6.9
200 Berkeley Street
Boston, Massachusetts 02116
All Directors and Executive Officers as a Group (9
persons).................................................. 4,656,660(10) 15.9 14.0
</TABLE>

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

* Less than 1%.

(1) Includes 350,000 shares of Common Stock issuable upon exercise of certain
options. Does not include 150,000 shares of Common Stock issuable upon
exercise of other options which become exercisable in March 1997. Mr.
Rouhana has agreed that, during the term of Nathan Kantor's employment
agreement with the Company, he would vote all shares of Common Stock he
controls in favor of Mr. Kantor as a director of the Company.

(2) Includes (i) 447,396 shares of Common Stock issuable upon exercise of
certain options. Does not include 350,000 shares of Common Stock issuable
upon exercise of other options which become exercisable in three equal
annual installments commencing in September 1996 and 78,000 shares of
Common Stock issuable upon exercise of options which become exercisable in
December 1996.

(footnotes continued on following page)

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<PAGE>
(3) Includes (i) 12,000 shares of Common Stock owned by the pension plan for
SGC Advisory Services, Inc., a telecommunications consulting firm of which
Mr. Chrust is President and owner, and (ii) 325,000 shares issuable upon
exercise of certain options owned by Mr. Chrust or members of his family.
Does not include 480,000 shares issuable upon exercise of other options
which become exercisable in four equal annual installments commencing in
January 1997.

(4) Includes 200,000 shares of Common Stock issuable upon exercise of certain
options. Does not include 75,000 shares of Common Stock issuable upon
exercise of other options which become exercisable in March 1997.

(5) Includes (i) 1,000 shares of Common Stock owned by Mr. Magyar's spouse,
over which Mr. Magyar disclaims beneficial ownership, and (ii) 30,000
shares of Common Stock issuable upon exercise of certain options.

(6) Includes 50,000 shares of Common Stock issuable upon exercise of certain
options. Does not include 20,000 shares of Common Stock issuable upon
exercise of other options which become exercisable in June 1997. Also
includes 500 shares owned by Mr. vanden Heuvel's spouse, as to which he
disclaims beneficial ownership.

(7) Includes 50,000 shares of Common Stock issuable upon exercise of certain
options. Does not include 20,000 shares of Common Stock issuable upon
exercise of other options which become exercisable in June 1997.

(8) Represents 20,000 shares of Common Stock issuable upon exercise of options.

(9) Includes 210,000 shares of Common Stock issuable upon exercise of certain
options. Does not include 50,000 shares of Common Stock issuable upon
exercise of other options which become exercisable in October 1997.

(10) Includes shares referred to as being included in notes (1) through (9).
Excludes shares referred to in such notes as being excluded.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

DESCRIPTION OF THE NEW NOTES

Concurrently with the Stock Offering, the Company is offering an aggregate
of $100 million of New Senior Notes and an aggregate of $100 million of New
Senior Subordinated Notes in the Debt Offering. Until July 2001, interest on the
New Notes will accrue but not be payable in cash. From and after July 2001, the
New Notes will pay interest in cash.

The New Senior Notes will be unsecured, unsubordinated obligations of the
Company, will rank pari passu in right of payment with all existing and future
unsecured, unsubordinated indebtedness (including the Old Senior Notes) and will
be senior in right of payment to all existing and future subordinated
indebtedness of the Company, including the New Senior Subordinated Notes and the
Old Convertible Notes. The New Senior Subordinated Notes will be unsecured,
senior subordinated obligations of the Company, will rank pari passu in right of
payment with the Old Convertible Notes and will be subordinated in right of
payment to the Company's obligations under the New Senior Notes, the Old Senior
Notes and its guarantees under the Equipment Lease Financing, the Everest Notes,
the Century Credit Facility and the CIT Credit Facility (each as defined below).

The New Notes may be redeemed at any time on or after July 2001, at the
option of the Company, in whole or in part, at premiums declining to 100% of the
sum of their principal amount plus interest accrued prior to July 2001, plus
accrued interest after July 2001.

The New Note Indentures contain certain covenants which, among other things,
restrict the ability of the Company and certain of its subsidiaries to: incur
additional indebtedness; create liens; engage in sale-leaseback transactions;
pay dividends or make distributions in respect of their capital stock; make
investments or make certain other restricted payments; sell assets; issue or
sell stock of such subsidiaries; enter into transactions with stockholders or
affiliates; acquire assets or businesses not constituting "telecommunications
assets" (as defined in such Indentures); or consolidate, merge or sell all or
substantially all of their assets. The covenants contained in the New Note
Indentures are subject to exceptions and the Company's new media and consumer
products subsidiary will not be subject to the covenants contained therein,
although the Company's ability to invest in such subsidiaries is limited.

DESCRIPTION OF OTHER INDEBTEDNESS

In October 1995, the Company raised net proceeds of $214.5 million from the
1995 Debt Placement. There will not be any accrual of cash interest on the Old
Notes prior to October 15, 2000 or payment of cash interest on the Old Notes
prior to April 15, 2001. From and after October 15, 2000, the Old Notes will
bear interest at the rate of 14% per annum, payable semi-annually in cash
commencing April 15, 2001. The Old Notes mature on October 15, 2005. At
maturity, the Old Senior Notes will have an aggregate principal amount of $294.2
million and the Old Convertible Notes will have an aggregate principal amount of
$147.1 million.

The Old Convertible Notes are convertible, at the option of the holder, into
Common Stock ("Conversion Shares") at any time on or after October 23, 1996. The
number of Conversion Shares issuable by the Company upon conversion is equal to
the accreted value of the Old Convertible Notes being converted (on the date of
conversion) divided by $20.625, subject to adjustment in certain events
("Conversion Price"). In addition, if the closing sale price of the Common Stock
on the Nasdaq National Market during the twelve-month periods from October 15,
1995 through October 15, 1999 has exceeded certain closing sale prices during
such periods ranging from $37.50 to $44.00 for at least 30 consecutive trading
days ("Market Criteria") and a registration statement with respect to the
Conversion Shares is effective and available, all of the Old Convertible Notes
automatically will be converted into Conversion Shares at the close of business
on the last day of the 30-day period; provided, however, that if the Market
Criteria is satisfied prior to October 15, 1996, the conversion will not occur
until

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<PAGE>
October 23, 1996 and will occur only if the closing sale price of the Common
Stock is at least $37.50 on such date. The Company is obligated to cause to be
declared effective a registration statement registering the issuance or resale
of the Conversion Shares on or prior to October 23, 1996. If such registration
statement is not declared effective on or prior to October 23, 1996, the
Conversion Price will be decreased to $20.06.

The Old Note Indentures contain certain covenants which are substantially
similar to the covenants contained in the New Note Indentures.

In September 1995, WinStar Wireless entered into an equipment lease
financing (the "Equipment Lease Financing") with ML Investors Services, Inc.
("ML") pursuant to which ML has agreed to make up to $10.0 million of equipment
financing available to WinStar Wireless until September 1996. As of the date of
this Prospectus, ML has made available only $7.0 million under the Equipment
Lease Financing. The balance of $3.0 million may be drawn by WinStar Wireless
only if ML agrees to make such funds available, which it is not obligated to do.
As of March 31, 1996, WinStar Wireless leased equipment having a value of
approximately $7.0 million under the Equipment Lease Financing. Pursuant to a
master lease agreement between WinStar Wireless and ML (the "Lease") entered
into in connection with the Equipment Lease Financing. WinStar Wireless may
lease transceivers and related network equipment from ML or its assignee for
payments at the rate of 2.2753% per month of the equipment value (a return of
approximately 13% per annum to the lessor) and are non-cancelable for sixty
months. After twelve months, Winstar Wireless may purchase the equipment at
scheduled rates which decline over the term of the Lease and which provide for a
return of approximately 15% per annum to the lessor. WinStar Wireless'
obligations under the Lease are guaranteed by the Company. As additional
consideration for providing the Equipment Lease Financing, the Company has
agreed to issue ML five-year options to purchase shares of Common Stock at the
rate of one share of Common Stock for each $100 of the Equipment Lease Financing
amount made available at a price equal to the market price on the day prior to
the date of grant. Pursuant to such agreement, the Company has issued to ML
options to purchase 55,000 shares of Common Stock at an exercise price of
$17.125 per share and options to purchase 15,000 shares of Common Stock at an
exercise price of $18.0625 per share.

In May 1995, the Company, WinStar Wireless and Everest Capital Fund L.P.
("Fund"), Everest Capital International Ltd. ("Capital" and, along with Fund the
"Purchasers") and Everest Capital Limited, agent for the Purchasers ("Agent"),
entered into a note and warrant purchase agreement, pursuant to which WinStar
Wireless issued $7.5 million of notes (the "Everest Notes"), which are
convertible into shares of the Company's Common Stock, and warrants to purchase
up to 550,000 shares of Common Stock. The Everest Notes bear interest at the
rate of 7% per annum, payable in cash on a semi-annual basis, and are payable in
May 2000. The Everest Notes are secured by a lien on all of the assets of
WinStar Wireless and Wireless Fiber Corp. and are guaranteed by the Company and
Wireless Fiber Corp. To secure its guaranty, the Company pledged all of the
outstanding shares of common stock of WinStar Wireless and Wireless Fiber Corp.
Under the Everest Notes, WinStar Wireless may not pay any dividends to the
Company and may not issue any capital stock. The Purchasers agreed to
subordinate their liens to any liens granted by the Company to secure up to
$30.0 million of equipment-related financing prior to February 29, 1996 and up
to an additional $20.0 million of such financing prior to February 28, 1997. Any
liens securing indebtedness above such amounts, and any liens granted after
February 28, 1997, require the consent of the Purchasers.

At any time, the unpaid principal amount of and accrued interest on the
Everest Notes are convertible, at the option of the Purchasers, into shares of
Common Stock at a conversion price of $7.00 per share. On December 28, 1995, the
Purchasers exercised their option to convert $3.75 million of principal and
approximately $25,000 of interest due under the Everest Notes into 539,255
shares of Common Stock. After December 15, 1996, WinStar Wireless may force
conversion of the Everest Notes if the last sale price of the Common Stock is
above 175% of the then conversion price (currently $12.25) for 20 consecutive
trading days. The warrants issued to the Purchasers were divided into three

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<PAGE>
classes: EC-A Warrants, EC-B Warrants and EC-C Warrants. The 300,000 aggregate
amount of EC-A Warrants are exercisable through May 24, 2000 at an exercise
price of $12.00 per share. The 100,000 EC-B Warrants are exercisable through May
24, 2000 at an exercise price of $13.00 per share. The 150,000 EC-C Warrants
were exercised in July 1995 by Everest at an exercise price of $.01 per share.

In November 1994, WinStar Gateway entered into a Loan and Security Agreement
("CIT Loan Agreement") with The CIT Group/Credit Finance, Inc. ("The CIT
Group"), pursuant to which The CIT Group agreed to make a $5.0 million (less
$100,000 until WinStar Gateway has maintained three consecutive calendar months
with positive net income from operations) revolving credit facility (the "CIT
Credit Facility") available to WinStar Gateway until November 1996. Pursuant to
the terms of the CIT Loan Agreement, borrowings are limited to 90% of most
eligible accounts receivable, with availability of certain types of accounts
receivable limited to 80% and 50% (less appropriate reserves as determined by
The CIT Group). In addition, WinStar Gateway is prohibited from paying dividends
to the Company. The Company also is party to a keepwell agreement requiring the
Company to make a monthly contribution to WinStar Gateway in an amount equal to
WinStar Gateway's net income (loss), plus its depreciation and amortization,
minus its capital expenditures, if such amount is less than zero for a
particular month. Borrowings bear interest at a rate of 3.0% in excess of the
prime commercial lending rate of The Chase Manhattan Bank, N.A. ("Chase
Manhattan") and are secured by a lien on all of WinStar Gateway's assets as well
as a guarantee from the Company as to the first $2.2 million in borrowings. The
CIT Loan Agreement also provides for an annual fee of $50,000 as well as certain
underutilization fees. As additional consideration for providing the CIT Credit
Facility, the Company issued to The CIT Group warrants to purchase 50,000 shares
of Common Stock until November 3, 1998 at an exercise price of $6.975 per share,
which warrants have been exercised.

In August 1994, WinStar Global Products entered into a Loan and Security
Agreement ("Century Loan Agreement") with Century Business Credit Corporation
("Century"), pursuant to which Century agreed to make a $6.0 million revolving
credit facility (the "Century Credit Facility") available, at its sole
discretion, to WinStar Global Products until September 1996. Pursuant to the
terms of the Century Loan Agreement, borrowings are limited to 80% of eligible
accounts receivable and 45% of eligible inventory. In addition, WinStar Global
Products is prohibited from paying dividends to the Company and may not make
capital expenditures in any fiscal year in an amount in excess of $150,000.
Borrowings bear interest at a rate 3.5% in excess of the prime commercial
lending rate of Chase Manhattan and are secured by a lien on all of WinStar
Global Products' assets as well as a guarantee from the Company as to the first
$3.0 million in borrowings. The Century Loan Agreement also provides for annual
facility fees as well as an overadvance facility of $1.5 million (included in
the $6.0 million of aggregate availability) which bears interest at a rate of
3.5% in excess of the prime commercial lending rate. In May 1995, as additional
consideration for providing the Century Credit Facility, the Company issued to
Century an option to purchase 25,000 shares of Common Stock at an exercise price
of $5.75 per share until May 30, 1998, which options have been exercised.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The authorized capital stock of the Company includes 75,000,000 shares of
Common Stock, $.01 par value. The holders of Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of
stockholders. Although the Company has no present intention of paying any
dividends, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation or dissolution of the Company,
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preference of preferred shares.

Holders of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities. There are no redemption or
sinking fund provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable.

The Company's Certificate of Incorporation, as amended, provides for a Board
of Directors divided into three classes, each of which will generally serve for
a term of three years, with only one class of directors being elected in each
year; provides that directors may be removed with or without cause and only by
at least a majority of the capital stock of the Company entitled to vote
thereon; and further requires an affirmative vote of the holders of at least
two-thirds of the capital stock of the Company entitled to vote thereon to
alter, amend or repeal the provisions relating to the classification of, and the
removal of members from, the Board of Directors. Nominations for the Board of
Directors may be made by the Company Board or by any stockholder entitled to
vote for the election of directors. A stockholder entitled to vote for the
election of directors at a meeting may nominate a person or persons for election
as director only if written notice of such stockholder's intent to make such
nomination is given to the Company's Secretary not later than sixty days in
advance of such meeting. The Company's Certificate of Incorporation and By-Laws
do not provide for cumulative voting rights which means that holders of more
than one-half of the outstanding voting rights, voting for the election of
directors, can elect all of the directors to be elected, if they so choose and,
in such event, the holders of the remaining shares will not be able to elect any
of the Company's directors. A special meeting of stockholders of the Company may
be called by the request of the holders of at least 10% of the outstanding
capital stock of the Company entitled to vote generally in all matters.

The registrar and the transfer agent for the Common Stock of the Company is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004.

PREFERRED STOCK

The authorized capital stock of the Company includes 15,000,000 shares of
"blank check" preferred stock, which may be issued from time to time in one or
more series upon authorization by the Company's Board of Directors. There
currently are no shares of preferred stock outstanding. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each series of preferred stock. The issuance of
preferred stock (and the ability of the Board of Directors to do so without
stockholder approval), while providing flexibility in connection with possible
acquisitions and other corporate purposes could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock.

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STATUTORY PROVISIONS AFFECTING STOCKHOLDERS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless prior to
the date the stockholder became an interested stockholder the board approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder or unless one of two exceptions
to the prohibitions are satisfied: (i) upon consummation of the transaction that
resulted in such person becoming an interested stockholder, the interested
stockholder owned at least 85% of the Company's voting stock outstanding at the
time the transaction commenced (excluding, for purposes of determining the
number of shares outstanding, shares owned by certain directors or certain
employee stock plans) or (ii) on or after the date the stockholder became an
interested stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote (and not by written consent) of
at least two-thirds of the outstanding voting stock, excluding the stock owned
by the interested stockholder. A "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation), together with affiliates and associates, owns (or, as an affiliate
or associate, within three years prior, did own) 15% or more of the
corporation's outstanding voting stock. It is possible that these provisions may
have the effect of delaying, deterring or preventing a change in control of the
Company.

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SHARES ELIGIBLE FOR FUTURE SALE

After giving effect to the Stock Offering (assuming no exercise of the U.S.
Underwriters' over-allotment option), the Company will have 31,748,005 shares of
Common Stock outstanding. In addition, as of May 31, 1996, there were
outstanding options and warrants with respect to an aggregate of 8,145,699
shares of Common Stock and 4,699,211 shares of Common Stock were issuable upon
conversion of the Old Convertible Notes (assuming the Old Convertible Notes are
converted on October 23, 1996, the first date on which conversion may occur) and
certain other convertible debt. See "Risk Factors -- Effect of Outstanding
Options, Warrants and Other Convertible Securities." Although a significant
number of the outstanding shares of Common Stock are "restricted securities," as
that term is defined in Rule 144 under the Securities Act ("Restricted Shares"),
and may not be sold unless such sale is registered under the Securities Act or
is made pursuant to an exemption from the registration under the Securities Act,
including the exemption provided by Rule 144, substantially all of such
Restricted Shares have been registered for resale under the Securities Act or
are currently, or will soon become, available for sale pursuant to Rule 144.
In addition, the Company may issue a substantial number of shares of Common
Stock in connection with the Milliwave Acquisition and Locate Acquisition, all
of which would be subject to registration rights requiring the Company to
register them for resale.

Sales or the expectation of sales of a substantial number of shares of Common
Stock in the public market could adversely affect the prevailing market price of
the Common Stock. The Company's directors and executive officers and certain
other officers of the Company and the Company's subsidiaries have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, they will not sell any of their shares of Common Stock,
except in certain limited circumstances, for a period of 120 days after the date
of this Prospectus. See "Underwriters."

In general, under Rule 144 as currently in effect, if two years have elapsed
since the later of the date of acquisition of Restricted Shares from the Company
or any "affiliate" of the Company, as that term is defined under the Securities
Act, the holder is entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of 1% of the
then-outstanding shares of Common Stock or the average weekly trading volume of
shares of Common Stock on all exchanges and reported through the automated
quotation system of a registered securities association during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Commission. Sales under Rule 144 are also subject to certain restrictions on the
manner of sales, notice requirements and the availability of current public
information about the Company. If three years have elapsed since the date of
acquisition of Restricted Shares from the Company or from any "affiliate" of the
Company, and the holder thereof is deemed not to have been an affiliate of the
Company at any time during the 90 days preceding a sale, such person would be
entitled to sell such Common Stock in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.

The Commission recently has proposed amendments to Rule 144 and Rule 144(k)
that would permit resales of restricted securities under Rule 144 after a
one-year, rather than a two-year, holding period, subject to compliance with the
other provisions of Rule 144, and would permit unlimited resales of restricted
securities by non-affiliates under Rule 144(k) after a two-year, rather than a
three-year, holding period. Adoption of such amendments could result in resales
of restricted securities sooner than would be the case under Rule 144 and Rule
144(k) as currently in effect. The Company is unable to determine when or if
such proposed amendments will be adopted.

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS

GENERAL

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a Non-U.S. Holder. For this purpose, the term "Non-U.S. Holder" is
defined as any person who is, for United States federal income tax purposes, a
foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust, as such terms are defined in the Internal Revenue Code
of 1986, as amended (the "Code"). This discussion does not address all aspects
of United States federal income and estate taxes and does not deal with foreign,
state and local consequences that may be relevant to such Non-U.S. Holders in
light of their personal circumstances, or to certain types of Non-U.S. Holders
which may be subject to special treatment under United States federal income tax
laws (for example, insurance companies, tax-exempt organizations, financial
institutions or broker-dealers). Furthermore, this discussion is based on
provisions of the Code, existing and proposed regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly with retroactive effect. Each
prospective purchaser of Common Stock is advised to consult a tax advisor with
respect to current and possible future tax consequences of acquiring, holding
and disposing of Common Stock as well as any tax consequences that may arise
under the laws of any state, local or foreign taxing jurisdiction. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF HOLDING
AND DISPOSING OF SHARES OF COMMON STOCK.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a nonresident alien) by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar year
(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to U.S. federal tax as if they were U.S. citizens.

DIVIDENDS

The Company does not anticipate paying cash dividends on its capital stock
in the foreseeable future. See "Dividend Policy." In the event, however, that
dividends are paid on shares of Common Stock, dividends paid to a Non-U.S.
Holder of Common Stock will be subject to withholding of United States federal
income tax at a 30% rate or such lower rate as may be provided by an income tax
treaty between the United States and the country of which the Non-U.S. Holder is
a tax resident, unless (i) the dividends are effectively connected with the
conduct of a trade or business of the Non-U.S. Holder within the United States
and the Non-U.S. Holder provides the payor with proper documentation or (ii) if
a tax treaty applies, the dividends are attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder. In order to claim the benefit
of an applicable tax treaty rate, a Non-U.S. Holder may have to file with the
Company or its dividend paying agent an exemption or reduced treaty rate
certificate or letter in accordance with the terms of such treaty. Dividends
that are effectively connected with the conduct of a trade or business within
the United States or, if a tax treaty applies, are attributable to such a United
States permanent establishment, are subject to United States federal income tax
on a net income basis (that is, after allowance for applicable deductions) at
applicable graduated individual or corporate rates. Any such effectively
connected dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.

Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed

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<PAGE>
above (unless the payor has knowledge to the contrary) and, under the current
interpretation of United States Treasury regulations, for purpose of determining
the applicability of a tax treaty rate. However, under proposed United States
Treasury regulations, in the case of dividends paid after December 31, 1997
(December 31, 1999 in the case of dividends paid to accounts in existence on or
before the date that is 60 days after the proposed United States Treasury
regulations are published as final regulations), a Non-U.S. Holder generally
would be subject to United States withholding tax at a 31% rate under the backup
withholding rules described below, rather than at a 30% rate or a reduced rate
under an income tax treaty, unless certain certification procedures (or, in the
case of payments made outside the United States with respect to an offshore
account, certain documentary evidence procedures) are complied with, directly or
through an intermediary. Certain certification and disclosure requirements must
be complied with in order to be exempt from withholding under the effectively
connected income exemption.

A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS"), provided that the required information is
furnished to the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S.Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) (a) the gain is effectively connected with a trade or
business conducted by the Non-U.S. Holder within the United States or (b) if a
tax treaty applies, the gain is attributable to a United States permanent
establishment maintained by the Non-U.S. Holder, (ii) in the case of a Non-U.S.
Holder who is an individual and holds the Common Stock as a capital asset, such
holder is present in the United States for 183 or more days in the taxable year
of the sale or other disposition and certain other conditions are met, (iii) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to United States expatriates, or (iv) the Company is or has been a
"U.S. real property holding corporation" for United States federal income tax
purposes at any time within the shorter of the five-year period preceding such
disposition or the period such Non-U.S. Holder held the Common Stock. If the
Company were, or to become, a U.S. real property holding corporation, gains
realized upon a disposition of Common Stock by a Non-U.S. Holder which did not
directly or indirectly own more than 5% of the Common Stock during the shorter
of the periods described above generally would not be subject to United States
federal income tax so long as the Common Stock is "regularly traded" on an
established securities market. The Company believes that it has not been, is not
currently, and does not anticipate becoming, a "U.S. real property holding
corporation" for United States federal income tax purposes.

If an individual Non-U.S. Holder falls under clause (i) above, such
individual generally will be taxed on the net gain derived from a sale under
regular graduated United States federal income tax rates. If an individual
Non-U.S. Holder falls under clause (ii) above, such individual generally will be
subject to a flat 30% tax on the gain derived from a sale, which may be offset
by certain United States capital losses (notwithstanding the fact that such
individual is not considered a resident of the United States). Thus, individual
Non-U.S. Holders who have spent (or expect to spend) 183 days or more in the
United States in the taxable year in which they contemplate a sale of Common
Stock are urged to consult their tax advisors as to the tax consequences of such
sale.

If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it generally will be taxed on its net gain under regular graduated United
States federal income tax rates and, in addition, will be subject to the branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable income tax
treaty.

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<PAGE>
FEDERAL ESTATE TAX

Common Stock owned or treated as owned by an individual who is neither a
United States citizen nor a United States resident (as defined for United States
federal estate tax purposes) at the time of death will be included in the
individual's gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise and, therefore, may be
subject to United States federal estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under United States Treasury regulations, the Company must report annually
to the IRS and to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends. These information
reporting requirements apply even if withholding was not required because the
dividends were effectively connected with a trade or business in the United
States of the Non-U.S. Holder or withholding was reduced or eliminated by an
applicable income tax treaty. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-U.S. Holder is a resident under the provisions of
an applicable income tax treaty or agreement.

United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to (i) dividends paid to Non-U.S. Holders that are
subject to the 30% withholding discussed above (or that are not so subject
because a tax treaty applies that reduces or eliminates such 30% withholding) or
(ii) under current law, dividends paid to a Non-U.S. Holder at an address
outside of the United States. However, under proposed United States Treasury
regulations, in the case of dividends paid after December 31, 1997 (December 31,
1999 in the case of dividends paid to accounts in existence on or before the
date that is 60 days after the proposed United States Treasury regulations are
published as final regulations), a Non-U.S. Holder generally would be subject to
backup withholding at a 31% rate, unless certain certification procedures (or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures) are complied with,
directly or through an intermediary.

Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Common Stock
to beneficial owners that are not "exempt recipients" and that fail to provide
in the manner required certain identifying information.

In general, backup withholding and information reporting will not apply to a
payment of the gross proceeds of a sale of Common Stock effected at a foreign
office of a broker. If, however, such broker is, for United States federal
income tax purposes, a U.S. person, a controlled foreign corporation or a
foreign person, 50% or more of whose gross income for certain periods is derived
from activities that are effectively connected with the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (i) such broker
has documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or (ii) the beneficial owner
otherwise establishes an exemption. Temporary United States Treasury regulations
provide that the Treasury is considering whether backup withholding should be
required in such circumstances. Under proposed United States Treasury
regulations not currently in effect, backup withholding will not apply to such
payments absent actual knowledge that the payee is a United States person. The
IRS recently proposed regulations addressing certain withholding, certification
and information reporting rules (some of which have been mentioned above) which
could affect treatment of the payment of the proceeds discussed above. Non-U.S.
Holders should consult their tax advisors regarding the application of these
rules to their particular situations, the availability of an exemption
therefrom, the procedure for obtaining such an exemption, if available, and

84
<PAGE>
the possible application of the proposed United States Treasury regulations
addressing the withholding and the information reporting rules.

Payment by a United States office of a broker of the proceeds of a sale of
Common Stock is subject to both backup withholding and information reporting
unless the beneficial owner certifies under penalties of perjury that it is a
Non-U.S. Holder, or otherwise establishes an exemption. Backup withholding is
not an additional tax. Any amounts withheld under the backup withholding rules
will be allowed as a refund or a credit against such holder's U.S. federal
income tax liability provided the required information is furnished to the IRS.

85
<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below, for whom Morgan Stanley & Co. Incorporated and CS First Boston
Corporation are acting as U.S. Representatives, have severally agreed to
purchase, and the Company has agreed to sell to them, and the International
Underwriters named below, for whom Morgan Stanley & Co. International Limited
and CS First Boston Limited are acting as International Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of the Common Stock set forth opposite the names of
such Underwriters below:

NUMBER
NAME OF SHARES
- ----------------------------------------------------------------- ---------

U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................
CS First Boston Corporation....................................

---------
]Subtotal................................................ 3,200,000
---------

International Underwriters:
Morgan Stanley & Co. International Limited.....................
CS First Boston Limited........................................

---------
Subtotal................................................. 800,000
---------
Total............................................. 4,000,000
---------
---------

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (a)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and (b)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside
the United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement Between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions, (a) it is not purchasing any International Shares (as defined below)
for the account of any United States or Canadian Person and (b) it has not
offered or sold, and will not offer or sell, directly or indirectly, any
International Shares or distribute any prospectus relating to the International
Shares in the United States or Canada or to a United States or Canadian Person.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada, or any
corporation, pension,

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<PAGE>
profit-sharing or other trust or other entity organized under the laws of the
United States or Canada or of any political subdivision thereof (other than a
branch located outside the United States or Canada of any United States or
Canadian Person) and includes any United States or Canadian branch of a person
who is otherwise not a United States or Canadian Person. All shares of Common
Stock to be purchased by the U.S. Underwriters and the International
Underwriters under the Underwriting Agreement are referred to herein as the "U.S
Shares" and the "International Shares," respectively.

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of shares of Common Stock to be purchased pursuant to the Underwriting
Agreement as may be mutually agreed. The per share price of any shares sold
shall be the Price to Public set forth on the cover page hereof, in United
States dollars, less an amount not greater than the per share amount of the
concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares of Common Stock, such dealer represents and agrees
that it has not offered or sold, and will not offer of sell, directly or
indirectly, any of such shares of Common Stock in Canada or to, or for the
benefit of, any resident of Canada in contravention of the securities laws of
Canada or any province or territory thereof and that any offer of shares of
Common Stock in Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province of Canada in which such offer
is made, and that such dealer will deliver to any other dealer to whom it sells
any of such shares of Common Stock a notice to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (a) it has not offered
or sold and will not offer or sell any shares of Common Stock to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding managing or disposing of investments (as principal or agent)
for the purpose of their business or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (b) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 and the Regulations with
respect to anything done by it in relation to the shares of Common Stock in,
from or otherwise involving the United Kingdom; and (c) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed on.

The Underwriters propose to offer part of the Common Stock directly to the
public at the Price to Public set forth on the cover page hereof and part to
certain dealers at a price which represents a concession not in excess of
$. per share under the Price to Public. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $. per share to
other Underwriters or to certain dealers. After the initial offering of the
Common Stock, the offering price and other selling terms may from time to time
be varied by the Representatives.

Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 600,000 additional shares of Common Stock at the
Price to Public set forth on the cover page hereof, less underwriting discounts
and commissions. To the extent such option is exercised, each U.S. Underwriter
will become

87
<PAGE>
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such U.S.
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock offered by the U.S. Underwriters hereby.

The Company's directors and executive officers and certain other officers of
the Company and its subsidiaries have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, they
will not, for a period of 120 days after the date of this Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, other than (a) shares of Common Stock acquired
in the open market after the date of this Prospectus, (b) any shares of Common
Stock transferred to immediate family members or trusts established for their
benefit if the transferee agrees in writing to be similarly bound and (c)
involuntary transfers as a result of existing contractual obligations.

The Company has agreed that, without the prior consent of Morgan Stanley &
Co. Incorporated on behalf of the Underwriters, it will not, for a period of 120
days after the date of this Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in any part, any of
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, other than (a)
the Common Stock offered hereby, (b) any shares of Common Stock issued by the
Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing, (c) the grant of any options to employees which do not
become exercisable until at least 120 days after the date of this Prospectus,
and (d) up to an aggregate of 1,587,500 shares (adjusted for any stock split) of
Common Stock (or securities convertible into such shares) in connection with
acquisitions, joint ventures, strategic alliances and other similar
transactions, if the holders thereof agree not to sell any such shares until 120
days after the date of this Prospectus.

In connection with the offering of Common Stock hereby, the Underwriters and
selling group members may engage in passive market making transactions in the
Company's Common Stock on the Nasdaq National Market immediately prior to the
commencement of the sale of shares in this offering, in accordance with Rule
10b-6A under the Exchange Act. Passive market making consists of displaying bids
on the Nasdaq National Market limited by the bid prices of market makers not
connected with this offering and purchases limited by such prices and effected
in response to order flow. Net purchases by a passive market maker on each day
are limited in amount to 30% of the passive market maker's average daily trading
volume in the Common Stock during the period of the two full consecutive
calendar months prior to the filing with the Commission of the Registration
Statement of which this Prospectus is a part and must be discontinued when such
limit is reached. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed 5% of the total number of shares of Common
Stock offered by them.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

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<PAGE>
LEGAL MATTERS

The legality of the securities offered hereby and certain tax matters are
being passed upon for the Company by Graubard Mollen & Miller, New York, New
York. Certain partners and employees of Graubard Mollen & Miller own shares of
Common Stock. Certain legal matters will be passed upon for the Underwriters by
Shearman & Sterling, New York, New York.

EXPERTS

The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1995 and February 28, 1995, and for the ten
months ended December 31, 1995 and for the two years in the period ended
February 28, 1995, the financial statements of Avant-Garde Telecommunications,
Inc. as of February 28, 1995 and for the two years in the period ended February
28, 1995 and the financial statements of Milliwave Limited Partnership as of
December 31, 1995 and for the period April 25, 1995 (inception) through December
3, 1995 included in this Prospectus, have been audited by Grant Thornton LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports thereon, and are included herein in reliance upon the
authority of such firm as experts in giving such reports.

The financial statements of the Microwave Division of Local Area
Telecommunications, Inc. as of December 31, 1995 and 1994, and for each of the
years then ended, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon (which contains an explanatory paragraph with respect to the
Division's ability to continue as a going concern as discussed in Note 1 to the
financial statements) appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, is required to file reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of the reports, proxy statements and
other information can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. In addition, all
reports filed by the Company via the Commission's Electronic Data Gathering and
Retrieval System (EDGAR) can be obtained from the Commission's Internet web site
located at www.sec.gov. The Common Stock of the Company is traded on the Nasdaq
National Market (Symbol: WCII), and such reports, proxy statements and other
information concerning the Company also can be inspected at the offices of the
Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the securities offered by this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement. For
further information about the Company and the securities offered hereby,
reference is made to the Registration Statement and to the financial statements,
exhibits and schedules filed therewith. The statements contained in this
Prospectus about the contents of any contract or other document referred to are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of each such document may be obtained from the Commission at
its principal office in Washington, D.C. upon payment of the charges prescribed
by the Commission.

89
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES:
Report of Independent Auditors..................................................... F-2
Consolidated Balance Sheets as of March 31, 1996 (unaudited), December 31, 1995 and
February 28, 1995................................................................. F-3
Consolidated Statements of Operations, Three Months Ended March 31, 1996 and 1995
(unaudited), Ten Months Ended December 31, 1995 and 1994 (unaudited as to 1994),
and Years Ended February 28, 1995 and 1994,...................................... F-4
Consolidated Statements of Stockholders' Equity, Ten Months Ended December 31,
1995, and Years Ended February 28, 1995 and 1994................................. F-5
Consolidated Statements of Cash Flows, Three Months Ended March 31, 1996 and 1995
(unaudited), Ten Months Ended December 31, 1995, and Years Ended February 28,
1995 and 1994.................................................................... F-8
Notes to Consolidated Financial Statements......................................... F-9

THE MICROWAVE DIVISION OF LOCAL AREA TELECOMMUNICATIONS, INC.:
Report of Independent Auditors..................................................... F-34
Balance Sheets as of March 31, 1996 (unaudited), December 31, 1995 and 1994........ F-35
Statements of Operations, Three Months Ended March 31, 1996 and 1995 (unaudited)
and Years Ended December 31, 1995 and 1994........................................ F-36
Statements of Divisional (Deficit) Surplus, Three Months Ended March 31, 1996
(unaudited) and Years Ended December 31, 1995 and 1994............................ F-37
Statements of Cash Flows, Three Months Ended March 31, 1996 and 1995 (unaudited)
and Years Ended December 31, 1995 and 1994........................................ F-38
Notes to Financial Statements...................................................... F-39

AVANT-GARDE TELECOMMUNICATIONS, INC.:
Report of Independent Auditors..................................................... F-43
Balance Sheet as of February 28, 1995.............................................. F-44
Statements of Operations, Period March 1, 1995 to July 17, 1995 (unaudited) and
Years Ended February 28, 1995 and 1994........................................... F-45
Statements of Cash Flows, Period March 1, 1995 to July 17, 1995 (unaudited) and
Years Ended February 28, 1995 and 1994........................................... F-46
Notes to Financial Statements...................................................... F-47

MILLIWAVE LIMITED PARTNERSHIP:
Report of Independent Auditors..................................................... F-50
Balance Sheets as of March 31, 1996 (unaudited) and December 31, 1995.............. F-51
Statement of Changes in Partners' Capital, April 25, 1995 (inception) through
December 31, 1995................................................................. F-52
Notes to Financial Statements...................................................... F-53

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:..................... F-56
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996...... F-57
Unaudited Pro Forma Condensed Consolidated Statement of Operations, Three Months
Ended March 31, 1996.............................................................. F-58
Unaudited Pro Forma Condensed Consolidated Statement of Operations, Ten Months
Ended December 31, 1995........................................................... F-59
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements........... F-60
</TABLE>

F-1

<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
WINSTAR COMMUNICATIONS, INC.

We have audited the accompanying consolidated balance sheets of WinStar
Communications, Inc. and Subsidiaries as of December 31, 1995 and February 28,
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the ten months ended December 31, 1995 and the years
ended February 28, 1995 and 1994. 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 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 consolidated financial position of WinStar
Communications, Inc. and Subsidiaries as of December 31, 1995 and February 28,
1995, and the consolidated results of their operations and their consolidated
cash flows for the ten months ended December 31, 1995 and the years ended
February 28, 1995 and 1994, in conformity with generally accepted accounting
principles.

GRANT THORNTON LLP

New York, New York
March 8, 1996

F-2
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, FEBRUARY 28,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents....................... $176,130,544 $138,105,824 $ 3,156,354
Short term investments.......................... 27,372,707 73,594,849 --
------------ ------------ ------------
Total cash, cash equivalents and short term
investments....................................... 203,503,251 211,700,673 3,156,354
Investments in marketable equity securities..... 6,158,250 6,515,250 --
Accounts receivable, net of allowance for
doubtful accounts of $878,000, $800,000 and
$824,000...................................... 9,746,373 8,683,860 4,035,007
Notes receivable................................ 374,908 199,635 706,329
Inventories..................................... 7,895,211 7,391,686 4,232,927
Prepaid expenses and other current assets....... 2,819,192 3,568,448 983,380
------------ ------------ ------------
Total current assets........................ 230,497,185 238,059,552 13,113,997
Property and equipment, net....................... 18,089,226 15,898,005 2,663,068
Notes receivable.................................. 4,029,280 3,488,948 2,289,002
Investments and advances.......................... 322,733 322,733 7,866,927
Licenses, net..................................... 12,443,408 12,556,281 --
Intangible assets, net............................ 3,071,629 3,033,505 3,213,785
Deferred financing costs.......................... 10,515,964 10,525,301 --
Other assets...................................... 1,503,366 1,478,530 362,673
------------ ------------ ------------
Total assets................................ $280,472,791 $285,362,855 $ 29,509,452
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans payable................................... $ 8,876,316 $ 8,287,461 $ --
Accounts payable and accrued expenses........... 11,169,254 13,513,369 5,732,039
Capitalized lease obligations................... 1,437,852 1,355,255 332,239
------------ ------------ ------------
Total current liabilities................... 21,483,422 23,156,085 6,064,278
Senior notes payable.............................. 159,194,067 153,971,508 --
Convertible notes payable......................... 79,597,033 76,985,754 --
Other notes payable............................... 3,436,314 3,416,288 4,410,753
Capitalized lease obligations..................... 5,809,745 6,081,299 754,525
------------ ------------ ------------
Total liabilities........................... 269,520,581 263,610,934 11,229,556
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock................................. 688,900 688,900 732,691
Common stock, $.01 par value; authorized
75,000,000 shares, issued 29,740,306,
29,707,792, and 20,146,934 shares; outstanding
27,233,543, 27,201,029, and 20,146,934
shares........................................ 297,404 297,079 201,470
Additional paid-in capital...................... 103,989,159 103,836,510 42,583,679
Accumulated deficit............................. (52,009,885) (41,311,075) (25,237,944)
------------ ------------ ------------
52,965,578 63,511,414 18,279,896
Less: Treasury stock.............................. (39,677,743) (39,677,743) --
Deferred compensation........................ (996,875) (1,100,000) --
Unrealized loss on investments in marketable
equity securities........................... (1,338,750) (981,750) --
------------ ------------ ------------
Total stockholders' equity.................. 10,952,210 21,751,921 18,279,896
------------ ------------ ------------
Total liabilities and stockholders'
equity..................................... $280,472,791 $285,362,855 $ 29,509,452
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See Notes to Consolidated Financial Statements

F-3
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE TEN MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31, FEBRUARY 28,
-------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
1996 1995 1995 1994 1995 1994
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................ $ 14,509,042 $ 6,157,949 $ 29,771,472 $22,018,106 $25,564,760 $15,625,019
Cost of sales........................ 8,573,271 4,598,541 19,546,351 14,761,290 17,702,570 10,712,090
------------ ----------- ------------ ----------- ----------- -----------
Gross profit........................ 5,935,771 1,559,408 10,225,121 7,256,816 7,862,190 4,912,929
Selling, general and administrative
expenses............................ 10,191,903 3,769,658 19,266,466 9,974,189 12,688,859 6,887,913
Restructuring expense................ -- -- -- 607,609 607,609 --
Depreciation......................... 361,510 58,994 770,284 137,055 177,158 92,537
------------ ----------- ------------ ----------- ----------- -----------
Operating loss....................... (4,617,642) (2,269,244) (9,811,629) (3,462,037) (5,611,436) (2,067,521)
Other (income) expense
Interest expense.................... 8,814,547 183,999 7,630,079 504,857 637,028 744,371
Interest income..................... (3,056,656) (125,107) (2,889,813) (297,051) (384,572) (109,320)
Amortization of intangibles......... 194,594 62,734 439,888 181,972 225,176 239,993
Equity in loss of Avant-Garde....... -- 536,595 865,676 766,543 1,108,962 --
Loss on discontinuation of product
lines.............................. -- -- -- -- -- 292,376
Performance stock option expense.... -- -- -- -- -- 5,316,667
Other............................... -- -- -- -- 32,165 (161,986)
------------ ----------- ------------ ----------- ----------- -----------
Net loss before extraordinary item
and income taxes.................... (10,570,127) (2,927,465) (15,857,459) (4,618,358) (7,230,195) (8,389,622)
Extraordinary item:
Gain from extinguishment of debt.... -- -- -- -- -- 194,154
------------ ----------- ------------ ----------- ----------- -----------
Net loss before income taxes......... (10,570,127) (2,927,465) (15,857,459) (4,618,358) (7,230,195) (8,195,468)
Income taxes......................... 128,683 -- -- -- -- --
------------ ----------- ------------ ----------- ----------- -----------
Net loss............................ $(10,698,810) $(2,927,465) $(15,857,459) $(4,618,358) $(7,230,195) $(8,195,468)
------------ ----------- ------------ ----------- ----------- -----------
------------ ----------- ------------ ----------- ----------- -----------
Net loss per share:
Before extraordinary item........... $ (0.39) $ (0.15) $ (0.70) $ (0.28) $ (0.42) $ (1.09)
Extraordinary item.................. -- -- -- -- -- 0.03
------------ ----------- ------------ ----------- ----------- -----------
Net loss............................ $ (0.39) $ (0.15) $ (0.70) $ (0.28) $ (0.42) $ (1.06)
------------ ----------- ------------ ----------- ----------- -----------
------------ ----------- ------------ ----------- ----------- -----------
Weighted average shares
outstanding........................ 27,214,281 19,934,710 22,769,770 16,609,305 17,122,318 7,718,988
------------ ----------- ------------ ----------- ----------- -----------
------------ ----------- ------------ ----------- ----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE>

WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE TEN MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TREASURY
STOCK
PREFERRED STOCK ----------
------------------------------------------
COMMON
B E COMMON STOCK ADDITIONAL STOCK
------------------ --------------------- --------------------- PAID-IN ACCUMULATED ----------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT SHARES
------- -------- -------- ---------- ---------- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
February 28,
1995........ 732.69 $732,691 0.00 $ -- 20,146,934 $201,470 $ 42,583,679 $(25,237,944) --
Issuances of
common stock
for cash
(exercise of
options and
otherwise).. 3,172,427 31,724 5,552,392
Issuance of
common stock
for the
acquisition
of
Avant-Garde... 1,275,000 12,750 5,087,250
Issuance of
Preferred
Stock E..... 932,040 6,000,008 (360,000)
Warrants and
common stock
equivalents
issued in
connection
with
convertible
notes....... 804,500
Common stock
equivalents
issued in
connection
with lease
financing..... 176,550
Conversion of
preferred
stock........ (146.16) (146,160) (932,040) (6,000,008) 682,952 6,830 6,139,338
Preferred
stock
dividends.... 102.37 102,369 (215,672)
Issuance of
restricted
stock to
employee.... 150,000 1,500 1,236,000
Private
Exchange
transaction.. 3,741,224 37,412 39,640,331 (2,506,763)
Issuance of
common stock
in connection
with the
converson of
convertible
notes
payable...... 539,255 5,393 3,408,928
Amortization
of deferred
compensation
expense......
Change in
market value
of
investments
in marketable
equity
securities...
Other......... (432,458)
Net loss...... (15,857,459)
------- -------- -------- ---------- ---------- -------- ------------ ------------ ----------
Balances at
December 31,
1995......... 688.90 $688,900 0.00 $ -- 29,707,792 $297,079 $103,836,510 $(41,311,075) (2,506,763)
------- -------- -------- ---------- ---------- -------- ------------ ------------ ----------
------- -------- -------- ---------- ---------- -------- ------------ ------------ ----------

UNREALIZED LOSS
PREFERRED STOCK B ON INVESTMENTS TOTAL
--------------------- DEFERRED IN MARKETABLE STOCKHOLDERS'
AMOUNT SHARES AMOUNT COMPENSATION EQUITY SECURITIES EQUITY
------------ ------- ----------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at
February 28,
1995........ $ -- -- $ -- $ -- $-- $ 18,279,896
Issuances of
common stock
for cash
(exercise of
options and
otherwise)... 5,584,116
Issuance of
common stock
for the
acquisition
of
Avant-Garde.. 5,100,000
Issuance of
Preferred
Stock E...... 5,640,008
Warrants and
common stock
equivalents
issued in
connection
with
convertible
notes........ 804,500
Common stock
equivalents
issued in
connection
with lease
financing.... 176,550
Conversion of
preferred
stock........ --
Preferred
stock
dividends.... (113,303)
Issuance of
restricted
stock to
employee..... (1,237,500) --
Private
Exchange
transaction.. (36,348,065) (688.90) (3,329,678) --
Issuance of
common stock
in connection
with the
converson of
convertible
notes
payable...... 3,414,321
Amortization
of deferred
compensation
expense...... 137,500 137,500
Change in
market value
of
investments
in marketable
equity
securities... (981,750) (981,750)
Other......... (432,458)
Net loss...... (15,857,459)
------------ ------- ----------- ------------ ------- -------------
Balances at
December 31,
1995......... $(36,348,065) (688.90) $(3,329,678) $ (1,100,000) $(981,750) $ 21,751,921
------------ ------- ----------- ------------ ------- -------------
------------ ------- ----------- ------------ ------- -------------
</TABLE>

See Notes to Consolidated Financial Statements

F-5

<PAGE>

WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------------------------------
B C D COMMON STOCK ADDITIONAL
--------------------- ------------------- -------------------- --------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
-------- ---------- ------- --------- -------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at February 28,
1994.................... 1,203.79 $1,203,791 173.00 $ 173,000 225,000 $ 900,000 9,842,670 $ 98,427 $20,289,677
Exercise of Series A and
Series B Warrants....... 3,291,417 32,914 10,657,038
Exercise of Series D and
Series E Warrants....... 2,814,142 28,141 2,081,137
Conversion of Preferred
Stock C................. (173.00) (173,000) 82,381 824 172,176
Conversion of Preferred
Stock B................. (533.00) (533,000) 177,665 1,777 531,223
Conversion of Preferred
Stock D................. (225,000) (900,000) 225,000 2,250 897,750
Issuances of common stock
for cash (exercise of
options and
otherwise).............. 3,685,087 36,852 7,767,569
Issuance of Prefered B
stock dividend.......... 61.90 61,900
Issuance of common stock
for the acquisition of
NFF, Inc................ 28,572 285 199,715
Other.................... (12,606)
Net loss.................
-------- ---------- ------- --------- -------- --------- ---------- -------- -----------
Balances at February 28,
1995.................... 732.69 $ 732,691 -- $ -- -- $ -- 20,146,934 $201,470 $42,583,679
-------- ---------- ------- --------- -------- --------- ---------- -------- -----------
-------- ---------- ------- --------- -------- --------- ---------- -------- -----------

TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ -------------
<S> <C> <C>
Balances at February 28,
1994.................... $(17,945,849) $ 4,719,046
Exercise of Series A and
Series B Warrants....... 10,689,952
Exercise of Series D and
Series E Warrants....... 2,109,278
Conversion of Preferred
Stock C................. --
Conversion of Preferred
Stock B................. --
Conversion of Preferred
Stock D................. --
Issuances of common stock
for cash (exercise of
options and
otherwise).............. 7,804,421
Issuance of Prefered B
stock dividend.......... (61,900) --
Issuance of common stock
for the acquisition of
NFF, Inc................ 200,000
Other.................... (12,606)
Net loss................. (7,230,195) (7,230,195)
------------ -------------
Balances at February 28,
1995.................... $(25,237,944) $ 18,279,896
------------ -------------
------------ -------------
</TABLE>

See Notes to Consolidated Financial Statements

F-6

<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED FEBRUARY 28, 1994
<TABLE>
<CAPTION>
PREFERRED STOCK
----------------------------------------------------------
B C D COMMON STOCK ADDITIONAL
--------------------- ---------------- ----------------- ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ---------- ------ -------- ------- -------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at February 28, 1993.... 1,135.66 $1,135,662 222.60 $222,600 0 $ -- 6,539,475 $65,394 $ 9,986,348
Issuances of common stock for
cash............................ 1,687,436 16,875 3,197,684
Issuance of common stock for
acquisition of WGN, Inc......... 1,271,351 12,714 1,457,286
Issuance of common stock for
acquisition of Inne
Dispensibles, Inc................ 39,506 395 99,605
Issuance of Preferred Stock D for
acquisition of Avant-Garde....... 225,000 900,000
Conversion of Preferred Stock
C............................... (50.00) (50,000) 23,810 238 49,762
Conversion of Series D
Warrants........................ 205,000 2,050 135,300
Issuance of common stock for
services rendered............... 63,406 634 48,096
Issuance of common stock to
retire debt..................... 50,000 500 56,531
Issuance of Preferred B stock
dividend........................ 68.13 68,129
Issuance of Preferred C stock
dividends....................... 10,789 108 19,272
Purchase and retirement of
treasury stock.................. (48,103) (481) (76,474)
Performance stock options........ 5,316,667
Net loss.........................
Adjustments...................... 0.40 400 (400)
--------- ---------- ------ -------- ------- -------- --------- ------- -----------
Balances at February 28, 1994.... 1,203.79 $1,203,791 173.00 $173,000 225,000 $900,000 9,842,670 $98,427 $20,289,677
--------- ---------- ------ -------- ------- -------- --------- ------- -----------
--------- ---------- ------ -------- ------- -------- --------- ------- -----------

TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ -------------
<S> <C> <C>
Balances at February 28, 1993.... $ (9,662,872) $ 1,747,132
Issuances of common stock for
cash............................ 3,214,559
Issuance of common stock for
acquisition of WGN, Inc......... 1,470,000
Issuance of common stock for
acquisition of Inne
Dispensibles, Inc................ 100,000
Issuance of Preferred Stock D for
acquisition of Avant-Garde....... 900,000
Conversion of Preferred Stock
C............................... --
Conversion of Series D
Warrants........................ 137,350
Issuance of common stock for
services rendered............... 48,730
Issuance of common stock to
retire debt..................... 57,031
Issuance of Preferred B stock
dividend........................ (68,129) --
Issuance of Preferred C stock
dividends....................... (19,380) --
Purchase and retirement of
treasury stock.................. (76,955)
Performance stock options........ 5,316,667
Net loss......................... (8,195,468) (8,195,468)
Adjustments...................... --
------------ -------------
Balances at February 28, 1994.... $(17,945,849) $ 4,719,046
------------ -------------
------------ -------------
</TABLE>

See Notes to Consolidated Financial Statements

F-7
<PAGE>
WINSTAR COMMUNICATIONS, INC, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED TEN MONTHS YEAR ENDED
MARCH 31, ENDED FEBRUARY 28,
-------------------------- DECEMBER 31, -------------------------
1996 1995 1995 1995 1994
------------ ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities, net of the
effects of the purchases of Avant-Garde in the ten
months ended December 31, 1995, and of WGN in the
year ended February 28, 1994
Net loss......................................... $(10,698,810) $(2,927,465) $(15,857,459) $(7,230,195) $(8,195,468)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 846,205 131,271 860,103 432,502 223,088
Amortization of licenses and intangibles...... 192,413 62,985 439,888 225,176 239,993
Provision for doubtful accounts............... 380,758 204,384 887,425 893,857 343,694
Equity in unconsolidated results of
Avant-Garde.................................. -- 520,560 865,676 1,108,962 --
Non cash interest expense..................... 7,853,864 -- 6,151,090 -- --
Extraordinary gain from extinguishment of
debt......................................... -- -- -- -- (194,154)
Performance stock option expense.............. -- -- -- -- 5,316,667
Non cash loss on discontinuation of product
lines........................................ -- -- -- -- 292,376
Other......................................... -- 32,952 177,735 78,374 (155,086)
(Increase) decrease in operating assets:
Accounts receivable........................ (1,443,271) 1,542,678 (5,526,618) (1,409,862) (1,438,263)
Inventories................................ (503,525) (1,116,507) (3,158,759) (1,729,395) (337,781)
Prepaid expenses and other current
assets.................................... 749,256 306,392 (2,478,501) (440,188) (249,496)
Other assets............................... (116,667) 4,552 (268,650) (90,637) (12,049)
(Decrease) increase in accounts payable and
accrued expenses............................. (2,146,939) 396,591 6,306,466 1,635,189 1,531,892
------------ ----------- ------------ ----------- -----------
Net cash used in operating activities............... (4,886,716) (841,607) (11,601,604) (6,526,217) (2,634,587)
------------ ----------- ------------ ----------- -----------
Cash flows from investing activities:
Investments in and advances to Avant-Garde....... -- (2,213,961) (5,703,608) (7,128,947) (632,000)
Acquisitions..................................... -- -- -- (678,566) 27,679
Decrease (increase) in short-term investments,
net............................................. 46,222,142 -- (73,593,849) -- --
Increase in other investments.................... -- -- (7,497,000) -- --
Collections of notes receivable.................. 34,331 180,000 1,003,859 360,000 600,000
Increase in notes receivable..................... (749,936) (806,158) (1,370,974) (2,234,636) --
Purchase of property and equipment, net.......... (2,576,983) (541,325) (8,607,794) (1,055,167) (227,787)
Cash proceeds from sale of skiwear brands........ -- -- -- -- 276,695
License acquisition costs........................ (118,729) -- (129,413) -- --
Other............................................ -- 294,736 (3,251) (50,140) --
------------ ----------- ------------ ----------- -----------
Net cash provided by (used in) investing
activities......................................... 42,810,825 (3,086,708) (95,902,030) (10,787,456) 44,587
------------ ----------- ------------ ----------- -----------
Cash flows from financing activities:
Proceeds from (repayment of) loans payable....... 588,855 (1,549,673) 3,849,233 1,695,447 (1,772,550)
Proceeds from notes payable...................... -- -- 221,946,330 -- 1,966,498
Repayment of notes payable....................... -- -- -- (431,793) (300,625)
Payment of dividends............................. -- -- (113,303) -- --
Debt financing costs............................. (303,744) -- (784,791) (329,483) --
Proceeds from equipment lease financing.......... -- -- 6,997,600 -- --
Proceeds of cash collateral...................... -- -- -- -- 100,000
Payment of capital lease obligations............. (308,572) (60,779) (700,828) (250,871) (115,249)
Net proceeds from equity transactions............ 124,072 2,533,832 11,258,863 19,067,386 2,800,739
------------ ----------- ------------ ----------- -----------
Net cash provided by financing activities........... 100,611 923,380 242,453,104 19,750,686 2,678,813
------------ ----------- ------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ 38,024,720 (3,004,935) 134,949,470 2,437,013 88,813
Cash and cash equivalents at beginning of period.... 138,105,824 5,287,188 3,156,354 719,341 630,528
------------ ----------- ------------ ----------- -----------
Cash and cash equivalents at end of period.......... 176,130,544 2,282,253 138,105,824 3,156,354 719,341
Short-term investments at end of period............. 27,372,707 -- 73,594,849 -- --
------------ ----------- ------------ ----------- -----------
Cash, cash equivalents, and short-term investments
at end of period................................... $203,503,251 $ 2,282,253 $211,700,673 $ 3,156,354 $ 719,341
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements

F-8
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 IS
UNAUDITED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION:

The consolidated financial statements include the accounts of WinStar
Communications, Inc. ("WCI") and its wholly owned subsidiaries, WinStar
Wireless, Inc. ("WWI"); WinStar Wireless Fiber Corp. ("WWFC"); WinStar Gateway
Network, Inc. (formerly Communications Gateway Network, Inc., "WGN"); WinStar
Global Products, Inc. (formerly Beauty Labs, Inc., "WGP"); WinStar New Media
Company, Inc. ("WNM"); and Non Fiction Films, Inc. ("NFF") (collectively
referred to as the "Company"). All material intercompany transactions and
accounts have been eliminated in consolidation.

NATURE OF BUSINESS:

The Company provides local and long distance telecommunications services in
the United States. The Company offers its Wireless FiberSM local
telecommunications services on a point-to-point basis in many major metropolitan
areas via its digital wireless capacity in the 38.6 to 40 gigahertz portion of
the radio spectrum, where it has licenses granted by the Federal Communications
Commission("FCC"). The Company's Wireless FiberSM services deliver high quality
voice and data transmissions which meet or exceed telephone industry standards
and provide transmission quality equivalent to that produced by fiber
optic-based facilities. The Company also offers resale- and facilities-based
long distance services and has authority in several states to provide local
switched telecommunications services. As regulatory and competitive conditions
permit, the Company intends to offer its customers integrated local and long
distance telecommunications services, thereby participating in both the $90
billion local exchange market and the $60 billion long distance market in the
United States. As a complement to its telecommunications operations, the Company
acquires rights to distribute and otherwise control certain information and
entertainment content and services. The Company also markets consumer products
nationwide through a subsidiary acquired prior to the Company's entry into the
telecommunications industry. The Company's telecommunications services are
subject to varying degrees of federal, state and local regulation.

FISCAL YEAR:

The Company changed its fiscal year end from February 28 to December 31,
effective January 1, 1996. Accordingly, these financial statements present a
transition period of the ten months ended December 31, 1995.

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of money market fund investments, short-term certificates of
deposit, and commercial paper. Exclusive of cash in banks, cash equivalents were
approximately $137,370,000 at December 31, 1995, and approximate fair value.

F-9
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
SHORT TERM INVESTMENTS:

Short term investments are widely diversified and principally consist of
certificates of deposit and money market deposits, U.S. government or government
agency securities, commercial paper rated "A-1/P-1" or higher, and municipal
securities rated "A" or higher with an original maturity of greater than three
months and less than six months. Short term investments are considered
held-to-maturity and are stated at amortized cost which approximates fair value.
As of December 31, 1995, cash, cash equivalents and short term investments
totaled $211,700,673.

INVENTORIES:

Inventories in the merchandising division are valued at the lower of cost or
market, principally using the first-in, first-out method.

Film inventories include direct and indirect production costs, which are
amortized to expense in the proportion that revenue recognized during the year
for each film bears to the estimated total revenue to be received from all
sources under the individual film forecast method. Management's estimate of
forecasted revenues exceeds the unamortized costs on an individual program
basis. Such forecasted revenue is subject to revision in future periods if
warranted by changing market conditions.

PROPERTY AND EQUIPMENT:

Property and equipment is stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
related assets.

INTANGIBLE ASSETS:

Intangible assets are being amortized by the straight-line method over their
estimated useful lives.

The Company's policy is to measure goodwill impairment by considering a
number of factors as of each balance sheet date including: (i) current operating
results of the applicable business, (ii) projected future operating results of
the applicable business, (iii) the occurrence of any significant regulatory
changes which may have an impact on the continuity of the business, and (iv) any
other material factors that affect the continuity of the applicable business.
The amortization period for goodwill is determined on a case-by-case basis for
each acquisition from which goodwill arises based on a review of the nature of
the business acquired as well as the factors cited above (Note 14).

INCOME TAXES:

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Pursuant to SFAS 109, deferred income taxes are recognized for temporary
differences between financial statement and income tax bases of assets and
liabilities and loss carryforwards and tax credit carryforwards for which income
tax benefits are expected to be realized in future years. A valuation allowance
is to be established to reduce deferred tax assets if it is more likely than not
that all, or some portion, of such deferred tax assets will not be realized. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

F-10
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
REVENUE RECOGNITION:

In the telecommunications division, sales are recorded upon placing of calls
or rendering of other related services. In the merchandising division, sales are
recorded upon shipment of merchandise and are presented in the accompanying
consolidated statement of operations net of merchandise returns. The Company
provides for future estimated returns of merchandise at the time of sale.
Revenues from film productions are recognized when a program is accepted by the
licensee and is available for broadcast.

NET LOSS PER COMMON SHARE:

Net loss per common share is calculated by dividing the net loss by the
weighted average number of shares of common stock outstanding. Stock options and
warrants have not been included in the calculation as their inclusion would be
antidilutive.

CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of trade receivables. Concentration of credit
risk with respect to these receivables is generally diversified due to the large
number of entities comprising the Company's customer base and their dispersion
across geographic areas. The Company routinely addresses the financial strength
of its customers and, as a consequence, believes that its receivable credit risk
exposure is limited.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of cash and cash equivalents, short term investments,
accounts and notes receivable, and accounts payable and accrued expenses
approximate fair value, principally because of the short maturity of these
items. Marketable equity securities are stated at quoted market value.

The carrying amounts of the loans payable to financial institutions issued
pursuant to the Company's subsidiaries' asset-based lending agreements
approximate fair value because the interest rates on these investments change
with market interest rates and the carrying amounts of the senior notes payable,
convertible notes payable and capitalized lease obligations approximate fair
value since the obligations were entered into principally in September and
October, 1995.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS:

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

UNAUDITED FINANCIAL STATEMENTS:

The unaudited consolidated balance sheet as of March 31, 1996 and the
unaudited consolidated statements of operations and statements of cash flows for
the three months ended March 31, 1996 and 1995 are condensed financial
statements in accordance with the rules and regulations of the Securities

F-11
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
and Exchange Commission. Accordingly, they omit certain information included in
complete financial statements and should be read in connection with the
information for the ten months ended December 31, 1995 and the years ended
February 28, 1995 and 1994. In the opinion of the Company, the accompanying
unaudited consolidated financial statements include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position as of March 31, 1996 and results of operations and the cash flows for
the three months ended March 31, 1996 and 1995.

NOTE 2--ACQUISITION OF AVANT-GARDE

Avant-Garde Telecommunications, Inc. ("Avant-Garde") was a privately held
company which held 30 millimeter wave radio licenses granted by the FCC in
September 1993. These licenses cover many of the largest metropolitan areas in
the United States, as well as other markets, and allow the licensee to deliver
voice, data and video via the 38 GHz band. Avant-Garde was required to begin the
provision of services authorized under such licenses by March 15, 1995, and on
that date, Avant-Garde filed a certificate of completion for each license with
the FCC.

Through July 17, 1995, the Company owned 49% of Avant-Garde, which it
acquired for $4,900,000, and accounted for its investment in Avant-Garde under
the equity method. For the periods from March 1, 1995 to July 17, 1995, and the
year ended February 28, 1995, Avant-Garde had net losses of approximately
$1,778,000 and $2,302,000 respectively.

In April 1995, the Company entered into a merger agreement with the holders
of the remaining 51% of Avant-Garde, subject to FCC approval. In June 1995, the
FCC granted Avant-Garde permission to transfer control of its licenses to the
Company. On July 17, 1995, pursuant to the terms of the merger agreement, the
Company exchanged 1,275,000 restricted shares of its common stock valued at
$5,100,000 for the 51% of Avant-Garde that it did not already own. Avant-Garde
was then merged into WinStar Wireless Fiber Corp., a wholly-owned subsidiary of
the Company which is the sole surviving corporation.

The acquisition of Avant-Garde has been treated as a "purchase" for purposes
of generally accepted accounting principles, with the purchase allocated based
on fair value of the assets acquired and liabilities assumed, including
approximately $12,600,000 allocated to the licenses acquired. The amount
allocated to licenses is being amortized over 40 years in accordance with
industry practice. The accounts of Avant-Garde have been consolidated into the
Company's financial statements as of the date of the acquisition.

Unaudited pro-forma results of operations, which reflect the merger of
Avant-Garde into the Company as if the merger occurred as of the beginning of
each period, are as follows:

<TABLE>
<CAPTION>
FOR THE
THREE FOR THE TEN FOR THE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, DECEMBER 31, FEBRUARY 28,
1995 1995 1995
------------ ------------ --------------
<S> <C> <C> <C>
Net sales.......................................... $ 6,161,027 $ 29,744,251 $ 25,572,218
Net loss........................................... (3,488,205) (16,769,516) (8,422,780)
Net loss per share................................. $ (0.16) $ (0.72) $ (0.46)
</TABLE>

F-12
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3--WGN ACQUISITION

On March 10, 1993, the Company completed the exercise of an option to
purchase an aggregate of 10,408 (51%) shares of the common stock of WGN for
approximately $1,045,000, paid in cash and through the assumption of notes. WGN
provides long-distance telephone service to businesses and residences. The
option was exercised by the Company in portions, commencing in December 1992.
The exercise of the option was financed primarily by a private placement of
units which was also completed on March 10, 1993. The transaction was treated as
a "purchase" for purposes of generally accepted accounting principles, with the
purchase price allocated based on the fair value of the Company's proportionate
ownership of the assets acquired and liabilities assumed. The excess of the
purchase price over the fair value of the net assets acquired, aggregating
approximately $828,000, has been recorded as goodwill.

The assets purchased and liabilities assumed have been valued as follows:

MARCH 10,
1993
ACQUISITION
-----------

Current assets:
Cash........................................................... $ 451,490
Accounts receivable............................................ 148,834
Other current assets........................................... 5,334
-----------
Total current assets........................................... 605,658

Property and equipment......................................... 733,675
Intangible assets.............................................. 18,386
Other assets................................................... 4,754
-----------
Total assets................................................... 1,362,473
-----------
Current liabilities:
Capitalized lease obligations.................................. 97,517
Accounts payable and accrued expenses.......................... 310,388
-----------
Total current liabilities...................................... 407,905

Capitalized lease obligations.................................. 528,674
Minority interest.............................................. 208,688
-----------
Total liabilities.............................................. 1,145,267
-----------
Net assets at acquisition date................................. $ 217,206
-----------
-----------

Through a stock exchange offer, the Company acquired the remaining 49%
interest in WGN on August 6, 1993, and paid approximately $1,470,000 through an
exchange of 127.135 shares of the Company's common stock for each WGN share
outstanding. The exchange ratio was based on the closing price of the Company's
common stock on July 16, 1993 of $1 5/32, as reported by NASDAQ. The purchase
price was determined as a multiple of revenues. This transaction impacted the
Company's financial statements as follows: (1) the elimination of the minority
interest of WGN of $53,602, which was originally $208,688 on March 10, 1993, and
was subsequently reduced by $155,086, the 49% minority interest in WGN's losses
during the period March 10, 1993 through August 6, 1993, (2) the recording of
the unallocated purchase price as goodwill aggregating $1,468,037, (3) the
increase in equity of $1,470,000 resulting from the issuance of 1,271,351 shares
of the Company's common stock, and (4) the increase in accounts payable of
$51,639 for fees incurred in connection with this transaction.

F-13
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3--WGN ACQUISITION--(CONTINUED)
Certain former stockholders of WGN (the "Affiliated Shareholders") were and
are affiliated with WCI. At the formation of WGN in May 1992, the Affiliated
Shareholders individually invested a combined total of approximately $82,000 in
a WGN private placement in which they received a combination of promissory notes
and an approximate 14% equity interest. One Affiliated Shareholder also received
a 5% equity interest in return for services rendered in connection with the
formation of WGN. As a result of the aforementioned acquisitions and subsequent
exchange of notes and stock of WGN for securities of the Company, the Affiliated
Shareholders received shares of the Company's common stock with an aggregate
market value of approximately $283,000 and approximately $82,000 in notes from
the aforementioned March 1993 private placement, all on the same basis as the
other WGN shareholders.

Unaudited pro forma results of operations, which reflect the combined
operations of the Company and WGN as if the merger occurred as of the beginning
of fiscal 1994, are as follows:

FOR THE YEAR ENDED
FEBRUARY 28, 1994
------------------

Net sales................................................. $ 15,651,885
Net loss before extraordinary item........................ (8,622,407)
Net loss per share before extraordinary item.............. $ (1.04)

NOTE 4--NFF ACQUISITION

On July 8, 1994, WinStar NFF Inc. ("WNFF"), a newly incorporated and
wholly-owned subsidiary of WCI, entered into an agreement with Non Fiction
Films, Inc. ("NFF") pursuant to which WNFF purchased 95 shares, or 19%, of the
common stock of NFF for a purchase price of $200,000 in cash. NFF is a producer
of non-fiction programming for cable television and for other media.
Additionally, the principal of NFF granted to WNFF an option to purchase all of
the shares of NFF owned by such principal, thereby making NFF a wholly-owned
subsidiary of WNFF. Effective December 1, 1994, WNFF exercised its option and
purchased the remaining 81% of NFF for 28,572 shares of WCI common stock valued
at $200,000. NFF was merged into WNFF, and the surviving corporation was renamed
Non Fiction Films, Inc. The transaction was treated as a "purchase" for purposes
of generally accepted accounting principles, with the purchase price allocated
based on the fair value of the assets acquired and liabilities assumed. The
total purchase price was $476,000 and the excess of the purchase price over the
fair value of the net assets acquired, aggregating approximately $495,000 has
been recorded as goodwill.

Unaudited pro forma results of operations, which reflect the combined
operations of the Company and NFF as if the merger occurred as of the beginning
of the year ended February 28, 1995 are as follows:

FOR THE YEAR ENDED
FEBRUARY 28, 1995
------------------

Net sales................................................. $ 26,099,553
Net loss.................................................. (7,470,205)
Net loss per share........................................ $ (.44)

No pro forma results of operations are shown for the year ended February 28,
1994, as NFF only commenced operations in March 1994.

F-14
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5--PREFERRED STOCK E

In April 1995, the Company completed a private placement of 932,040 shares
of Series E Convertible Preferred Stock ("Preferred Stock E") at a price of
$6.4375 per share for gross proceeds of $6,000,000. Preferred Stock E holders
were entitled to dividends at the rate of 9% per annum, payable quarterly
beginning on June 30, 1995. During the ten month period ended December 31, 1995,
the entire 932,040 shares of Preferred Stock E were converted into 634,228
shares of common stock.

NOTE 6--RESTRUCTURING

During the year ended February 28, 1995, the Company's WGN subsidiary
restructured its operations by reducing its clerical and middle management
staff, replacing senior management personnel, and discontinuing certain
unprofitable programs initiated by previous management. In connection with this
restructuring, the Company recorded an expense of approximately $608,000 during
the year ended February 28, 1995, including $235,000 in benefits related to the
termination of 19 employees. Of the amount recorded at February 28, 1995,
$349,000 related to future cash outflows, with the balance representing charges
related to amounts paid or to write-off of assets purchased prior to February
28, 1995. During the ten month period ended December 31, 1995, the Company
incurred approximately $111,000 of the expected cash outflows, leaving a
remaining liability balance of approximately $238,000 at December 31, 1995 and
March 31, 1996.

NOTE 7--INVESTMENTS IN MARKETABLE EQUITY SECURITIES

On December 13, 1995, the Company purchased 714,000 shares of a publicly
traded interactive media and telecommunications services company at $10.50 per
share, for a total cash consideration of $7,497,000. At December 31, 1995, the
investment has been reflected at the market value of the shares held by the
Company, $6,515,250. In accordance with the treatment of the investment as an
available for sale security under Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities", the
$981,750 difference between the market value of the investment at December 31,
1995, and the original purchase price has been reflected in unrealized losses on
long term investments, a component of stockholders' equity. At March 31, 1996, a
$1,338,750 difference between the market value of the investment at March 31,
1996 and the original purchase price has been reflected in unrealized losses on
long term investments, a component of stockholders' equity. The Company believes
that this decrease in market value is temporary.

NOTE 8--NOTES RECEIVABLE

Notes receivable at December 31, 1995 consist of the following:

Notes receivable--TWL(a)....................................... $3,008,948
Notes receivable--Robern Skiwear(b)............................ 540,000
Other.......................................................... 139,635
----------
Total.......................................................... 3,688,583
Less: current portion.......................................... 199,635
----------
Long-term notes receivable..................................... $3,488,948
----------
----------

F-15
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--NOTES RECEIVABLE--(CONTINUED)

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

<TABLE>
<C> <S>
(a) WNM's stated business purpose is to capitalize upon opportunities in the media content
industry by acquiring distribution and other rights in and from emerging companies in
this field. On April 8, 1994, WNM entered into an agreement with The Winning Line, Inc.
("TWL"), a producer of sports programming. As subsequently amended, the agreement
provides for WNM to make periodic cash advances to TWL, with such advances being
collateralized by a first lien on all of the assets of TWL as well as by shares of TWL
common stock owned by certain individuals. Advances made to date are payable on demand
and bear interest at a rate of 12% or at a rate 3% in excess of the prime commercial
lending rate (8.25% at December 31, 1995). WNM had the right, which was exercised in
April 1996, to convert up to $970,000 of advances made, together with all accrued
interest thereon, into 65% of TWL's then issued and outstanding shares of common stock
(Note 28).
(b) In connection with the sale of its skiwear brands product line in April 1993 to Robern
Skiwear, Inc., the Company has a note receivable from the buyer. The note bore interest
at 8% per annum payable quarterly, through January 31, 1996. Effective February 1,
1996, the note was modified such that interest now accrues at 9% per annum and is
payable monthly. The $540,000 of outstanding principal is payable in 22 monthly
installments of $19,054, inclusive of interest, beginning January 31, 1996, through
October 31, 1997, with a final payment of $180,000 to be paid in a lump sum on November
30, 1997. The note is guaranteed by the principals of Robern Skiwear, Inc. as well as
certain other individuals.
</TABLE>

NOTE 9--DISCONTINUATION OF PRODUCTS LINES

As of February 28, 1994, the Company discontinued its remaining apparel and
tennis racquet product lines as a result of lower-than-expected sales and
continuing losses in these lines. Included as a loss on the discontinuation of
product lines for the year ended February 28, 1994, is the writedown of the net
assets of these product lines (primarily intangible assets) as well as the
accrual of certain expenses incurred in the windup of these lines, amounting to
$292,000 in total.

NOTE 10--PERFORMANCE STOCK OPTION EXPENSE

In connection with the Company's initial public offering in April 1991,
options to purchase 1,000,000 shares of common stock of the Company at $0.01 per
share were granted to the original shareholders of the company (Note 22).
Subsequent to February 28, 1994, the conditions for exercise of these options
were met, and in connection therewith, the Company recorded a non-cash expense
of $5,316,667 at February 28, 1994, representing the difference between the
option price and the market price on the day the options actually became
exercisable.

NOTE 11--GAIN FROM EXTINGUISHMENT OF DEBT

On September 7, 1993, the Company paid the following in full satisfaction of
an obligation of approximately $501,000: (i) $250,000 in cash, and (ii) 50,000
shares of the Company's common stock valued at $57,031. The gain of $194,154 on
the payment of the indebtedness is classified in the statement of operations as
an extraordinary item. No tax provision has been recorded as a result of the
Company's tax loss carryforwards.

F-16
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 12--INVENTORIES

Components of inventories are as follows:
<TABLE>

MARCH 31, DECEMBER 31, FEBRUARY 28,
1996 1995 1995
----------- ------------ ------------

(UNAUDITED)

<CAPTION>
<S> <C> <C> <C>
Finished goods......................................... $ 1,715,871 $1,432,951 $ 1,190,670
Raw materials.......................................... 4,423,420 4,017,655 2,092,101
Film inventories....................................... 1,755,920 1,941,080 950,156
----------- ------------ ------------
$ 7,895,211 $7,391,686 $ 4,232,927
----------- ------------ ------------
----------- ------------ ------------

NOTE 13--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28, ESTIMATED
1995 1995 USEFUL LIFE
------------ ------------ -----------------
<S> <C> <C> <C>
Machinery, equipment and software............... $ 16,072,511 $ 2,963,690 5 to 10 years
Furniture and fixtures.......................... 867,963 239,507 4 to 5 years
Leasehold improvements.......................... 536,115 185,919 Life of the lease
------------ ------------
17,476,589 3,389,116
Less accumulated depreciation and
amortization................................... (1,578,584) (726,048)
------------ ------------
$ 15,898,005 $ 2,663,068
------------ ------------
------------ ------------
</TABLE>

NOTE 14--INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28, ESTIMATED
1995 1995 USEFUL LIFE
------------ ------------ -------------
<S> <C> <C> <C>
Goodwill............................................. $2,953,021 $ 2,953,021 20 years
Covenants not to compete............................. 668,397 668,397 5 to 10 years
Other................................................ 39,460 39,460 3 to 5 years
------------ ------------
3,660,878 3,660,878
Less accumulated amortization........................ (627,373) (447,093)
------------ ------------
$3,033,505 $ 3,213,785
------------ ------------
------------ ------------
</TABLE>

Licenses are amortized over a 40 year period. As of December 31, 1995, the
value of licenses was $12,556,281, net of accumulated amortization of $256,039.

F-17
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 15--LOANS PAYABLE

Loans payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
Loan payable-financial institution(a).............................. $3,153,821 $ 1,668,743
Loan payable-financial institution(b).............................. 4,338,099 2,742,010
Other(c)........................................................... 795,541 --
------------ ------------
$8,287,461 $ 4,410,753(d)
------------ ------------
------------ ------------
</TABLE>

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

<TABLE>
<C> <S>
(a) In November 1994, WGN entered into a Loan and Security Agreement with a financial
institution providing for the financing of WGN's receivables. Borrowings under this
agreement are limited to 90% of most eligible accounts receivable, with availability of
certain types of accounts receivable limited to 80% and 50%, subject to a maximum
credit availability of $5,000,000. Borrowings bear interest at a rate ranging from 2.5%
to 3% in excess of the prime commercial lending rate and are secured by a lien on all
WGN assets as well as a guarantee from WCI as to the first $2,200,000 in borrowings.
The agreement also calls for an annual fee of $50,000 as well as certain underutiliza-
tion fees. This agreement expires November 3, 1996.

(b) In August 1994, WGP secured an asset based loan from a financial institution to finance
its receivables and inventory. Borrowings under this loan are limited to 80% of
eligible accounts receivable and 45% of eligible inventory, with a $1,500,000
overadvance facility, subject to a maximum credit availability of $6,000,000.
Borrowings bear interest at a rate 3.5% in excess of the prime commercial lending rate
and are secured by a lien on all WGP assets as well as a guarantee from WCI as to the
first $3,000,000 in borrowings. The agreement also provides for annual facility fees.
This agreement expires September 30, 1996.

(c) In April 1995, NFF secured a production loan from an Irish limited partnership. NFF
issued a letter of credit to the creditor in the amount of $807,000 which may be
presented at any time from March 1996 forward. The letter of credit is secured by an
equal amount of investments in U.S. Treasury Bills on deposit with the financial
institution which issued the letter of credit.

(d) Included in long-term other notes payable at February 28, 1995.
</TABLE>

NOTE 16--CAPITAL LEASE OBLIGATIONS

In September 1995, WinStar Wireless entered into a $10,000,000 equipment
lease financing facility, of which $7,000,000 has been made available as of
December 31, 1995. As of December 31, 1995, the Company has utilized
substantially all of the amount available under this facility. Borrowings bear
interest at a rate of 13% per annum and are payable over sixty months. After
twelve months, WinStar Wireless has the option to purchase the equipment at a
price that will provide a return of 15% to the lessor. As additional
consideration, the Company has agreed to issue options to purchase up to 100,000
shares of stock to the lessor, of which options to purchase 70,000 shares of
stock have been issued through December 31, 1995.

The Company leases its transmission equipment utilized by WWI and its switch
equipment utilized by WGN as well as certain computer and other equipment used
by the Company. Such leases have been accounted for as capital leases in
accordance with Statement of Financial Accounting Standards No. 13, "Accounting
for Leases".

F-18
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 16--CAPITAL LEASE OBLIGATIONS--(CONTINUED)
Future minimum lease payments on these capital leases are as follows:

YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------

1996................................................... $ 2,364,838
1997................................................... 2,420,841
1998................................................... 1,963,914
1999................................................... 1,910,601
2000................................................... 1,324,164
-----------
9,984,358
Less amount representing interest...................... (2,547,805)
-----------
Present value of minimum lease payments................ $ 7,436,553
-----------
-----------

The carrying value of assets under capital leases was $8,052,000 at December
31, 1995 and is included in property and equipment. Amortization of these assets
is included in depreciation expense.

NOTE 17--SENIOR AND CONVERTIBLE NOTES PAYABLE

In October 1995, the Company completed a $225 million private placement of
debt securities with institutional investors (the "Debt Placement"). The
transaction was structured as a unit offering with two components: $150 million
of Senior Discount Notes due in 2005 (the "Senior Notes"), and $75 million of
Convertible Senior Subordinated Discount Notes due in 2005 (the "Convertible
Notes"), convertible at $20.625, a 10% premium over the closing price on October
18, 1995, the day of pricing. Both securities accrue interest at 14% per annum,
with no interest payable during the first five years, and principal payable only
at maturity in October 2005. After five years, both securities require the
payment of interest only, in cash, until maturity. In addition, the Convertible
Notes, including accretion thereon, will be automatically converted during the
initial five year period if the market price of the Company's common stock
exceeds certain levels for thirty consecutive trading days, ranging from $37.50
per share in the first year to $44.00 per share in the fifth year.

Under the terms of the Debt Placement, the Company was obligated to
consummate an exchange offer with respect to the Senior Notes by April 23, 1996,
whereby these notes would be exchanged for new notes (the "New Notes") which
would be identical in every respect to the original Senior Notes except that the
New Notes would be registered under the Securities Act of 1933. Pursuant to such
obligation, the Company filed an offer to exchange the Senior Notes for the New
Notes on January 31, 1996, upon which all Senior Notes were subsequently
converted. The Company is also obligated to cause to be declared effective a
registration statement registering the issuance or resale of the shares
underlying the convertible Notes (the "Conversion Shares") by October 23, 1996.
If the exchange offer or the registration of the Conversion Shares does not take
place prior to the respective deadlines, the Company will be obligated to pay
additional interest on the Senior Notes and/or lower the conversion price on the
Convertible Notes. The Company intends to file such registration statement in a
timely manner. The terms of the Debt Placement also place certain restrictions
on the ability of the Company to pay dividends, incur additional indebtedness,
issue guarantees, sell assets, or enter into certain other specified
transactions.

F-19
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 18--OTHER NOTES PAYABLE

In May 1995, WinStar Wireless completed a private placement of $7,500,000 of
five year secured convertible notes (the "Notes"). The Notes bear interest at a
rate of 7%, payable semiannually, with all principal due and payable on May 24,
2000. The Notes are guaranteed by the Company and are collateralized by a first
lien on WinStar Wireless' assets and a pledge by the Company of its shares of
WinStar Wireless and WinStar Wireless Fiber Corp. The noteholders' first lien
and rights are subject to subordination to certain future secured equipment
financing for WinStar Wireless. The Notes are convertible into common stock at a
price of $7.00 per share. The noteholders also received 550,000 warrants and
share equivalents, of which 300,000 warrants at an exercise price of $12.00 per
share and 100,000 warrants at an exercise price of $13.00 per share were
outstanding at December 31, 1995.

The portion of the proceeds attributable to the warrants and share
equivalents has been valued at $805,000 and has been accounted for as additional
paid-in capital and as a reduction in convertible notes payable. The resulting
debt discount is being amortized to interest expense over the life of the Notes.

On December 28, 1995, the note holders converted $3,750,000 of the
convertible notes and accrued interest thereon into 539,255 shares of common
stock of the Company. In addition, the note holders have committed that they
will convert all remaining outstanding Notes into common shares of the Company
on or prior to December 15, 1996.

NOTE 19--COMMITMENTS AND CONTINGENCIES

A. OPERATING LEASES

The Company's manufacturing and warehousing facilities and offices, along
with various equipment and roof access rights, are leased under operating leases
expiring in 1996 through 2006.

Future minimum lease payments on noncancellable operating leases are as
follows:

YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------

1996.................................................... $1,546,000
1997.................................................... 1,316,000
1998.................................................... 1,314,000
1999.................................................... 1,306,000
2000.................................................... 884,000
Thereafter.............................................. 2,749,000
----------
$9,115,000
----------
----------

Rent expense for the ten month period ended December 31, 1995 and the years
ended February 28, 1995 and 1994 was $1,044,000, $500,000 and $366,000,
respectively.

F-20
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
B. EMPLOYMENT CONTRACTS

Amounts due under employment contracts are as follows:

YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------

1996.................................................... $2,450,000
1997.................................................... 1,750,000
1998.................................................... 861,000
1999.................................................... 525,000
2000.................................................... 54,000
----------
$5,640,000
----------
----------

C. LITIGATION

In January 1995, the Company's directors, certain other persons, and the
Company (as a nominal defendant) were named in one or more of four actions
brought by various stockholders of the Company in the Court of Chancery of the
State of Delaware in and for New Castle County. These actions subsequently were
consolidated into a single lawsuit. The complaint alleges that certain
transactions including (i) the payment of consideration to certain directors and
others in connection with the Company's acquisition of WGN and (ii) the payment
of compensation (including the granting of options and the issuance of warrants)
to certain directors and others involved self dealing, waste of corporate assets
or otherwise were unfair to the Company and, in each case, were in violation of
the fiduciary obligations of certain directors to the Company.

The Company believes that the allegations set forth in the complaint are
based on misstatements of fact and misunderstandings of relevant facts and
further believes that there are meritorious defenses to all of the allegations.
The Company recently has entered into a settlement agreement with the plaintiffs
pursuant to which the Company has agreed to amend its bylaws to formalize
certain corporate governance changes and to payment of legal fees of plaintiffs'
counsel. The settlement agreement is subject to notice to stockholders and
approval of the Delaware Chancery Court. The Company believes that the
resolution of this lawsuit will not have a material adverse impact on the
Company's financial position.

The Company occasionally receives inquiries from state authorities arising
with respect to consumer complaints concerning the provision of
telecommunications services, including allegations of unauthorized switching of
long distance carriers and misleading marketing. The Company believes such
inquiries are common in the long distance industry and addresses such inquiries
in the ordinary course of business. The Company recently has experienced an
increased level of consumer and regulatory complaints, a substantial majority of
which arose from the activities of several independent marketing companies
involving contest programs and the use of executed written letters of
authorization ("LOAs") to switch long distance carriers. The inquiries primarily
arose from allegations of unauthorized or misleading switching of long distance
carriers. In order to eliminate further complaints from these programs, the
Company, on May 10, 1996, adopted a policy of mandatory independent verification
for one hundred percent of LOAs received from these programs and effective as of
June 10, 1996 no longer accepts LOAs from these programs. The Company has also
initiated discussions with the FCC and a number of state regulatory authorities
with respect to the resolution of any issues arising from the terminated
programs. The Company is also involved in

F-21
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
miscellaneous claims, inquiries and litigation arising in the ordinary course of
business. The Company believes that these matters, taken individually or in the
aggregate, would not have a material adverse impact on the Company's financial
position.

In June, 1996, the Company commenced an action for declaratory judgment
against a former officer of WinStar Gateway, who recently notified the Company
of his belief that he was entitled to the issuance of certain shares of Common
Stock (or payment of the cash value thereof) having an aggregate market value in
excess of $27 million under the terms of stock options granted to him during his
employment with WinStar Gateway from the Company. He has based his beliefs on
standard anti-dilution language contained in his stock option agreement which
was designed and intended to adjust the number of shares purchasable thereunder
in the event of a merger or capital restructuring of the Company. As the Company
has never been subject of a merger or capital restructuring, the former officer
was immediately notified of the Company's belief that his claim was without
merit in law or fact. To expedite resolution of these issues, the Company
currently is seeking declaratory judgment that it has no obligation to the
former officer. Further, because the Company believes that any and all claims
that may be advanced by the former officer with regard to the foregoing issue
would be frivolous, the Company has notified the former officer and his counsel
of its intention to seek Rule 11 sanctions and such other remedies as may be
available against the former officer and his counsel in the event that the
former officer and his counsel seek to assert any defense to the Company's
action for declaratory judgment or otherwise proceed with respect to the issue.

D. OTHER

In November 1994, and as subsequently amended in December 1995, the Company
entered into a non-exclusive, four year agreement with P-Com, Inc. ("P-Com"), a
manufacturer and distributor of radio links, providing for the purchase of radio
links from P-Com. The contract pricing structure includes provisions whereby the
Company pays additional amounts above the agreed upon price for links purchased
at the beginning of the contract period. These amounts will be recovered in the
form of discounted radio links once certain volume levels have been reached. An
annual minimum volume requirement must be met in order to maintain the agreed
upon pricing structure. The contract is cancellable by the Company subject to
certain conditions, primarily the acceptance of a minimum number of links and
the guarantee of the next 90 days' purchases in accordance with an agreed upon
schedule. As of December 31, 1995, the Company's noncancellable purchase
commitment was approximately $15,600,000. These conditions to cancellation
become more favorable to the Company as certain volume levels are reached.

F-22
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 20--INCOME TAXES

SFAS 109 requires the use of the liability method in accounting for income
taxes. Temporary differences and carryforwards that give rise to deferred tax
assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
Deferred tax assets
Net operating loss carry forward............................. $ 14,700,000 $ 9,230,000
Allowance for doubtful accounts.............................. 1,025,000 440,000
Other........................................................ 2,275,000 380,000
------------ ------------
Gross deferred tax asset....................................... 18,000,000 10,050,000
Valuation allowance.......................................... (18,000,000) (10,050,000)
------------ ------------
Net deferred tax assets.................................. $ -- $ --
------------ ------------
------------ ------------
</TABLE>

If not utilized, the net operating loss carryforwards will expire in various
amounts through the year 2010. The tax loss carryforwards relating to WGP are
limited by the Separate Return Limitation Year rules and Section 382 of the
Internal Revenue Code with respect to the amount utilizable each year. The
Company's remaining net operating loss carryforwards are also subject to
limitation under the Internal Revenue Code. These limitations will reduce the
Company's ability to utilize the net operating loss carryforwards included
above. The amount of the limitation has not been quantified by the Company.

SFAS 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets may not be realized. The valuation allowances
at February 28, 1995, and December 31, 1995, primarily pertain to uncertainties
with respect to future utilization of net operating loss carry forwards.

NOTE 21--STOCKHOLDERS' EQUITY

COMMON STOCK:

The authorized capital stock of WCI includes 75,000,000 shares of common
stock, $.01 par value. The holders of common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Although the Company has no present intention of paying any dividends, holders
of common stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation or dissolution of WCI, holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preference of preferred shares.

Holders of common stock have no preemptive rights and have no rights to
convert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock.

PREFERRED STOCK:

The authorized capital stock of the Company includes 15,000,000 shares of
preferred stock, $.01 par value, which may be issued from time to time in one or
more series upon authorization by the Company's Board of Directors. There are
currently no shares of preferred stock outstanding. The Board

F-23
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 21--STOCKHOLDERS' EQUITY--(CONTINUED)
of Directors, without further approval of the stockholders, is authorized to fix
the rights and terms, conversion rights, voting rights, redemption rights and
terms, liquidation preferences and any other rights, preferences, privileges and
restrictions applicable to each series of preferred stock. In March 1994, all
173 outstanding shares of Preferred Stock C were converted into an aggregate of
82,381 shares of common stock of the Company. In addition, in accordance with
the terms of the Preferred Stock C, the holders of the Preferred Stock C
received 41,191 Series B Warrants upon conversion, all of which were
subsequently exercised during the year ended February 28, 1995. In December
1994, all 225,000 outstanding shares of Preferred Stock D were automatically
converted into 225,000 shares of common stock as a result of the market value of
the Company's common stock having met certain criteria. In November 1995, all
outstanding shares of Preferred Stock B were acquired in the Private Exchange
transaction (Note 23). As of December 31, 1995, all classes of preferred stock
other than Preferred Stock B have been retired.

TREASURY STOCK:

Included in treasury stock at cost are 2,506,763 shares of common stock and
689 shares of Preferred Stock B which were acquired in the Private Exchange
transaction (Note 23).

NOTE 22--STOCK OPTIONS AND STOCK PURCHASE WARRANTS

Options to purchase 1,000,000 shares of common stock of the Company at $.01
per share were issued at the time of the Company's initial public offering in
April 1991 to the original shareholders of the Company. The options were
exercisable at any time after April 3, 1993 and prior to April 3, 1996, or April
3, 1998 for one investor, if the market price of the Company's common stock
exceeded $5.00 per share (the "Market Price") as adjusted, over a period of 40
consecutive business days at any time after April 3, 1992. Pursuant to certain
antidilutive provisions in the option agreements, the number of shares subject
to these options was increased to 1,253,931, and the Market Price was reduced to
$3.99 per share. The Market Price was met and such options became exercisable in
April 1994 (Note 10), and all such options were exercised during the year ended
February 28, 1995. In addition, options to purchase 14,000 shares of common
stock at $.01 per share were granted to an employee on June 30, 1991 in lieu of
compensation.

In 1990, the Board of Directors adopted a non-qualified common stock
incentive plan, as amended, pursuant to which options to purchase an aggregate
of 150,000 shares of common stock may be granted to key employees of the Company
as selected by the Board of Directors. The exercise price for shares covered by
options granted pursuant to this plan will not be less than the fair market
value of the shares on the date of the grant. In 1992, the Board of Directors
adopted and stockholders approved the 1992 Performance Equity Plan ("1992
Plan"), which authorizes the granting of awards up to 1,000,000 shares of common
stock to the Company's key employees, officers, directors and consultants.
Awards consist of stock options (both non-qualified and options intended to
qualify as "incentive" stock options under the Internal Revenue Code),
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards. The plan provides for automatic issuance of 10,000
stock options annually to each director on January 13, at the fair market value
at that date, subject to availability. In June 1995, the Board of Directors
adopted the 1995 Performance Equity Plan ("1995 Plan") which was approved by the
stockholders of the Company at the Annual Meeting of Stockholders in September
1995. The 1995 Plan authorizes the granting of awards of up to 1,500,000 shares
of Common Stock to the Company's key employees, officers, directors and
consultants. The 1995 Plan is similar to the

F-24
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 22--STOCK OPTIONS AND STOCK PURCHASE WARRANTS--(CONTINUED)
1992 Plan, except that the 1995 Plan does not allow for annual automatic annual
director grants. In addition to these three plans, the Company has granted
options to certain individuals not under any plan (Note 28).

The Company has granted options to purchase common stock as follows:

<TABLE>
<CAPTION>
NUMBER PRICE PER SHARE
---------- ---------------
<S> <C> <C>
Balance, March 1, 1993.......................................... 3,064,000 $1.63--$ 5.25
Granted......................................................... 2,570,067 $1.06--$ 6.17
Canceled........................................................ (616,500) $1.69--$ 3.63
----------
Balance, February 28, 1994...................................... 5,017,567 $1.06--$ 6.17
Granted......................................................... 2,851,360 $4.22--$ 9.50
Exercised....................................................... (1,389,547) $1.50--$ 4.90
Canceled........................................................ (235,050) $1.69--$ 9.03
----------
Balance, February 28, 1995...................................... 6,244,330 $1.06--$ 9.50

]Granted........................................................ 3,896,000 $5.50--$19.75
Exercised....................................................... (2,091,572) $1.06--$ 6.88
Canceled........................................................ (708,133) $2.13--$ 8.81
----------
Balance, December 31, 1995...................................... 7,340,625 $1.06--$19.75
----------
----------
</TABLE>

In addition to the above, in May 1992, the Company granted to WinStar
Venture II, Inc. ("WVII"), an affiliate of a Director of the Company, an option
through August 31, 1998 to purchase shares of Series C preferred stock in the
amount of $2,000,000 in return for WVII's guarantee of certain company debt.

At December 31, 1995, options for 2,848,462 shares were exercisable at
exercise prices ranging from $1.06 to $17.13 per share.

Warrants to purchase the Company's common stock were issued as follows:

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding at February 28,
1993............................ 1,277,646 1,897,867 250,000 -- --
Issued in connection with private
placement of debt............... -- -- -- 2,000,000 --
Other warrants issued............ 135,804 79,807 -- 200,000 200,000
Warrants exercised............... -- -- -- (205,000) --
---------- ---------- -------- ---------- ----------
Outstanding at February 28,
1994............................ 1,413,450 1,977,674 250,000 1,995,000 200,000
Warrants issued.................. -- 41,191 -- -- 1,000,000
Warrants exercised............... (1,397,500) (1,975,738) -- (1,995,000) (1,200,000)
Warrants expired................. (15,950) (43,127) (250,000) -- --
---------- ---------- -------- ---------- ----------
Outstanding at February 28,
1995............................ -- -- -- -- --
---------- ---------- -------- ---------- ----------
---------- ---------- -------- ---------- ----------
</TABLE>

Each Series A Warrant entitled the registered holder to purchase one share
of WCI's common stock for an exercise price of $3.00 per share and each Series B
Warrant entitled the registered holder to purchase one share of common stock for
an exercise price of $3.75 per share through April 3, 1994. In March and April
1994, approximately 1,337,000 Series A Warrants and approximately 1,921,000

F-25
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 22--STOCK OPTIONS AND STOCK PURCHASE WARRANTS--(CONTINUED)
Series B Warrants were exercised prior to their scheduled expiration. Proceeds
to the Company, net of registration costs and fees to WinStar Services, Inc.,
were approximately $10,700,000. All remaining Series A and Series B Warrants,
which were unregistered and did not expire on April 3, 1994, were exercised in
May 1994.

The Series C Warrants expired without having become exercisable upon
issuance of the fiscal 1994 financial statements for the year ended February 28,
1994, because the conditions for the exercise of these warrants were not met.

In connection with a private placement of debt, the Company on March 10,
1993 issued 2,000,000 Series D Warrants. Each Series D Warrant entitled the
holder to purchase one share of common stock for $.67 during the five year
period commencing March 10, 1993 and ending March 9, 1998. In connection with
the same private placement, the Company in March 1994 issued 1,000,000 Series E
Warrants, each of which entitled the holder to purchase one share of common
stock at an exercise price of $2.24 per share. Series E Warrants were
exercisable from April 1, 1994 through March 10, 1999. In addition to the above,
the Company also issued 200,000 Series D Warrants and 200,000 Series E Warrants
to a separate noteholder in return for an extension of that note payable on
terms more favorable to the Company. In April 1994, the holders of the Series D
and Series E Warrants exercised their warrants. The exercise price on the
warrants was paid primarily by the warrant holders assigning their notes which
they had acquired in the private placement, as well as any accrued interest
thereon. The balance due from the warrant holders was satisfied by the return to
the Company of that number of unexercised Series E Warrants which, when valued
by reference to the fair market value of the common stock on that date, would
satisfy such balance due. The net effect of this conversion was that the Company
satisfied $1,996,650 in notes payable and $59,079 in accrued interest thereon,
and issued approximately 2,814,000 shares of common stock for the exercise of
1,995,000 Series D Warrants and 1,200,000 Series E Warrants. The common shares
which were issued upon exercise of all Series D and Series E Warrants were
restricted shares.

F-26
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 23--RELATED PARTY TRANSACTIONS

MANAGEMENT AGREEMENT

The Company and WinStar Services, a wholly-owned subsidiary of WinStar
Companies, a corporation of which two of the Company's directors are principal
officers and stockholders, were parties to a five-year management agreement
which provided, as amended, that WinStar Services would render financial,
advisory and management services in connection with the capital, acquisition and
planning needs of the Company. The Company agreed to pay WinStar Services as
compensation for such services $200,000 per year plus certain contingent
performance fees, in addition to reimbursement of all out-of-pocket expenses
incurred by WinStar Services. In August 1993, the terms of the management
agreement were extended to August 31, 1998, and the Company granted to WinStar
Services options to purchase 500,000 shares of the Company's Common Stock at the
then current market price of $2.13 per share which options were exercised in
connection with the transaction between WinStar Companies, WinStar Services and
WinStar Venture II, Inc. The expiration date for these options as well as for
any options or warrants previously granted to WinStar companies and its
subsidiaries was set at August 31, 1998. During the years ended February 28,
1995 and 1994, an aggregate of $254,560 and $254,095, respectively, was paid to
WinStar Services by the Company as management fees and reimbursement of
expenses. Additionally, the Company paid $481,039 and $78,040 in cash and issued
notes amounting to $481,038 and $78,040 in payment of contingent performance
fees to WinStar Services during the years ended February 28, 1995 and 1994,
respectively. These contingent performance fees related to specific debt and
equity financing and investment transactions in excess of $33.6 million. During
the year ended February 28, 1995, all such notes were satisfied when they were
used to pay for the exercise of warrants and stock options held by WinStar
Services and its affiliates. See Private Exchange Transaction.

The management agreement was terminated prospectively as of February 28,
1995.

PRIVATE EXCHANGE TRANSACTION

On November 29, 1995, the Company acquired, in exchange for the issuance of
3,741,224 shares of its Common Stock ("Private Exchange"), substantially all of
the assets of WinStar Companies, whose assets consisted of (i) all the
outstanding capital stock of WinStar Services and WinStar Venture, two
wholly-owned subsidiaries of WinStar Companies, and (ii) 389,580 shares of the
Company's Common Stock owned by WinStar Companies. The sole assets of WinStar
Services and WinStar Venture were 2,117,183 shares of the Company's Common Stock
and other securities of the Company that were exercisable or convertible into
1,429,633 shares of the Company's Common Stock. Accordingly, the Company issued
3,741,224 shares of Common Stock and, in exchange, acquired 3,936,396 shares of
Common Stock and Common Stock equivalents. All of the Common Stock and certain
of the Common Stock equivalents received in the Private Exchange are included in
Treasury Stock at December 31, 1995. WinStar Companies, WinStar Services and
WinStar Venture had no liabilities at the time of the closing of the Private
Exchange other than a liability previously assumed by the Company or liabilities
for which the Company is being indemnified.

The new shares of the Company's Common Stock issued in the Private Exchange
represented that number of shares which had an aggregate market value based upon
the average of the last sale price of the Company's Common Stock on the 30
trading days preceding November 15, 1995, the date as of which the exchange
agreement regarding the above-described transaction was executed, equal to the
market value of the Company's Common Stock (i) transferred by WinStar Companies
to the Company,

F-27
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 23--RELATED PARTY TRANSACTIONS--(CONTINUED)
(ii) owned by WinStar Services and WinStar Venture and (iii) underlying certain
other securities of the Company owned by WinStar Services and WinStar Venture
which were convertible into or exercisable for shares of the Company's Common
Stock, less the aggregate exercise price of such latter securities.

The stockholders of WinStar Companies included several of the Company's
current executive officers and directors. Simultaneously with the Private
Exchange, WinStar Companies was dissolved and the new shares issued in the
Private Exchange were issued directly to the stockholders of WinStar Companies
in proportion to their equity ownership of WinStar Companies.

The Private Exchange was considered and approved by a special committee of
independent and disinterested directors of the Company and an opinion from an
independent investment banking firm that the Private Exchange was fair to the
Company and its stockholders was obtained in connection with the Private
Exchange.

SGC CONSULTING AGREEMENT

In November 1993, the Company entered into a consulting agreement with SGC,
pursuant to which SGC received a monthly fee of $5,000 and immediately
exercisable five-year options to purchase 50,000 shares of Common Stock for
$2.75 per share. The President and Director of SGC is currently a Director and
employee of the Company. In April 1994, the Company entered into a restated and
amended consulting agreement with SGC. Pursuant to the new agreement, SGC
provided consulting services to the Company and was paid a monthly fee of
$17,500. SGC also received options to purchase 125,000 shares of Common Stock at
a price of $4.50 per share, which vest in two equal annual installments
beginning in April 1994. The Company granted certain registration rights for all
shares, warrants and options issued to SGC or its President. Under this
consulting agreement, SGC was entitled to receive a cash fee equal to 5% of the
consideration paid in connection with certain transactions introduced to the
Company by SGC. Fees and expenses paid to SGC during the ten months ended
December 31, 1995, and the year ended February 28, 1995 were $0 and $119,000,
respectively.

In connection with investments by the Company in Avant-Garde and TWL, a
producer of sports-related radio programming, both of which businesses were
introduced to the Company by SGC, SGC was paid fees by Avant-Garde and by TWL.
Additionally, in connection with the Company's acquisition of its equity
interest in Avant-Garde, such Director was paid a fee by the principal of
Avant-Garde equal to 4.0% of the total consideration received by such principal
from the Company in connection with the acquisition. The Company paid no fees to
SGC in connection with such transactions, but the fees received by SGC and such
Director from Avant-Garde and TWL were credited against the monthly fees payable
to SGC by the Company.

The consulting agreement was terminated in January 1995 in connection with
the execution of such Director's employment agreement with the Company.

AGREEMENT WITH ITC GROUP, INC.

In May 1994, the Company, WWI and ITC entered into a two-year agreement
pursuant to which ITC advised the Company on the operations of WWI, WWFC and
WGN. ITC, together with the management and employees of WWI, developed and
implemented a two-year operating plan ("Operating Plan") for the Company's
wireless telecommunications business. Pursuant to the terms of the consulting
agreement, ITC made its consultants available to the Company and its
subsidiaries. The Company paid ITC an annual base consulting fee of $700,000 in
monthly installments for the services

F-28
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 23--RELATED PARTY TRANSACTIONS--(CONTINUED)
of a core management team, as well as supplemental fees at agreed upon rates for
additional consulting services rendered by ITC as necessary from time to time.
ITC also was entitled to receive a bonus of up to $2.0 million per year at such
time that certain pretax income targets set forth in the Operating Plan were
attained. No such bonus was paid during the year ended February 28, 1995. During
the year ended February 28, 1995 and through September 1995, ITC was paid
$1,553,249 and $1,046,084, respectively, in fees and expenses under the terms of
the consulting agreement, providing up to 12 consultants at any given time. In
connection with the consulting agreement, the Company granted options to
purchase an aggregate of 500,000 shares of Common Stock for $4.41 per share to
certain consultants of ITC. Of such options, 375,000 are presently exercisable.
ITC and the Company executed a noncompetition agreement, pursuant to which ITC,
and its key employees and consultants, must refrain from providing services to
any segment of a business which provides wireless telecommunications services or
otherwise competes with the Company; provided, however, that ITC may provide
services to entities in connection with the provision of cellular and personal
communication services. In October 1994, ITC's President was elected as a
director of the Company.

Effective September 5, 1995, ITC's President became President and Chief
Operating Officer of the Company and certain core management personnel
previously provided by ITC also became employees, and ITC ceased providing
services to the Company under the consulting agreement. The Company's obligation
to pay any future compensation to ITC under such agreement was terminated.

NOTE 24--SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest during the three months ended March 31, 1996, the ten
months ended December 31, 1995, and the years ended February 28, 1995 and 1994
was $972,000, $1,270,000, $621,000, and $726,000, respectively.

During the ten month period ended December 31, 1995, the Company completed
the following material non-cash transactions: (i) the conversion of $3,750,000
of convertible notes plus accrued interest thereon; (ii) the conversion of
Preferred Stock E; (iii) the acquisition of approximately $7,500,000 in property
and equipment through various capitalized leases; (iv) the Private Exchange
transaction; (v) the settlement of the Company's placement expenses from the
gross proceeds of the Debt Placement; (vi) the acquisition of Avant-Garde.

During the year ended February 28, 1995, the Company completed the following
material non-cash transactions: (i) the conversion of the Series D and Series E
Warrants through the assignment of notes payable and accrued interest (Note 22);
(ii) the satisfaction of approximately $600,000 in notes payable through the
exercise of stock options; (iii) conversions of Preferred Stock B, C, and D;
(iv) the acquisition of approximately $740,000 in property and equipment through
various capitalized leases; and (v) the purchase of Non Fiction Films, Inc.,
wherein the purchase price was satisfied in part through the issuance of 28,572
shares of common stock valued at $200,000.

During the year ended February 28, 1994, the Company completed the following
material non-cash transactions: (i) the sale of the net assets of the skiwear
brands product line, net of cash received, for a $1,500,000 note receivable;
(ii) the private placement of $458,717 in notes for non-cash consideration;
(iii) the purchases, in March and August 1993, of WGN, whose net assets,
including cash acquired, have been valued at $1,470,000 for 1,271,351 shares of
the Company's common stock (Note 3); (iv) the exercise by an investor of 200,000
Series D warrants with a total exercise price of $134,000 through the releasing
of $100,000 owed him by the Company, with the balance paid in cash;

F-29
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24--SUPPLEMENTAL CASH FLOW INFORMATION--(CONTINUED)
(v) the purchase of certain assets of a bath products company, valued at
$100,000 net of cash paid, for 39,506 shares of the Company's common stock; (vi)
the sale of 287,043 shares of common stock for stock subscriptions receivable of
$758,065, which amount was included in other current assets at February 28,
1994, and was realized in March 1994; and (vii) the acquisition of an investment
in AGT valued at $1,691,950 for $232,000 in notes payable, $900,000 in Series D
preferred stock and $27,950 in accounts payable, with the balance paid in cash.

NOTE 25--MAJOR CUSTOMERS

No customer individually amounted to more than 10% of net sales for the ten
months ended December 31, 1995 and the years ended February 28, 1995 and 1994.

NOTE 26--BUSINESS SEGMENTS

The Company's business segments are telecommunications, information
services, and merchandising. The following table is a summary of these segments
for the ten months ended December 31, 1995 and the years ended February 28, 1995
and 1994. For the year ended February 28, 1994, information related to the
telecommunications business segment relates only to the period from March 10,
1993 (date of acquisition of WGN) to February 28, 1994, and no amounts are shown
for the information services segment, which commenced operations in the year
ended February 28, 1995.

<TABLE>
<CAPTION>
TOTAL
INFORMATION BUSINESS GENERAL
TELECOMMUNICATIONS SERVICES MERCHANDISING SEGMENTS CORPORATE CONSOLIDATED
------------------ ----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE TEN MONTHS
ENDED DECEMBER 31,
1995:
Net sales.......... $ 13,136,644 $ 2,648,203 $13,986,625 $29,771,472 $ -- $ 29,771,472
Operating income
(loss)............ (6,944,690) 238,129 756,135 (5,950,426) (3,861,203) (9,811,629)
Depreciation and
amortization...... 586,114 3,097 166,929 756,140 103,963 860,103
Amortization of
intangibles....... 344,228 20,706 74,954 439,888 -- 439,888
Capital
expenditures...... 7,457,971 14,478 528,985 8,001,434 650,758 8,652,192
Identifiable assets
at December 31,
1995.............. $ 36,998,045 $20,194,679 $10,458,663 $67,651,387 $217,711,468 $285,362,855
FOR THE YEAR ENDED
FEBRUARY 28, 1995:
Net sales.......... $ 14,909,225 $ 473,392 $10,182,143 $25,564,760 $ -- $ 25,564,760
Operating income
(loss)............ (3,422,937) (117,605) 307,097 (3,233,445) (2,377,991) (5,611,436)
Depreciation and
amortization...... 263,839 744 153,731 418,314 14,188 432,502
Amortization of
intangibles....... 128,117 6,165 90,894 225,176 -- 225,176
Capital
expenditures...... 1,328,938 4,486 286,583 1,620,007 196,321 1,816,328
Identifiable assets
at February 28,
1995.............. $ 14,594,048 $ 4,218,579 $ 6,911,270 $25,723,897 $ 3,785,555 $ 29,509,452
</TABLE>

F-30
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 26--BUSINESS SEGMENTS--(CONTINUED)

NOTE 27--NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" ("SFAS No. 121"),
which provides guidance on when to assess and how to measure impairment of
long-lived assets, certain intangibles and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable intangibles
to be disposed of. The Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which gives companies a choice of the method of
accounting used to determine stock-based compensation. Companies may account for
such compensation either by using the intrinsic value-based method provided in
APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB No. 25") or the
fair market value-based method provided in SFAS No. 123. These accounting
standards are effective for financial statements for fiscal years beginning
after December 15, 1995. As of January 1, 1996, the Company adopted SFAS No. 121
and SFAS No. 123. The adoption of SFAS No. 121 had no effect on the Company. The
Company intends to continue to use the intrinsic value-based method provided in
APB No. 25 to determine stock-based compensation, and therefore the sole effect
of the adoption of SFAS No. 123 will be the obligation to comply with the new
disclosure requirements provided thereunder.

NOTE 28--SUBSEQUENT EVENTS TO DECEMBER 31, 1995 (UNAUDITED)

AGREEMENT TO ACQUIRE MILLIWAVE LIMITED PARTNERSHIP:

In June 1996, a subsidiary of the Company entered into certain agreements
with Milliwave Limited Partnership ("Milliwave") whereby the Company would
acquire Milliwave for a purchase price of $40 million in cash and 3.4 million
shares of the Company's common stock (which had an aggregate market value of
$85 million based on a $25 per share market price at the time the agreements
were executed). The number of shares to be issued in connection with the
acquisition is subject to upward or downward adjustment depending on the market
price of the Company's Common Stock at the time the transaction is closed;
provided, however, that the Company may determine not to consummate the
transaction if the adjustment results in the Company being required to issue
in excess of 4.5 million shares. The acquisition is subject to certain
regulatory approvals, but is expected to be consummated in the second quarter
of calendar year 1997. The Company also has

F-31
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 28--SUBSEQUENT EVENTS TO DECEMBER 31, 1995 (UNAUDITED)--(CONTINUED)

entered into a (i) services agreement with Milliwave pursuant to which it has
agreed to provide services to Milliwave in connection with the buildout by
Milliwave of its licensed areas in consideration for payment of monthly site
access and management fees, as well as installation fees, and (ii) a two-year
transmission path lease agreement with Milliwave permitting the Company to use
up to 488 radio links in Milliwave's licensed areas.

AGREEMENT TO ACQUIRE PINNACLE NINE COMMUNICATIONS, LLC:

In June 1996, the Company entered into an agreement to acquire the
outstanding membership interests of Pinnacle Nine Communications, LLC which is
the holder of three 38 GHz licenses. The acquisition is subject to
certain regulatory approvals, but is expected to be consummated in the last
quarter of 1996.

AGREEMENT TO ACQUIRE LOCAL AREA TELECOMMUNICATIONS, INC.:

In April 1996, a subsidiary of the Company entered into an agreement to
acquire certain assets of Local Area Telecommunications, Inc. ("Locate"),
comprising its business as a competitive access provider of local digital
microwave distribution services and facilities to large corporations and to
interexchange and other common carriers. The purchase price for such assets will
be $17,500,000, which will be paid in the form of a promissory note due six
months after closing and bearing interest at the annual rate of eight percent.
The Company may convert the note, in whole but not part, at its election, into
that number of shares of Common Stock equal to (a) the principal amount and all
accrued and unpaid interest on the note divided by (b) the average of the
closing prices of the Common Stock for the five days ending on the date on which
the Company gives written notice of its decision to convert the note. Locate has
no rights of conversion. The Company has granted certain registration rights to
Locate with respect to such shares of Common Stock in the event that the Company
elects such conversion.

Consummation of the purchase is subject to certain closing conditions
including (i) expiration or termination of the waiting period under
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (ii)
consent of the Federal Communications Commission and certain state agencies to
the transfer of control of, or the assignment of certain licenses and other
authorizations to conduct business. The purchase is expected to close as soon as
practicable after satisfaction of all closing conditions set forth in the
purchase agreement.

In connection with the purchase, the Company and Locate entered into a
service agreement for a term commencing in April 1996 and terminating upon the
earlier to occur of (i) the closing of the purchase or (ii) termination of the
purchase agreement. Pursuant to the services agreement, the Company performs
certain consulting and related services for Locate. As full compensation for
performance of such services, Locate pays the Company a fee of $125,000 per
month during the term of the agreement, subject to certain adjustments.

ACQUISITION OF 80% EQUITY INTEREST IN FOX LORBER ASSOCIATES, INC.:

In April 1996, NFF acquired 80% of the outstanding common stock of
Fox/Lorber Associates, Inc. ("Fox/Lorber"), an independent distributor of films,
entertainment series and documentaries in the television and home video markets.
The purchase price consisted of $150,000 in common stock of the Company and
$300,000 in cash contributed by NFF to the working capital of Fox/Lorber.

F-32
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 28--SUBSEQUENT EVENTS TO DECEMBER 31, 1995 (UNAUDITED)--(CONTINUED)
NFF also purchased, in a separate, simultaneous transaction, all of the
outstanding shares of Fox/Lorber's preferred stock, together with three
promissory notes in the aggregate principal amount of $136,507 for an aggregate
purchase price of $1,020,000 in the Company's Common Stock.

The 20% minority shareholder has an option subject to certain earnings
levels, to put his interest to the Company and the Company is obligated, under
certain conditions, to provide up to $2,000,000 in working capital to Fox
Lorber.

ACQUISITION OF 65% EQUITY INTEREST IN THE WINNING LINE, INC.:

In April 1996, WNM converted $970,000 principal amount of loans (plus
accrued interest) outstanding to The Winning Line, Inc. ("TWL"), into a 65%
equity interest in TWL.

TWL operates the SportsFan Radio Network ("SportsFan"). SportsFan is a
multimedia sports programming and production company which provides live sports
programming to more than 200 sports and talk format radio stations across the
United States, up to 24 hours a day, including to affiliate stations in 90 of
the top 100 United States markets.

WNM has the right to require certain principals of TWL who own the remaining
35% equity interest in TWL to sell, and such principals have the right to
require WNM to purchase the remaining 35% equity interest based upon certain
criteria. At WNM's option, the purchase price in either instance can be paid in
shares of the Company's common stock (Note 8).

STOCK OPTION PLAN:

On April 26, 1996, the Board of Directors approved an amendment to the 1992
and 1995 Plans, increasing the number of shares of common stock available for
grant to 1,500,000 and 3,500,000, respectively, subject to stockholder approval.

PUBLIC OFFERING:

The Company has filed Registration Statements to offer to the public four
million shares of the Company's common stock and $200 million of Senior Notes
and Senior Subordinated Notes (the "Offering"). There can be no assurance that
the Offering will be completed.

AGREEMENT WITH DIGEX, INC.:

In June 1996, the Company entered into a six-year agreement with Digex, Inc.
("Digex"), a national provider of Internet access services. Pursuant to this
agreement, the Company has the right of first refusal to provide all of Digex's
local access and/or customer interconnection requirements through the use of the
Company's Wireless Fiber or other services. The Company also will purchase from
Digex, during the term of the agreement, a minimum of $5 million of Internet
access services on a discounted basis.

F-33
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Local Area Telecommunications, Inc.

We have audited the accompanying balance sheets of the Microwave Division of
Local Area Telecommunications, Inc. as of December 31, 1995 and 1994, and the
related statements of operations, divisional (deficit) surplus and cash flows
for the years 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Microwave Division of
Local Area Telecommunications, Inc. at December 31, 1995 and 1994, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the financial statements, the Microwave Division's
recurring losses from operations and divisional deficit raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustment that might result from the outcome of this
uncertainty. As also discussed in Note 1, on April 1, 1996, the Company entered
into an agreement to sell certain of the assets of the Microwave Division to
WinStar Communications, Inc.

Ernst & Young LLP

MetroPark, New Jersey
April 9, 1996

F-34
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
MARCH --------------------------
31, 1996 1995 1994
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 71,961 $ 441,994 $ 1,772,460
Accounts receivable, net of allowance for doubtful
accounts of $75,000, $90,000 and $73,000 at
March 31, 1996 and December 31, 1995 and 1994....... 441,906 538,269 526,391
Inventories....................................... 3,366,607 3,353,641 2,895,981
Prepaids and other current assets................. 148,191 171,752 619,885
----------- ----------- -----------
Total current assets................................ 4,028,665 4,505,656 5,814,717
Property and equipment, net......................... 9,409,962 10,015,056 11,531,900
Security deposits................................... 84,077 83,308 85,164
----------- ----------- -----------
Total assets........................................ $13,522,704 $14,604,020 $17,431,781
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND DIVISIONAL (DEFICIT) SURPLUS
Current liabilities:
Accounts payable and accrued expenses............. $ 528,941 $ 874,001 $ 1,945,129
Obligations under capital leases.................. 80,050 107,816 65,535
Interest payable.................................. 2,059,013 1,645,708 641,579
Notes payable..................................... 17,300,000 17,300,000
----------- ----------- -----------
Total current liabilities........................... 19,968,004 19,927,525 2,652,243
Capital lease obligations, less current portion..... 233,862 233,862 210,295
Long-term debt...................................... 25,000 25,000 13,050,000
----------- ----------- -----------
Total liabilities................................... 20,226,866 20,186,387 15,912,538
Divisional (deficit) surplus........................ (6,704,162) (5,582,367) 1,519,243
----------- ----------- -----------
Total liabilities and divisional (deficit)
surplus............................................ $13,522,704 $14,604,020 $17,431,781
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes.

F-35
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------------------- --------------------------
1996 1995 1995 1994
----------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Sales of communication services....... $ 987,007 $1,097,650 $ 4,264,664 $ 4,946,988
Sales of communications systems....... 225,530 680,729 2,656,718 1,842,828
Installation charges.................. 3,500 4,665 169,165 88,151
----------- ---------- ----------- -----------
1,216,037 1,783,044 7,090,547 6,877,967
Operating expenses:
Network services...................... 673,540 616,601 2,320,374 2,381,922
Cost of systems sold.................. 158,159 493,243 1,714,429 1,302,601
Selling, general and administrative... 456,187 530,355 2,582,894 2,780,982
Depreciation and amortization......... 637,109 686,322 2,784,156 2,608,765
----------- ---------- ----------- -----------
1,924,995 2,326,521 9,401,853 9,074,270
----------- ---------- ----------- -----------
Loss from operations.................... (708,958) (543,477) (2,311,306) (2,196,303)
Other income (expense):
Interest income....................... 2,407 4,974 11,736 7,370
Interest expense...................... (480,080) (350,004) (1,587,851) (1,012,434)
----------- ---------- ----------- -----------
(477,673) (345,030) (1,576,115) (1,005,064)
----------- ---------- ----------- -----------
Net loss.............................. $(1,186,631) $ (888,507) $(3,887,421) $(3,201,367)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>

See accompanying notes.

F-36
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
STATEMENTS OF DIVISIONAL (DEFICIT) SURPLUS
THREE MONTHS ENDED MARCH 31, 1996 AND
YEARS ENDED DECEMBER 31, 1995 AND 1994

Divisional surplus at December 31, 1993......................... $ 4,692,407
Net loss...................................................... (3,201,367)
Net activity with Locate...................................... 28,203
-----------
Divisional surplus at December 31, 1994......................... 1,519,243
Net loss...................................................... (3,887,421)
Net activity with Locate...................................... (3,214,189)
-----------
Divisional deficit at December 31, 1995......................... (5,582,367)
Net loss (unaudited).......................................... (1,186,631)
Net activity with Locate (unaudited).......................... 64,836
-----------
Divisional deficit at March 31, 1996 (unaudited)................ $(6,704,162)
-----------
-----------

See accompanying notes.

F-37
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1996 1995 1995 1994
----------- ----------- ----------- -----------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................... $(1,186,631) $ (888,507) $(3,887,421) $(3,201,367)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization........ 637,109 683,822 2,784,156 2,608,765
Changes in assets and liabilities:
Accounts receivable................ 96,363 (216,240) (11,878) 142,512
Inventory.......................... (12,966) (51,785) (457,660) (228,059)
Prepaids and other................. 22,792 9,559 449,989 (291,231)
Accounts payable and accrued
expenses.......................... (345,060) (407,414) (1,071,128) (223,308)
Interest payable................... 413,305 (89,422) 1,004,129 2,918
----------- ----------- ----------- -----------
Net cash used in operating
activities............................ (375,088) (959,987) (1,189,813) (1,189,770)
INVESTING ACTIVITIES
Capital expenditures................... (32,015) (137,719) (1,164,712) (432,099)
----------- ----------- ----------- -----------
Net cash used in investing
activities............................ (32,015) (137,719) (1,164,712) (432,099)
FINANCING ACTIVITIES
Cash overdraft......................... 300,553
Payments made under capital lease
obligation............................ (27,766) (15,776) (36,752) (20,471)
Payments made on long-term debt........ (25,000) (7,500,000)
Proceeds from issuance of long-term
debt.................................. 4,300,000 10,500,000
Payments to Locate..................... (1,499,988) (6,073,442) (3,109,794)
Payments from Locate................... 64,836 540,457 2,859,253 2,952,997
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities................. 37,070 (674,754) 1,024,059 2,822,732
----------- ----------- ----------- -----------
Net (decrease) increase in cash........ (370,033) (1,772,460) (1,330,466) 1,200,863
Cash at beginning of period............ 441,994 1,772,460 1,772,460 571,597
----------- ----------- ----------- -----------
Cash at end of period.................. $ 71,961 $ -- $ 441,994 $ 1,772,460
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NON-CASH FINANCING ACTIVITIES
Acquisition of equipment under capital
leases................................ $ 102,600 $ 296,300
Issuance of Locate's common stock to
retire debt........................... 185,000
</TABLE>

See accompanying notes.

F-38
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
MARCH 31, 1996 AND 1995 (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Local Area Telecommunications, Inc. (the Company), a subsidiary of
MobileMedia Corporation (MobileMedia), was incorporated on October 21, 1981. The
Company's Microwave Division (the Division) is engaged in operations pertaining
to the installation, servicing and maintenance of digital microwave radio
systems for business use within major metropolitan areas. The Division provides
voice, data and image transmission between dispersed locations through
point-to-point, point-to-multipoint and point-to-point short-haul digital
microwave radio. The Division also designs, installs and sells microwave
infrastructures used in cellular communication systems and other networks.

The accompanying financial statements of the Microwave Division of Local
Area Telecommunications, Inc. include all of the microwave operations of Local
Area Telecommunications, Inc., including an allocated share of common expenses
and specifically identifiable assets, liabilities and long-term debt. These
financial statements have been prepared from the accounting records of Local
Area Telecommunications, Inc. and are presented on a going concern basis which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. The Division incurred net losses
of $3,769,387 and $3,201,367 for the years ended December 31, 1995 and 1994,
respectively, and as of December 31, 1995 had a divisional deficit of
$5,432,367. The continued operations of the Division are dependent upon the
receipt of additional funding from MobileMedia and/or other sources. There can
be no assurance that such funding will be received.

In October 1994, following a comprehensive review of the operations of the
Company, the Company's Board of Directors developed a plan to sell substantially
all of the assets of the Company by October 1995, retaining an investment banker
to market the assets. At December 31, 1994, in accordance with Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions", the Company accrued
losses in anticipation of disposal prior to December 31, 1995. At December 31,
1995, the Microwave Division remained unsold and the Company accrued additional
losses expected to be incurred due to the delay in consummating the disposal.
The accrued losses at December 31, 1995 and 1994 have been recorded in the
Company's accounts, and the accompanying financial statements do not reflect any
allocation therefrom.

On April 1, 1996, the Company entered into an agreement (the "Sale
Agreement") to sell the assets of the Microwave Division, excluding cash,
accounts receivable and certain security deposits, to WinStar Communications,
Inc. (WinStar) in exchange for the assumption of certain liabilities and $17.5
million in the form of notes bearing interest at 8% (the WinStar Notes). The
WinStar Notes are convertible into common stock of WinStar at the option of
WinStar.

Consummation of the sale noted above is subject to regulatory approval.
There can be no assurance, however, that the sale will be consummated or that,
if consummated, it will be consummated on the terms described above.

In connection with the Sale Agreement, the Company entered into a service
agreement ("Services Agreement") for a term commencing in April 1996 and
terminating upon the earlier to occur of (i) the closing of the Sale Agreement,
or (ii) termination of the Sale Agreement. Pursuant to the Services Agreement,
WinStar performs certain consulting and related services for the Company. As
full

F-39
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
compensation for WinStar's performance of such services, the Company pays
WinStar a fee of $125,000 per month during the term of the agreement, subject to
certain adjustments.

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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Unaudited Interim Financial Statements

The interim financial information as of March 31, 1996 and the three months
ended March 31, 1996 and 1995 contained herein is unaudited but, in the opinion
of management, includes all adjustments of a normal recurring nature which are
necessary for a fair presentation of the financial position, results of
operations, and cash flows for the periods presented. Results of operations for
the periods presented herein are not necessarily indicative of results of
operations for the entire year.

Inventories

Inventories consist of the cost of communications equipment not yet placed
in service plus the net book value of equipment previously in service which the
Company anticipates returning to service within one year. All inventory is
recorded at the lower of average cost or market.

Property and Equipment

Property and equipment additions, as well as the labor costs associated with
the installation thereof, are capitalized at cost. Depreciation is computed on
the straight-line method based upon estimated useful lives ranging from 5 to 10
years.

Revenue Recognition

The Company recognizes revenue for communication services when the services
are provided. Sales of communication systems are recognized upon delivery and
installation.

Impairment of Long-Lived Assets

In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Division adopted Statement No.
121 as of January 1, 1996, which had no effect on the Division's financial
position or results of operations.

Income Taxes

The Division is included in the consolidated federal income tax return of
MobileMedia. No consolidated federal income tax expense or benefit is allocated
to the Division.

F-40
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
MARCH --------------------------
31, 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)

<CAPTION>
<S> <C> <C> <C>
Equipment placed in service......................... $26,504,158 $26,472,594 $26,641,661
Furniture and fixtures.............................. 1,691,465 1,715,051 1,452,478
----------- ----------- -----------
28,195,623 28,187,645 28,094,139
Less accumulated depreciation....................... 18,785,661 18,172,589 16,562,239
----------- ----------- -----------
$ 9,409,962 $10,015,056 $11,531,900
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

Included in equipment placed in service is certain equipment obtained under
capital leases. At March 31, 1996, this equipment has a gross book value of
approximately $429,000 and a net book value of approximately $366,000.

3. NOTES PAYABLE

Notes payable, all of which are unsecured, consisted of the following:
<TABLE>
<CAPTION>
MARCH DECEMBER 31
31, 1996 1995 1994
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
12% super senior note payable....................... $ 7,300,000 $ 7,300,000 $ 3,000,000
10% senior notes payable, due March 31, 1996........ 7,500,000 7,500,000 7,500,000
10% senior note payable, due September 15, 1996..... 2,500,000 2,500,000 2,500,000
12% Subordinated Note............................... 25,000 25,000 50,000
----------- ----------- -----------
$17,325,000 $17,325,000 $13,050,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

In December 1994, the Division refinanced $7,500,000 of its $10,000,000 10%
note payable, due September 15, 1996 with two $3,750,000 10% senior notes
payable (the Senior Notes), due January 1, 1996. On April 28, 1995, the due
dates of the two $3,750,000 Senior Notes were extended to March 31, 1996.

In December 1994, the Division borrowed $3,000,000 from a MobileMedia
shareholder in exchange for a 12% super senior note payable due January 1, 1996.
During 1995, the Division borrowed $4,300,000 in exchange for six additional 12%
super senior notes (collectively, the "Super Senior Notes").

As of April 9, 1996, neither the Senior Notes nor the Super Senior Notes
(collectively, the "Notes") were repaid. It is anticipated that the Notes will
be exchanged for WinStar Notes acquired by the Company pursuant to the Sale
Agreement (Note 1).

Total interest paid for the three months ended March 31, 1996 and 1995, and
for the years ended December 31, 1995 and 1994 was approximately $67,000,
$439,000, $586,000 and $1,269,000, respectively.

F-41
<PAGE>
THE MICROWAVE DIVISION OF
LOCAL AREA TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. RELATED PARTY TRANSACTIONS

For the three months ended March 31, 1996 and 1995, and for the years ended
December 31, 1995 and 1994, the Division had sales to MobileMedia of
approximately $9,000, $18,000, $70,000 and $721,000, respectively.

In December 1995, on behalf of the Division, the Company acquired certain
vehicles, totaling approximately $103,000, under capital lease agreements (the
Agreements) with Roos Capital Planners, Inc., a related party. The Agreements
require the Company to make 36 monthly installments of $4,000.

5. COMMITMENTS AND CONTINGENCIES

On behalf of the Division, the Company leases space under cancellable and
noncancellable operating leases which expire at various dates through 2000.
Total rental expense for the three months ended March 31, 1996 and 1995, and for
the years ended December 31, 1995 and 1994 was approximately $402,000, $373,000,
$1,586,000 and $1,811,000, respectively. Additionally, the Company is obligated
under capital leases for certain equipment.

Future minimum payments under capital leases and noncancellable operating
leases with initial terms of one year or more consists of the following as of
December 31, 1995:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1996................................................................. $147,900 $ 630,000
1997................................................................. 147,900 538,000
1998................................................................. 122,708 18,000
1999................................................................. 8,000
2000................................................................. 3,000
-------- ----------
Total future minimum payments........................................ 418,508 $1,197,000
----------
----------
Less amount representing interest.................................... 76,830
--------
Present value of net minimum lease payments (including current
portion of $107,816)............................................... $341,678
--------
--------
</TABLE>

The Company has employment agreements with certain executives through
December 31, 1996 requiring the payment of $428,645 per year in compensation
with increases of 5% per annum. Additionally, payments of $1,500,000 may be
required in certain circumstances by the Company in the event of the termination
of employment of the executives within six months from the date of sale of the
Company, as defined in the employment agreements. Also, if the earnings before
interest, depreciation, taxes and amortization of MobileMedia increase by more
than 30% and 50%, the Chief Executive Officer is entitled to a payment of
$350,000 for each noted percentage increase. Based on the specified performance
criteria, $350,000 was expensed in each of 1994 and 1995, and is included in the
results of operations of the Division.

F-42
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors
AVANT-GARDE TELECOMMUNICATIONS, INC.

We have audited the accompanying balance sheet of Avant-Garde
Telecommunications, Inc. as of February 28, 1995, and the related statements of
operations, and cash flows for each of the two years in the period ended
February 28, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Avant-Garde
Telecommunications, Inc. as of February 28, 1995, and the results of its
operations and its cash flows for each of the two years in the period ended
February 28, 1995, in conformity with generally accepted accounting principles.

GRANT THORNTON LLP

New York, New York
July 28, 1995

F-43
<PAGE>
AVANT-GARDE TELECOMMUNICATIONS, INC.
BALANCE SHEET
FEBRUARY 28, 1995

<TABLE>
<S> <C>
ASSETS
Cash......................................................................... $ 237
Accounts receivable.......................................................... --
Other current assets......................................................... 97,140
-----------
Total current assets....................................................... 97,377
Property and equipment, net.................................................. 3,149,911
Other assets................................................................. 432,683
-----------
Total assets............................................................... $ 3,679,971
-----------
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable and accrued expenses........................................ $ 2,765,578
-----------
Due to affiliate............................................................. 3,350,510
-----------
Total liabilities............................................................ 6,116,088
-----------
Stockholders' Deficiency
Preferred stock, $.001 par value; authorized 50,000 shares, no shares issued
and outstanding............................................................ --
Common stock, $.001 par value; authorized 200,000 shares, issued and
outstanding 2,250 shares................................................... 2
Additional paid-in capital................................................... 20
Accumulated deficit.......................................................... (2,436,139)
-----------
Total stockholders' deficiency............................................. (2,436,117)
-----------
Total liabilities and stockholders' deficiency............................. $ 3,679,971
-----------
-----------
</TABLE>

See Notes to Financial Statements

F-44
<PAGE>
AVANT--GARDE TELECOMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE PERIOD FEBRUARY 28,
MARCH 1 TO ------------------------
JULY 17, 1995 1995 1994
-------------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Revenues.............................................. $ 17,779 $ 7,458 $ --
-------------- ----------- ---------
Expenses:
Selling, general, and administrative expenses....... 1,704,294 2,277,094 134,797
Depreciation........................................ 59,250 25,872 --
-------------- ----------- ---------
Total expenses........................................ 1,763,544 2,302,966 134,797
-------------- ----------- ---------
Operating loss........................................ (1,745,765) (2,295,508) (134,797)
Interest expense (income), net........................ -- 6,039 (205)
Amortization of intangibles........................... 31,978 -- --
-------------- ----------- ---------
Net loss.............................................. (1,777,743) (2,301,547) (134,592)
Accumulated deficit, beginning of period.............. (2,436,139) (134,592) --
-------------- ----------- ---------
Accumulated deficit, end of period.................... $ (4,213,882) $(2,436,139) $(134,592)
-------------- ----------- ---------
-------------- ----------- ---------
</TABLE>

See Notes to Financial Statements

F-45
<PAGE>
AVANT--GARDE TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE PERIOD FEBRUARY 28,
MARCH 1 TO ------------------------
JULY 17, 1995 1995 1994
-------------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net loss............................................ $ (1,777,743) $(2,301,547) $(134,592)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation........................................ 59,250 25,872 --
Amortization of intangibles......................... 31,978 -- --
(Increase) decrease in operating assets
Accounts receivable............................... (9,660) 22 --
Other current assets.............................. 168 (97,140) --
Increase (decrease) in accounts payable and accrued
expenses........................................... (913,593) 921,890 43,688
-------------- ----------- ---------
Net cash used in operating activities................. (2,609,600) (1,450,903) (90,904)
-------------- ----------- ---------
Cash flows from investing activities
Purchase of property and equipment.................. (2,447,761) (1,375,783) --
Investment in other assets.......................... (458,371) (432,683) --
-------------- ----------- ---------
Net cash used in investing activities................. (2,906,132) (1,808,466) --
-------------- ----------- ---------
Cash flows from financing activities
Increase in due to affiliate........................ 5,515,815 3,245,510 105,000
-------------- ----------- ---------
Net increase (decrease) in cash....................... 83 (13,859) 14,096
Cash at beginning of period........................... 237 14,096 --
-------------- ----------- ---------
Cash at end of period................................. $ 320 $ 237 $ 14,096
-------------- ----------- ---------
-------------- ----------- ---------
</TABLE>

See Notes to Financial Statements

F-46
<PAGE>
AVANT-GARDE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements include the accounts of Avant-Garde
Telecommunications, Inc. ("Company"), prepared in accordance with generally
accepted accounting principles.

NATURE OF BUSINESS:

The Company develops, markets and delivers local telecommunication services
in the United States. The local telecommunications market has become
increasingly open to competition as a result of recent technological
developments and procompetitive regulatory initiatives. The Company, based in
Washington, D.C., holds 30 licenses, each encompassing four 100-MHz millimeter
wave radio channels. These licenses allow the Company to deliver voice, data and
video over 400 MHz of exclusive bandwidth in the 38 GHz band. These licenses
were issued to the Company on September 16, 1993. Under the terms of its
licenses, the Company was required to begin the provision of services authorized
under such licenses by March 15, 1995. On March 15, 1995, the Company filed a
certificate of completion for each license with the Federal Communications
Commission ("FCC").

PROPERTY AND EQUIPMENT:

Property and equipment is stated at cost. When assets are placed into
service, depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the related assets, which ranges from
3 to 8 years.

OTHER ASSETS:

Certain costs, associated directly with meeting FCC license requirements
have been capitalized. These costs will be amortized over a 3 year period
beginning June 1, 1995, when the licenses are deemed to have been placed in
service. The amount capitalized is $417,000 as of February 28, 1995.

UNAUDITED FINANCIAL STATEMENTS:

In the opinion of the Company, the accompanying unaudited statements of
operations and statements of cash flows for the period of March 1 to July 17,
1995 include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results of operations and the cash flows for the
period of March 1, 1995 to July 17, 1995.

NOTE 2--DUE TO AFFILIATE

In February and April, 1994, WinStar Wireless, Inc. ("Wireless"), a
wholly-owned subsidiary of WinStar Communications, Inc. ("WCII"), purchased a
49% interest in the company from its majority stockholder for $4,900,000 in cash
and stock. Wireless also obtained an option to acquire an additional 31% of the
Company from the majority stockholder. The Company entered into a management
agreement (the "Agreement") with Wireless at that time. Under the terms of the
Agreement, Wireless has managed the operations of the company since February
1994, subject to the direction of the majority shareholder, including the
development of a strategic business plan and financing all of the operations of
the Company, including capital expenditures. The Agreement provided for a
management fee to Wireless equal to 20% of the Company's gross receipts, subject
to a minimum fee of $10,000 per month. All amounts advanced by Wireless to the
Company, as well as accrued management fees

F-47
<PAGE>
AVANT-GARDE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--DUE TO AFFILIATE--(CONTINUED)
payable, are included in Due to Affiliate in the accompanying balance sheets and
are non-interest bearing.

On April 10, 1995, WCII entered into an agreement with all of the Company's
shareholders pursuant to which WCII agreed to acquire the remaining 51% of the
Company in exchange for 1,275,000 restricted shares of WCII's common stock
valued at $5,100,000. This agreement was contingent upon the Company obtaining
consent from the FCC to transfer control of its licenses. On June 26, 1995, such
consent was granted by the FCC, and on July 17, 1995, this agreement was
consummated and the transfer took place. Pursuant to the terms of the agreement,
the Company merged into WinStar Wireless Fiber Corporation, a wholly-owned
subsidiary of WCII which is the sole surviving corporation.

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

FEBRUARY 28, 1995
-----------------

Communications Network..................................... $ 2,532,103
Computer Systems and Equipment............................. 592,901
Furniture, Fixtures & Equipment............................ 48,230
Other...................................................... 2,549
-----------------
$ 3,175,783
Accumulated Depreciation................................... (25,872)
-----------------
$ 3,149,911
-----------------
-----------------

NOTE 4--P-COM CONTRACT

In November 1994, the Company entered into a non-exclusive, three year
agreement with P-Com, Inc. ("P-Com"), a manufacturer and distributor of radio
links, providing for the purchase of radio links from P-Com. The contract
pricing structure includes provisions relating to the volume of purchases under
the agreement. An annual minimum volume requirement must be met in order to
maintain the agreed upon pricing structure. The contract is cancelable by the
Company subject to certain conditions, such as the guarantee of the next 90
days' purchases in accordance with an agreed upon schedule as well as the
payment of certain deferred billings. As of February 28, 1995, the Company's
noncancellable purchase commitment was approximately $7,250,000. These
conditions to cancellation become more favorable to the Company as certain
volume levels are reached.

Certain amounts paid under the contract are prepayments for future purchases
and are included in communications equipment in property and equipment but are
not being depreciated. In future periods, as certain volume levels are attained,
these amounts may be recovered. This prepaid amounts as of February 28, 1995 is
$822,500.

F-48
<PAGE>
AVANT-GARDE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5--INCOME TAXES

The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires the use of the asset and liability
method of accounting for income taxes. Under this method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying
enacted statutory rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities.

The temporary differences which result in deferred tax assets consist of net
operating loss carryforwards. The tax effect of this temporary difference is as
follows:

FEBRUARY 28, 1995
-----------------

Net operating loss carryforwards........................... $ 826,000
Valuation allowance........................................ (826,000)
-----------------
$--
-----------------
-----------------

Due to losses incurred by the Company, a full valuation of the deferred tax
asset has been provided because realization of this future benefit cannot
currently be assured. The Company's net operating loss carryforwards of
approximately $3,534,000 will begin to expire in 2009, if not utilized. The
Company's ability to utilize its net operating losses deductions to offset
future taxable income is limited due to the change in control as defined in
Internal Revenue Code Section 382.

NOTE 6--COMMITMENTS

In May 1995, Wireless completed a private placement of $7,500,000 of five
year secured convertible notes (the "Notes"). These Notes are guaranteed by the
Company, and the security for the Notes includes a pledge by Wireless of its
shares of the Company.

F-49
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

THE PARTNERS
MILLIWAVE LIMITED PARTNERSHIP

We have audited the accompanying balance sheet of Milliwave Limited
Partnership (a Florida limited partnership) as of December 31, 1995 and the
related statement of changes in partners' capital for the period April 25, 1995
(inception) through December 31, 1995. These financial statements are the
responsibility of the management of Milliwave Limited Partnership. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Milliwave Limited
Partnership as of December 31, 1995, in conformity with generally accepted
accounting principles.

GRANT THORNTON LLP

New York, New York
June 27, 1996

F-50
<PAGE>
MILLIWAVE LIMITED PARTNERSHIP
BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash............................................................... $ 200,876 $ 11,222
----------- ------------
Total current assets........................................... 200,876 11,222
Licenses........................................................... 359,462 317,581
----------- ------------
Total assets................................................... $ 560,338 $328,803
----------- ------------
----------- ------------

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable................................................... $ 85,338 $ 53,803
Loans payable--partners............................................ 200,000
----------- ------------
Total current liabilities...................................... 285,338 53,803
PARTNERS' CAPITAL.................................................... 275,000 275,000
----------- ------------
Total liabilities and partners' capital........................ $ 560,338 $328,803
----------- ------------
----------- ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-51
<PAGE>
MILLIWAVE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
APRIL 25, 1995 (INCEPTION) THROUGH
DECEMBER 31, 1995

Cost of contributed license applications........................... $122,654
Cash contributed................................................... 152,346
--------
Partners' capital at December 31, 1995............................. $275,000
--------
--------

The accompanying notes are an integral part of these statements.

F-52
<PAGE>
MILLIWAVE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND MARCH 31, 1996 (UNAUDITED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Milliwave Limited Partnership (a Florida limited partnership, hereinafter
referred to as the "Partnership") was formed on April 25, 1995 to apply for and
obtain licenses from the Federal Communications Commission ("FCC") and to
exploit such licenses for commercial purposes. Through March 31, 1996, the
Partnership has had no operations, other than the application for licenses from
the FCC.

A summary of the significant accounting policies applied in the preparation
of the accompanying balance sheet follows:

1. Income Taxes

No provision for Federal, state or local income taxes has been provided as
the Partnership is not a taxable entity and the partners are individually liable
for the taxes on their shares of the Partnership's income.

2. Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, the Partnership is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.

3. Unaudited Financial Statements

In the opinion of the Partnership, the accompanying unaudited balance sheet
as of March 31, 1996 includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Partnership as of March 31, 1996.

NOTE 2--NATURE OF BUSINESS AND LICENSES

The Partnership holds 88 licenses granted by the FCC. These licenses allow
the Partnership to deliver communication services over the 38 GHz band specified
in the licenses. The licenses were issued at various dates through March 15,
1996. Under the terms of the licenses, the Partnership must construct a minimum
of one radio link per licensed service area within eighteen months of the date
of grant or risk revocation of the licenses by the FCC. The Partnership is
required to complete its minimum construction requirement for the licenses
granted at various dates from August 1996 through September 1997. At March 31,
1996 and December 31, 1995, the Partnership has capitalized $359,462 and
$317,581, respectively, of license costs consisting of filing, application and
legal fees relative to the licenses. (Reference is made to Note 5.)

F-53
<PAGE>
MILLIWAVE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND MARCH 31, 1996 (UNAUDITED)

NOTE 3--LOANS PAYABLE--PARTNERS

Loans payable--partners consist of the following:

MARCH 31,
1996
(UNAUDITED)
-----------
Loan payable--limited partners.................................. $ 200,000
-----------
-----------

In March 1996, the Partnership issued two $100,000 promissory notes to two
limited partners bearing interest at 5.86% per annum. The notes were to mature
on December 31, 1996 but were repaid in June 1996 out of the proceeds of a sale
of limited partnership interests. (Reference is made to Note 4.)

NOTE 4--PARTNERS' CAPITAL

For the period May 1994 through the formation of the Partnership in April
1995, one of the partners incurred $122,654 in license application costs, which
were contributed to the Partnership at cost and included in the capital of the
Partnership.

The balance of the capital contributed during the period ended December 31,
1995 represented cash contributed of $152,346.

On May 30, 1996, the Partnership amended and restated its limited
partnership agreement to provide for Series A and Series B Limited Partners.
Concurrent with the amendment, the Partnership sold $5,000,000 of Series B
Limited Partnership interests.

NOTE 5--COMMITMENTS AND CONTINGENCIES

Subsequent to December 31, 1995, the Partnership entered into purchase
orders to purchase radio links from P-Com, Inc. amounting to approximately
$570,000.

On November 13, 1995, the FCC released an order freezing the acceptance for
filing of new applications for 38 GHz frequency licenses. On December 15, 1995,
the FCC announced the issuance of an NPRM, pursuant to which it proposed to
amend its current rules relating to 38 GHz including, among other items, the
imposition of minimum construction requirements and an auction procedure for
issuance of licenses in the 37-40 GHz band. In addition, the FCC ordered that
those applications that are subject to mutual exclusivity with other applicants
or that were placed on public notice by the FCC after September 13, 1995 would
be held in abeyance and not processed by the FCC pending the outcome of the
proceeding initiated by the NPRM. Final rules with respect to the changes
proposed by the NPRM have not been adopted and the changes proposed by the NPRM
have been, and are expected to continue to be, the subject of numerous comments
by members of the telecommunications industry and others. Consequently, there
can be no assurance that the NPRM will result in the issuance of rules
consistent with the rules initially proposed in the NPRM. Until final rules are
adopted, the rules currently in existence remain in effect with respect to
outstanding licenses.

F-54
<PAGE>
MILLIWAVE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND MARCH 31, 1996 (UNAUDITED)

NOTE 6--WINSTAR COMMUNICATIONS, INC. AGREEMENT

In June 1996, the Partnership entered into an agreement with WinStar
Communications, Inc. ("WinStar") whereby WinStar would acquire the Partnership
for a purchase price of $40 million in cash and 3.4 million shares of WinStar
common stock. At the date of signing the agreement, the market value of the
common stock was approximately $85,000,000. The number of shares issued is
subject to adjustment, depending on WinStar's stock price on the date of closing
of the transaction with a maximum of 4.5 million shares and an ability for
WinStar to issue fewer than 3.4 million shares if the stock price exceeds
certain levels. The acquisition is subject to FCC approval, but is expected to
be consummated in the second quarter of calendar year 1997. The Partnership also
has entered into a (i) services agreement with Winstar pursuant to which Winstar
has agreed to provide services to the Partnership in connection with the
buildout of its licensed areas in consideration for payment of monthly site
access and management fees, as well as installation fees, and (ii) a two-year
transmission path lease agreement with Winstar permitting its use of up to 488
radio links in the Partnerships' licensed areas.

F-55
<PAGE>

WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated balance sheet has
been prepared by taking the March 31, 1996 consolidated balance sheets of
WinStar Communications, Inc. and subsidiaries (the "Company") and the balance
sheets of Milliwave Limited Partnership ("Milliwave"), the Microwave Division of
Local Area Telecommunications, Inc. ("Locate"), The Winning Line, Inc. ("TWL"),
and Fox Lorber Associates, Inc. ("Fox/Lorber"), and giving effect to the
acquisitions of 65% of TWL, 80% of Fox/Lorber, and certain assets of Locate by
the Company as if they occurred on March 31, 1996. The following unaudited pro
forma "as adjusted" balance sheet gives effect to each of these acquisitions as
well as to the Stock Offering and Debt Offering as if they occurred on March 31,
1996. The unaudited pro forma condensed consolidated balance sheet has been
prepared for information purposes only and does not purport to be indicative of
the financial condition that necessarily would have resulted had these
transactions taken place on March 31, 1996.

The following unaudited pro forma condensed consolidated statements of
operations for the ten month period ended December 31, 1995 and for the three
months ended March 31, 1996 give effect to the Company's acquisition of
Milliwave, certain assets of Locate, 65% of TWL, 80% of Fox/Lorber, and the
remaining 51% of Avant-Garde Telecommunications, Inc. ("AGT"), as well as the
Everest Financing and issuance of the Old Notes, as if they occurred as of the
beginning of the respective periods. The following unaudited pro forma "as
adjusted" statements of operations for the ten month period ended December 31,
1995 and for the three month period ended March 31, 1996 give effect to these
acquisitions and financings as well as to the Stock Offering and Debt Offering
as if they occurred as of the beginning of the respective periods. The revenues
and results of operations included in the following unaudited pro forma
condensed consolidated statements of operations are not indicative of
anticipated results of operations for periods subsequent to the transactions,
nor are they considered necessarily to be indicative of the results of
operations for the periods specified had the transactions actually been
completed at the beginning of each respective period.

These financial statements should be read in conjunction with the notes to
the unaudited pro forma condensed consolidated financial statements, which
follow, the consolidated financial statements of the Company and the financial
statements of Milliwave, Locate and AGT and the related notes thereto, appearing
elsewhere in the Prospectus.

F-56
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996

<TABLE>
<CAPTION>
THE COMPANY, MILLIWAVE, LOCATE, TWL, FOX/LORBER,
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............. $176,130,544 $ 200,876 $ 71,961 $ 11,126 $ 175,293
Short term investments................ 27,372,707 -- -- -- --
------------ --------- ----------- ----------- -----------
Total cash, cash equivalents and
short term investments................ 203,503,251 200,876 71,961 11,126 175,293
Investments in marketable equity
securities............................ 6,158,250 -- -- -- --
Accounts receivable, net.............. 9,746,373 -- 441,906 335,869 3,978,467
Notes receivable...................... 374,908 -- -- -- --
Inventories........................... 7,895,211 -- 3,366,607 -- 1,642,336
Prepaid expenses and other current
assets................................ 2,819,192 -- 148,191 24,552 82,899
------------ --------- ----------- ----------- -----------
Total current assets................ 230,497,185 200,876 4,028,665 371,547 5,878,995
Property and equipment, net........... 18,089,226 -- 9,409,962 166,918 194,990
Notes receivable...................... 4,029,280 -- -- -- --
Investments and advances.............. 322,733 -- -- 76,996
Licenses, net......................... 12,443,408 359,462 -- -- --
Intangible assets, net................ 3,071,629 -- -- -- 68,187
Deferred financing costs.............. 10,515,964 -- -- -- --
Other assets.......................... 1,503,366 -- 84,077 54,390 223,559
------------ --------- ----------- ----------- -----------
Total assets....................... $280,472,791 $ 560,338 $13,522,704 $ 592,855 $ 6,442,727
------------ --------- ----------- ----------- -----------
------------ --------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans payable......................... $ 8,876,316 $ 200,000 $17,300,000 $ 3,619,055 $ 820,380
Accounts payable and accrued
expenses.............................. 11,169,254 85,338 2,587,954 1,092,584 7,444,263
Capitalized lease obligations......... 1,437,852 -- 80,050 -- 17,000
------------ --------- ----------- ----------- -----------
Total current liabilities........... 21,483,422 285,338 19,968,004 4,711,639 8,281,643
Old senior notes payable.............. 159,194,067 -- -- -- --
New senior notes offered hereby....... -- -- -- -- --
New senior subordinated notes offered
hereby................................ -- -- -- -- --
Old convertible notes payable......... 79,597,033 -- -- -- --
Other notes payable................... 3,436,314 -- 25,000 -- 167,270
Capitalized lease obligations......... 5,809,745 -- 233,862 -- 3,013
------------ --------- ----------- ----------- -----------
Total liabilities................... 269,520,581 285,338 20,226,866 4,711,639 8,451,926
------------ --------- ----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock....................... 688,900 -- -- -- 3,151,800
Common stock, $.01 par value;
authorized 75,000,000 shares, issued
29,740,306 and outstanding 27,233,543
shares, pro forma issued 33,207,739
and outstanding 30,700,976 shares,
and pro forma as adjusted issued
37,207,739 and outstanding 34,700,976
shares................................ 297,404 -- -- 746,291 290,118
Partners' capital..................... 275,000
Additional paid-in capital............ 103,989,159 -- -- -- --
Accumulated deficit................... (52,009,885) -- (6,704,162) (4,865,075) (5,042,854)
------------ --------- ----------- ----------- -----------
52,965,578 275,000 (6,704,162) (4,118,784) (1,600,936)
Less: Treasury stock.................. (39,677,743) -- -- -- (408,263)
Deferred compensation.............. (996,875) -- -- -- --
Unrealized loss on investments in
marketable equity securities.... (1,338,750) -- -- -- --
------------ --------- ----------- ----------- -----------
Total stockholders' equity............ 10,952,210 275,000 (6,704,162) (4,118,784) (2,009,199)
------------ --------- ----------- ----------- -----------
Total liabilities and stockholders'
equity................................ $280,472,791 $ 560,338 $13,522,704 $ 592,855 $ 6,442,727
------------ --------- ----------- ----------- -----------
------------ --------- ----------- ----------- -----------

<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
INCREASE/ PRO FORMA INCREASE/
(DECREASE) AS ADJUSTED (DECREASE)
FOR FOR FOR THE PRO FORMA
ACQUISITIONS ACQUISITIONS OFFERINGS AS ADJUSTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............. $(40,000,000)(e) $136,492,839 $297,198,750(f) $433,691,589
$ (25,000)(b)
(71,961)(a)
Short term investments................ -- 27,372,707 27,372,707
------------ ------------ ------------ ------------
Total cash, cash equivalents and
short term investments................ (40,096,961) 163,865,546 297,198,750 461,064,296
Investments in marketable equity
securities............................ 6,158,250 6,158,250
Accounts receivable, net.............. (441,906)(a) 14,060,709 14,060,709
Notes receivable...................... 374,908 374,908
Inventories........................... 12,904,154 12,904,154
Prepaid expenses and other current
assets................................ (200,312)(c) 2,503,394 2,503,394
(148,191)(a)
(222,937)(d)
------------ ------------ ------------ ------------
Total current assets................ (41,110,307) 199,866,961 297,198,750 497,065,711
Property and equipment, net........... 27,861,096 27,861,096
Notes receivable...................... (970,000)(c) 435,725 435,725
(2,623,555)(d)
Investments and advances.............. 399,729 399,729
Licenses, net......................... 124,725,000(e) 142,565,213 142,565,213
5,037,343(a)
Intangible assets, net................ 3,090,724(b) 10,184,404 10,184,404
3,953,864(c)
Deferred financing costs.............. -- 10,515,964 7,925,000(f) 18,440,964
Other assets.......................... (64,080)(c) 1,717,235 1,717,235
(84,077)(a)
------------ ------------ ------------ ------------
Total assets....................... $ 91,954,912 $393,546,327 $305,123,750 $698,670,077
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans payable......................... $ 17,500,000(a) $ 27,285,688 $ $ 27,285,688
(136,508)(b)
(970,000)(c)
(17,300,000)(a)
(2,623,555)(d)
Accounts payable and accrued
expenses.............................. 23,033(b) 19,162,223 850,000(f) 20,012,223
(429,312)(c)
(2,587,954)(a)
(222,937)(d)
Capitalized lease obligations......... 1,534,902 1,534,902
------------ ------------ ------------ ------------
Total current liabilities........... (6,747,233) 47,982,813 850,000 48,832,813
Old senior notes payable.............. 159,194,067 -- 159,194,067
New senior notes offered hereby....... -- -- 100,000,000(f) 100,000,000
New senior subordinated notes offered
hereby................................ -- -- 100,000,000(f) 100,000,000
Old convertible notes payable......... 79,597,033 -- 79,597,033
Other notes payable................... (25,000)(a) 3,603,584 3,603,584
Capitalized lease obligations......... 6,046,620 6,046,620
------------ ------------ ------------ ------------
Total liabilities................... (6,772,233) 296,424,117 200,850,000 497,274,117
------------ ------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock....................... (3,151,800)(b) 688,900 688,900
Common stock, $.01 par value;
authorized 75,000,000 shares, issued
29,740,306 and outstanding 27,233,543
shares, pro forma issued 33,207,739
and outstanding 30,700,976 shares,
and pro forma as adjusted issued
37,207,739 and outstanding 34,700,976
shares................................ 34,000(e) 332,078 40,000(f) 372,078
(289,444)(b)
(746,291)(c)
Partners' capital..................... (275,000)(e)
Additional paid-in capital............ 1,169,326(b) 190,124,485 104,233,750(f) 294,358,235
84,966,000(e)
Accumulated deficit................... 5,042,854(b) (52,009,885) (52,009,885)
6,704,162(a)
4,865,075(c)
------------ ------------ ------------ ------------
98,318,882 139,135,578 104,273,750 243,409,328
Less: Treasury stock.................. 408,263(b) (39,677,743) (39,677,743)
Deferred compensation.............. (996,875) (996,875)
Unrealized loss on investments in
marketable equity securities.... (1,338,750) (1,338,750)
------------ ------------ ------------ ------------
Total stockholders' equity............ 98,727,145 97,122,210 104,273,750 201,395,960
------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity................................ $ 91,954,912 $393,546,327 $305,123,750 $698,670,077
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

F-57

<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
INCREASE/ PRO FORMA
(DECREASE) AS ADJUSTED
THE COMPANY, MILLIWAVE, LOCATE, TWL, FOX/LORBER, FOR FOR
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ACQUISITIONS ACQUISITIONS
------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 14,509,042 $-- $ 1,216,037 $ 391,108 $ 1,779,879 $ $ 17,896,066
Cost of sales................. 8,573,271 -- 831,699 338,628 1,115,958 10,859,556
--
------------ ----------- ----------- ----------- ------------ ------------
Gross profit............... 5,935,771 -- 384,338 52,480 663,921 -- 7,036,510
Selling, general and
administrative expenses...... 10,191,903 -- 456,187 475,729 647,472 11,771,291
Depreciation.................. 361,510 -- 637,109 8,250 7,000 1,013,869
--
------------ ----------- ----------- ----------- ------------ ------------
Operating loss................ (4,617,642) -- (708,958) (431,499) 9,449 -- (5,748,650)
Other (income) expense
Interest expense............. 8,492,345 -- 480,080 104,969 21,044 (132,810)(a) 8,965,628
Interest income.............. (2,734,454) -- (2,407) -- -- 520,000(m) (2,216,861)
Amortization of
intangibles................... 194,594 -- -- 1,800 1,500 119,807(b) 317,701
--
------------ ----------- ----------- ----------- ------------ ------------
Net loss before income
taxes......................... (10,570,127) -- (1,186,631) (538,268) (13,095) (506,997) (12,815,118)
Income taxes.................. 128,683 -- -- -- -- 128,683
--
------------ ----------- ----------- ----------- ------------ ------------
Net loss...................... $(10,698,810) $-- $(1,186,631) $ (538,268) $ (13,095) $ (506,997) $(12,943,801)
--
--
------------ ----------- ----------- ----------- ------------ ------------
------------ ----------- ----------- ----------- ------------ ------------
Net loss per share............ $ (0.39) $ (.42)
------------ ------------
------------ ------------
67,433(g)
Weighted average shares
outstanding................... 27,214,281 3,400,000(n) 30,681,714
------------ ------------ ------------
------------ ------------ ------------

<CAPTION>
PRO FORMA
ADJUSTMENTS
INCREASE/
(DECREASE)
FOR
THE PRO FORMA
OFFERINGS AS ADJUSTED
------------ ------------
<S> <C<C> <C>
Net sales..................... $ $ 17,896,066
Cost of sales................. 10,859,556

------------ ------------
Gross profit............... -- 7,036,510
Selling, general and
administrative expenses...... 11,771,291
Depreciation.................. 1,013,869

------------ ------------
Operating loss................ -- (5,748,650)
Other (income) expense
Interest expense............. 7,073,125(k) 16,038,753
Interest income.............. (2,216,861)
Amortization of
intangibles................... 317,701

------------ ------------
Net loss before income
taxes......................... (7,073,125) (19,888,243)
Income taxes.................. 128,683

------------ ------------
Net loss...................... $ (7,073,125) $(20,016,926)

------------ ------------
------------ ------------
Net loss per share............ $ (.58)
------------
------------

Weighted average shares
outstanding................... 4,000,000(l) 34,681,714
------------ ------------
------------ ------------
</TABLE>

F-58
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TEN MONTH PERIOD ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
INCREASE/
AGT, (DECREASE)
HISTORICAL, FOR ACQUISITIONS
THE COMPANY, MILLIWAVE, MARCH 1 TO LOCATE, TWL, FOX/LORBER, AND PRIOR
HISTORICAL HISTORICAL JULY 17, 1995 HISTORICAL HISTORICAL HISTORICAL FINANCINGS
------------ ----------- ------------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. $ 29,771,472 $-- $ 17,779 $ 7,090,547 $ 1,381,319 $ 7,534,876 $ (2,189,994)(c)
(45,000)(e)
Cost of sales.............. 19,546,351 -- -- 4,034,803 957,190 5,679,399 (1,568,699)(c)
------------ ----------- ------------- ----------- ----------- ----------- ----------------
Gross profit.............. 10,225,121 -- 17,779 3,055,744 424,129 1,855,477 (666,295)
Selling, general and
administrative expenses... 19,266,466 -- 1,704,294 2,582,894 1,470,831 2,296,448 (70,000)(d)
(651,101)(c)
(45,000)(e)
Depreciation............... 770,284 -- 59,250 2,784,156 25,000 27,521 (450,786)(c)
------------ ----------- ------------- ----------- ----------- ----------- ----------------
Operating loss............. (9,811,629) -- (1,745,765) (2,311,306) (1,071,702) (468,492) 550,592
Other (income) expense
Interest expense 7,309,258 -- -- 1,587,851 244,454 79,174 (197,782)(a)
(239,413)(c)
21,705,785(i)
155,421(j)
Interest income........... (2,568,992) -- -- (11,736) -- --
Amortization of
intangibles................ 439,888 -- 31,978 -- 7,045 5,619 399,357(b)
(937)(c)
Other expense............. -- -- -- -- -- 126,188 (21,031)(c)
Equity in loss of AGT..... 865,676 -- -- -- -- -- (865,676)(f)
------------ ----------- ------------- ----------- ----------- ----------- ----------------
Net loss................... $(15,857,459) $-- $ (1,777,743) $(3,887,421) $(1,323,201) $ (679,473) $ (20,385,132)
------------ ----------- ------------- ----------- ----------- ----------- ----------------
------------ ----------- ------------- ----------- ----------- ----------- ----------------
Net loss per share......... $ (0.70)
------------
------------
3,400,000(n)
575,000(h)
Weighted average shares
outstanding................ 22,769,770 67,433(g)
----------------
----------------

PRO FORMA
PRO FORMA ADJUSTMENTS
AS ADJUSTED INCREASE/
FOR ACQUISITIONS (DECREASE)
AND PRIOR FOR THE PRO FORMA
FINANCINGS OFFERINGS AS ADJUSTED
---------------- ------------ ------------
<S> <C> <C> <C>
Net sales.................. $ 43,560,999 $ $ 43,560,999

Cost of sales.............. 28,649,044 28,649,044
---------------- ------------ ------------
Gross profit.............. 14,911,955 14,911,955
Selling, general and
administrative expenses... 26,554,832 26,554,832

Depreciation............... 3,215,425 3,215,425
---------------- ------------ ------------
Operating loss............. (14,858,302) (14,858,302)
Other (income) expense
Interest expense 30,644,748 24,207,500(k) 54,852,248

Interest income........... (2,580,728) (2,580,728)
Amortization of
intangibles.............. 882,950 882,950

Other expense............. 105,157 105,157
Equity in loss of AGT..... -- --
---------------- ------------ ------------
Net loss................... $ (43,910,429) $(24,207,500) $(68,117,929)
---------------- ------------ ------------
---------------- ------------ ------------
Net loss per share......... $ (1.64) $ (2.21)
---------------- ------------
---------------- ------------

Weighted average shares
outstanding............... 26,812,203 4,000,000(l) 30,812,203
---------------- ------------ ------------
---------------- ------------ ------------
</TABLE>

F-59

<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The adjustments below were prepared based on data currently available and in
some cases are based on estimates or approximations. It is possible that the
actual amounts to be recorded may have an impact on the results of operations
and the balance sheet different from that reflected in the accompanying
unaudited pro forma condensed consolidated financial statements. It is therefore
possible that the entries presented below will not be the amounts actually
recorded at the closing date. Deferred income taxes have not been considered in
the pro forma balance sheet because they are not expected to be material at the
time of the consummation of the acquisitions.

BALANCE SHEET AT MARCH 31, 1996

(a) To record the issuance of $17,500,000 in notes payable in payment for
certain assets of Locate, to eliminate assets and liabilities not acquired or
assumed and division deficiency, and to allocate the excess of the purchase
price over the fair value of the assets acquired to the licenses acquired.

(b) To record the acquisition of 80% of Fox/Lorber as follows:

INCREASE/
(DECREASE)
----------

Reduce cash for payment of closing costs....................... $ (25,000)
Allocate excess purchase price to goodwill..................... 3,090,724
----------
Total asset adjustments.................................. $3,065,724
----------
----------
Reduce notes payable acquired from minority shareholder and
canceled...................................................... $ (136,508)
Accrue additional closing costs................................ 73,000
Reduce miscellaneous accruals.................................. (49,967)
Acquire and cancel preferred stock............................. (3,151,800)
Eliminate subsidiary equity.................................... 5,160,999
Record issuance of 67,433 shares of the Company's common stock
at approximately $17.375 per share............................ 1,170,000
----------
Total liability and equity adjustments................... $3,065,724
----------
----------

INCREASE/
(DECREASE)
-----------

Eliminate notes and interest receivable converted into equity
in TWL...................................................... $(1,170,312)
Allocate excess purchase price to goodwill.................... 3,953,864
Other......................................................... (64,080)
-----------
Total asset adjustments................................. $ 2,719,472
-----------
-----------
Accrue additional closing costs............................... $ 20,000
Eliminate management fees payable by TWL to the Company....... (249,000)
Eliminate subsidiary equity................................... 2,948,472
-----------
Total liability and equity adjustments.................. $ 2,719,472
-----------
-----------

F-60
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(d) To eliminate the remaining $2,623,555 in notes and $222,937 in interest
payable by TWL to the Company.

(e) To record the acquisition of Milliwave Limited Partnership as follows:

INCREASE/
(DECREASE)
-------------

Record cash payment to Milliwave partners................... $ (40,000,000)
Allocate excess purchase price to licenses.................. 124,725,000
-------------
Total asset adjustments............................... $ 84,725,000
-------------
-------------
Eliminate Partners' Capital accounts........................ $ (275,000)
Record the issuance of 3,400,000 shares of the Company's
common stock at an assumed price of $25.00 per share
Common Stock.......................................... 34,000
Additional Paid in Capital............................ 84,966,000
-------------
Total equity adjustments.................................. $ 84,725,000
-------------
-------------

The number of WinStar common shares issued is subject to adjustment, depending
on the Company's stock price on the date of closing of the Transaction.

(f) To record the Stock Offering of 4,000,000 shares of common stock (at an
assumed public offering price of $27.625 per share), the $200 million Debt
Offering and related fees and expenses.

STATEMENTS OF OPERATIONS FOR THE TEN MONTHS ENDED DECEMBER 31, 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996

(a) To eliminate interest expense incurred by Locate on liabilities not
assumed by the Company, offset in part by an adjustment to record interest
expense at 8% per annum on a $17.5 million promissory note to be issued by the
Company in connection with the acquisition of certain assets of Locate.

(b) To record amortization of the excess of the purchase price over the net
book value of the assets acquired in the Locate, TWL and Fox/Lorber
transactions.

(c) To adjust the historical results of operations to a ten month period.
The historical results of operations reflected in the December 31, 1995
unaudited pro forma condensed consolidated statement of operations for Locate
and Fox/Lorber are for the twelve months ended December 31, 1995 and September
30, 1995, respectively, and these adjustments are made to restate these
historical results for the ten months ended on those respective dates. Had the
historical results of operations and the pro forma adjustments been restated in
all instances to reflect twelve months of activity, the unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1995 would reflect net sales of $49.4 million, an operating loss of $16.1
million, and a net loss of $51.5 million.

(d) To eliminate management fee expense incurred by TWL and payable to the
Company.

(e) To eliminate management fees charged by the Company to AGT pursuant to a
management agreement.

F-61
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(f) To eliminate the Company's proportionate share of AGT's results for the
period, recorded previously under the equity method.

(g) To record shares issued in accordance with the Fox/Lorber acquisition
agreement as being outstanding for the entire period.

(h) To record shares issued in accordance with the AGT merger agreement as
being outstanding for the entire period.

(i) To record interest expense on $225 million in Old Notes issued in
October 1995, bearing interest at 14% per annum compounding semiannually, as if
the Old Notes were issued at the beginning of the period.

(j) To record interest expense on the Everest Financing as if it occurred at
the beginning of the period.

(k) To record interest expense on $200 million of New Notes issued in the
Debt Offering, at an assumed interest rate of 13.5% on the New Senior Notes and
14% on the New Senior Subordinated Notes, including amortization of debt
offering costs and other related fees, as if the New Notes were issued as of the
beginning of the respective periods. If the interest rate on the New Notes
changed by 0.5%, interest expense would change by approximately $0.9 million and
$0.3 million for the ten months ended December 31, 1995 and the three months
ended March 31, 1996, respectively.

(l) To record the issuance of the Common Stock issued in the Stock Offering
as if such shares were outstanding for the entire respective periods.

(m) To eliminate interest income, at an assumed rate of 5.2% per annum, on
$40 million cash, assuming such cash was paid at the beginning of the period in
connection with the Milliwave Limited Partnership acquisition.

(n) To record 3,400,000 shares of the Company's Common Stock issued in
connection with the Milliwave Limited Partnership acquisition at an assumed
price of $25.00 per share.

F-62
<PAGE>

BACK COVER

[WINSTAR COMMUNICATIONS INC. LOGO]

<PAGE>

[Alternate Page for International Prospectus]

PROSPECTUS (Subject to Completion)
Issued July 5, 1996
[WINSTAR COMMUNICATIONS, INC. LOGO]

4,000,000 Shares
WinStar Communications, Inc.
COMMON STOCK
------------------

ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
OF THE 4,000,000 SHARES BEING OFFERED, 800,000 SHARES ARE BEING OFFERED
INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS
AND 3,200,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA
BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." THE COMMON STOCK OF THE COMPANY IS
QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "WCII." ON JULY 2, 1996,
THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
WAS $27 5/8 PER SHARE.

CONCURRENTLY WITH THE STOCK OFFERING, THE COMPANY WILL MAKE A PUBLIC OFFERING OF
$100 MILLION OF % SENIOR NOTES DUE 2006
AND $100 MILLION OF
% SENIOR
SUBORDINATED NOTES
DUE 2006.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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

PRICE $ A SHARE
-------------------

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

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriters."

(2) Before deducting estimated expenses of $425,000 payable by the Company.

(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
600,000 additional Shares of Common Stock at the price to public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions
and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriters."
-------------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters named herein. It is expected that
delivery of the Shares will be made on or about , 1996 at the office
of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor
in immediately available funds.

-------------------
MORGAN STANLEY & CO. CS FIRST BOSTON
International
, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:

SEC registration fee.......................................... $ 42,232.76
NASD filing fee............................................... 12,748.00
Nasdaq additional listing application fee..................... 17,500.00
Printing and engraving expenses............................... 100,000.00
Legal fees and expenses....................................... 125,000.00
Accounting fees and expenses.................................. 75,000.00
Miscellaneous................................................. 52,519.24
-----------
Total..................................................... $425,000.00
-----------
-----------

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that all directors,
officers, employees and agents of the Registrant shall be entitled to be
indemnified by the Company to the fullest extent permitted by law.

Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.

"Section 145. Indemnification of officers, directors, employees and agents;
insurance.

(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgement in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably

II-1
<PAGE>
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

(d) Any indemnification under sections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.

(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.

(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.

(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an

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<PAGE>
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith an in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a 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 Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

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<PAGE>
ITEM 16.
(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement (Previously filed)
2.1 Agreement by and among the Company, WinStar New Media, TWL, and the principals of
TWL relating to certain financing provided by the Company to TWL and related
matters (Incorporated by reference to Exhibit 2.3 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended February 28, 1994)
2.2 First Amendment to Agreement by and among the Company, WinStar New Media, TWL and
the principals of TWL (Incorporated by reference to Exhibit 2.2 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended February 28, 1995)
2.3 Second Amendment to Agreement by and among the Company, WinStar New Media, TWL and
the principals of TWL (Incorporated by reference to Exhibit 2.2 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended February 28, 1995)
2.4 Merger Agreement by and among WinStar Wireless, WinCom Corp., Avant-Garde, Leo
George and The Larry D. Hudson Trust (Incorporated by reference to Exhibit 2.5 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
2.5 Preferred Stock E Subscription Agreement between the Company and GFL Ultra Fund
Limited ("GFL") for the purchase by GFL of 932,040 shares of Preferred Stock E
(Incorporated by reference to Exhibit 2.6 to the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1995)
2.6 Agreement and Plan of Merger by and among the Company, WinStar NFF Inc. ("WinStar
NFF") and Non Fiction Films Inc. ("NFF") (Incorporated by reference to Exhibit 2.7
to the Company's Annual Report on Form 10-KSB for the fiscal year ended February
28, 1995)
3.1 Restated Certificate of Incorporation of the Company (Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-18 (No. 33-37024))
3.2 Amendment to Certificate of Incorporation of the Company effecting name change
from "Robern Apparel, Inc." to "Robern Industries, Inc." (Incorporated by
reference to Exhibit 3.1(b) to the Company's Registration Statement on Form S-4
(No. 33-52716))
3.3 Second Amendment to Certificate of Incorporation of the Company effecting name
change from "Robern Industries, Inc." to "WinStar Communications, Inc."
(Incorporated by reference to Exhibit 3.1(b) to the Company's Registration
Statement on Form S-1 (No. 33-43915))
3.4 Certificate of Designations, Preferences and Rights of Series B Preferred Stock
(Incorporated by reference to Exhibit 3.3 to the Company's Registration Statement
on Form S-1 (No. 33-43915))
3.5 Certificate of Designations, Preferences and Rights of Series E Preferred Stock
(Incorporated by reference to Exhibit 3.6 to the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1995)
3.6 By-Laws of the Company (Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-18 (No. 33-37024))
3.7 Certificate of Incorporation of WinStar Wireless (Incorporated by reference to
Exhibit 7 to the Company's Current Report on Form 8-K, dated February 11, 1994)
3.8 By-Laws of WinStar Wireless (Incorporated by reference to Exhibit 8 to the
Company's Current Report on Form 8-K, dated February 11, 1994)
3.9 Certificate of Incorporation of WinStar Gateway (Incorporated by reference to
Exhibit 3.5 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1993)
3.10 Amendment to Certificate of Incorporation of WinStar Gateway effecting name change
from "Communications Gateway Network, Inc." to "WinStar Gateway Network, Inc."
(Incorporated by reference to Exhibit 3.11 to the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1995)
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
3.11 By-Laws of WinStar Gateway (Incorporated by reference to Exhibit 3.6 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1993)
3.12 Certificate of Incorporation of WinStar New Media (Incorporated by reference to
Exhibit 3.9 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1994)
3.13 Amendment to Certificate of Incorporation of WinStar New Media effecting name
change from "WinStar Interactive Media Company, Inc." to "WinStar New Media
Company, Inc." (Incorporated by reference to Exhibit 3.14 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended February 28, 1995)
3.14 By-Laws of WinStar New Media (Incorporated by reference to Exhibit 3.10 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1994)
3.15 Certificate of Incorporation of WinCom Corp. (Incorporated by reference to Exhibit
3.16 to the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995)
3.16 Amendment to Certificate of Incorporation of WinCom Corp. effecting name change to
"WinStar Wireless Fiber Corp." (Incorporated by reference to Exhibit 3.17 the
Company's Registration Statement on Form S-3 (No. 33-95242))
3.17 Certificate of Merger effecting merger of Avant-Garde Telecommunications, Inc.
into Wireless Fiber Corp (Incorporated by reference to Exhibit 3.18 the Company's
Registration Statement on Form S-3 (No. 33-95242))
3.18 By-Laws of WinCom Corp. (Incorporated by reference to Exhibit 3.17 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
3.19 Certificate of Incorporation of WinStar Global Products (Incorporated by reference
to Exhibit 3.3 to the Registration Statement on Form S-18 of WinStar Global
Products (No. 33-12549))
3.20 Amendment to Certificate of Incorporation of WinStar Global Products to change its
name from "Beauty Labs, Inc." to "WinStar Global Products, Inc." (Incorporated by
reference to Exhibit 3.19 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
3.21 By-Laws of WinStar Global Products (Incorporated by reference to Exhibit 3.4 to
the Registration Statement on Form S-18 of WinStar Global Products (No. 33-12549))
3.22 Certificate of Incorporation of WinStar NFF Inc. ("WinStar NFF") (Incorporated by
reference to Exhibit 3.21 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
3.23 By-laws of WinStar NFF (Incorporated by reference to Exhibit 3.22 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended February 28, 1995)
3.24 Certificate of Merger of NFF with and into WinStar NFF, with WinStar NFF as the
merger's surviving entity (Incorporated by reference to Exhibit 3.23 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
3.25 Amendment to Certificate of Incorporation of WinStar NFF changing its name from
"WinStar NFF Inc." to "Non Fiction Films Inc." (Incorporated by reference to
Exhibit 3.24 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
3.26 Certificate of Incorporation of WinStar Telecommunications, Inc. (Incorporated by
reference to Exhibit 3.26 of the Company's Transitional Report on Form 10-KSB for
the ten months ended December 31, 1995)
3.27 By-laws of WinStar Telecommunications, Inc. (Incorporated by reference to Exhibit
3.27 of the Company's Transitional Report on Form 10-KSB for the ten months ended
December 31, 1995)
4.1 Specimen of Common Stock Certificate (Incorporated by reference to Exhibit 4.3 to
the Registration Statement of Company on Form S-18 (No.33-37024))
4.2 Specimen of Preferred Stock B Certificate (Incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-1 (No. 33-43915))
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
4.3 Specimen of Preferred Stock C Certificate (Incorporated by reference to Exhibit
4.4(a) to the Company's Registration Statement on Form S-1 (No. 33-43915))
4.4 Specimen of Preferred Stock E Certificate (Incorporated by reference to Exhibit
4.5 to the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995)
4.6 EC-A Warrants issued to Everest Capital Fund, L.P. ("Fund") for 130,500 shares of
Common Stock and to Everest Capital International, L.P. ("Capital") for 169,500
shares of Common Stock (Incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-3 (No. 33-95242))
4.7 EC-B Warrants issued to Fund for 43,500 shares of Common Stock and to Capital for
56,500 shares of Common Stock (Incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement on Form S-3 (No. 33-95242))
4.8 EC-C Warrants issued to Fund for 65,250 shares of Common Stock and to Capital for
84,750 shares of Common Stock (Incorporated by reference to Exhibit 4.8 to the
Company's Registration Statement on Form S-3 (No. 33-95242))
4.9 Form of Senior Notes Indenture (To be filed by amendment)
4.10 Form of Senior Subordinated Notes Indenture (To be filed by amendment)
5.1 Opinion of Graubard Mollen & Miller (To be filed by amendment)
10.1 Agreement between the Company and ITC Group (Incorporated by reference to Exhibit
10.9 to the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995)
10.2 Lease for 230 Park Avenue, New York, New York facilities (Incorporated by
reference to Exhibit 10.10 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.2(a) Lease for additional space at 230 Park Avenue, New York, New York 10169
(Incorporated by reference to Exhibit 10.2(a) to the Company's Transitional Report
on Form 10-KSB for the ten months ended December 31, 1995)
10.3 Lease for 60 Oser Avenue, Hauppauge, New York facilities ((Incorporated by
reference to Exhibit 10.10 to the Company's Registration Statement on Form S-4
(No. 33-52716))
10.4 Lease for 144 Fairfield Road, Fairfield, New Jersey facilities (Incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.5 Lease for 5221 North O'Connor Boulevard, Irving, Texas facilities (Incorporated by
reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1, as
amended on Form SB-2 (No. 33-43915))
10.6 Lease for 500 South Ervay Street, Dallas, Texas facilities (Incorporated by
reference to Exhibit 10.11(a) to the Company's Registration Statement on Form S-1,
as amended on Form SB-2 (No. 33-43915))
10.7 Lease for 7799 Leesburg Pike, Tysons Corner, Virginia facilities (Incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.7(a) Amendment to Leesburg Pike Lease (Incorporated by reference to Exhibit 10.7(a) of
the Company's Transitional Report on Form 10-KSB for the ten months ended December
31, 1995)
10.8 Common Stock Incentive Plan (1990) (Incorporated by reference to Exhibit 10.19 to
the Company's Registration Statement on Form S-18 (No. 33-37024))
10.9 1992 Performance Equity Plan (Incorporated by reference to Exhibit 10.53 to the
Company's Registration Statement on Form S-18 (No. 33-37024))
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.10 Asset Purchase Agreement by and among Inne Dispensables Inc., a wholly-owned
subsidiary of WinStar Global Products ("Inne Dispensables"), Savonnerie, Inc.
("Savonnerie") and John Todd (Incorporated by reference to Exhibit 10.81 to the
Company's Registration Statement on Form S-1, as amended by Form SB-2 (No. 33-
43915))
10.11 Assignment of Trademarks from Savonnerie to WinStar Global Products (Incorporated
by reference to Exhibit 10.82 to the Company's Registration Statement on Form S-1,
as amended on Form SB-2 (No. 33-43915))
10.12 Loan and Security Agreement between WinStar Gateway and The CIT Group/Credit
Finance, Inc. ("CIT") (Incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended February 28, 1995)
10.13 Stock Purchase Warrant issued by the Company to CIT in connection with Exhibit
10.12 above (Incorporated by reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended February 28, 1995)
10.14 Registration Rights Agreement between the Company and CIT in connection with
Exhibits 10.12 and 10.13 above (Incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
10.15 Guaranty and Surety Agreement between the Company and CIT in connection with
Exhibit 10.12 above (Incorporated by reference to Exhibit 10.25 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended February 28, 1995)
10.16 Subordination Agreement between the Company and CIT in connection with Exhibit
10.12 above (Incorporated by reference to Exhibit 10.26 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended February 28, 1995)
10.17 Keepwell Agreement between the Company and CIT in connection with Exhibit 10.12
above (Incorporated by reference to Exhibit 10.27 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended February 28, 1995)
10.18 Agreement between CIT and Zero Plus Dialing, Inc. regarding Escrow and Disbursing
Agreement with Texas Commerce Bank and Assignment of Outstanding Accounts
Receivable in connection with Exhibit 10.22 above (Incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.19 Loan and Security Agreement between Century Business Credit Corporation
("Century") and WinStar Global Products (Incorporated by reference to Exhibit
10.29 to the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995)
10.20 Supplement Letter of Credit Security Agreement between Century and WinStar Global
Products in connection with Exhibit 10.19 above (Incorporated by reference to
Exhibit 10.30 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.21 Trademark Collateral Security Agreement between Century and WinStar Global
Products in connection with Exhibit 10.19 above (Incorporated by reference to
Exhibit 10.31 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.22 Trademark Assignment of Security by WinStar Global Products to Century in
connection with Exhibits 10.19 and 10.21 above (Incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.23 Trademark Collateral Security Agreement between Century and Inne Dispensables in
connection with Exhibit 10.19 above (Incorporated by reference to Exhibit 10.33 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.24 Trademark Assignment of Security by Inne Dispensables Inc. to Century in
connection with Exhibits 10.19 and 10.23 above (Incorporated by reference to
Exhibit 10.34 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.25 Landlord's Waiver and Consent with respect to the facilities at 60 Oser Avenue,
Hauppauge, New York in connection with Exhibit 10.19 above (Incorporated by
reference to Exhibit 10.35 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.26 Intercreditor and Subordination Agreement between the Company and Century in
connection with Exhibit 10.19 above (Incorporated by reference to Exhibit 10.36 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
10.27 Guaranty of Inne Dispensables in connection with Exhibit 10.19 above (Incorporated
by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended February 28, 1995)
10.28 Limited Guaranty of the Company in connection with Exhibit 10.19 above
(Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1995)
10.29 Guaranty Security Agreement between Inne Dispensables and Century in connection
with Exhibit 10.27 above (Incorporated by reference to Exhibit 10.39 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1995)
10.30 Executive Incentive Compensation Program (Incorporated by reference to Exhibit
10.40 to the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995)
10.31 Agreement Terminating the Management Agreement between the Company and WinStar
Services, Inc. (Incorporated by reference to Exhibit 10.41 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended February 28, 1995)
10.32 Note and Warrant Purchase Agreement by and among the Company, WinStar Wireless and
Avant-Garde and the Fund and Capital (the Fund and Capital collectively referred
to herein as the "Purchasers") and Everest Capital Limited ("Agent") (Incorporated
by reference to Exhibit 10.42 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.33 Promissory Notes payable to Fund for $3,262,500 and to Capital for $4,237,500
(Incorporated by reference to Exhibit 10.43 to the Company's Registration
Statement on Form S-3 (No. 33-95242))
10.34 Conversion Rights Agreement among the Company, WinStar Wireless and the Purchasers
(Incorporated by reference to Exhibit 10.44 to the Company's Registration
Statement on Form S-3 (No. 33-95242))
10.35 Registration Rights Agreement between the Company and the Purchasers (Incorporated
by reference to Exhibit 10.45 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.36 Security Agreement and Conditional Assignment between WinStar Wireless and the
Agent (Incorporated by reference to Exhibit 10.46 to the Company's Registration
Statement on Form S-3 (No. 33-95242))
10.37 Security Agreement between Avant-Garde and the Agent (Incorporated by reference to
Exhibit 10.47 to the Company's Registration Statement on Form S-3 (No. 33-95242))
10.38 Guarantee from the Company to the Agent on behalf of the Purchasers (Incorporated
by reference to Exhibit 10.48 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.39 Guarantee from Avant-Garde to the Agent on behalf of the Purchasers (Incorporated
by reference to Exhibit 10.49 to the Company's Registration Statement on Form S-3
(No. 33-95242))
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.40 Pledge Agreement between the Company and the Agent (Incorporated by reference to
Exhibit 10.50 to the Company's Registration Statement on Form S-3 (No. 33-95242))
10.41 Pledge Agreement between the Avant-Garde, Leo I. George, as Voting Trustee, and
the Agent (Incorporated by reference to Exhibit 10.51 to the Company's
Registration Statement on Form S-3 (No. 33-95242))
10.42 Lease for 12 Gardner Road, Fairfield, New Jersey facilities (Incorporated by
reference to Exhibit 10.52 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.43 Agreement between the Company, WinStar Wireless and P-Com, Inc. (Incorporated by
reference to Exhibit 10.11 to the Registration Statement on Form S-1 of P-Com,
Inc. (No. 33-88492) on file with the Commission)
10.44 Employment Agreement between the Company and Nathan Kantor, together with voting
stipulation given by William J. Rouhana, Jr. to Mr. Kantor (Incorporated by
reference to Exhibit 10.54 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.45 Form of Stock Option Agreement between the Company and Nathan Kantor for the
purchase of 350,000 shares of Common Stock (Incorporated by reference to Exhibit
10.55 to the Company's Registration Statement on Form S-3 (No. 33-95242))
10.46 Form of Stock Option Agreement between the Company and Nathan Kantor for the
purchase of 350,000 additional shares of Common Stock (Incorporated by reference
to Exhibit 10.56 to the Company's Registration Statement on Form S-3 (No.
33-95242))
10.47 Employment Agreement between the Company and William J. Rouhana, Jr. (Incorporated
by reference to Exhibit 10.57 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.48 Employment Agreement between the Company and Fredric E. von Stange (Incorporated
by reference to Exhibit 10.58 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.49 Facility Agreement between ML Investors Services, Inc. ("ML") and WinStar Wireless
(Incorporated by reference to Exhibit 10.59 to the Company's Registration
Statement on Form S-3 (No. 33-95242))
10.50 Master Lease Agreement between ML and WinStar Wireless (Incorporated by reference
to Exhibit 10.60 to the Company's Registration Statement on Form S-3 (No.
33-95242))
10.51 Form of Stock Option Agreement between the Company and ML (Incorporated by
reference to Exhibit 10.61 to the Company's Registration Statement on Form S-3
(No. 33-95242))
10.52 Lease Guaranty between the Company and ML (Incorporated by reference to Exhibit
10.62 to the Company's Registration Statement on Form S-3 (No. 33-95242))
10.53 Service Agreement between WinStar Wireless and AT&T (Incorporated by reference to
Exhibit 10.63 to the Company's Registration Statement on Form S-3 (No. 33-95242))
(confidentiality granted under Rule 406 promulgated under the Act; accordingly,
certain information has been omitted from this exhibit and filed separately with
the Commission)
10.54 Placement Agreement between the Company and Morgan Stanley & Co. Incorporated,
entered into in connection with the 1995 Debt Placement (Incorporated by reference
to Exhibit 1 to the Current Report on Form 8-K, dated October 23, 1995)
10.55 Senior Notes Indenture, including form of Restricted Global Senior Note, entered
into in connection with the 1995 Debt Placement (Incorporated by reference to
Exhibit 2 to the Current Report on Form 8-K, dated October 23, 1995)
10.56 Convertible Notes Indenture, including form of Restricted Global Convertible
Notes, entered into in connection with the 1995 Debt Placement (Incorporated by
reference to Exhibit 3 to the Current Report on Form 8-K, dated October 23, 1995)
</TABLE>

II-9
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.57 Senior Notes Registration Rights Agreement, entered into in connection with the
1995 Debt Placement (Incorporated by reference to Exhibit 4 to the Current Report
on Form 8-K, dated October 23, 1995)
10.58 Convertible Notes Registration Rights Agreement, entered into in connection with
the 1995 Debt Placement (Incorporated by reference to Exhibit 5 to the Current
Report on Form 8-K, dated October 23, 1995)
10.59 Employment Agreement between WinStar Global Products and Joseph Dwyer
(Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement
on Form S-4 (No. 33-52716))
10.60 Employment Agreement between the Company and Doreen F. Davidson (Incorporated by
reference to Exhibit 10.29(a) to the Company's Registration Statement on Form S-1,
as amended on Form SB-2 (No. 33-43915))
10.61 Employment Agreement between WinStar Wireless and Leo I. George (Incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.62 Employment Agreement between NFF and Stuart B. Rekant (Incorporated by reference
to Exhibit 10.5 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1995)
10.63 Employment Agreement between WinStar New Media and Stuart B. Rekant (Incorporated
by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.64 Employment Agreement between WinStar Telecommunications Group and David Ackerman
(Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1995)
10.65 Employment Agreement between the Company and Amy Newmark (Incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1995)
10.66 Exchange Agreement, dated November 15, 1995, between the Company and WinStar
Companies, Inc. (Incorporated by reference to Exhibit 10.69 to the Company's
Current Report on Form 8-K, dated December 11, 1995)
10.67 Letter from Everest Capital electing to convert certain debt of the Company into
shares of Common Stock (Incorporated by reference to Exhibit 10.67 to the
Company's Transitional Report on Form 10-KSB for the ten months ended December 31,
1995)
10.68 Agreement and Plan of Reorganization by and among Non Fiction Films Inc., the
Company, GFL, Fox/Lorber Associates, a wholly-owned subsidiary of GFL, and Richard
Lorber (Incorporated by reference to Exhibit 10.67 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996)
10.69 Security Agreement between Fox/Lorber and WinStar New Media (Incorporated by
reference to Exhibit 10.68 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996)
10.70 Purchase and Sale Agreement by and among the Company, WinStar Locate, MobileMedia
Corporation and Local Area Telecommunications, Inc., a wholly-owned subsidiary of
MobileMedia (Incorporated by reference to Exhibit 10.69 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996)
10.72 Agreement between the Company and Source Media (Filed herewith)
10.73 Purchase Agreement between and among Pinnacle Seven Communications, Inc. ("P7C"),
Pinnacle Eight Communications, Inc. ("P8C"), Pinnacle Nine Communications, LLC
("P9C") and WinPinn Corp. (Filed herewith)
10.74 Service Agreement by and between WinStar Wireless, P7C and P9C (Filed herewith)
10.75 Transmission Path Lease Agreement between P7C, P9C and WinStar Wireless (Filed
herewith)
</TABLE>

II-10
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.76 Agreement and Plan of Merger among Milliwave Limited Partnership ("Milliwave"),
WinStar Milliwave, Inc. and the Company (To be filed by amendment)
10.77 Services Agreement between WinStar Wireless and Milliwave (To be filed by
amendment)
10.78 Transmission Path Lease Agreement between Milliwave and WinStar Wireless (To be
filed by amendment)
17.1 Letter of Resignation delivered by Richard Russano to the Company pursuant to
which he resigns as a director of the Company (Incorporated by reference to
Exhibit 17.1 to the Company's Registration Statement on Form S-3 (No. 33-95242))
21.1 Schedule of Company's Subsidiaries (Incorporated by reference to the Company's
Transitional Report on Form 10-KSB for the ten months ended December 31, 1995)
23.1 Consent of Grant Thornton LLP with respect to the Company (Filed herewith)
23.2 Consent of Grant Thornton LLP with respect to Avant-Garde (Filed herewith)
23.3 Consent of Grant Thornton LLP with respect to Milliwave (Filed herewith)
23.4 Consent of Ernst & Young LLP (Filed herewith)
23.5 Consent of Graubard Mollen & Miller (To be included in Exhibit 5.1)
24.1 Power of Attorney (Previously filed)
</TABLE>

(B) SCHEDULES

<TABLE>
<C> <S>
S-1 Report of Independent Certified Public Accountants on Schedules
S-2 Schedule II-Valuation and Qualifying Accounts.
</TABLE>

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 of 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 and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;

(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 (1)(i) and (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 Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.

II-11
<PAGE>
(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 offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(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.

(h) 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 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.

(i) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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-12
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, 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 July 3, 1996.

WINSTAR COMMUNICATIONS, INC.

By: /s/ WILLIAM J. ROUHANA, JR.
..................................
William J. Rouhana, Jr.
Chairman of the Board and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, 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>

/s/ WILLIAM J. ROUHANA, JR. Chief Executive Officer and Chairman July 3, 1996
..................................... of the Board
William J. Rouhana, Jr.

* Executive Vice President, Director, July 3, 1996
..................................... Chief Financial Officer and
Fredric E. von Stange Principal Accounting Officer

* Vice Chairman of the Board July 3, 1996
.....................................
Steven Chrust

* President, Chief Operating Officer July 3, 1996
..................................... and Director
Nathan Kantor

* Director July 3, 1996
.....................................
William Harvey

* Director July 3, 1996
.....................................
Steven Magyar

* Director July 3, 1996
.....................................
William J. vanden Heuvel

* Director July 3, 1996
.....................................
Bert Wasserman

* By: /s/ WILLIAM J. ROUHANA, JR.
.....................................
William J. Rouhana, Jr.
as attorney-in-fact
</TABLE>

II-13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON SCHEDULES

Board of Directors
WINSTAR COMMUNICATIONS, INC.

In connection with our audit of the consolidated financial statements of
WinStar Communications, Inc. and Subsidiaries referred to in our report dated
March 8, 1996, which is included in the Propectus constituting Part I of this
Registration Statement, we have also audited Schedule II as of December 31,
1995, February 28, 1995 and 1994 and for the ten months ended December 31, 1995
and the years ended February 28, 1995 and 1994.

In our opinion, this schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information required to be set forth therein.

GRANT THORNTON LLP

New York, New York
March 8, 1996

S-1
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- -------------------------------------------------------------------------------------------------------------------
COLUMN C
-----------------
COLUMN B COLUMN E
COLUMN A -------------------- ADDITIONS CHARGED COLUMN D --------------
- --------------------------- BALANCE AT BEGINNING TO COSTS AND ---------------------- BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- --------------------------- -------------------- ----------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Reserves deducted from
assets to which they
apply:

Ten months ended December
31, 1995
Allowance for doubtful
accounts (a)............ $823,709 $ 887,425 $911,403(b) $799,731
---------- ----------------- ---------- --------------
---------- ----------------- ---------- --------------

Year ended February 28,
1995
Allowance for doubtful
accounts (a)............ $357,843 $ 893,857 $427,991(b) $823,709
---------- ----------------- ---------- --------------
---------- ----------------- ---------- --------------

Year ended February 28,
1994
Allowance for doubtful
accounts (a)............ $196,015 $ 343,694 $181,866(b) $357,843
---------- ----------------- ---------- --------------
---------- ----------------- ---------- --------------
</TABLE>

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

(a) Deducted from accounts receivable.

(b) Uncollectible accounts receivable charged against allowance.

S-2
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------ --------
<C> <S> <C>
10.72 Agreement between the Company and Source Media..........................
10.73 Purchase Agreement between and among Pinnacle Seven Communications, Inc.
("P7C"), Pinnacle Eight Communications, Inc. ("P8C"), Pinnacle Nine
Communications, LLC ("P9C") and WinPinn Corp. ..........................
10.74 Service Agreement by and between WinStar Wireless, P7C and P9C..........
10.75 Transmission Path Lease Agreement between P7C, P9C and WinStar
Wireless................................................................
23.1 Consent of Grant Thornton LLP with respect to the Company...............
23.2 Consent of Grant Thornton LLP with respect to Avant-Garde...............
23.3 Consent of Grant Thornton LLP with respect to Milliwave.................
23.4 Consent of Ernst & Young LLP............................................
</TABLE>

EXHIBIT 10.72

WINSTAR [LOGO]
- --------------------------------------------------------------------------------
NEW MEDIA CO. INC.

As of June 6, 1996

Source Media, Inc.
8140 Walnut Hill Lane, Suite 1000
Dallas, TX 75231

Gentlemen:

This will acknowledge and confirm the terms pursuant to which Source Media, Inc.
("Licensor") has agreed to license WinStar New Media Company, Inc. and/or its
affiliates ("Company") the right to utilize the programming service and
technology of The Interactive Channel ("IC"), a patented platform for
interactive television services owned by IT Network, Inc., a wholly owned
subsidiary of Licensor, as more fully set forth in Schedule A, attached hereto
and forming a part hereof.

1. Rights Granted: Licensor hereby grants to Company a license to utilize the
--------------
services, products and technology of IC in "Wireless Distribution," as
hereinafter defined, in the United States, its territories and possessions and
Canada ("Territory"). Wireless Distribution means any and all forms of over-the-
air and/or wireless distribution using any frequency of the spectrum, method or
media, including but not limited to MDS, MMDS, 28 Ghz frequency, 38 Ghz
frequency, conventional broadcast and satellite distribution, but excluding
cable television system distribution. The license granted to Company hereunder
for (i) Wireless Distribution using 37-40 Ghz frequency ("38 Ghz Wireless
Distribution") shall be exclusive to Company in the United States, its
territories and possessions, and nonexclusive in Canada, and (ii) all other
forms of Wireless Distribution ("Non-38 Ghz Wireless Distribution") shall be
nonexclusive to Company in the Territory. Company shall have the right to
sublicense the rights granted in the license hereunder, without limitation;
provided, however, that Company shall have the right to sublicense the services,
products and technology of IC in forms of Non-38 Ghz Wireless Distribution only
to the extent that any such sublicense is in furtherance of Company's reasonable
commercial efforts and consistent with Company's reasonable business judgment to
develop and/or implement 38 Ghz Wireless Distribution.

2. Term: An initial period of 5 years. Company shall have an option,
----
exercisable by notice to Licensor no later than January 22, 2001, to extend the
Term of the Agreement for an additional period of 5 years. Thereafter, Company
shall have options exercisable on or before March 22 of the fifth year of any
such 5-year period, each to extend the Term by a successive 5-year period.

3. License Fees: In consideration of the rights granted herein, Company shall
------------
pay Licensor the following sums ("License Fees"):

<PAGE>

(i) $0.20 per month for each consumer subscriber, and

(ii) 5% of Company's monthly "Adjusted Gross Revenue" for each business-to-
business installation. Adjusted Gross Revenue shall be defined in a manner
that includes as deductions from Company's gross revenues all deductions
enumerated in Schedule B, attached hereto and forming a part hereof, and
that is no less favorable than that contained in Schedule B, save for the
different percentage of gross revenue specified. Licensor warrants and
represents that the definition of revenues set forth in Schedule B is
substantially similar to that currently in force in Licensor's agreement
with Cableshare.

The License Fees shall be payable no later than 60 days following the end of any
calendar quarter in which Company has generated revenue from engaging in
Wireless Distribution to any consumer or business-to-business installation.

4. Minimum Guarantee: In the event that Company exercises its option pursuant
-----------------
to paragraph 2 to extend the term of the Agreement for an additional period of 5
years ("Years 6 - 10"), Company shall pay Licensor License Fees of no less than
the following amount ("Minimum Guarantee") in each contract year as follows:

Year 6 $50,000
Year 7 $50,000
Year 8 $150,000
Year 9 $250,000
Year 10 $250,000

In Year 11, if any, and any subsequent year, the Guarantee shall be increased by
the sum of $50,000 over the preceding year, up to a maximum of $500,000 per year
in Year 15, if any. If the License Fees payable pursuant to paragraph 3 hereof
are less that the Minimum Guarantee, the difference shall be paid by Company
within 60 days following the end of such contract year.

Notwithstanding the foregoing, in any year of Year 6 - Year 16, if any, in which
the License Fee is less than the Minimum Guarantee, Company may elect not to pay
Licensor the Minimum Guarantee in any such year. If Company so elects, then
Company's license hereunder shall become nonexclusive as to 38 Ghz Wireless
Distribution in the Territory for any succeeding years of the Term.

Upon 15 business days' prior notice, Licensor may audit the books and records of
Company with respect to the accuracy of the License Fee paid by Company.
Licensor may request an audit more than one time in any calendar year. Any
audit shall be conducted at the Company's offices during normal business hours
and at Licensor's expense. In the event of a discrepancy in favor of Licensor
which exceeds 5%, Company shall reimburse Licensor's actual, substantiated, out-
of-pocket cost for the audit and pay Licensor the amount of any discrepancy.

<PAGE>

5. Services of Licensor: During the Term hereof, Licensor shall make available
--------------------
to Company products and/or services set forth in Schedule A on the following
basis:

(a) For Part II, IC Interactive System Hardware, Company's cost shall not
exceed Licensor's actual, auditable, out-of-pocket costs, with a mark-up of
7-1/2%, notwithstanding any provision in Part II to the contrary;

(b) For Part III, IC Interactive System, in each local area where Company
or any of its affiliates or desingees holds a license for providing
telecommunications services in the 38 Ghz band ("Licensed Area"), there
shall be a cost to Company of $22,500 for the first headend software
unit in any Licensed Area, $1,500 for each additional headend in a Licensed
Area using a headend software unit, and $100 for each copy of ITN
authorizing software provided to Company by Licensor. Company shall pay
costs due Licensor within 30 days of delivery of software. All costs
payable to Licensor pursuant to this subparagraph 5 (b) shall be deemed an
advance against and recoupable from any License Fees otherwise owed
Licensor hereunder. There shall be no other costs to Company for the IC
Interactive System except those provided in subparagraph 5(b),
notwithstanding any provision in Part III to the contrary; and

(c) For Part IV, Training, the cost to Company shall be Licensor's actual,
out-of-pocket, direct costs for personnel, calculated on a per-diem basis,
plus an amount equal to 15% of such the per-diem personnel costs,
representing Licensor's overhead, notwithstanding any provision in Part IV
to the contrary.

Licensor warrants and represents that the costs charged to Company pursuant to
subparagraphs 5(a), (b) and 5(c) hereof shall be at least as favorable to
Company as those charged by Licensor to its most favored licensee and/or
customer. In no event shall Company have any obligation to utilize any of the
products and/or services specified in Schedule A. In the event that Licensor
should develop and offer to sell to third parties any additional products,
services and/or technologies applicable to any aspect of the products, services
and/or technologies licensed hereunder, Licensor shall make any such products,
services, or technologies available to Company on the foregoing basis.

6. Press Releases: Promptly following the execution of this Agreement, the
--------------
parties shall mutually agree on any press release with respect to the
transaction which is the subject of this Agreement.

7. Warranties and Representations: Each party warrants and represents that it
------------------------------
has the right to enter into this Agreement, to grant all rights granted herein,
and to perform all of its obligations hereunder and that the party's exercise of
its rights hereunder shall not violate the rights of any third party, including
but not limited to patent or trademark. Each party shall indemnify and hold
harmless the other against any claims, damages, liabilities, costs and expenses,
including but

<PAGE>

not limited to reasonable counsel fees, resulting from or arising out of the
breach by the indemnifying party of any warranty, representation or agreement
herein.

8. Information: Licensor retains all right, title and interest in and to any
-----------
software, programming, trademarks and/or technology use for the IC interactive
system and licensed to Company under this Agreement. Company will not permit
the software, programming, trademarks and/or technology to be copied or
disclosed to any third party, except pursuant to a valid sublicense under this
Agreement.

Each party, and its employees, agents and representatives, shall maintain in
confidence the terms and conditions of this Agreement, including all data or
information, whether oral or written,
provided by one party to the other party, or acquired or developed pursuant to
this Agreement ("Information") and shall not provide such information to any
third party unless:

(a) with the consent of the party originally providing the Information;

(b) to the extent necessary to comply with law or a valid court order;

(c) as part of the party's normal reporting or review procedures to its
parent company, its financiers or their duly appointed representatives,
its auditors or attorneys, provided that the parent company, financiers or
their duly appointed representatives, auditors or attorneys agree to be
bound by the obligations of this paragraph 8; or

(d) in order to enforce the party's rights under this Agreement.

9. Termination of Exclusivity: In the event that Company has not engaged in
--------------------------
meaningful deployment of 38 Ghz Wireless Distribution by the end of Year 9 or
any subsequent year of the Term, if any, Licensor shall have the right upon one
year's prior written notice to Company to be given not earlier that the first
day of Year 10 ("Notice Period"), to cause Company's license thereof to become
nonexclusive; provided, however, that such notice shall have no effect if,
during the Notice Period following Company's receipt of such notice, Company has
commenced meaningful deployment of 38 Ghz Wireless Distribution. In the event
that Licensor exercises its foregoing right and Company has not commenced
meaningful deployment of 38 Ghz Wireless Distribution during the Notice Period,
Company shall have no further obligation to pay a Minimum Guarantee hereunder.

10. Standard Provisions: This Agreement shall be governed by and construed
-------------------
according to the laws of the State of New York applicable to contract made and
to be fully performed therein. Licensor hereby consents to and submits to the
jurisdiction of the federal and state courts located in the State of New York.
The rights granted to Company hereunder are of a special and unique character
which gives them a peculiar value, the loss of which cannot reasonable or
adequately be compensated for in damages in an action at law, and the breach by
Licensor of any provisions contained in this Agreement will cause Company
irreparable injury and damage. Company shall be entitled, as a matter of right,
to seek injunctive and other equitable relief to prevent the violation of any of
the provisions of this Agreement by Licensor. Neither this provision, nor the

<PAGE>

exercise by Company of any of its rights hereunder shall constitute a waiver by
Company of any other rights which it may have to damages or otherwise.

While it is the desire of the parties hereto to enter into a more formal
agreement, containing the terms and conditions set forth herein as well as other
provisions standard in agreements of this
nature, unless and until such an agreement is executed, this Agreement shall be
binding in all respects and constitute the entire understanding between the
parties with respect to the subject matter hereof.

Please sign below to indicate your acceptance of the foregoing.
Very truly yours,

WINSTAR NEW MEDIA CO., INC. ACCEPTED & AGREED:

SOURCE MEDIA INC.:

By:
-------------------------

By:
--------------------------

<PAGE>

SCHEDULE A

(Attached to and forming a part of the Agreement dated as of June 6, 1996,
between WinStar New Media Co. Ind. and Source Media, Inc.)

Interactive Channel Products and Services

I. Introduction

IT Network, Inc. (ITN), a wholly-owned subsidiary of Source
Media, Inc., and its research and development company Cableshare
(CSH) have developed a patented platform for Interactive
Television services-The Interactive Channel (IC) that allows
cable subscribers to simultaneously select and view prerecorded
audio and video presentations. The presentations are multiplexed
and only need a regular 62MHz cable bandwidth.

Subscribers direct interactive sessions with an infrared remote
control by selecting menu items listed on their television
screens. The Interactive Receiver sends the control messages over
the telephone line to the Presentation System (Headend computer).
This computer interprets the message, assembles the requested
presentation, and returns the video image over the CATV network
and the audio through the telephone line. Once the video and
audio signals are received, the signals are combined and
displayed on the television set.

II. IC Interactive System Hardware

ITN Interactive Television products provide a complete multimedia
Interactive television system. This system consists of three key
components: the Interactive Receiver or Interactive Set-Top Box,
the Presentation System, and the Media Production Workstation.

A. The Presentation System (Headend)

The IC Presentation System resides at the cable system
headend. The system can be modularly expanded to handle
larger numbers of concurrent users, with all users reaching
different information at the same time.

1. Unix System Components

a. System & Application Server
b. Digital Video Subsystem
c. Digital Audio Subsystem (PC/Unix)
d. Miscellaneous Standard Hardware

Source Media, Inc. 1

<PAGE>
2. Unix Systems Cost
<TABLE>

Systems:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Systems by Users 12 24 32 48 96 192 384 500
Est. Est. Est.
Total Cost (USSK)
Max # of IC Subscribers 240 480 640 960 1,920 3,840 7,680 10,000
(Assuming 5% peak usage)

IC Unix Presentation System
350

300

250

200 [GRAPH]

150

100

0
12 24 32 48 100 192 384 500
Systems by Concurrent Users
</TABLE>

3. Installation Per Unix System

B. The Interactive Receiver

The Interactive Receiver receives and displays the
requested interactive television programming on users' TV
screen. ITN's ITV server solution supports a variety of
subscriber terminal.

ITN/CSH Interactive Receivers Available Time

Phase A/Analog Receiver June 96
Phase B/Analog Receiver Q4 96
Sidecar for GI, S-A Decoder Q1 97
Sidecar for Any MPEG Decoder Q1 97

Source Media, Inc. 2
<PAGE>

INT Interactive Set-Top Box Cost Est.
[Costs (US)]

200

150 [GRAPH]

100

Phase A Phase B Sidecar
Sec-Top Boxes

C. The Media Production Workstation

Programming is created and modified using a Media Production
Workstation (MPW) which is software based and operates on a
personal computer. From an equipment stand point, the whole MPW
system is divided into two segments: hardware and software.
Hardware can be secured off the shelf. The system utilizes two
kinds of software: proprietary software provided by ITN and off-
the-shelf multimedia software.

Bundled PCs and ITN software
(ITN Authoring software only:

III. IC Interactive System

Together with bundled IC hardware, ITN will provide ITV server
operating software, ITV client operating software, remote management
and updated software, software training and documentation, software
support, enhancements/updates, and maintenance.

A. IC System Software License in accordance with the terms of the
Agreement. Including maintenance, update and telephone support

Source Media, Inc. 3
<PAGE>

B. IC Programming License
(Distribution restricted to IC infrastructure)

Basic Templates included:

1. Navigation System
2. Main Menu
3. News-on-Demand
4. Advertisements
5. Electronic Programming Guide Module
6. Home Shopping Catalog
7. Educational Programming
8. Electronic Yellow Pages Module
9. Games (Trivia, Time Zone, Word Trap)

Optional Application Templates (Not included in IC Programming
License):

Each application will be delivered with complete navigation to
interface with the system and with basic screens or menus
consistent with the "look and feel" found on existing IC
programming.

1. Movie-On-Demand
2. On Line Information Services (Stock Quotes, etc.)
3. Distance Learning
4. Authoring Navigational Software

IV. Training
A. Training Courses

1. MPW Training:
Media Production Workshop-------------------------ITN-100

2. Application Training:
a. Introduction for Application Development-------ITN-150
b. Advanced Application Development---------------ITN-151

3. System Training:
a. Configuring a ITN/CSH System-------------------ITN-200
b. Maintaining a ITN/CSH System-------------------ITN-201

4. Marketing and Customer Service Training:

Source Media, Inc. 4
<PAGE>

a. Model Subscriber Acquisition Campaign for launch
period--ITN301
b. Marketing Support Procedures includes collateral material
-----ITN302
c. Subscriber Service Procedures includes collateral
material--------ITN303

B. Training Fees

All training is provided at either IT Network, Inc. Dallas,
Texas, USA or Cableshare, Inc. London, Ontario, Canada. Training
fees are based on maximum class capacity of 10 trainees.

1. System, MPW and Application Training
2. Application Development and Consulting

3. Marketing and Customer Service Training

Source Media, Inc. 5
<PAGE>

SCHEDULE B

(Attached to a forming a part of the Agreement dated as of June 6, 1996, between
WinStar New Media Co. Inc. and Source Media Inc.)

Definition from Agreement between Cableshare and IT Network, Inc., revised for
Agreement between WinStar New Media Co. Inc. and Source Media, Inc.:

"Revenue" means gross revenues, exclusive of value added taxes, gross
receipts taxes or similar taxes, derived by Company from operating or sub-
licensing a wireless system utilizing Interactive Channel programming
services and technology, determined on the basis of generally accepted
accounting principles.

Exhibit 10.73

PURCHASE AGREEMENT

BETWEEN AND AMONG

PINNACLE SEVEN COMMUNICATIONS, INC.
PINNACLE EIGHT COMMUNICATIONS, INC.
PINNACLE NINE COMMUNICATIONS, L.L.C.
AND
WINPINN CORP.

DATED: JUNE 20, 1996

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----

ARTICLE I
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01. First P9C Interests . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Second P9C Interests . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Consideration . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II
CLOSINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. First Closing . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Second Closing . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.03. P7C Deliveries . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.04. Purchaser's Deliveries . . . . . . . . . . . . . . . . 4

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PINNACLE PARTIES . . . . . . . . 4
SECTION 3.01. Organization . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.02. Authority . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.03. The P9C Interests . . . . . . . . . . . . . . . . . . . 6
(a) Ownership . . . . . . . . . . . . . . . . . . . . 6
(b) Capitalization . . . . . . . . . . . . . . . . . . 6
SECTION 3.04. Compliance with Instruments and Laws . . . . . . . . . 6
SECTION 3.05. The Licenses . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.06. Assets and Liabilities . . . . . . . . . . . . . . . . 7
SECTION 3.07. Contracts . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.08. Litigation . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.09. Tax Liabilities . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.10. Consents and Approvals . . . . . . . . . . . . . . . . 9
SECTION 3.11. Title to Properties . . . . . . . . . . . . . . . . . . 10
SECTION 3.12. No Guarantees . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.13. Brokers . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.14. Disclosure . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.15. Survival of Representations and Warranties . . . . . . 11

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . 11
SECTION 4.01. Organization . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.02. Authority . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.03. Consents and Approvals . . . . . . . . . . . . . . . . 12
SECTION 4.04. Compliance with Instruments and Laws . . . . . . . . . 13
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.06. Investment . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.07. Sufficient Cash . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.08. Brokers . . . . . . . . . . . . . . . . . . . . . . . . 14

<PAGE>

ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.01. Transfer of Existing Licenses. . . . . . . . . . . . . 14
SECTION 5.02. No Transfer of P9C Interests . . . . . . . . . . . . . 15
SECTION 5.03. Financial Statements . . . . . . . . . . . . . . . . . 15
SECTION 5.04. Operation of Business . . . . . . . . . . . . . . . . . 15
SECTION 5.05. No Transfer of Control . . . . . . . . . . . . . . . . 17
SECTION 5.06. Prosecution of FCC Consent; Disclosure . . . . . . . . 17
SECTION 5.07. No Adverse Applications . . . . . . . . . . . . . . . . 18
SECTION 5.08. Reports . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.09. Access to Information . . . . . . . . . . . . . . . . . 19
SECTION 5.10. No Securities Transactions . . . . . . . . . . . . . . 19
SECTION 5.11. Disclosure of Certain Matters . . . . . . . . . . . . . 19
SECTION 5.12. Confidentiality . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.13. Regulatory and Other Authorizations . . . . . . . . . . 21
SECTION 5.14. Cooperation; Further Action . . . . . . . . . . . . . . 21
SECTION 5.15. Resignations . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.16. Operating Agreement. . . . . . . . . . . . . . . . . . 22
SECTION 5.17. Survival . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . 22
SECTION 6.01. Conditions to Each Party's Obligations . . . . . . . . 22
SECTION 6.02. Conditions to the Obligation of the
Purchaser . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.03. Conditions to the Obligation of P7C and P8C . . . . . . 25

ARTICLE VII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.01. Indemnification by the Pinnacle Parties . . . . . . . . 26
SECTION 7.02. Indemnification by the Purchaser . . . . . . . . . . . 27
SECTION 7.03. Notice, Etc . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.05. Indemnity Escrow Agreement . . . . . . . . . . . . . . 29

ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.01. Methods of Termination . . . . . . . . . . . . . . . . 29
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . 30

ARTICLE IX
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9.01. Certain Defined Terms . . . . . . . . . . . . . . . . . 31

ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 10.01. Expenses . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 10.03. Public Announcements . . . . . . . . . . . . . . . . . 34
SECTION 10.04. Assignment; Merger . . . . . . . . . . . . . . . . . . 35
SECTION 10.05. Amendment . . . . . . . . . . . . . . . . . . . . . . 35

<PAGE>

SECTION 10.06. Waiver . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10.07. Severability . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10.08. Entire Agreement; Conflict . . . . . . . . . . . . . . 36
SECTION 10.09. Benefit . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10.10. Governing Law; Jurisdiction . . . . . . . . . . . . . 36
SECTION 10.11. Counterparts . . . . . . . . . . . . . . . . . . . . . 37

EXHIBIT I - FORM OF P9C OPERATING AGREEMENT
EXHIBIT II - FORM OF INDEMNITY ESCROW AGREEMENT

SCHEDULE A - SERVICE AREAS

SCHEDULE B - LICENSES

iii

<PAGE>

PURCHASE AGREEMENT
------------------

AGREEMENT dated June 20, 1996, among PINNACLE SEVEN COMMUNICATIONS, INC., a

Florida corporation whose address is 2901 South Bayshore Drive, Suite 4B,

Coconut Grove, Florida 33133 ("P7C"), PINNACLE EIGHT COMMUNICATIONS, INC., a
---

Florida corporation whose address is 2901 South Bayshore Drive, Suite 4B,

Coconut Grove, Florida 33133 ("P8C"), PINNACLE NINE COMMUNICATIONS, L.L.C., a
---

Delaware limited liability company whose address is 2901 South Bayshore Drive,

Suite 4B, Coconut Grove, Florida 33133 ("P9C"), and WINPINN CORP., a Delaware
---

corporation whose address is 230 Park Avenue, New York, New York 10169

("Purchaser").
---------

WHEREAS, P7C and P8C are the owners, respectively, of 99.5% and 0.5% of the

outstanding membership interests of P9C; and

WHEREAS, P7C is the holder of licenses granted to it by the Federal

Communications Commission (the "FCC") to operate transmission facilities in the
---

38.6 GHz--40 GHz band (such band, together with the 37 GHz--38.6 GHz band, the

"38 GHz Band") in the areas of the United States listed in Schedule A annexed
-----------

hereto (the "Existing Licenses"), and to install or acquire (by purchase, lease
-----------------

or otherwise); and

WHEREAS, P9C has been formed to be the transferee of the Existing Licenses

from P7C and to own and operate telecommunications facilities (all of the

foregoing, the "Business of P9C"); and
---------------

WHEREAS, the Purchaser wishes to acquire the outstanding membership

interests of P9C from P7C and P8C and P7C and P8C wish to sell such membership

interests to the Purchaser on the terms and conditions herein contained;

IT IS AGREED:

<PAGE>

ARTICLE I

PURCHASE AND SALE
-----------------

SECTION 1.01. First P9C Interests. Subject to the terms and conditions of
-------------------

this Agreement, P7C shall sell, transfer, assign and convey to the Purchaser,

and the Purchaser shall purchase from P7C, on the First Closing Date (as herein-

after defined) forty-nine percent (49%) of the issued and outstanding membership

interests of P9C, consisting of 49 units of P9C's membership interests (the

"First P9C Interests").
-------------------

SECTION 1.02. Second P9C Interests. Subject to the terms and conditions
--------------------

of this Agreement, P7C and P8C shall sell, transfer, assign and convey to the

Purchaser, and the Purchaser shall purchase from P7C and P8C, on the Second

Closing Date (as hereinafter defined), all, and not less than all, of the

remaining fifty-one per cent (51%) of the issued and outstanding membership

interests of P9C, consisting of 51 units of P9C's membership interests (the

"Second P9C Interests" and, together with the First P9C Interests, the " P9C
-------------------- ----

Interests").
- ---------

SECTION 1.03. Consideration.
-------------

(a) As consideration and payment for the First P9C Interests,

the Purchaser shall pay to P7C the sum of $425,575.00.

(b) As consideration and payment for the Second P9C Interests,

the Purchaser shall pay to P7C and P8C on the Second Closing Date the aggregate

sum of $442,946.00, of which $438,603.40 shall be paid to P7C and $4,342.60

shall be paid to P8C.

<PAGE>

ARTICLE II

CLOSINGS
--------

SECTION 2.01. First Closing. Subject to the terms and conditions of this
-------------
Agreement, the consummation of the sale and purchase of the First P9C Interests

shall take place at a closing (the "First Closing") to be held at 10:00 a.m.,
-------------
New York City time, at a mutually agreeable location in New York City, on such

date ("First Closing Date") designated by the Purchaser in a written notice to
------------------
P7C and P8C which is no later than 10 days after the Purchaser has received

written notice from P7C that the First FCC Consent (as defined in Section 3.10)

has been received by P7C.

SECTION 2.02. Second Closing. Subject to the terms and conditions of this
--------------

Agreement, the consummation of the sale and purchase of the Second P9C Interests

shall take place at a closing (the "Second Closing") to be held at 10:00 a.m.,
--------------

New York City time, at a mutually agreeable location in New York City, on such

date ("Second Closing Date") as is specified by the Purchaser in a written
-------------------

notice to P7C and P8C and which is no later than 35 days after the FCC has

issued public notice of the issuance of the Second FCC Consent (as defined in

Section 3.10 and, together with the First FCC Consent, the "FCC Consents"), but
------------
in no event earlier than November 1, 1996.

SECTION 2.03. P7C Deliveries. At the First Closing, P7C shall deliver to
--------------

the Purchaser an instrument, satisfactory in form and substance to the Purchaser

and its counsel ("Transfer Instrument"), representing the First P9C Interests,
-------------------

in form for transfer, free and clear of any liens, claims, charges, restric-

tions, security interests or other encumbrances (collectively, "Liens"). At
-----

Purchaser's request, P9C shall reissue the First P9C Interests in the name of

the Purchaser and shall promptly deliver the instruments therefor to the

Purchaser. At the Second Closing, P7C

3
<PAGE>

and P8C shall deliver to the Purchaser Transfer Instruments representing the

Second P9C Interests, free and clear of any Liens. At each of the First Closing

and the Second Closing, P7C and P8C shall deliver the certificates and documents

required to be delivered by them pursuant to Article VI hereof.

SECTION 2.04. Purchaser's Deliveries. At the First Closing, the Purchaser
----------------------

shall deliver to P7C the sum of $425,575.00, by wire-transfer or certified or

bank check to the order of P7C. At the Second Closing, the Purchaser shall

deliver to P7C and P8C the sums of $438,603.40 and $4,342.60, respectively, by

wire-transfer or certified or bank checks to their respective orders. At each

of the First Closing and the Second Closing, the Purchaser shall deliver the

certificates and documents required to be delivered by it pursuant to Article

VI.

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE PINNACLE PARTIES
-----------------------

Each of P7C, P8C and P9C (collectively, the "Pinnacle Parties"), severally
----------------
and not jointly, represents and warrants to the Purchaser as follows and

acknowledges that the Purchaser is relying upon such representations and

warranties:

SECTION 3.01. Organization. Each of P7C and P8C is a corporation duly
------------

organized, validly existing and in good standing under the law of the State of

Florida. P9C is a limited liability company, duly organized, validly existing

and in good standing under the law of the State of Delaware. Each of P7C, P8C

and P9C is duly qualified to do business and is in good standing in each of the

jurisdictions in which the property owned, leased or operated by it or the

nature of the business which it conducts requires qualification, or if not so

qualified, such failure or failures, in

4
<PAGE>

the aggregate, would not have a material adverse effect on its business or

operations. Each of P7C, P8C and P9C has all requisite power to own, lease and

operate its properties and to carry on its business as now being conducted,

except for such state and local licenses and other governmental requirements

which the failure to obtain, in the aggregate, would not have a material adverse

effect on its business or operations.

SECTION 3.02. Authority. Each of the Pinnacle Parties has all necessary
---------

power and authority to enter into this Agreement and to perform its obligations

as contemplated hereby. All corporate and other action necessary to be taken by

a Pinnacle Party to authorize the execution, delivery and performance of this

Agreement and all other agreements and instruments delivered by such Pinnacle

Party in connection with this Agreement has been duly and validly taken.

Subject to the compliance with terms and satisfaction of the conditions hereof,

this Agreement constitutes the valid and binding obligation of the Pinnacle

Parties, enforceable in accordance with its terms, except as the enforceability

thereof may be limited by any applicable bankruptcy, insolvency or other laws

affecting creditors' rights generally or by general principles of equity,

regardless of whether such enforceability is considered in equity or at law and

except that enforceability of any indemnification provision may be limited under

Federal and state securities laws. Subject to receipt of the FCC Consents and

compliance with the rules and regulations of the FCC (the "FCC Rules") and
---------

except as set forth in the Disclosure Schedule delivered to the Purchaser

concurrently with the execution of this Agreement (the "Disclosure Schedule"),
-------------------

the execution, delivery and performance of this Agreement does not and will not

violate or result in any default under any provision of the Certificates of

Incorporation or By-Laws of P7C or P8C or the Certificate of Formation or

Operating Agreement of P9C or any default under any material indenture, license

or other material agreement to which any of the Pinnacle

5
<PAGE>

Parties is a party or any law, regulation, order, writ, judgment or decree

applicable to it by which the ability of any of the Pinnacle Parties to consum-

mate the transactions to be consummated by them hereunder would be adversely

affected as a consequence of such default.

SECTION 3.03. The P9C Interests.
-----------------

(a) Ownership. P7C and P8C are the registered and beneficial
---------

owners of, and have the sole, entire and unfettered right to vote, the

respective P9C Interests owned by each of them, free and clear of any Lien

whatsoever and subject to no restrictions with respect to the transferability

thereof except as to the Federal and state securities laws and the FCC Rules and

as provided in the Certificate of Formation or Operating Agreement of P9C and as

set forth in the Disclosure Schedule.

(b) Capitalization. Except as set forth in the Disclosure
--------------

Schedule, the P9C Interests represent all the issued and outstanding membership

interests of P9C. Except as set forth in the Disclosure Schedule, there are no

options, warrants or other contractual rights outstanding which require, or give

any Person the right to require, the issuance of any membership interests of P9C

whether or not such rights are presently exercisable.

SECTION 3.04. Compliance with Instruments and Laws. None of P7C, P8C or
------------------------------------
P9C is in violation of any term of its Certificate of Incorporation, By-laws,

Certificate of Formation or Operating Agreement, as the case may be. Except as

set forth in the Disclosure Schedule, none of P7C, P8C or P9C is in violation of

the provisions of any material mortgage, indenture, contract, agreement,

instrument, judgment, decree, order, statute, rule or regulation or writ or

decree of any court, governmental agency or instrumentality to which it is

subject, a violation of which would

6
<PAGE>

have a material adverse effect on its ability to perform its obligations under

this Agreement or on its business.

SECTION 3.05. The Licenses.
------------

(a) P7C is the sole holder of each of the Existing Licenses,

free and clear of any Lien other than the FCC Rules and except as set forth in

the Disclosure Schedule. Each of the Existing Licenses was granted in the form

annexed hereto as Schedule B, has not been amended and is in full force and

effect. There are no pending petitions for reconsideration of the grants of the

Existing Licenses and the orders of the FCC granting the Existing Licenses to

P7C which have appeared on Public Notice not later than forty days prior to the

date hereof have become final orders, no longer subject to reconsideration by

the FCC on its own motion or to judicial review. No Pinnacle Party has been

notified of any unresolved protest to the grants of the Existing Licenses or

objections by the FCC.

(b) Except as set forth in the Disclosure Schedule, none of P7C,

P8C or P9C has granted any interest in or rights under the Existing Licenses to

other Persons and P7C retains, and P9C will obtain, upon the transfer to it of

the Existing Licenses in accordance with Section 5.01 hereof, the exclusive

right to operate transmission facilities under the Existing Licenses. P7C, P8C

and P9C have timely filed all Forms 494A and all reports required by 47 C.F.R.

Sec. 21.711 of the FCC Rules which they have been required to file and have

taken all other actions necessary to be taken by them on or before the date of

this Agreement in order for the Existing Licenses to be in full force and

effect on the date hereof.

SECTION 3.06. Assets and Liabilities. The Disclosure Schedule contains
----------------------
(a) a true and complete list of all material assets owned by P9C as of the date

of this Agreement and (b) to the

7
<PAGE>

best of its knowledge a true and complete list as of the date of this Agreement

of all of the material liabilities or material obligations of any kind, whether

absolute, accrued, contingent or otherwise, of P9C.

SECTION 3.07. Contracts. The Disclosure Schedule contains a list as of
---------
the date of this Agreement of all existing material contracts, obligations,

arrangements, understandings or commitments (written or oral) of any nature

whatsoever to which P9C is a party ("Contracts"). Except as set forth in the
---------

Disclosure Schedule, each Contract to which P9C is a party is a valid and

binding obligation of P9C, enforceable in accordance with its terms (except as

the enforceability thereof may be limited by any applicable bankruptcy,

insolvency or other laws affecting creditors' rights generally or by general

principles of equity, regardless of whether such enforceability is considered in

equity or at law), and is in full force and effect (provided that any Contracts

which by their terms expire prior to the Second Closing Date or are terminated

prior to the Second Closing Date in accordance with the terms thereof or are

terminated as specifically permitted by this Agreement will not be in full force

and effect on the Second Closing Date) and neither P9C nor, to the knowledge of

the applicable Pinnacle Parties, any other party thereto is in breach of any

material provision of, or is in default in any material respect under the terms

of (and, to the knowledge of the applicable Pinnacle Parties, no condition

exists which, with the passage of time, the giving of notice, or both, would

result in a default under the terms of), any of the Contracts the effect of

which, individually or in the aggregate, would have a material adverse effect on

the business of the Pinnacle Parties. The Pinnacle Parties have delivered to

the Purchaser (i) true and complete copies of each of the written Contracts and

(ii) reasonably complete and accurate written summaries of the oral Contracts,

if any.

8
<PAGE>

SECTION 3.08. Litigation. There are no actions, suits, arbitrations or
----------

other proceedings pending or, to the knowledge of the Pinnacle Parties,

threatened against P7C, P8C or P9C at law or in equity before any court,

federal, state, municipal or other governmental department or agency or other

tribunal. None of the Pinnacle Parties or any of their respective properties is

subject to any order, judgment, injunction or decree relating specifically to it

or any of its property or assets including the Existing Licenses which,

individually or in the aggregate, would have a material adverse effect on the

business of the Pinnacle Parties.

SECTION 3.09. Tax Liabilities. P9C has filed all Federal, state and local
---------------

Tax reports and returns required by any law or regulation to be filed by it and

for which the failure to file would have a material adverse effect on it, and

has either duly paid all Taxes, duties, and charges indicated as being due on

the basis of such returns and reports, or will have made adequate provision for

the payment thereof, and the assessment of any material amount of additional

Taxes in excess of those paid and reported are not reasonably expected. There

are no material unresolved questions or claims concerning Tax liability of P9C.

P9C has not been audited by any taxing authority and is not currently involved

in any such audit.

SECTION 3.10. Consents and Approvals. Except as set forth in the
----------------------
Disclosure Schedule, the execution and delivery of this Agreement by the

Pinnacle Parties do not, and the performance of this Agreement and the

consummation of the transactions contemplated hereby by the Pinnacle Parties

will not, require any consent, approval, authorization or other action by, or

filing with or notification to, any governmental or regulatory authority or

other third party other than (a) the consent required to be given by the FCC

with respect to the License Transfer (as defined in Section 5.01) (the "First
-----

FCC Consent"), (b) the consent of the FCC with
- -----------

9
<PAGE>

respect to a change in control of the holder of the Existing Licenses in

connection with the sale of the Second P9C Interests (the "Second FCC Consent"),
------------------

set forth in the Disclosure Schedule (the "Other Approvals" and, with the FCC
---------------

Consents, the "Approvals"), and (d) such consents, approvals, authorizations,
---------
actions, notifications and filings which, if not obtained or taken, would not

prevent any of the Pinnacle Parties from performing any of its material

obligations under this Agreement and would not materially and adversely affect

the business of P9C.

SECTION 3.11. Title to Properties. Except as set forth in the Disclosure
-------------------
Schedule, P9C owns all of its properties and assets, free and clear of any

Liens, other than Liens imposed by law which, in the aggregate, are not material

to the business of P9C and except as set forth in the Disclosure Schedule.

SECTION 3.12. No Guarantees. Other than as provided for in this
-------------

Agreement, P9C is not a party to or bound by any agreement of guarantee,

indemnification, assumption, or endorsement or any other like commitment of the

obligations, liabilities (contingent or otherwise) or indebtedness of any other

Person, firm or corporation.

SECTION 3.13. Brokers. No broker, finder or investment banker is entitled
-------

to any brokerage, finder's or other fee or commission in connection with the

transactions contemplated by this Agreement based upon arrangements made by or

on behalf of any of the Pinnacle Parties.

SECTION 3.14. Disclosure. No representation or warranty by the Pinnacle
----------
Parties contained in this Agreement and no information contained in the

Disclosure Schedule or other instrument furnished

10
<PAGE>

or to be furnished to the Purchaser pursuant to this Agreement or in connection

with the transactions contemplated hereby contains any untrue statement of a

material fact or omits to state a material fact necessary in order to make the

statements, in light of the circumstances under which they were made, contained

therein not misleading.

SECTION 3.15. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Pinnacle Parties set forth in this

Agreement shall survive until six months from the Second Closing Date except

that if this Agreement is terminated without the Second Closing occurring they

shall survive until six months from the First Closing Date, and except that the

representations and warranties set forth in Sections 3.02, 3.03, 3.05 and 3.11

shall survive without limitation as to time and the representations and warran-

ties in Section 3.09 with respect to any period with respect to which a Tax is

required to be paid ("Tax Period") shall survive until the expiration of the
----------
statute of limitations with respect to such Tax Period. Notwithstanding

anything to the contrary contained in this Agreement, it is the explicit intent

of each party hereto that the Pinnacle Parties are making no representation or

warranty whatsoever, express or implied, except those representations and

warranties contained in Article III and in any certificate delivered pursuant to

Article VI.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------

The Purchaser represents and warrants as follows to the Pinnacle

Parties and acknowledges that the Pinnacle Parties are relying upon such

representations and warranties:

SECTION 4.01. Organization. The Purchaser is a corporation duly
------------
organized, validly existing and in good standing under the law

11
<PAGE>

of the State of Delaware. The Purchaser has all the requisite power to own,

lease and operate its properties and to carry on its business as now being

conducted and as presently contemplated to be conducted.

SECTION 4.02. Authority. The Purchaser has all necessary power and
---------
authority to enter into this Agreement and to perform its obligations as

contemplated hereby. All corporate action necessary to be taken by the

Purchaser to authorize the execution, delivery and performance of this Agreement

and all other agreements and instruments delivered by the Purchaser in

connection with this Agreement has been duly and validly taken. Subject to the

terms and conditions hereof, this Agreement constitutes the valid and binding

obligation of the Purchaser, enforceable in accordance with its terms, except as

the enforceability thereof may be limited by any applicable bankruptcy,

insolvency or other laws affecting creditors' rights generally or by general

principles of equity, regardless of whether such enforceability is considered in

equity or at law and except that enforceability of any indemnification provision

may be limited under Federal and state securities laws. Subject to receipt of

the FCC Consent and compliance with the FCC Rules, the execution, delivery and

performance of this Agreement by the Purchaser does not and will not violate or

result in any default under any provision of the Certificate of Incorporation or

By-Laws of the Purchaser or any default under any indenture, license or other

agreement to which the Purchaser is a party or any law, regulation, order, writ,

judgment or decree applicable to it and by which its ability to consummate the

transactions hereunder would be adversely affected.

SECTION 4.03. Consents and Approvals. The execution and delivery of this
----------------------

Agreement by the Purchaser do not, and the performance of this Agreement and the

consummation of the transactions contemplated hereby by the Purchaser will not,

require any consent,

12
<PAGE>

approval, authorization or other action by, or filing with or notification to,

any governmental or regulatory authority or other third party other than (a) the

First FCC Consent, (b) the Second FCC Consent, (c) the Other Approvals, and (d)

such consents, approvals, authorizations, actions, notifications and filings

which, if not obtained or taken, would not prevent the Purchaser from performing

any of its material obligations under this Agreement.

SECTION 4.04. Compliance with Instruments and Laws. The Purchaser is not
------------------------------------

in violation of any term of its Certificate of Incorporation or By-laws or the

provisions of any material mortgage, indenture, contract, agreement, instrument,

judgment, decree, order, statute, rule or regulation or writ or decree of any

court, governmental agency or instrumentality to which it is subject, a

violation of which would have a material adverse effect on its ability to

perform its obligations under this Agreement or on its business.

SECTION 4.05. Litigation. There are no actions, suits, arbitrations or
----------

other proceedings pending or, to the knowledge of the Purchaser, threatened

against the Purchaser at law or in equity before any court, federal, state,

municipal or other governmental department or agency or other tribunal. Neither

the Purchaser nor any of its properties is subject to any order, judgment,

injunction or decree relating specifically to it or any of its property or

assets which, individually or in the aggregate, would have a material adverse

effect on the business of the Purchaser.

SECTION 4.06. Investment. The P9C Interests will be acquired by the
----------
Purchaser for its own account for the purpose of investment, it being understood

that the right to dispose of such Interests shall, subject to the terms of the

Operating Agreement, be entirely within the discretion of the Purchaser. The

Purchaser shall

13
<PAGE>

refrain from transferring or otherwise disposing of any of the P9C Interests, or

any interest therein, in such manner as to cause the Pinnacle Parties to be in

violation of the registration requirements of the Securities Act of 1933, as

amended, or applicable state securities, or blue sky laws.

SECTION 4.07. Sufficient Cash. At the First Closing and the Second
---------------

Closing the Purchaser will have sufficient cash to pay the purchase price for

the P9C Interests specified in Section 2.04 and to make all other necessary

payments required by this Agreement in connection with the transactions

contemplated by this Agreement.

SECTION 4.08. Brokers. No broker, finder or investment banker is entitled
-------

to any brokerage, finder's or other fee or commission in connection with the

transactions contemplated by this Agreement based upon arrangements made by or

on behalf of the Purchaser.

SECTION 4.09. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Purchaser set forth in this Agreement

shall survive until six months from the Second Closing Date except that, if this

Agreement is terminated without the Second Closing occurring, they shall survive

until six months from the First Closing Date and except that the representations

and warranties set forth in Section 4.02 shall survive without limitation as to

time.

ARTICLE V
ADDITIONAL AGREEMENTS
---------------------

SECTION 5.01. Transfer of Existing Licenses. Promptly upon execution of
-----------------------------

this Agreement, P7C shall take all actions as are necessary to transfer the

Existing Licenses to P9C, free and clear of all Liens (the "License Transfer"),
----------------

and to obtain the First FCC

14
<PAGE>

Consent and such consents as are necessary from other governmental agencies

having jurisdiction with respect thereto so that such transfer is in compliance

with the FCC Rules and other applicable laws, rules and regulations ("Transfer
--------
Consents"). Promptly upon receipt by P7C of any Transfer Consents, it shall
- --------

give copies thereof to the Purchaser.

SECTION 5.02. No Transfer of P9C Interests. From the date hereof until
----------------------------
the earlier of the Second Closing Date or the termination of this Agreement in

accordance with the provisions of Article VIII, neither P7C nor P8C shall sell,

assign, transfer or otherwise dispose of any P9C Interests, except to the

Purchaser pursuant to this Agreement.

SECTION 5.03. Financial Statements. The Pinnacle Parties understand that
--------------------
the Purchaser is a wholly-owned indirect subsidiary of WinStar Communications,

Inc. ("WinStar"), which is a public company which may need to file with the SEC
-------
and other regulatory bodies audited, unaudited and pro forma financial

statements reflecting P9C's operations. Accordingly, the Pinnacle Parties agree

to cooperate fully with the Purchaser and WinStar in this regard and, at the

Purchaser's expense, to provide the Purchaser and WinStar all information they

may reasonably request in that connection.

SECTION 5.04. Operation of Business. Between the date of this Agreement
---------------------

and the Second Closing Date or the earlier termination of this Agreement, P9C

shall (a) retain complete control over its operations and not transfer control

thereof to any other Person, (b) take all reasonable action within its means to

preserve the Existing Licenses, (c) lease or otherwise exploit 38 GHz Band

spectrum or transmission paths included in its Existing Licenses, (d) otherwise

conduct the Business of P9C in the ordinary course of its business as a common

carrier and in accordance with reasonable

15
<PAGE>

operating standards, and (e) incur no liabilities except those incurred in the

ordinary course of business and as specifically permitted by this Agreement.

Notwithstanding the foregoing, except as specifically permitted by this

Agreement and except in connection with the performance of its obligations

pursuant to Contracts listed in the Disclosure Schedule, none of the Pinnacle

parties will:

(i) issue any membership interests of P9C, options,

warrants or other rights to purchase any capital stock of P8C, any securities or

other instruments convertible or exchangeable into membership interests of P9C

or any other right, security or instrument which in any way, shape or form

grants to the holder thereof an equity interest or the right to acquire an

equity interest in P9C;

(ii) sell, assign, transfer, pledge, hypothecate or

otherwise dispose, encumber or impose a Lien on any of the Existing Licenses or

the P9C Interests;

(iii) cause P9C to (A) incur any obligations or commitments

other than (I) obligations or commitments of not more than $75,000 in the

aggregate incurred and paid in any calendar year all of which shall have been

incurred in the ordinary course of business, and (II) obligations owed to the

Purchaser or any Affiliate (as defined in Section 9.01) of the Purchaser

pursuant to any Contract listed in the Disclosure Schedule, or (B) otherwise

enter into or amend any contract, agreement, commitment, understanding or

arrangement under which the obligation or commitment (or the additional

obligation or commitment in the case of an amendment) is in excess of $15,000 in

any single instance and $50,000 in the aggregate; or

16
<PAGE>

(iv) amend the Certificate of Formation or Operating

Agreement of P9C.

SECTION 5.05. No Transfer of Control.
----------------------

this Agreement is intended to give to the Purchaser any right which would be

deemed to constitute a transfer of control (as "control" is defined in the

Communications Act of 1934, as amended, and/or the FCC Rules or case law) of one

or more of P9C's Existing Licenses from P9C to the Purchaser.

(d) Nothing in this Agreement is intended to diminish or

restrict P9C's obligations as an FCC licensee and the Parties desire that this

Agreement be in full compliance with the FCC Rules and/or the rules and

regulations of any state or local jurisdiction. Subject to the provisions of

Section 10.07, if the FCC or any state regulatory body of competent jurisdiction

determines that any provision of this Agreement violates any applicable rules,

policies, or regulations, the Parties shall use their best efforts to

immediately bring this Agreement into compliance, consistent with the intent of

this Agreement.

SECTION 5.06. Prosecution of FCC Consent; Disclosure.
--------------------------------------

(a) Promptly after the last to occur of (i) effectiveness of the

License Transfer or (ii) the completion of construction of the minimum number of

transmission paths in each of the areas listed in Schedule A as are required by

the FCC for purposes of maintaining in effect the Existing Licenses during the

term of this Agreement, the Pinnacle Parties and the Purchaser will make such

filings and take such other actions as are necessary to obtain the Second FCC

Consent and any applicable state regulatory

17
<PAGE>

consents and shall thereafter diligently prosecute such consents until they are

obtained.

(b) The Pinnacle Parties shall cooperate in disclosing

information to the Purchaser to enable the Purchaser or its Affiliates to make

such regulatory filings and take such other actions as it deems necessary or

appropriate to disclose the existence of this Agreement, the transactions

contemplated hereby and the relationships of the Parties. The Purchaser shall

give the Pinnacle Parties advance written notice of any such filings it or its

Affiliates propose to make with the FCC, which notice shall be at least two

Business Days in advance of such filing whenever practicable.

SECTION 5.07. No Adverse Applications. None of the Pinnacle Parties shall
-----------------------
file any petition, pleading or other document in opposition to the transactions

contemplated by this Agreement or assist or support any other Person, in any

manner whatsoever, in making any such filing.

SECTION 5.08. Reports. The Pinnacle Parties shall (a) furnish to the
-------

Purchaser monthly financial (balance sheet and statements of operations and cash

flow) and operating statements and reports describing the status of the Existing

Licenses and applications for the FCC Consents and Other Approvals, weekly

reports describing filings on Form 494A and reports filed pursuant to 47 C.F.R.

Sec. 21.711 (with copies thereof and of any amendments thereto) and the status

of prior filings on Form 494A and such other information as the Purchaser may

reasonably request, and (b) give the Purchaser prompt notice of any other

Persons to whom rights to use the capacity available under an Existing License

have been granted.

18
<PAGE>

SECTION 5.09. Access to Information. The Pinnacle Parties will (i) on not
---------------------

less than one Business Day's notice, permit the Purchaser and its

Representatives (as defined in Section 9.01) reasonable access during normal

business hours to all of the books, records, financial and operating data,

reports and other related materials, offices and other facilities and properties

of P9C; and (ii) permit the Purchaser and its Representatives to make such

inspections and copies thereof as they may reasonably request.

SECTION 5.10. No Securities Transactions. The Pinnacle Parties shall not
--------------------------

engage in any transactions involving the securities of WinStar prior to the time

of the making of a public announcement of the transactions contemplated by this

Agreement. Each of the Pinnacle Parties shall use its best efforts to require

each of its officers, directors, stockholders, employees, agents and Representa-

tives to comply with the foregoing requirement.

SECTION 5.11. Disclosure of Certain Matters. From the date hereof through
-----------------------------
the Second Closing Date or the termination of this Agreement, the Pinnacle

Parties, on the one hand, and the Purchaser, on the other hand (each a

"Representing Party") shall give the other prompt written notice of any event or
------------------

development that occurs that (a) had it existed or been known on the date hereof

would have been required to be disclosed by the Representing Party under this

Agreement, (b) would cause any of the representations and warranties of the

Representing Party contained herein to be inaccurate, incomplete or otherwise

misleading in any material respect, (c) causes the Representing Party to

conclude that any of the conditions set forth in Article VI can not be satis-

fied, or (d) is of a nature that is or could reasonably be considered to be

materially adverse to the business of the Representing Party (excluding changes,

revisions or proposed revisions in the FCC Rules and other publicly available

information). Upon such disclosure of a breach

19
<PAGE>

hereunder being made by a Representing Party, the sole remedy of the other Party

shall be to terminate this Agreement.

SECTION 5.12. Confidentiality. The Pinnacle Parties, on the one hand, and
---------------

the Purchaser, on the other hand, shall hold and shall cause their respective

Representatives to hold in strict confidence, unless compelled to disclose by

the FCC, the SEC or by other judicial or administrative process or by other

requirements of law, all documents and information concerning the other Party

furnished it by such other Party or its Representatives in connection with the

transactions contemplated by this Agreement or by any other agreement between

any of the Pinnacle Parties and the Purchaser and/or any of its Affiliates

(except to the extent that such information can be shown to have been (a)

previously known by the Party to which it was furnished, (b) in the public

domain through no fault of such Party or (c) later lawfully acquired from any

other source, which source is not the agent of the other Party, by the Party to

which it was furnished), and each Party shall not release or disclose such

information to any other Person, except its Representatives in connection with

this Agreement. Notwithstanding the foregoing, WinStar shall be entitled to

issue press releases and make such filings with the SEC to disclose such matters

as it is required to disclose to meet its legal obligations. The recipients of

such information shall treat such information as confidential in all respects

until the close of the first Business Day following publication thereof. In

addition, subject to the same exceptions as are set forth in the first sentence

of this Section 5.12, the Pinnacle Parties and their directors and officers

shall hold and shall cause their respective Representatives to hold in strict

confidence all documents and information obtained by them concerning P9C

including, without limitation, financial information, trade secrets and "know-

how," customers, end-user identification, suppliers and methodologies. In

addition to any other right or remedy available to the Purchas-

20
<PAGE>

er, the provisions of this Section 5.12 shall be enforceable by a proceeding for

specific performance or other equitable relief.

SECTION 5.13. Regulatory and Other Authorizations. Each Party will use
-----------------------------------

all reasonable efforts to obtain the FCC Consents and all other authorizations,

consents, orders and approvals of all Federal, state and other regulatory bodies

and officials that may be or become necessary for the performance of its

obligations pursuant to this Agreement and will cooperate fully with the other

Party in promptly seeking to obtain all such authorizations, consents, orders

and approvals. Notwithstanding anything to the contrary in this Agreement,

action by a Party in support or in opposition to any rule making proceeding or

other action by the FCC which results in the adoption by the FCC of a rule,

regulation or practice which may have an adverse impact upon any other Party

hereto (except with respect to obtaining the FCC Consents or otherwise relating

to the ability of the Purchaser to consummate the transactions contemplated

hereby) shall not be deemed to be a breach of any obligation or condition

incumbent upon a Party pursuant to this Agreement.

SECTION 5.14. Cooperation; Further Action. Subject to the terms and
---------------------------
conditions of this Agreement, each Party shall cooperate with the other and

shall use all reasonable efforts to take, or cause to be taken, all actions and

to do, or cause to be done, all things necessary, proper or advisable to

consummate the transactions contemplated hereby, including the execution and

delivery of any additional instruments necessary to consummate the transactions

contemplated hereby. Each of the Parties shall execute such documents and other

papers and take such further actions as may be reasonably required or desirable

to carry out the provisions hereof to satisfy conditions contained in this

Agreement.

21
<PAGE>

SECTION 5.15. Resignations. On or prior to the Second Closing Date, each
------------

Person who is a manager or officer of P9C shall resign from all of his positions

or offices, such resignation to be effective on the Second Closing Date.

SECTION 5.16. Operating Agreement. Effective upon the First Closing Date,
-------------------

the Operating Agreement of P9C shall be in the form annexed hereto as Exhibit I.

SECTION 5.17. Survival. If the Purchaser acquires the First P9C
--------
Interests, the provisions of Sections 5.03, 5.08, 5.09 and 5.12 shall survive

the termination of this Agreement for any reason until the earlier of (i) ten

years from the date of such termination or (ii) such time as the Purchaser or

any of its Affiliates is no longer the owner of any P9C Interests. If this

Agreement is terminated prior to the acquisition by the Purchaser of the First

P9C Interests, no provisions of this Article V shall survive.

ARTICLE VI

CONDITIONS
PRECEDENT TO CLOSING
-----------------------

SECTION 6.01. Conditions to Each Party's Obligations. The respective
--------------------------------------

obligations of each Party to consummate the sale of the P9C Interests shall be

subject to the fulfillment at or prior to the First Closing Date and the Second

Closing Date, as the case may be (each the "Relevant Closing Date"), of the
---------------------
following conditions:

(a) No Governmental Order or Regulation. There shall not be in
-----------------------------------

effect any order, decree or injunction (whether preliminary, final or

appealable) of a United States Federal or state court of competent jurisdiction,

and no rule or regulation shall have been enacted or adopted by any governmental

authority or

22
<PAGE>

agency that prohibits consummation of the sale of the P9C Interests to the

Purchaser.

(b) Approvals. All Approvals required for the consummation of
---------

the sale of the First P9C Interests or the Second P9C Interests, as the case may

be, including but not limited to the FCC Consents, shall have been granted.

SECTION 6.02. Conditions to the Obligation of the Purchaser. The
---------------------------------------------

obligation of the Purchaser to consummate the sale of the First P9C Interests or

the Second P9C Interests, as the case may be, shall be subject to the satisfac-

tion or waiver, on or before the Relevant Closing Date, of each of the following

conditions:

(a) Representations and Warranties. The representations and
------------------------------

warranties of the Pinnacle Parties contained in this Agreement shall be true and

correct in all material respects on and as of the Relevant Closing Date, with

the same force and effect as if made as of the Relevant Closing Date, with such

exceptions as do not in the aggregate have a material adverse effect on the

business of the Pinnacle Parties or as are specifically permitted by this

Agreement or result from acts or omissions of the Pinnacle Parties not inconsis-

tent with their obligations under this Agreement;

(b) Covenants. All the covenants contained in this Agreement to
---------
be complied with by the Pinnacle Parties on or before the Relevant Closing Date

shall have been complied with in all material respects;

(c) Certificate. The Purchaser shall have received a
-----------
certificate executed by the Presidents of P7C, P8C and P9C (i) to the effect set

forth in Sections 6.02(b) and (c) and (ii) listing all of the material

liabilities of P9C as of the Relevant Closing Date which do not arise under or

in connection with any other

23
<PAGE>

agreement between any of the Pinnacle Parties and/or the Purchaser and its

Affiliates.

(d) Litigation. No order, stay, judgment or decree shall have
----------

been issued by any court restraining or prohibiting the consummation of the sale

of the P9C Interests and no action or proceeding shall be pending or threatened

by any Person other than the Purchaser or an Affiliate of the Purchaser which

seeks to enjoin or prohibit (i) such sale or (ii) the right of P9C to conduct

its operations and carry on its business in the ordinary course.

(e) Resignations. With respect to the Second Closing, P9C shall
------------
have delivered to the Purchaser resignations executed by each manager, officer

and attorney-in-fact, if any, of P9C from all of his or her offices and

positions, to be effective at the Second Closing Date.

(f) Bankruptcy. None of P7C, P8C or P9C shall have commenced
----------

any case, proceeding or other action (A) relating to bankruptcy, insolvency,

reorganization or relief of debtors, seeking to have an order for relief entered

with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or

seeking reorganization, arrangement, adjustment, liquidation, dissolution,

composition or other relief with respect to it or its debts, or (B) seeking

appointment of a receiver, trustee, custodian or other similar official for it

or for all or any substantial part of its property, or shall have made a general

assignment for the benefit of its creditors, and there shall not have been

commenced against P7C, P8C or P9C any case, proceeding or other action of a

nature referred to in clause (A) above or seeking issuance of a warrant of

attachment, execution, distraint or similar process against all or any

substantial part of its property, which case, proceeding or

24
<PAGE>

other action (x) results in the entry of an order for relief or (y) remains

undismissed, undischarged or unbonded.

SECTION 6.03. Conditions to the Obligation of P7C and P8C. The obligation
-------------------------------------------

of P7C and P8C to consummate the sale of the P9C Interests shall be subject to

the satisfaction or waiver, on or before the Relevant Closing Date, of each of

the following conditions:

(a) Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 4.02 shall be true and correct

in all material respects on and as of the Relevant Closing Date, with the same

force and effect as if made as of the Relevant Closing Date.

(b) Covenants. All the covenants contained in this Agreement to
---------

be complied with by the Purchaser on or before the Relevant Closing Date shall

have been complied with in all material respects.

certificate of the Purchaser to the effect set forth in Sections 6.03(a) and

6.03(b).

(d) Tender of Payment. The Purchaser shall make the payment
-----------------

required pursuant to Section 1.03(a) or Section 1.03(b), as the case may be.

(e) Litigation. No order, stay, judgment or decree shall have
----------
been issued by any court restraining or prohibiting the consummation of the sale

of the P9C Interests and no action or proceeding shall be pending in any court

or threatened by any Person other than a Pinnacle Party or any Affiliate of a

Pinnacle Party which seeks to enjoin or prohibit such sale.

25
<PAGE>

(f) Bankruptcy. The Purchaser shall not have commenced any
----------

case, proceeding or other action (A) relating to bankruptcy, insolvency,

reorganization or relief of debtors, seeking to have an order for relief entered

with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or

seeking reorganization, arrangement, adjustment, liquidation, dissolution,

composition or other relief with respect to it or its debts, or (B) seeking

appointment of a receiver, trustee, custodian or other similar official for it

or for all or any substantial part of its property, or shall have made a general

assignment for the benefit of its creditors, and there shall not have been

commenced against the Purchaser any case, proceeding or other action of a nature

referred to in clause (A) above or seeking issuance of a warrant of attachment,

execution, distraint or similar process against all or any substantial part of

its property, which case, proceeding or other action (x) results in the entry of

an order for relief or (y) remains undismissed, undischarged or unbonded.

ARTICLE VII
INDEMNIFICATION
---------------

SECTION 7.01. Indemnification by the Pinnacle Parties.
---------------------------------------

(a) The Pinnacle Parties, other than P9C, shall indemnify and

hold harmless the Purchaser and P9C from and against, and shall reimburse the

Purchaser and P9C for, any Damages which may be sustained, suffered or incurred

by the Purchaser or P9C, whether as a result of any Third Party Claim or

otherwise, and which arise from or in connection with or are attributable to (i)

the breach of any of the representations and warranties of the Pinnacle Parties

contained in this Agreement or (ii) all liabilities of P9C on the Second Closing

Date, including liabilities for Taxes, incurred by P9C as a result of activities

not specifically

26
<PAGE>

permitted pursuant to this Agreement or any other agreement between P9C and the

Purchaser or any of the Purchaser's affiliates.

(b) Claims under the indemnity provided in Section 7.01(a) may

be made until six months after the Relevant Closing Date with respect to

representations and warranties made at such Relevant Closing Date except that a

Claim based upon a breach of the representations and warranties contained in

Sections 3.02, 3.03, 3.05 and 3.11 may be made without limitation as to time and

a Claim based upon a breach of the representations and warranties in Section

3.09 with respect to any Tax Period may be made until three years after the

expiration of such Tax Period.

termination of this Agreement for any reason.

SECTION 7.02. Indemnification by the Purchaser.
--------------------------------

(a) The Purchaser shall indemnify and hold harmless the Pinnacle

Parties from and against, and shall reimburse the Pinnacle Parties for, any

Damages which may be sustained, suffered or incurred by the Pinnacle Parties

whether as a result of Third Party Claims or otherwise, and which arise or

result from or in connection with or are attributable to the breach of any of

the representations and warranties of the Purchaser contained in this Agreement.

(b) Claims under the indemnity provided in Section 7.02(a) may

be made until six months after the Relevant Closing Date with respect to

representations and warranties made at such Relevant Closing Date except that a

Claim based upon a breach of the representations and warranties in Section 4.02

may be made without limitation as to time.

27
<PAGE>

termination of this Agreement for any reason.

SECTION 7.03. Notice, Etc. A Party required to make an indemnification
------------
payment pursuant to this Agreement ("Indemnifying Party") shall have no
------------------

liability unless the Party entitled to receive such indemnification payment

("Indemnified Party") gives notice to the Indemnifying Party specifying (i) the
-----------------

covenant, representation or warranty, agreement, undertaking or obligation

contained herein which it asserts has been breached, and (ii) in reasonable

detail, the nature and dollar amount of any claim the Indemnified Party may have

against the Indemnifying Party by reason thereof under this Agreement. With

respect to Third Party Claims, an Indemnified Party (iv) shall give the

Indemnifying Party prompt notice of any Third Party Claim, (v) prior to taking

any action with respect to such Third Party Claim, shall consult with the

Indemnifying Party as to the procedure to be followed in defending, settling, or

compromising the Third Party Claim, (vi) shall not consent to any settlement or

compromise of the Third Party Claim without the written consent of the

Indemnifying Party (which consent shall not be unreasonably withheld or

delayed), and (vii) shall permit the Indemnifying Party, if it so elects, to

assume the exclusive defense of such Third Party Claim (including the compromise

or settlement thereof) at its own cost and expense. Notwithstanding the

foregoing, the Party which defends any Third Party Claim shall, to the extent

required by insurance policies, share or give control thereof to any insurer

with respect to such Claim. If the Indemnifying Party shall elect to assume the

exclusive defense of any Third Party Claim pursuant to this Agreement, it shall

notify the Indemnified Party in writing of such election, and the Indemnifying

Party shall not be liable hereunder for any fees or expenses of the Indemnified

Party's counsel relating to such Third Party Claim after the date of delivery to

the Indemnified Party of such notice of election. The Indemnifying

28
<PAGE>

Party will not compromise or settle any such Third Party Claim without the

written consent of the Indemnified Party (which consent shall not be

unreasonably withheld or delayed) if the relief provided is other than monetary

damages and such relief would materially adversely affect the Indemnified Party.

SECTION 7.05. Indemnity Escrow Agreement. Concurrently with the execution
--------------------------

of this Agreement, P7C and P8C, the Purchaser and Graubard Mollen & Miller, as

escrow agent, shall enter into an Indemnity Escrow Agreement in the form annexed

hereto as Exhibit II, pursuant to which P7C and P8C will pledge the P9C

Interests to the Purchaser as security for the obligations of the Pinnacle

Parties pursuant to this Article VII.

ARTICLE VIII
TERMINATION
-----------

SECTION 8.01. Methods of Termination. This Agreement may be terminated at
----------------------

any time:

(a) by mutual written consent of the Purchaser and P7C;

(b) by written notice of either the Purchaser or P7C, if the

First FCC Consent has not been granted by one year from date of Agreement or if

the Second FCC Consent has not been granted by two years from the date of

Agreement; provided, however, that the right to terminate this Agreement under

this Section 8.01(b) shall not be available to any Party that has breached any

of its covenants, representations or warranties in this Agreement in any

material respect;

have failed to perform in any material respect any

29
<PAGE>

of its covenants or agreements contained in this Agreement or in any other

agreement between any of the Pinnacle Parties and the Purchaser and/or any of

its Affiliates or (ii) if the representations and warranties of the Purchaser

contained in Section 4.02 shall not be true and correct in all material respects

at the time made, or (iii) if such representations and warranties shall not be

true and correct on and as of the Relevant Closing Date in all material respects

as though such representations and warranties were made again at and as of the

Relevant Closing Date, and in any such event, if such breach is subject to cure,

the Purchaser has not cured such breach within 10 business days of P7C's notice

of an intent to terminate; or

(d) by the Purchaser, (i) if any of the Pinnacle Parties shall

have failed to perform any of its covenants in this Agreement or in any other

agreement between any of the Pinnacle Parties and the Purchaser and/or any of

its Affiliates in any material respect or (ii) if the representations and

warranties of the Pinnacle Parties contained in this Agreement shall not be true

and correct in all material respects at the time made, or (iii) except as

provided in paragraph (a) of Section 6.02, if such representations and

warranties shall not be true and correct in all material respects on and as of

the Relevant Closing Date as though such representations and warranties were

made again at and as of the Relevant Closing Date, except to the extent that

such representations are made herein as of a specific date prior to the Relevant

Closing Date, and in any such event, if such breach is subject to cure, the

Pinnacle Parties have not cured such breach within 10 Business Days of the

Purchaser's notice of an intent to terminate.

SECTION 8.02. Effect of Termination. In the event of termination by the
---------------------
Purchaser or by P7C, or both, pursuant to Section 8.01 hereof, written notice

thereof shall forthwith be given to the other Party and all further obligations

of the Parties

30
<PAGE>

under this Agreement shall terminate, no Party shall have any right under this

Agreement against any other Party except as set forth in this Section 8.02, and

each Party shall bear its own costs and expenses. In such event:

(a) If this Agreement is terminated by P7C pursuant to Section

8.01(c) or by the Purchaser pursuant to Section 8.01(d), the terminating Party's

right to pursue all legal and equitable remedies for breach of contract or

otherwise, including, without limitation, damages relating thereto, shall

survive such termination unimpaired;

(b) All confidential information received by a Party with

respect to the business of another Party shall be treated in accordance with

Section 5.12, which shall survive such termination or abandonment; and

hereof by another Party, from pursuing all equitable remedies, including

specific performance, it being acknowledged and agreed by the Parties that the

businesses of P9C and the Purchaser are of a special, unique and extraordinary

character and that any breach will cause irreparable injury to the non-breaching

Party for which money damages will not provide a wholly adequate remedy.

ARTICLE IX

DEFINITIONS
-----------

SECTION 9.01. Certain Defined Terms. As used in this Agreement, the
---------------------

following terms shall have the following meanings:

"Affiliate" means, with respect to a Party, a Person controlled by,
---------

controlling or under common control with such Party.

31
<PAGE>

"Business Day" means a day of the year on which banks are not required or
------------

authorized to be closed in the City of New York.

"Damages" means the dollar amount of any loss, damage, expense or
-------

liability, including, without limitation, reasonable attorneys' fees and

disbursements incurred by an Indemnified Party in any action or proceeding

between the Indemnified Party and the Indemnifying Party or between the

Indemnified Party and a third party, which is determined (as provided in Article

VII) to have been sustained, suffered or incurred by a Party and to have arisen

from or in connection with an event or state of facts which is subject to

indemnification under this Agreement, provided, that in no event shall "Damages"
--------

include incidental or consequential damages; the amount of Damages shall be the

amount finally determined by a court of competent jurisdiction or appropriate

governmental administrative agency (after the exhaustion of all appeals) or the

amount agreed to upon settlement in accordance with the terms of this Agreement,

if a Third Party Claim (as hereinafter defined), or by the Parties, if a Direct

Claim (as hereinafter defined).

"Direct Claim" means any Claim (as hereinafter defined) other than a Third
------------

Party Claim.

"Party" means the Purchaser, on the one hand, and any or all of the
-----

Pinnacle Parties, as the context shall require, on the other hand (collectively,

"Parties").
-------

"Person" means an individual, partnership, corporation, joint venture,
------

unincorporated organization, cooperative or a governmental entity or agency

thereof.

32
<PAGE>

"Representatives" of either Party means such Party's employees,
---------------

accountants, auditors, actuaries, counsel, financial advisors, bankers,

investment bankers and consultants.

"Tax" or "Taxes" means all income, gross receipts, sales, stock transfer,
--- -----

excise, bulk transfer, use, employment, franchise, profits, property or other

taxes, fees, stamp taxes and duties, assessments, levies or charges of any kind

whatsoever (whether payable directly or by withholding), together with any

interest and any penalties, additions to tax or additional amounts imposed by

any taxing authority with respect thereto.

"Third Party Claim" means a claim, demand, suit, proceeding or action
-----------------

("Claim") by a Person, firm, corporation or government entity other than a Party
-----

hereto or any affiliate of such Party.

ARTICLE X
GENERAL PROVISIONS
------------------

SECTION 10.01. Expenses. Except as otherwise provided herein, all costs
--------

and expenses, including, without limitation, fees and disbursements of

Representatives, incurred in connection with this Agreement and the transactions

contemplated hereby shall be paid by the Party incurring such costs and

expenses, except that filing fees payable to the FCC in connection with

obtaining the Second FCC Consent shall be shared equally by the Parties.

SECTION 10.02. Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly

given or made as of the date delivered or mailed if delivered personally or by

nationally recognized courier or mailed by registered mail (postage prepaid,

return receipt requested) or by telecopy to the Parties at the following

addresses (or at such other address for a Party as shall be specified by like

33
<PAGE>

notice, except that notices of changes of address shall be effective upon

receipt):

(a) If to the Pinnacle Parties:

Pinnacle Seven Communications, Inc.
2901 South Bayshore Drive
Suite 4B
Coconut Grove, Florida 33133
Attention: Mr. Richard Landy
Telecopier No.: 305-445-4800

with a copy to:

Akin, Gump, Strauss, Hauer & Field, L.L.P.
1333 New Hampshire Avenue, N.W., Suite 400
Washington, DC 20036
Attention: Thomas W. Davidson, P.C.
Telecopier No.: 202-887-4288

- and -

Mr. Richard Landy
745 Fifth Avenue, Suite 1701
New York, New York 10151
Telecopier No.: 212-688-3043

(b) If to the Purchaser:

230 Park Avenue
Suite 3126
New York, New York 10169
Attention: Timothy R. Graham, Esq.
Telecopier No.: (212) 867-1565

with a copy to:

Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
Telecopier No.: (212) 818-8881

SECTION 10.03. Public Announcements. Neither the Pinnacle Parties nor the
--------------------

Purchaser or WinStar shall make any public announcements in respect of this

Agreement or the transactions

34
<PAGE>

contemplated herein without the consent of the other, which consent shall not

unreasonably withheld or delayed, except that the Purchaser and WinStar may make

any public announcement they deem necessary to comply with WinStar's legal

obligations.

SECTION 10.04. Assignment; Merger. The Purchaser may assign its rights
------------------

under this Agreement, or any portion thereof, to any wholly-owned direct or

indirect subsidiary of WinStar, provided that such assignment shall not relieve

the Purchaser of its obligations hereunder to the extent not fulfilled by such

assignee. In lieu of the purchase by the Purchaser or any such assignee of the

Second P9C Interests, at the Purchaser's option, the transaction contemplated by

the Second Closing may be accomplished by a statutory merger of P9C into the

Purchaser or such assignee, in which event the merger consideration to be

received by P7C and P8C shall be the amounts payable to them pursuant to Section

1.03(b). The Pinnacle Parties shall execute such agreements and instruments and

take such other actions as are reasonably requested by the Purchaser to

effectuate such merger.

SECTION 10.05. Amendment. This Agreement may not be amended or modified
---------

except by an instrument in writing signed by P7C and the Purchaser, which

instrument shall thereupon be binding upon all the Parties.

SECTION 10.06. Waiver. Any Party may (a) extend the time for the
------

performance of any of the obligations or other acts of any other Party, (b)

waive any inaccuracies in the representations and warranties contained herein or

in any document delivered pursuant hereto and (c) waive compliance with any of

the agreements or conditions contained herein. Any such extension or waiver

shall be valid only if set forth in an instrument in writing signed by the Party

to be bound thereby.

35
<PAGE>

SECTION 10.07. Severability. If any provision of this Agreement is
------------

determined to be invalid, illegal or incapable of being enforced by a court or

regulatory agency of competent jurisdiction, the other provisions of this

Agreement shall not be affected and shall remain in full force and effect and

the Parties shall negotiate in good faith revisions to this Agreement so as to

effect the original intent of the Parties pursuant to the provision so affected.

SECTION 10.08. Entire Agreement; Conflict. This Agreement and the
--------------------------

Schedules and Exhibits hereto constitute the entire agreement and supersede all

prior agreements and undertakings, both written and oral, among the Parties with

respect to the subject matter hereof and, except as otherwise expressly provided

herein, are not intended to confer upon any other Person any rights or remedies

hereunder.

SECTION 10.09. Benefit. This Agreement shall inure to the benefit of and
-------

be binding upon the successors and assigns of the Parties.

SECTION 10.10. Governing Law; Jurisdiction. This Agreement shall be
---------------------------
governed by, and construed in accordance with, the law of the State of New York,

without regard to principles of conflicts of law. The Parties agree that any

action or proceeding arising out of or in any way relating to this Agreement

shall be brought in the courts of the State of New York in the County of New

York or the United States District Court for the Southern District of New York

and irrevocably submit to such jurisdiction, which jurisdiction shall be

exclusive. The Parties waive all objections to such exclusive jurisdiction and

that such courts constitute an inconvenient forum. Process or summons in any

such action or proceeding may be served by registered mail, return receipt

requested, postage prepaid, addressed to a Party at the address set forth in

Section

36
<PAGE>

10.02. Such mailing shall be deemed personal service and shall be deemed made

upon the Party served upon the first attempt at delivery if such attempt is

refused.

SECTION 10.11. Counterparts. This Agreement may be executed in one or
------------
more counterparts, and by the different Parties in separate counterparts, each

of which when executed shall be deemed to be an original but all of which when

taken together shall constitute one and the same agreement.

37
<PAGE>

IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above.

PINNACLE SEVEN COMMUNICATIONS, INC.

By:_________________________________
Name:
Title:

PINNACLE EIGHT COMMUNICATIONS, INC.

By:_________________________________
Name:
Title:

PINNACLE NINE COMMUNICATIONS, L.L.C.

By:_________________________________
Name:
Title:

WINPINN CORP.

By:_______________________________
Name:
Title:

38
<PAGE>

SCHEDULE A

SERVICE AREAS

The service areas authorized by the FCC in the radio station
authorizations issued to Pinnacle Seven Communications, Inc. for: Station WPJA
784 in Philadelphia, Pennsylvania (File No. 3125-CF-P/L-95); Station WPJA 785 in
Dallas, Texas (File No. 3126-CF-P\L-95); and Station WPJA 786 in Baltimore,
Maryland (File No. 3128-CF-P/L-95).

Exhibit 10.74

SERVICE AGREEMENT
-----------------

THIS SERVICE AGREEMENT (this "Agreement") is made as of this 20th day
of June, 1996 by and between WINSTAR WIRELESS, INC., a Delaware corporation
("WinStar"), and PINNACLE SEVEN COMMUNICATIONS, INC., a Florida corporation
("P7C"), and PINNACLE NINE COMMUNICATIONS, L.L.C., a Delaware limited liability
company ("P9C" and, together with P7C, "Pinnacle").

RECITALS

WHEREAS, Pinnacle acts as a competitive access provider of local
digital microwave distribution services and facilities to large corporations and
to inter-exchange and other common carriers (the "Business");

WHEREAS, P7C, P9C, Pinnacle Eight Communications, Inc., a Florida
corporation, and an affiliate of WinStar have entered into that certain Purchase
Agreement of even date herewith pursuant to which such affiliate of WinStar will
purchase the outstanding membership interests of P9C (the "Purchase Agreement");
and

WHEREAS, WinStar, directly or through its subsidiaries, is to perform
certain consulting and related services for Pinnacle in connection with the
Business beginning on the Effective Date (as hereinafter defined) and ending
upon the termination of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:

1. Appointment. Pinnacle hereby retains WinStar on the conditions
-----------
and the terms set forth herein to provide the Services (as defined below) during
the Term (as defined below).

2. Term. This Agreement shall commence as of June 20, 1996 (the
----
"Effective Date") and shall continue in full force and effect until terminated
pursuant to Section 10 below (the "Term").

3. Services. WinStar agrees to provide consulting and related
--------
assistance to Pinnacle (the "Services") at the request and direction of Pinnacle
with respect to all aspects of the operation of the Business, including the
following: maintaining the systems and equipment of the Business; performing
obligations under customer contracts, real estate leases, and other operating
agreements; bookkeeping and accounting; preparation, at WinStar's expense, of
tax returns and financial statements, including cash flow statements; preparing
schedules for audits and assistance with audits; collecting rent, subscriber
fees, income, and other revenues from customers; making all necessary disburse-
ments, deductions and payments with respect to the repair, maintenance and

<PAGE>

operation of the Business; and, consistent with the existing practices of
Pinnacle, assisting Pinnacle's employees and legal advisors in performing such
acts required in each jurisdiction where the Business operates which are
necessary to comply with applicable statutes, ordinances, laws, rules and
regulations (including, without limitation, the Communications Act of 1934, as
amended, and any rules or regulations promulgated by the Federal Communications
Commission (the "FCC Rules") (the "Applicable Laws"), including the preparation
and filing of any appropriate license renewal applications and other reports and
filings necessary to keep in force and effect any Federal Communications
Commission ("FCC") license or authorization held by Pinnacle which is being
utilized in connection with the Business. WinStar shall report weekly to the
chief executive officer of Pinnacle (or other designee of the Board of Directors
of P7C) with respect to the operation of the Business and the Services provided
by WinStar and prepare monthly written reports to the Board of Directors of P7C
with respect to the Services provided by WinStar and the financial performance
of the Business. If requested by the Board of Directors of P7C upon reasonable
advance notice, WinStar will have in attendance at any meeting of the Board of
Directors of P7C (in person if such meeting is held in New York or Washington,
D.C., or by telephone if elsewhere) a representative of WinStar to report on the
Services performed by WinStar and the performance of the Business.

4. Monthly Fee.
-----------

(a) As full compensation for WinStar's performance of the
Services, P7C shall pay WinStar a fee of $4,500 per month during the Term. In
the event of a partial month during the Term, the Monthly Fee shall be
calculated ratably based on the number of days in such period. Such fee shall
continue to be paid by P7C notwithstanding the assignment to P9C by P7C of any
license issued by the FCC to provide telecommunications services. WinStar
agrees not to challenge the validity of this Agreement as a consequence of P7C's
assignment of its rights under this Agreement to P9C.

(b) The Monthly Fee shall be paid on or before the 5th day after
the close of each month during which Services were performed, except to the
extent that there is insufficient cash generated from the Business for the
payment of such fee after the payment of expenses, in which case the fee shall
be paid as and when such cash is received.

5. Standard of Services. WinStar shall perform the Services in a
--------------------
professional manner and in accordance with all applicable professional or
industry standards and all Applicable Laws.

2
<PAGE>

6. Indemnification.
---------------

(a) WinStar shall indemnify and hold Pinnacle harmless from and
against all damages, expenses, costs, or losses suffered or incurred by Pinnacle
resulting from or arising out of WinStar's performance or nonperformance of its
obligations hereunder.

(b) Pinnacle shall indemnify and hold WinStar harmless from and
against all damages, expenses, costs, or losses suffered or incurred by WinStar
in connection with Pinnacle's performance or non-performance of its obligations
under this Agreement.

7. Proprietary Information. Each party acknowledges that, in the
-----------------------
course of the performance of this Agreement, it may have access to privileged
and proprietary information claimed to be unique, secret, and confidential, and
which constitutes the exclusive property or trade secrets of the other, and the
parties acknowledge that they are in a confidential relationship with each
other. This information may be presented in documents marked with a restrictive
notice or otherwise tangibly designated as proprietary or during oral
discussions, at which time representatives of the disclosing party will specify
that the information is proprietary. Each party agrees to maintain the
confidentiality of the proprietary information and to use the same degree of
care as it uses with regard to its own proprietary information to prevent the
disclosure, publication or unauthorized use of the proprietary information.
Neither party may duplicate or copy proprietary information of the other party
other than to the extent necessary for legitimate business uses in connection
with this Agreement. A party shall be excused from these nondisclosure
provisions if the proprietary information has been, or is subsequently,
generally available to the public without breach of this Agreement, the
proprietary information is made public by the other party, the other party gives
its express, prior written consent to the disclosure of the proprietary
information, the proprietary information is independently developed by such
party, or if the disclosure is required by law, regulation or court process.
Notwithstanding anything to the contrary in this Agreement, this provision shall
survive the termination or expiration of this Agreement.

8. Control by Pinnacle.
-------------------

(a) Notwithstanding anything in this Agreement to the contrary,
Pinnacle shall retain ultimate control over the personnel, operations and
policies of the Business, including, without limitation, all legal and
regulatory matters, until the Second Closing (as defined in the Purchase
Agreement). Pinnacle

3
<PAGE>

and its officers, employees and agents shall retain full access at all times to
all aspects of the operations and books and records of the Business. Pinnacle
may, in its discretion, accept or reject, in whole or in part, any
recommendation made by WinStar under this Agreement; provided, however, in the
event of a dispute as to the acceptance or rejection of a material
recommendation by WinStar, WinStar shall have the right at its discretion to
terminate this Agreement and all of its obligations hereunder on not less than
thirty (30) days advance written notice to Pinnacle.

(b) It is expressly understood that nothing in this Agreement is
intended to give to WinStar or any affiliate of WinStar any right which would be
deemed to constitute a transfer of control (as "control" is defined in the
Communications Act of 1934, as amended, and/or the FCC Rules or case law) of one
or more of Pinnacle's licenses from Pinnacle to WinStar or any affiliate of
WinStar.

(c) Nothing in this Agreement is intended to diminish or
restrict Pinnacle's obligations as an FCC licensee and the parties hereto desire
that this Agreement and the transactions contemplated hereby be in full
compliance with the FCC Rules. If the FCC determines that any provision of this
Agreement violates any applicable rules, policies, or regulations, the parties
shall use their best efforts to immediately bring this Agreement into
compliance, consistent with the intent of this Agreement.

9. Assignment. Neither party shall assign any rights or obligations
----------
under this Agreement to any person other than to a wholly-owned direct or
indirect subsidiary of such party or of the corporate parent of such party
without the prior written consent of the other party, except that WinStar may,
without such consent, assign its right to receive payments under this Agreement
to any other person or entity. In addition, P7C may assign its rights hereunder
to P9C without the consent of WinStar. Any attempted assignment in violation of
this Section 9 shall be null and void. This Agreement shall be binding upon and
inure to the benefit of the parties' permitted successors and assigns; provided,
--------
however, that the assigning party shall remain liable for the performance of
- -------
this Agreement by the assignee.

10. Termination. Either party may terminate this Agreement at any
-----------
time by written notice to the other party upon the occurrence of any of the
following events:

(a) the continued material failure by the other party to perform
any of its obligations under this Agreement; provided, however, that the other
-------- -------
party shall be given notice thereof by the terminating party and a ten day
period thereafter to cure such material failure;

4
<PAGE>

(b) the insolvency of the other party, appointment of a receiver
of the property of the other party, or assignment for the benefit of the
creditors of the other party;

(c) the filing of a voluntary petition by or against the other
party under the bankruptcy laws of the United States or 60 days after the filing
of an involuntary petition if such involuntary petition is not discharged by
such date; or

(d) the termination of the Purchase Agreement pursuant to
Section 8.01 thereof, provided that such termination does not result from a
breach of its obligations under the Purchase Agreement by the party proposing to
terminate this Lease Agreement.

11. No Joint Venture; Non-Exclusive Engagement. Nothing herein
------------------------------------------
contained shall be deemed to have created, or be construed as having created any
joint venture, joint employer, or partnership relationship between WinStar and
Pinnacle. At all times during the performance of its duties and obligations
arising hereunder, WinStar shall be deemed to be acting as an independent
contractor and shall have no right or authority to assume or create any
obligation or responsibility, express or implied, on behalf of or in the name of
Pinnacle, except as authorized by Pinnacle. No provision of this Agreement
shall be construed to preclude WinStar, or any agent, assistant, affiliate or
employee of WinStar from engaging in any activity whatsoever, including, without
limitation, receiving compensation for services, or acting as an advisor to any
person or advisor to or participant or owner in any corporation, partnership,
trust or other business entity or from receiving compensation or profit
therefor. WinStar shall not be obligated to present any particular business
opportunity to Pinnacle, even if such opportunity is of such a character which,
if presented to Pinnacle, could be taken by Pinnacle, and WinStar and any
affiliate thereof shall have the right to take for its own account (individu-
ally) or to recommend to others any such particular business opportunity.
Pinnacle shall provide WinStar with such access to its facilities as is
reasonably required for WinStar to provide its services hereunder.

12. Individual Designees. WinStar shall only be required to make
--------------------
available such employees, agents, or designees to perform services hereunder as
it shall deem to be reasonably necessary to provide such services and Pinnacle
shall not be entitled to the services of any particular executive or employee of
WinStar in connection with this Agreement.

13. Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or by
nationally recognized courier or mailed

5
<PAGE>

by registered mail (postage prepaid, return receipt requested) or by telecopy to
the Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):

(a) If to Pinnacle:

Pinnacle Seven Communications, Inc.
2901 South Bayshore Drive
Suite 4B
Coconut Grove, Florida 33133
Attention: Mr. Richard Landy
Telecopier No.: 305-445-4800

with a copy (which shall not constitute notice) to:

Akin, Gump, Strauss, Hauer & Field, L.L.P.
1333 New Hampshire Avenue, N.W., Suite 400
Washington, DC 20036
Attention: Thomas W. Davidson, P.C.
Telecopier No.: 202-887-4288

- and -

Mr. Richard Landy
745 Fifth Avenue, Suite 1701
New York, New York 10151
Telecopier No.: 212-688-3043

(b) If to WinStar:

WinStar Wireless, Inc.
230 Park Avenue, Suite 3126
New York, New York 10169
Attention: Timothy R. Graham, Esq.
Facsimile: (212) 867-1565

with a copy (which shall not constitute notice) to:

David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Facsimile: (212) 818-8881

or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this section;
provided, that a notice not given

6
<PAGE>

as above shall, if it is in writing, be deemed given if and when actually
received by the party to whom it is required or permitted to be given.

14. Persons Bound. This Agreement and all terms and provisions
-------------
contained herein shall bind and inure to the benefit of the parties hereto, and
their respective successors, assigns and legal representatives.

15. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties relating to the transactions contemplated hereby. All prior
or contemporaneous agreements, understandings, representations and statements
regarding such transactions, oral or written, are merged herein.

16. Choice of Law. This Agreement is made pursuant to, and shall be
-------------
governed by and construed in accordance with the law applicable to contracts
made and to be performed entirely within the State of New York.

17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.

18. Severability. If any provision of this Agreement or the
------------
application thereof to any particular circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.

7
<PAGE>

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first mentioned above.

WINSTAR WIRELESS, INC.

By:_______________________________
Name:
Title:

PINNACLE SEVEN COMMUNICATIONS, INC.

By:_________________________________
Name:
Title:

PINNACLE NINE COMMUNICATIONS, L.L.C.

By:_________________________________
Name:
Title:

Exhibit 10.75

TRANSMISSION PATH LEASE AGREEMENT
---------------------------------

TRANSMISSION PATH LEASE AGREEMENT dated June 20, 1996, between
PINNACLE SEVEN COMMUNICATIONS, INC. ("P7C" or "Carrier"), a Florida corporation,
PINNACLE NINE COMMUNICATIONS, L.L.C. ("P9C"), a Delaware limited liability
company, and WINSTAR WIRELESS, INC. ("Customer"), a Delaware corporation.

WHEREAS, Carrier is the holder of licenses issued by the Federal
Communications Commission ("FCC") to provide wireless telecommunications
services utilizing specific portions of the 38.6 to 40 GHz frequency band ("38
GHz" or "38 GHz Band") in certain geographical areas; and

WHEREAS, Carrier offers its wireless telecommunications services to
the public; and

WHEREAS, Customer is a common carrier providing various wireless
communications services to the public, including audio, data and video
transmission services; and

WHEREAS, Carrier and Customer both desire to bring innovative wireless
local distribution services to the public in as rapid a fashion and at as low a
cost as possible; and

WHEREAS, Customer desires to lease Transmission Paths (as hereinafter
defined) from Carrier between various points to be designated by Customer from
time to time, in order to supplement and/or complement its existing capacity so
as to meet its customers' needs and expand its offerings for audio, data and
video transmission services; and

WHEREAS, Carrier desires to lease such Transmission Paths to Customer
upon the terms and conditions set forth herein; and

WHEREAS, Customer is making a substantial commitment to Carrier
hereunder and will be incurring significant continuing market development costs
and sharing valuable proprietary information with Carrier;

NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants and conditions set forth below, the parties hereto agree as
follows:

1. Definitions. As used in this Lease Agreement, the following
terms shall have the meanings indicated:

A. "Effective Date" means June 20, 1996.

<PAGE>

B. "Transmission Facilities" means the radio equipment and
related facilities needed to transmit and/or receive 38 GHz Band radio signals
via a specific radio channel allotted by Carrier for Customer's use between
Transmission Points (as hereinafter defined) selected by the Customer in
accordance with the terms hereof.

C. "Service Area" means a geographical area bounded by minimum
and maximum latitude and longitude coordinates within which Carrier is licensed
by the FCC to provide 38 GHz services. Exhibit A hereto contains a list of all
of Carrier's presently licensed Service Areas.

D. "Transmission Point" means a building or other structure
selected by Customer.

E. "Transmission Path" means the communications path between
two Transmission Points, including intermediate/repeater Transmission Points,
and also means all Special Configuration Arrangements (as hereinafter defined).

F. "Circuit Path" means a segment of bandwidth used by Customer
in accordance with the terms hereof, capable of transmitting a minimum of four
(4) T-1/DS-1 circuits in a two way/duplex mode between Transmission Points.

2. Term. The term of this Lease Agreement shall begin on the
Effective Date and shall continue for a period of seven (7) years ("Term"),
except as provided in Paragraph 12 or Paragraph 13 hereof.

3. Lease of Transmission Paths.

A. Effective upon the execution hereof and payment by Customer
of the initial lease payments due hereunder, Carrier shall lease to Customer one
or more Transmission Paths in each Service Area listed in Schedule A, as may be
requested by Customer, during the Term. Transmission Paths shall be requested
by Customer in accordance with Paragraph 3B below. Customer may also utilize a
deployment configuration other than direct point-to-point ("Special
Configuration Arrangement") including, without limitation, a point to multipoint
configuration and a configuration whereby one or more multiple point-to-point
Transmission Paths are provided from a single location to numerous receiver
locations, in either case, for video, audio and/or data transmission. All
Special Configuration Arrangements within a Service Area shall be considered one
Transmission Path for purposes of this Lease Agreement.

B. To initiate service hereunder for a Transmission Path,
Customer shall issue a service notice ("Service

2
<PAGE>

Notice"), addressed to Carrier at Carrier's Business Office, specifying the
desired location of the Transmission Points, the number of Circuit Paths in the
Transmission Path, the Transmission Facilities to be utilized to operate each
Circuit Path, the desired Circuit Path capacity, and the expected date for the
commencement of service. Customer may modify the form of Service Notice from
time to time as the need reasonably arises in order to obtain information
reasonably necessary for determining installation and service requirements.
Customer may subsequently increase or decrease or move its desired Circuit Path
capacity or discontinue, move or modify service on any Transmission Path by
submitting a new Service Notice. In lieu of submitting a Service Notice,
Customer may file with Carrier a request ("Preclearance Request") with respect
to a specified Transmission Path stating that it has concluded a prior
coordination study which has determined that utilization of such Transmission
Path will not be prevented by reason of electromagnetic interference to or from
another licensee or to or from another Transmission Path then in service and
requesting Carrier to protect the subject precleared Transmission Path (i.e.,
----
not lease or otherwise grant rights to the precleared Transmission Path to any
other customer, not use the precleared Transmission Path other than for the
provision of service to Customer and not grant any rights to any other customer
or use for its own benefit any other Transmission Path which would electromag-
netically interfere with the usage of such precleared Transmission Path by
Customer) until such time specified by Customer in the Service Order or
Preclearance Request as the desired date for commencement of service, which
shall not be later than nine (9) months from the date of the Preclearance
Request; provided, however, Customer may renew without cost to Customer a
Preclearance Request for up to one additional nine-month period by delivering a
notice of renewal to Carrier prior to the scheduled expiration thereof.

C. Upon Customer's delivery to Carrier of a Service Notice
pursuant to Paragraph 3B, Customer shall promptly act to have the necessary
Transmission Facilities installed as soon as practicable at Customer's sole cost
and expense and subject in all respects to Carrier's ultimate control of and
access to such Transmission Facilities. Customer shall obtain any required
construction approvals and site leases. In addition, Customer shall be
responsible for providing, at its sole cost and expense, electrical power,
single-line telephone connection, heating and cooling, and conduit and wiring
hook-ups required to install and operate the Transmission Facilities.

D. Customer shall, at its sole cost and expense, install and
maintain all Transmission Facilities that are subject to this Agreement,
including site preparation, engineering and design work. All equipment used by
Customer shall be of its own selection; provided, however, that such equipment
shall not violate

3
<PAGE>

technical standards of the FCC in effect from time to time. In order to ensure
a superior level of quality and to maintain the integrity of proprietary
information, Carrier retains the sole discretion to approve (or reject) the
person(s) providing such installation, maintenance and support services.

E. Notwithstanding anything to the contrary in this Agreement,
Customer shall construct and install in each Service Area to which this
Agreement applies, on or before the close of the sixtieth day after the
Effective Date, at least one Transmission Path or such greater number of
Transmission Paths as may be required for purposes of maintaining in effect the
licenses held by Carrier under any revised regulations issued by the FCC in
connection with FCC NPRM 95-183 which are in effect on the Effective Date. In
the event the FCC adopts rules during the term of this Agreement increasing the
minimum number of Transmission Paths required in each Service Area to maintain
in effect the licenses held by Carrier, Customer shall construct and install on
or before the close of the sixtieth day after such requirements have become
effective such number of Transmission Paths as are required for purposes of
maintaining in effect the licenses held by Carrier under the revised regulations
issued by the FCC.

F. Notwithstanding anything to the contrary contained in this
Lease Agreement, Carrier's agreement to provide any individual Transmission Path
to Customer is contingent upon (i) the existence of a direct or indirect (i.e.,
using repeaters or other equipment) line of sight path between the Transmission
Points selected by Customer, (ii) Carrier, at no cost to Carrier, being provided
with rights of access allowing entry upon the premises of Transmission Points
for the purpose of installing, operating, maintaining, and controlling
Transmission Facilities located there, (iii) the provision by Customer to
Carrier, at no cost to Carrier, of sufficient electricity to operate the
Transmission Facilities, (iv) the provision by Customer, at no cost to Carrier,
of all means necessary to connect Customer's traffic to the Transmission
Facilities, (v) Carrier, where requested by Customer, at no cost to Carrier,
obtaining required interconnection agreements with other carriers, (vi) the
availability of a connecting co-channel Transmission Path in an adjacent service
area operated by another carrier, or in an adjacent Service Area, in a
deployment situation where Customer desires to carry traffic between service
areas, (vii) the availability of sufficient capacity, and (viii) the provision
of any service hereunder not being prohibited by any applicable rule or practice
of the FCC and/or of any state or local authority having jurisdiction.

G. The Transmission Paths provided hereunder may be used for
any purpose, including, without limitation, for the transmission of audio, data
and/or video signals, as well as any combination thereof, except where any such
uses may, from time to

4
<PAGE>

time, be prohibited by law or by the rules and practices of the FCC and/or any
state or local authority with jurisdiction over that particular Service Area.
Subject to compliance with any applicable FCC or state regulation, Customer may
resell the services provided herein.

H. Carrier shall maintain such information as Carrier shall
deem necessary or appropriate to provide the service hereunder and to comply
with applicable FCC and/or state and local regulations. Upon reasonable
request, Customer shall provide such information to Carrier with respect to the
location and usage of Transmission Paths (other than the identity of its
customers unless specifically requested in writing by the FCC or a state or
local regulatory authority) as Carrier shall deem necessary in order to carry
out its obligations hereunder and, upon reasonable request, Carrier shall
provide information to Customer with respect to Transmission Paths leased
hereunder. Customer acknowledges that Carrier may be required to use such
information in reports submitted to the FCC and/or other regulatory authorities,
and consents to the disclosure of such information solely for that purpose and
subject to the provisions of Paragraph 14 hereof.

I. Notwithstanding anything in this Lease Agreement to the
contrary, including the availability of Transmission Paths and Transmission
Facilities to Carrier hereunder, Customer may, at any time, obtain Transmission
Paths and Transmission Facilities in the 38 GHz Band from any other source,
including Customer's affiliates ("Additional Sources"), to supplement, or in
lieu of, the Transmission Paths and Transmission Facilities provided to Customer
hereunder. Carrier shall not be entitled to any compensation from Customer for
any Transmission Paths and Transmission Facilities obtained by Customer from
Additional Sources.

J. Customer shall ensure that all FCC tower lighting and
painting requirements, as well as all applicable Federal Aviation Administration
requirements, are followed.

4. Control of Facilities. Notwithstanding any other provision of
this Lease Agreement, Carrier has and shall at all times continue to retain
control over all FCC licenses and Transmission Facilities subject to this Lease
Agreement and shall have, at all times, unfettered access to all of the
Transmission Facilities installed pursuant to this Lease Agreement. In
exercising this control, Carrier will not disturb or interfere with the services
provided to Customer or its customers without good cause, such as a request from
the FCC to shut down interfering transmissions, emergency service restoration or
correction of other technical problems; provided, however, that Carrier shall
provide Customer as much time as is reasonably practicable in the case of
emergency disruptions of service. Carrier shall, with the

5
<PAGE>

reasonable cooperation and assistance of Customer, fully comply with all
regulations necessary to keep Carrier's licenses in full force and effect.
Carrier and Customer shall comply with all applicable FCC rules and regulations
as well as any applicable state and local regulations and requirements governing
Carrier's licenses and the provision of telecommunications services thereunder.
In this regard, Carrier and Customer specifically agree as follows:

A. Customer shall not represent itself as the holder of any FCC
licenses issued to Carrier.

B. Neither Carrier nor Customer shall represent itself as the
legal representative of the other before the FCC or any state regulatory body.
Except as otherwise required by law, all filings made before regulatory bodies
with respect to Carrier's licenses and/or the services provided hereunder shall
be made by and in the name of Carrier. Carrier and Customer will cooperate with
each other with respect to regulatory matters concerning Carrier's licenses and
the services provided pursuant to this Lease Agreement.

C. Nothing in this Lease Agreement is intended to diminish or
restrict Carrier's obligations as an FCC licensee and both parties desire that
this Lease Agreement be in full compliance with the rules and regulations of the
FCC and/or any state or local jurisdiction. Subject to the provisions of
Paragraph 25 hereof, if the FCC or any state regulatory body of competent
jurisdiction determines that any provision of this Lease Agreement violates any
applicable rules, policies, or regulations, both parties shall use their best
efforts to immediately bring this Lease Agreement into compliance, consistent
with the intent of this Lease Agreement.

D. It is expressly understood by Carrier and Customer that
nothing in this Lease Agreement is intended to give to Customer any right which
would be deemed to constitute a transfer of control (as "control" is defined in
the Communications Act of 1934, as amended, and/or any applicable FCC rules or
case law) of one or more of Carrier's licenses from Carrier to Customer.

5. Primacy of Service During Initial Phase.

In light of the significant market development activities to be
undertaken by Customer, as well as the need for Customer to provide Carrier with
proprietary information under this Lease Agreement, Carrier agrees that, in all
Service Areas, Carrier will not during the Initial Phase (as defined below) of
the Initial Term, market or sell 38 GHz Band services of any kind to customers
of Customer or to any other End User (as defined below) located in, or who
provides 38 GHz Band services to others located in, such Service Area. "Initial
Phase" shall mean, with respect to each

6
<PAGE>

Service Area, the period beginning with the Effective Date and ending on the
fifth anniversary of the Effective Date. Customer agrees that during the
Initial Phase for each Service Area Customer will provide its services to any
end user introduced to Customer by Carrier ("End User"), provided, however, that
(i) the End User is financially acceptable to Customer and agrees to pay
Customer on such financial and tariff terms as Customer may reasonably require,
(ii) the End User enters into a contract or Service Order with Customer, (iii) a
suitable Transmission Path is available and no conflict exists with an installed
Circuit Path a pending Service Order or a Reserved Transmission Path, (iv) the
addition of such End User will not result in radio frequency interference for
existing or planned services, and (v) a sufficient quantity of radio equipment
is available to service such End User. If Customer furnishes services to an End
User, Customer shall collect charges from each End User in accordance with its
normal practices. After the Initial Phase, Customer will have no obligation to
provide services to any new End User but may agree to do so from time to time at
the request of Carrier. Carrier agrees that during the Term it will not accept
as its customer any entity which has been a customer of Customer during the
Initial Phase including, without limitation, any End User provided service by
Customer.

6. Payments. In consideration for the provision of facilities and
services hereunder, Customer shall pay to P7C the sum of $4,000 per month for
each Service Area to which this Lease Agreement applies, payable in advance on
the Effective Date and on the equivalent day of each month thereafter during the
Term. Such payment shall continue to be made to P7C notwithstanding the
transfer to P9C of any license subject to this Lease Agreement. Customer agrees
not to challenge the validity of this Lease Agreement as a consequence of P7C's
transfer to P9C of such License.

7. Regulatory Matters.

A. Carrier shall timely file with the FCC and other regulatory
agencies all required reports or notices, including (without limitation) semi-
annual reports pursuant to Section 21.711 of the FCC's rules. Carrier shall
make all other filings with the FCC and other regulatory bodies required in
connection with Carrier's ability to provide services hereunder, including
tariffs, upon reasonable request by Customer. Customer shall cooperate with
Carrier by timely supplying to Carrier the information it requests in order to
make such filings. Carrier agrees that it will consult with Customer with
respect to any FCC or other regulatory filings that relate to services provided
hereunder, and will provide Customer with a copy of any regulatory submissions
made by Carrier in connection with the provision by Carrier of services
hereunder at least three (3) business days prior to their being filed at the FCC
or other regulatory body.

7
<PAGE>

Except as otherwise provided in this Lease Agreement, neither party shall be
restricted under this Lease Agreement from making any filings with state or
federal regulatory authorities, including without limitation the FCC and the
Securities and Exchange Commission, as it deems to be appropriate; provided,
however, that neither party shall make any filing with any governmental agency
which challenges the validity of any agreement entered into between Carrier and
Customer or the ability of Carrier to provide services hereunder. Customer and
Carrier shall also cooperate to comply with any FCC requirements for posting of
licenses.

B. Carrier shall use its best efforts, and Customer shall
reasonably cooperate with Carrier, to obtain any and all FCC and state and local
licenses, permits, authorizations or approvals required to provide the services
contemplated by this Lease Agreement in a timely manner and as requested by
Customer. During the term hereof (i) Carrier shall report to Customer on a
monthly basis with regard to the status of its licenses and governmental
authorizations to render interstate and intrastate services; and (ii) Carrier
shall supply copies of Forms 494A to Customer within ten (10) business days
after the Forms have been submitted to the FCC.

C. Customer shall give Carrier such advance notice as is
reasonable in the circumstances if Carrier proposes to utilize the Transmission
Facilities in such manner as would require Carrier to be subject to regulation
by any state regulatory authority. In such event, Customer, at its sole
expense, shall prepare all such applications and other documents as may be
required of Carrier by such authorities and will assist Carrier in filing and
prosecuting all applications necessary for Carrier to obtain the approvals
required by such authorities. Carrier will use its best efforts to file and
prosecute such applications. Customer will reimburse Carrier for all expenses
incurred by Carrier in connection therewith.

8. Regulatory Treatment of this Transmission Path Lease
Agreement. Carrier and Customer intend that this Lease Agreement shall be
treated for regulatory purposes as a carrier-to-carrier contract, which shall be
binding upon Carrier and which may not be modified or abrogated by any tariff
filed by Carrier. Promptly after execution of this Lease Agreement, Carrier
shall file with the FCC and appropriate state authorities, if necessary, a copy
of this Lease Agreement or a summary of the terms of this Lease Agreement.

9. Liability of Carrier and Customer.

A. The liability of Carrier for damages arising out of
mistakes, omissions, interruptions, delays, errors, or defects in transmission
occurring in the course of furnishing

8
<PAGE>

service hereunder shall in no event exceed an amount equal to the proportionate
charge to Customer for the period of time during which such mistake, omission,
delay, error, or defect in transmission occurs. Interruptions of service will
be measured from the time reported by Customer until the time service is
restored. No credit will be given for interruptions of less than thirty (30)
minutes in duration. In no event will Carrier be liable for consequential
damages.

B. Carrier shall be indemnified and saved harmless from and
against all loss, liability, damage, ad expense, including reasonable counsel
fees, due to (i) claims for libel, slander, or infringement of copyright arising
from the material transmitted over Transmission Facilities; (ii) claims for
infringement of patents arising from combining, or using in connection with
service or facilities (including the Transmission Facilities) furnished by
Carrier, facilities or equipment of Customer; and (iii) claims for damage to
property and injury or death to persons, including payments made under any
Workmen's Compensation Law or under any plan for employees disability and death
benefits which may arise out of, or be caused by, the construction,
installation, maintenance, presence, use or removal of Customer facilities or
equipment connected, or to be connected, to Carrier's facilities (including the
Transmission Facilities).

C. Carrier shall not be liable for any act or omission of any
other carrier or other entity which furnishes facilities or equipment used with
Transmission Facilities provided hereunder, unless such carrier or other entity
acted as an agent of Carrier. Carrier shall be liable for any defacement or for
damage to any premises resulting from the furnishing of services hereunder in
such premises or the installation or removal of Transmission Facilities
therefrom, unless such defacement or damage is not the result of actions or
omissions of the agents or employees of Carrier.

10. Liability Insurance. Customer shall maintain during the term of
this Lease Agreement the following insurance coverage as well as all other
insurance required by law in each jurisdiction where services are provided
hereunder: (1) Worker's Compensation and related insurance as required by law;
(2) employer's liability insurance with a limit of at least three million
dollars ($3,000,000) for each occurrence; (3) comprehensive general liability
insurance, with a limit of at least three million ($3,000,000) per occurrence;
(4) comprehensive motor vehicle liability insurance with limits of at least
three million dollars ($3,000,000) for bodily injury including death, to any one
person, three hundred thousand dollars ($300,000) for each occurrence of
property damage, and three million dollars ($3,000,000) for any one occurrence.
Customer shall furnish Carrier, if requested by the Carrier, certificates or
adequate proof of the insurance required

9
<PAGE>

by this clause. Each policy shall provide that the insurer must give both
parties, in writing, at least ten (10) days prior to cancellation of, or any
material change in the policy.

11. Indemnification. Carrier and Customer shall indemnify, defend
and hold the other party harmless from any and all claims, damages, causes of
action, penalties, statutory damages, interest, and costs and expenses,
including reasonable attorneys' fees and court costs, arising directly or
indirectly out of (i) the breach of such party's obligations hereunder, or
(ii) the gross negligence or willful misconduct of the said party, its employees
or agents in connection with the performance of this Lease Agreement.

12. Default. For purposes of this Lease Agreement, it shall be an
"Event of Default" hereunder if:

A. Customer fails to make any payment due and payable under
this Lease Agreement and such failure continues for ten (10) days after written
notice thereof shall have been sent to Customer by Carrier unless payment is
being disputed in good faith by Customer; or

B. Any of the representations or warranties of Customer or
Carrier prove at any time to be materially incorrect as of the date of this
Lease Agreement; or

C. Except with respect to a payment default as provided in
Paragraph 12A, Carrier or Customer breaches any material provision of this Lease
Agreement and such breach continues for thirty (30) days after written notice
thereof shall have been sent by the nonbreaching party to the breaching party;
or

D. Carrier shall forfeit, surrender, submit for cancellation,
suffer the revocation of, or suffer or accept the materially adverse
modification of one or more of its licenses covering a Service Area ("Affected
Licenses"), such event not resulting from any act or failure to act on the part
of Customer and having no cure period, and considered a final action and no
longer subject to further administrative or judicial review.

If an Event of Default occurs under this Paragraph 12, the
nondefaulting party may terminate this Lease Agreement upon ten (10) days
written notice to the other party if such Event of Default occurs prior to the
time Customer has fulfilled its obligations pursuant to paragraph 3E and upon
sixty (60) days written notice to the other party if such Event of Default
occurs thereafter. Any party seeking to terminate this Lease Agreement shall
continue to fulfill its obligations under this Lease Agreement during the notice
period. Each party's rights to indemnity from the other party and to specific
performance of this

10
<PAGE>

Lease Agreement shall survive the termination of this Lease Agreement. In the
event of a default by a party hereunder, the nondefaulting party may offset
against amounts owed by the nondefaulting party to the defaulting party
hereunder any amounts owed by the defaulting party to the nondefaulting party.

13. Termination of Purchase Agreement.

A. If that certain Purchase Agreement among Pinnacle Seven
Communications, Inc., a Florida corporation, Pinnacle Eight Communications,
Inc., a Florida corporation, Carrier and WinPinn Corp. ("WinStar Subsidiary")
dated as of the date of this Agreement pursuant to which WinStar Subsidiary will
purchase the outstanding membership interests of Carrier (the "Purchase
Agreement") is terminated prior to the time WinStar Subsidiary acquires the
First P9C Interests (as defined in the Purchase Agreement), this Lease Agreement
shall immediately terminate and Customer shall be entitled to remove and, at the
request of Carrier, shall promptly remove, at Customer's expense, all of the
Transmission Facilities it has installed pursuant hereto.

B. If the Purchase Agreement is terminated after WinStar
Subsidiary has acquired the First P9C Interests but before it has acquired the
Second P9C Interests (as defined in the Purchase Agreement), this Lease
Agreement shall terminate thirty days after the termination of the Purchase
Agreement unless Customer, within such thirty-day period, pays to Carrier the
sum of $300,000, in which event the Term shall be extended for a period of ten
years from the date of such payment and, if the Service Agreement dated the date
hereof among the parties hereto is also terminated, the monthly fee payable
pursuant to Paragraph 6 shall be reduced to the sum of $2,500 per month for each
Service Area to which this Lease Agreement then applies. It shall be a
condition to the exercise of Customer's rights under this Paragraph 13B that, at
the time of such exercise, no WinStar Party (as hereinafter defined) which is a
party to an agreement with P7C or P9C shall be in material breach of any of its
obligations pursuant to such agreement. As used herein, "WinStar Party" means
WinStar Communications, Inc. or any of its wholly-owned direct or indirect
subsidiaries or permitted assigns or successors.

14. Specific Performance. Carrier acknowledges and agrees that
irreparable damage would occur to Customer in the event that any of the
provisions of this Lease Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, Carrier agrees that
Customer shall be entitled to an injunction and other remedies of "specific
performance" in order to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which it may be entitled at law or equity.

11
<PAGE>

15. Use of Information. All confidential technical and business
information and all software and related documentation in whatever form recorded
(all hereinafter designated "Information") furnished by either party to the
other party under or in contemplation of this Lease Agreement shall remain the
property of the furnishing party. For purposes of this Lease Agreement, the
parties hereto agree that Customer's customer lists and End User identification
which may become known to Carrier during the course of this Lease Agreement are
confidential in nature and shall be deemed "Information" hereunder. Unless the
parties otherwise agree in writing, all Information: (i) shall be treated in
confidence by the receiving party and used only for the purposes for which
furnished, (ii) shall not be reproduced or copied in whole or in part, except as
necessary for use as authorized in this Lease Agreement, and (iii) shall,
together with any copies thereof, be returned or destroyed when no longer
needed, or may, if in the form of software recorded on an erasable storage
medium, be erased. The above conditions do not apply to any part of the
Information that becomes known to the receiving party free of any obligation to
keep it in confidence. Carrier shall provide to Customer a letter agreement
executed by each of the managers, members, officers and employees of Carrier
confirming their agreement to the terms hereof.

16. Notices. Unless otherwise required hereunder, all notices,
requests, comments and other communications hereunder shall be in writing and
shall be sent via facsimile, in each case addressed:

If to Customer:

WinStar Wireless, Inc.
Attention: Ralph Peluso
7799 Leesburg Pike
Falls Church, Virginia 22043
Telecopier No.: 703/917-6557

With a copy to:

WinStar Wireless, Inc.
Attention: Timothy R. Graham
230 Park Avenue, Suite 3126
New York, New York 10169
Telecopier No.: 212/867-1565

If to Carrier:

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<PAGE>

Pinnacle Seven Communications, Inc.
2901 South Bayshore Drive
Suite 4B
Coconut Grove, Florida 33133
Attention: Mr. Richard Landy
Telecopier No.: 305-445-4800

with a copy to:

Akin, Gump, Strauss, Hauer & Field, L.L.P.
1333 New Hampshire Avenue, N.W., Suite 400
Washington, DC 20036
Attention: Thomas W. Davidson, P.C.
Telecopier No.: 202-887-4288

- and -

Mr. Richard Landy
745 Fifth Avenue, Suite 1701
New York, New York 10151
Telecopier No.: 212-688-3043

provided, however, that if any party shall have designated a different address
or telecopier number by notice to the others, then to the last address so
designated. Notice shall be deemed given when transmitted via facsimile as
indicated above.

17. Waiver. Any waiver by any party of any breach of or failure to
comply with any provision of this Lease Agreement by the other party shall be in
writing and shall not be construed as, or constitute, a continuing waiver of
such provision or a waiver of any other provision of this Lease Agreement.

18. Complete Agreement. This Lease Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any party or any
officer, employee or representative of any party.

19. Governing Law; Jurisdiction. This Lease Agreement shall be
construed and interpreted in accordance with and governed by the law of the
State of New York and of the United States of America. Except where FCC primary
jurisdiction is specified by law, the parties agree that any action or
proceeding arising out of this Lease Agreement shall be brought in the courts of
the State of New York in the County of New York or the United States District
Court for the Southern District of New York and irrevocably submit to such
jurisdiction, which jurisdiction shall be exclusive. The parties waive all
objections to such exclusive jurisdiction and

13
<PAGE>

that such courts constitute an inconvenient forum. Process or summons in any
such action or proceeding may be served by registered mail, return receipt
requested, postage prepaid, addressed to a party at the address set forth in
Paragraph 16. Such mailing shall be deemed personal service and shall be deemed
made upon the party served upon the first attempt at delivery if such attempt is
refused.

20. Force Majeure. If by reason of force majeure either party is
unable in whole or in part to carry out its obligations hereunder, that party
shall not be deemed in violation or default during the continuance of such
inability. The term "force majeure," as used herein, shall mean the following:
acts of God; acts of public enemies; orders of any kind of the government of the
United States of America or of any individual state or any of their departments,
agencies, political subdivisions, or officials or any civil or military
authority; insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, volcanic activity, storms of extraordinary force, floods,
washouts, drought, strikes, embargoes, civil disturbances, explosions, or any
other cause or event not reasonably within the control of the adversely affected
party.

21. Amendment. This Lease Agreement may be amended or modified only
by an instrument in writing duly executed by both parties.

22. Counterparts. More than one counterpart of this Lease Agreement
may be executed by the parties.

23. Dealings with Third Parties; Use of Indicia. Neither party is,
nor shall either party hold itself out to be, vested with any power or right to
contractually bind on behalf of the other as its contracting broker, agent or
otherwise for committing, selling, conveying or transferring any of the other
party's assets or property, contracting for or in the name of the other party,
or making any contractually binding representations as to the other party which
shall be deemed representations contractually binding upon such party. Neither
Carrier nor Customer shall have the right to use the other's name, trade names,
trademarks, service marks, logos, codes or other symbols without the other's
written consent, except as required by law; provided, however, that Customer
shall be permitted to refer to Carrier in its customer and supplier agreements,
as well as any regulatory filings, to identify Carrier's status as the holder of
the applicable 38 GHz Band licenses and regulatory authority. In furtherance
(and not in limitation) of the foregoing, Carrier acknowledges that "WinStar
Wireless" and "Wireless Fiber" are service marks of Customer and/or its
affiliates, to which all rights are reserved to Customer.

14
<PAGE>

24. Binding Effect. This Lease Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
assigns.

25. Assumption of Lease by License Transferee. Carrier shall not
transfer any license subject to this Lease Agreement other than to P9C unless,
concurrently with such transfer, the transferee assumes Carrier's obligations
under this Lease Agreement with respect to such license in a written agreement
satisfactory to Carrier. In accordance with the foregoing, upon transfer by
Carrier to P9C of any license to provide wireless communications services for a
Service Area, P9C shall assume all obligations of Carrier under this Lease
Agreement with respect to such Service Area and shall be deemed to be the
Carrier with respect thereto hereunder.

26. Severability. If any provision of this Lease Agreement is
determined to be invalid, illegal or incapable of being enforced by a court or
regulatory agency of competent jurisdiction, the other provisions of this
agreement shall not be affected and shall remain in full force and effect and
the parties shall negotiate in good faith revisions to this Lease Agreement so
as to effect the original intent of the parties pursuant to the provisions so
affected.

27. Assignment. This Lease Agreement may not be assigned by Carrier
or Customer, unless the assigning party obtains the prior written consent of the
other party and any attempted assignment in contravention of this provision
shall be void and ineffective. Carrier agrees that sales by Customer to its
customers or other service arrangements are not assignments within the
contemplation of this Paragraph. Notwithstanding the foregoing, (a) Customer
may assign this Lease Agreement without Carrier's prior written consent (i) in
conjunction with the merger or reorganization of Customer or any controlling
corporation, or the sale by Customer or any controlling corporation of all or
substantially all of its assets, in each instance with or to an entity that is a
wholly-owned direct or indirect subsidiary of Customer or Customer's corporate
parent; or (ii) to any entity that is a wholly-owned direct or indirect
subsidiary of Customer or of Customer's corporate parent; or (iii) as collateral
security to any financing source of Customer in connection with any financing of
the Transmission Facilities provided to Customer and/or any affiliate thereof,
and (b) Carrier may assign this Agreement to P9C as set forth in Paragraph 25.

28. Headings. The Paragraph and other headings contained in this
Lease Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Lease Agreement.

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<PAGE>

IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be
executed by their duly authorized officers on the day and year first above
written.

WINSTAR WIRELESS, INC.

By:
--------------------------------

Title:
-----------------------------

PINNACLE SEVEN COMMUNICATIONS, INC.

By:
--------------------------------

Title:
-----------------------------

PINNACLE NINE COMMUNICATIONS, L.L.C.

By:
--------------------------------

Title:
-----------------------------

16
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EXHIBIT A

SERVICE AREAS

EXHIBIT 23.1

CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

We have issued our reports dated March 8, 1996, accompanying the
consolidated financial statements and schedule of WinStar Communications, Inc.
and Subsidiaries contained in the Registration Statement and Prospectus and our
report dated March 8, 1996 appearing in the Transition Report on Form 10-KSB for
the ten months ended December 31, 1995 which is incorporated by reference in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports and the incorporation by reference in the Registration
Statement and Prospectus and to the use of our name as it appears under the
captions "Experts" and "Selected Financial Information."

GRANT THORNTON LLP

New York, New York
July 1, 1996

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

We have issued our report dated July 28, 1995, accompanying the financial
statements of Avant-Garde Telecommunications, Inc. contained in the Registration
Statement. We consent to the use of the aforementioned report in the
Registration Statement, and to the use of our name as it appears under the
caption "Experts."

GRANT THORNTON LLP

New York, New York
July 1, 1996

EXHIBIT 23.3

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated June 27, 1996, accompanying the balance
sheet and statement of partners' capital of Milliwave Limited Partnership
contained in the Registration Statement. We consent to the use of the
aforementioned report in the Registration Statement, and to the use of our name
as it appears under the caption "Experts."

GRANT THORNTON LLP

New York, New York
July 1, 1996

EXHIBIT 23.4

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 9, 1996, with respect to the financial
statements of the Microwave Division of Local Area Telecommunications, Inc.
included in the Form S-3 Registration Statement and related Prospectus of
WinStar Communications, Inc. for the registration of 4,000,000 shares of its
common stock.

/S/ ERNST & YOUNG LLP
......................................
Ernst & Young LLP

MetroPark, New Jersey

June 28, 1996