WINSTAR COMMUNICATIONS INC
S-3/A, 1998-06-17
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1998
                                                      REGISTRATION NO. 333-50575
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                AMENDMENT NO. 1
                                    FORM S-3
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

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

                          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) 584-4000
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

                            WILLIAM J. ROUHANA, JR.
               CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
                          WINSTAR COMMUNICATIONS, INC.
                                230 PARK AVENUE
                            NEW YORK, NEW YORK 10169
                                 (212) 584-4000
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

                                   Copies to:
                            DAVID ALAN MILLER, ESQ.
                            GRAUBARD MOLLEN & MILLER
                                600 THIRD AVENUE
                            NEW YORK, NEW YORK 10016
                           TELEPHONE: (212) 818-8800
                              FAX: (212) 818-8881

                            ------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes 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. /x/
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
                                                                   PROPOSED            PROPOSED
           TITLE OF SECURITY                 AMOUNT TO BE      MAXIMUM AGGREGATE   MAXIMUM AGGREGATE      AMOUNT OF
            TO BE REGISTERED                  REGISTERED        PRICE PER SHARE     OFFERING PRICE     REGISTRATION FEE
<S>                                        <C>                 <C>                 <C>                 <C>
Series D 7% Cumulative Convertible
Preferred Stock ('Preferred Stock').....    4,000,000 shares        $50.00(1)        $ 200,000,000       $  59,000.00
Common Stock, par value $.01 per share,     
underlying Preferred Stock..............    4,031,445 shares(2)     $49.61(3)        $ 200,000,000       $  59,000.00
Common Stock to be resold by certain
persons.................................    4,046,130 shares        $41.313          $ 167,157,769       $  49,311.54
 Total..................................   12,077,575 shares                                             $ 167,311.54(5)
</TABLE>

(1) Represents the per-share sales price ($50.00) of the Preferred Stock sold by
    the Registrant in an institutional private placement in March 1998, each
    share having a liquidation preference of $50.00.
 
(2) Pursuant to Rule 416(b) promulgated under the Securities Act of 1933, as
    amended (the 'Act'), this Registration Statement also covers a presently
    indeterminable number of additional shares of Common Stock which may be
    issued in lieu of cash dividends during the term of the Preferred Stock
    ('Dividend Shares'). Pursuant to Rule 416, this Registration Statement also
    covers a presently indeterminable number of additional shares of Common
    Stock issuable by the Company in the event the Preferred Stock is converted
    in connection with a change of control of the Company.
 
(3) Represents the conversion price ($49.61) for a share of Common Stock.
 
(4) Based on the last sale price of a share of Common Stock as reported by
    Nasdaq on June 16, 1998, based on Rule 457.
 
(5) Such fee was previously paid.

                            ------------------------
 
    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>

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.


                             SUBJECT TO COMPLETION
 
                   PRELIMINARY PROSPECTUS DATED JUNE 17, 1998
  
         4,000,000 SHARES OF SERIES D 7% SENIOR CUMULATIVE CONVERTIBLE
                                PREFERRED STOCK
                          WINSTAR COMMUNICATIONS, INC.
 
                        8,077,575 SHARES OF COMMON STOCK

                            ------------------------
 
     This Prospectus relates to offers which may occur from time to time for the
account of certain persons ('Selling Preferred Stockholders') of (i) an
aggregate of 4,000,000 shares of the Series D 7% Senior Cumulative Convertible
Preferred Stock ('Series D Preferred Stock') of WinStar Communications, Inc.
('Company'); (ii) an indeterminable number of shares of the Company's common
stock ('Common Stock') that the Company may issue on a quarterly basis in lieu
of cash dividend payments on the Series D Preferred Stock ('Dividend Shares');
and (iii) up to an aggregate of 4,031,445 shares of Common Stock, subject to
adjustment, that may be issued by the Company upon conversion of the Series D
Preferred Stock ('Conversion Shares'). See 'Selling Securityholders and Plan of
Distribution.'
 
     Dividends on each share of Series D Preferred Stock are payable at a per
annum rate of 7% of the liquidation preference thereof ($50.00), which is
equivalent to an annual dividend of $3.50. Dividends are payable to each holder
of Series D Preferred Stock quarterly on March 15, June 15, September 15 and
December 15 of each year, commencing September 15, 1998 and may be paid in cash
or, at the Company's election, through the issuance of that number of Dividend
Shares determined by dividing the amount of the dividend due to such holder by
the Discounted Current Market Value of the Common Stock (rounding up or down to
the next nearest whole share). 'Discounted Current Market Value' means the
product of (a) 97% and (b) the closing bid price for a share of Common Stock as
reported by the Nasdaq National Market on the fourth trading day preceding the
dividend payment date.
 
     The Series D Preferred Stock is convertible into Conversion Shares at a
rate of 1.0079 Conversion Shares for each share of Series D Preferred Stock
converted, which, based on the Series D Preferred Stock's liquidation preference
of $50.00 per preferred share, is equivalent to a conversion price of $49.61 for
each Conversion Share received upon conversion.
 
     This Prospectus also relates to offers which may occur from time to time
for the account of certain persons ('Selling Stockholders' and, together with
the Selling Preferred Stockholders, the 'Selling Securityholders') of an
aggregate of 4,046,130 shares of Common Stock ('Selling Stockholder Shares').
See 'Selling Securityholders and Plan of Distribution.'
 
     There is no public market for the Series D Preferred Stock and no such
market is expected to develop. The Common Stock is traded on the Nasdaq National
Market under the symbol 'WCII.' The last sale price of the Common Stock on the
Nasdaq National Market on June 16, 1998 was $41.313 per share. See 'Price 
Range of Common Stock.'



     The Company will not receive any cash proceeds from the sale of the Series
D Preferred Stock, Dividend Shares, Conversion Shares or Selling Stockholder
Shares by the Selling Securityholders. All costs, expenses and fees in
connection with the registration of the securities offered by this Prospectus
will be borne by the Company. Such expenses are estimated to be approximately
$400,000.

                            ------------------------
 
     SEE 'RISK FACTORS' BEGINNING ON PAGE 11 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.
 
                  THE DATE OF THIS PROSPECTUS IS JUNE  , 1998

<PAGE>

                               TABLE OF CONTENTS
 
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                                                                                                              PAGE
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<S>                                                                                                           <C>
Incorporation of Certain Documents by Reference............................................................     2
Summary....................................................................................................     3
Risk Factors...............................................................................................    11
Price Range of Common Stock................................................................................    22
Certain United States Federal Income Tax Considerations....................................................    23
Description of Capital Stock...............................................................................    29
Selling Securityholders and Plan of Distribution...........................................................    40
Legal Matters..............................................................................................    43
Experts....................................................................................................    43
Available Information......................................................................................    43
</TABLE>
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following documents or information have been filed by the Company with
the Securities and Exchange Commission ('Commission') pursuant to the Securities
Exchange Act of 1934, as amended ('Exchange Act'), and are incorporated herein
by reference:
 
     (1) Annual Report on Form 10-K (as amended) for the year ended December 31,
         1997;
 
     (2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998;
 
     (3) Current Report on Form 8-K/A filed January 30, 1998;
 
     (4) Current Report on Form 8-K/A filed February 5, 1998;
 
     (5) Current Report on Form 8-K filed March 5, 1998;
 
     (6) Current Report on Form 8-K filed March 12, 1998;
 
     (7) Current Report on Form 8-K filed March 30, 1998; and
 
     (8) The description of the Company's (i) Common Stock contained in the
         Company's registration statement on Form 8-A under the Exchange Act
         (File No. 1-10726) and (ii) Series B Preferred Stock Purchase Rights
         contained in the Company's Registration Statement on Form 8-A, as
         amended, under the Exchange Act (File No. 0-20876).
 
     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 212-584-4000), Attention: Investor Relations
(extension 4053), 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.
 
                                       2

<PAGE>

                                    SUMMARY
 
     This summary is qualified in its entirety by the detailed information and
financial statements (and notes thereto) incorporated by reference into this
Prospectus. Unless otherwise indicated, references herein to the 'Company' or
'WinStar' refer to WinStar Communications, Inc. and, where appropriate, its
subsidiaries. Wireless Fibersm is a service mark and WinStar(Registered) is a
trademark of WinStar Communications, Inc.
 
                                  THE COMPANY
 
GENERAL
 
     WinStar provides facilities-based voice and data telecommunications
services to businesses and other customers in major metropolitan areas
throughout the United States. WinStar holds licenses ('Wireless Licenses') which
provide it with the largest amount of 38 GHz radio spectrum in the country,
covering more than 110 Metropolitan Statistical Areas ('MSAs') with a total
population of approximately 200 million, including the 50 largest MSAs. WinStar
is building a unique nationwide network using its fiber-quality digital capacity
in the 38 GHz band ('Wireless Fiber') in order to provide its customers with a
broad range of attractively priced services and an alternative to the incumbent
local exchange carriers ('ILECs'), other competitive local exchange carriers
('CLECs') and the interexchange carriers ('IXCs'). WinStar believes that its
ability to provide information content and services further differentiates it
from competitors. The annual business telecommunications market in the United
States is estimated at $110 billion, with local telephony and data services,
WinStar's target segment, accounting for approximately $47 billion.
 
     WinStar is rapidly building a modern telecommunications infrastructure. It
currently provides telecommunications services on a switched basis in 24 major
metropolitan markets, including Atlanta, Boston, Chicago, Dallas, Los Angeles,
New York City, San Diego and Washington, D.C. WinStar expects to provide
telecommunications services using its own switches in 30 major metropolitan
markets by the end of 1998 and 40 major metropolitan markets by the end of 1999.
WinStar's network buildout has been accelerated through several recent strategic
acquisitions. In October 1997, WinStar purchased from US ONE Communications
Corp. ('US ONE') twelve Lucent 5ESS switches, seven of which are located in
markets that WinStar had targeted but had not yet entered. In January 1998,
WinStar purchased GoodNet, a Tier I Internet service provider ('ISP'), from
Telesoft Corp. ('Telesoft'). GoodNet maintains a national Asynchronous Transfer
Mode ('ATM') backbone, points of presence ('POPs') in 27 cities throughout the
United States and more than 130 peering arrangements with other ISPs. Also in
January 1998, as part of its acquisition of the assets of Midcom Communications
Inc. ('Midcom'), WinStar acquired PacNet, a data transmission services provider.
PacNet maintains a network of frame relay data switches, POPs in 20 cities
throughout the western United States and, through its membership in the Unispan
consortium, interconnection and cooperative service arrangements with other
frame relay providers with networks across the United States and
internationally.
 
NETWORK STRENGTHS
 
     WinStar believes that its Wireless Fiber and switch-based infrastructure
provides it with significant competitive advantages, including:
 
     Ability to Provide a Full Range of Voice and Data Telecommunications
Services.  The large amount of bandwidth afforded by the Wireless Licenses,
together with WinStar's voice and data switching facilities, allow WinStar to
offer customers a full range of voice and data telecommunications services,
including (i) local dial tone, private branch exchange ('PBX') trunks,
individual business lines, Centrex and long distance, (ii) data services, such
as Internet access, Wide Area Network ('WAN') services utilizing frame relay,
Internet Protocol ('IP') and ATM data transport, and private network services
and (iii) facilities-based broadband local access and digital network services
('Carrier Services'). WinStar holds Wireless Licenses in each of the 50 largest
MSAs. Including certain additional licenses which WinStar has agreed to acquire,
the Wireless Licenses cover an average of approximately seven 100 MHz channels
in the 20 largest U.S. markets and four 100 MHz channels in the next 20 largest
U.S. markets. Each 100 MHz Wireless Fiber channel can support transmission
capacity of one DS-3 at 45 Mbps, which is over 750 times the rate of the fastest
dial-up modem in general use (56 Kbps) and over 350 times the rate of the
fastest integrated services digital network line in general use (128 Kbps). It
is
 
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anticipated that the Company's commercial deployment of multipoint facilities,
planned to begin in late 1998, will allow a single 100 MHz Wireless Fiber
channel to support one OC-3 equivalent of capacity at 155 Mbps.
 
     Rapid and Cost-Effective Deployment of Infrastructure.  Wireless Fiber
services generally can be deployed considerably more rapidly than wireline
services because of the construction time and permit procedures required for
wireline buildout. Further, the equipment used for 38 GHz transmission (e.g.,
antennae, transceivers and digital interface units) is small, unobtrusive and
relatively inexpensive.
 
     Ability to Penetrate Target Markets.  In implementing its network plan,
WinStar identifies strategically located sites to serve as hubs in each of its
metropolitan areas. These hub sites are connected via Wireless Fiber links to
customer buildings. Certain characteristics of the 38 GHz frequency, including
the effective range of its radio signal and the small amount of dispersion
(i.e., scattering) of the radio beam as compared to the more dispersed radio
beams produced at lower frequencies, allow for multiple hub sites using the same
channel in a licensed area. Further, WinStar's ability to use multiple 38 GHz
channels in its target markets provides it with advantages over other providers
of fixed wireless telecommunications services that possess fewer channels in
their respective portions of the radio spectrum. WinStar believes that its
multiple channels, together with the deployment of multipoint technology and its
hub-based network architecture, will allow it to address the needs of a
significant portion of the business customers in its target markets via its
Wireless Fiber services.
 
     Scalable Capital Expenditures.  Because of WinStar's Wireless Fiber
capacity and hub-based network architecture, a substantial portion of its
planned capital expenditures is variable and more directly tied to demand.
WinStar expects to be able to minimize non-revenue generating deployment of
infrastructure because (i) it does not need to fully build out its network in a
market before offering services in that market, (ii) bandwidth can be more
easily allocated as demanded and (iii) the small size and relatively low cost of
radio transceivers and other equipment allow for cost-efficient redeployment as
customer demands change.
 
     Deployment of Multipoint Technology.  WinStar expects that its planned
deployment of point-to-multipoint technology within its networks will allow it
to further reduce per-building installation and equipment costs, better leverage
existing and future investment in hub equipment, address a significantly greater
number of buildings in each market and provide customers with variable amounts
of bandwidth as their demands and needs change. WinStar believes that it will be
able to efficiently integrate point-to-multipoint technology into its
point-to-point network infrastructure, thereby enabling the Company to create
point-to-multipoint infrastructure in its markets rapidly and cost effectively.
 
     Other Core Assets.  WinStar has accumulated a group of core assets, in
addition to those described above, which it believes are necessary for it to
commercially deploy its telecommunications services. Among these assets are (i)
authorizations to operate as a CLEC in 30 states and the District of Columbia,
(ii) agreements that allow it to interconnect its facilities with those of other
carriers in 41 of the 50 most populated MSAs, (iii) roof rights to install its
radios on more than 2,200 buildings and (iv) state-of-the-art information
systems platforms to assure the accurate and flexible handling of the billing
and customer satisfaction requirements of a diverse customer base purchasing a
variety of telecommunications services. WinStar intends to acquire additional
core assets as it further rolls out its services and expands its network
coverage.
 
BUSINESS STRATEGY
 
     The telecommunications industry is being reshaped by a number of factors,
including the deregulation of local telecommunications markets, growing demand
for high-speed, high-capacity digital telecommunications services and the rapid
advances in wireless technologies that enable service providers to address this
demand, as well as the increasing importance to customers of information
services. WinStar believes it is well-positioned to compete successfully in this
new telecommunications environment. Key elements of WinStar's strategy to
continue its growth as a national provider of telecommunications services are
to:
 
     Continue to Expand Network Infrastructure.  WinStar currently provides
switch-based telecommunications services in 24 major metropolitan markets and
expects to provide telecommunications services using its own switches in 30
major metropolitan markets by the end of 1998 and 40 major metropolitan markets
by the end of 1999. WinStar is continuing to deploy network infrastructure on a
city-by-city basis using its Wireless Fiber capabilities, its voice and data
switches and, where appropriate, facilities leased from other carriers. The
 
                                       4

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Company believes that a limited number of hub sites (generally less than 10) in
each metropolitan area will allow it to address more than 70% of its targeted
buildings and ultimately to carry the majority of its customers' traffic on its
own network instead of the higher-cost facilities of other carriers. WinStar
also intends over time to interconnect all of its local networks through
intercity fiber optic facilities, creating a single network capable of providing
facilities-based voice and data telecommunications services among the
metropolitan areas in which the Company has local networks. By building and
utilizing its own network, WinStar reduces its reliance on the facilities of
other providers, such as the ILECs, enhances service to its customers and
reduces its cost of providing services. Unlike most fiber-based CLECs, which
typically use facilities leased from incumbent providers to carry the majority
of their telecommunications traffic, WinStar anticipates enhancing its operating
margins by routing a significant portion of its traffic over its own network as
this network and WinStar's presence in its markets mature.
 
     Exploit First-to-Market Advantage.  WinStar seeks to exploit its
'first-to-market' advantage as the leading provider of fixed wireless local
switched and dedicated telecommunications services with an established operating
infrastructure and broad geographic license coverage. WinStar believes that
early entrance into its markets provides it with advantages over many potential
competitors by allowing it to (i) expand its customer base prior to widespread
competition from other CLECs, (ii) develop a proven, reliable and low-cost
network infrastructure using its own switching and transmission capabilities
ahead of many other CLECs, (iii) develop and implement the advanced information,
data and other systems necessary to integrate its fixed wireless infrastructure
into the existing global telecommunications network, and (iv) acquire roof
rights for antennae placement on a large number of buildings on favorable terms
and in advance of other fixed wireless service providers.
 
     Provide Integrated Voice and Data Telecommunications and Information
Services.  WinStar has found that customers typically prefer to purchase their
voice and data telecommunications services as a single package. WinStar offers
its customers a broad range of telecommunications services, including basic
local dial tone and long distance and, with the acquisitions of GoodNet and
PacNet, high-speed switched and dedicated data and Internet access services.
WinStar believes that the ability to package information, entertainment and
other content and services with telecommunications services will become an
increasingly important factor in the business customer's decision to select or
retain a telecommunications provider. Accordingly, WinStar actively seeks
opportunities to expand its information and content assets and services and to
use them to enhance the marketability of its telecommunications services.
 
     Focus on Business Customers.  WinStar believes that a substantial
opportunity exists to attract a significant base of business customers by
rapidly penetrating local markets with high-bandwidth telecommunications
services. Initially, WinStar targeted small and medium-sized business customers
in buildings that have more than 100,000 square feet of commercial space and
which, in most instances, are not served by fiber facilities provided by CLECs.
The Company estimates that there are more than 8,000 buildings that meet the
criteria of this initial target group. WinStar believes that the growth of its
infrastructure and the planned deployment of point-to-multipoint technology will
make it cost-effective for the Company to target smaller buildings as well,
increasing the number of target buildings to more than 30,000. Furthermore,
WinStar's introduction of its data communications services and the expansion of
its sales and marketing capabilities now allows it to target larger business
customers.
 
     Market Wireless Fiber to Other Carriers.  WinStar offers its broadband
Carrier Services to other telecommunications providers, including providers of
personal communications, cellular and specialized mobile radio services. WinStar
believes that its Carrier Services present an attractive, economical method for
telecommunications providers to add a high-capacity extension to their own
networks, especially as they seek to rapidly penetrate new markets opening as a
result of the Telecommunications Act of 1996 (the 'Telecommunications Act').
WinStar's Carrier Services also can provide cost-efficient route diversity where
network reliability concerns require multiple telecommunications paths.
 
     Offer High Quality Networks and Superior Customer Service.  WinStar
believes that it offers cost and service quality advantages over ILECs and other
CLECs as a result of its Wireless Fiber technology, integrated service
offerings, customer support and network management and monitoring systems.
WinStar consults with its customers to develop competitively priced
telecommunications services that are tailored to meet their particular
 
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needs. WinStar's centrally-managed customer care and support operations are also
designed to facilitate the processing of orders for changes and upgrades in
services. WinStar believes that it provides greater attention and responsiveness
to its customers than do the ILECs.
 
     Capitalize on Management Team Experience.  WinStar has assembled a
management team and hired operating personnel experienced in all areas of
telecommunications and information services, including more than 250 former
officers and employees of MCI Communications Corp. and Sprint Corporation, as
well as numerous executives and other employees from Regional Bell Operating
Companies ('RBOCs') and other established telecommunications companies. WinStar
continues to hire additional experienced telecommunications and information
services personnel as appropriate.
 
RECENT ACQUISITIONS OF KEY STRATEGIC ASSETS
 
     Three acquisitions consummated since October 1997 have provided WinStar
with various strategic assets, including additional customers, additions to its
sales force serving the medium to large-sized business segment, voice and data
switches and a data network with which to launch its data services business.
 
     US ONE Asset Acquisition
 
     In October 1997, WinStar purchased from US ONE and its subsidiaries (the
'US ONE Asset Acquisition'), 12 Lucent switches, leased fiber-optic capacity in
the New York metropolitan area and certain related assets for a purchase price
of approximately $81.3 million in cash. In order to finance the cash portion of
the purchase price of, and to pay certain expenses relating to, the US ONE Asset
Acquisition, WinStar borrowed $62.3 million from certain institutions, which
borrowings were repaid with proceeds obtained from the offering in December 1997
Preferred Stock Placement (as defined). The US ONE Asset Acquisition will allow
WinStar to accelerate the city-by-city buildout of its Wireless Fiber and
switch-based infrastructure.
 
     GoodNet Acquisition
 
     In January 1998, WinStar acquired GoodNet, a Tier I ISP, from Telesoft for
a purchase price of approximately $22.0 million, consisting of $3.5 million in
cash and 732,784 shares of Common Stock (the 'GoodNet Acquisition'). GoodNet is
a national provider of Internet access services, offering high-capacity data
services to high-bandwidth users, including Internet service providers,
universities and colleges, large landlords, RBOCs and cable television
operators, and dial-up Internet access to consumers.
 
     Midcom Asset Acquisition
 
     In January 1998, WinStar acquired substantially all of the assets and
business of Midcom (the 'Midcom Business') for a purchase price of approximately
$92.0 million in cash (the 'Midcom Asset Acquisition'). WinStar anticipates,
however, that its net costs for the Midcom Asset Acquisition will amount to less
than $70.0 million after the expected collection of accounts receivable acquired
in the transaction, the planned divestiture of two small business interests
acquired in the transaction and certain post-closing price adjustments. Midcom
is an entity in bankruptcy under Chapter 11.
 
     The Midcom Business is providing long distance voice and data
telecommunications services. The Midcom Business includes basic '1 plus' and
'800' long distance provided primarily to small and medium-sized businesses,
most of which are in major metropolitan areas in California, Florida, Illinois,
New York, Ohio and Washington, and Midcom's PacNet operations, which provide
frame relay data transmission and dedicated private line services.
 
OTHER RECENT DEVELOPMENTS
 
     Acquisition of 28 GHz Licenses
 
     WinStar participated in the FCC's recently concluded auction of 28 GHz
local multipoint distribution services licenses ('LMDS Licenses'). At the close
of the auction, WinStar was the high bidder for the A-Block LMDS Licenses in
nine markets and the B-Block LMDS Licenses in six markets. Each LMDS License
covers a
 
                                       6

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defined Basic Trading Area (BTA), with each A-Block LMDS License consisting of
1150 MHz of spectrum and each B-Block LMDS License consisting of 150 MHz of
spectrum. WinStar made aggregate bids for such LMDS Licenses of approximately
$58 million. However, WinStar has claimed a 25% bidding credit in the auction,
making its total commitment to purchase LMDS Licenses approximately $43.4
million. Prior to the auction, WinStar made a $13 million payment which will be
offset against this amount, with the balance being payable when the licenses are
granted by the FCC, which WinStar anticipates will take place in the second
quarter of 1998.
 
     Financings
 
     On March 17, 1998, the Company and a wholly owned subsidiary sold an
aggregate of 4,000,000 shares ('Preferred Shares') of Series D Preferred Stock
in an institutional private placement ('Preferred Stock Placement'). The sale
price per Preferred Share was $50.00, with each of the initial purchasers
thereof receiving a discount equal to 3.38% (or $1.6875) of the purchase price
of each Preferred Share it purchased. The Registration Statement of which this
Prospectus forms a part serves to register the resale of the Preferred Shares as
well as the Dividend Shares and Conversion Shares, if any, issued with respect
thereto. See Description of Capital Stock--Preferred Stock--Series D Preferred
Stock.'
 
     On March 20, 1998, the Company sold $200.0 million of its 10% Senior
Subordinated Notes due 2008 ('Cash-Pay Notes') and $250.0 million of its 11%
Senior Subordinated Deferred Interest Notes due 2008 ('Deferred Interest Notes'
and, together with the Cash-Pay Notes, the '1998 Notes') in an institutional
private placement (the '1998 Debt Placement'). Each of the initial purchasers of
the 1998 Notes received a discount equal to 2.875% of the aggregate purchase
price of the 1998 Notes it purchased.
 
     The Company received aggregate net proceeds of approximately $629.6 million
from the Preferred Stock Placement and 1998 Debt Placement which it intends to
use to fund the expansion of its telecommunications and other operations.
 
     Acquisition of Equity Interest in Advanced Radio Telecom Corp.
 
     On June 2, 1998, WinStar LHC1 LLC, a limited liability company owned by
WinStar, purchased ('ART Equity Purchase') from certain persons ('Sellers') an
aggregate of 3,313,864 outstanding shares ('ART Shares') of the common stock of
Advanced Radio Telecom Corp. ('ART'). These shares constitute approximately
12.4% of the outstanding ART Shares as of the date of this Prospectus. ART is a 
provider of broadband data services to businesses not served by fiber optic
networks. Based on publicly available information, WinStar understands that ART
possesses 38 GHz licenses which cover 90 of the 100 largest metropolitan markets
in the United States (giving effect to certain pending acquisitions). WinStar
issued an aggregate of 1,525,301 shares of WinStar's Common Stock for the ART
Shares and certain other assets acquired from one of the Sellers.
 
CORPORATE INFORMATION
 
     The Company was incorporated under the laws of the State of Delaware in
September 1990. Its principal office is located at 230 Park Avenue, New York,
New York 10169 and its telephone number is (212) 584-4000.
 
                                  RISK FACTORS
 
     See 'Risk Factors' commencing on page 11 hereof for a discussion of certain
risks that should be considered in connection with an investment in the Series D
Preferred Stock and the Common Stock.
 
                                       7

<PAGE>

                         SUMMARY FINANCIAL INFORMATION
 
     The summary financial historical data presented below for the ten months
ended December 31, 1995, and the years ended December 31, 1996 and 1997 have
been derived from the Company's audited Consolidated Financial Statements
incorporated by reference into this Prospectus from the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, reclassified to reflect the
operations of WinStar Global Products, Inc. ('Global Products'), the Company's
merchandising subsidiary, as a discontinued operation. The summary financial
data for the three months ended March 31, 1997 and 1998 have been derived from
the Unaudited Condensed Consolidated Financial Statements incorporated by
reference into this Prospectus from the Company's Quarterly Report on Form 10Q
for the quarterly period ended March 31, 1998. In the opinion of management, the
Unaudited Condensed Consolidated Financial Statements have been prepared on the
same basis as the audited Consolidated Financial Statements and include all
adjustments which consist of only normal recurring adjustments necessary for a
fair presentation of the results of operations for the period. The summary pro
forma data presented below have been derived from the Unaudited Pro Forma
Condensed Consolidated Financial Statements included elsewhere in this
Prospectus (the 'Pro Forma Financial Statements'). The pro forma adjustments are
based upon available information and certain assumptions that management
believes are reasonable. The Pro Forma Financial Statements do not purport to
represent what the Company's results of operations or financial condition would
actually have been had the Pro Forma Transactions (as defined) in fact occurred
on such date or to project the Company's results of operations or financial
condition for any future period or date.


<TABLE>
<CAPTION>
                              TEN MONTHS                                     YEAR ENDED                    THREE MONTHS ENDED
                                ENDED         YEAR ENDED                 DECEMBER 31, 1997                     MARCH 31,
                             DECEMBER 31,    DECEMBER 31,    ------------------------------------------    ------------------
                                 1995            1996              ACTUAL              PRO FORMA(A)               1997
                             ------------    ------------    -------------------    -------------------    ------------------
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                          <C>             <C>             <C>                    <C>                    <C>
STATEMENT OF OPERATIONS
  DATA:
  Net sales:
    Telecommunications....     $ 13,137        $ 33,969           $  38,277              $ 136,560              $  7,063
    Information
      services............        2,648          14,650              41,354                 41,354                 6,014
                             ------------    ------------        ----------             ----------              --------
      Total net sales.....       15,785          48,619              79,631                177,914                13,077
  Operating income (loss):
    Telecommunications....       (7,288)        (43,698)           (153,139)              (241,054)              (26,548)
    Information
      services............          217          (1,409)             (4,092)                (4,092)               (1,105)
    General corporate.....       (3,861)        (11,373)            (30,815)               (30,815)               (5,283)
                             ------------    ------------        ----------             ----------              --------
      Total operating
        loss..............      (10,932)        (56,480)           (188,046)              (275,961)              (32,936)
Interest expense..........       (7,186)        (36,748)            (77,257)              (152,752)              (10,798)
Interest income...........        2,890          10,515              17,577                 12,793                 2,235
Other (expenses) income,
  net(c)..................         (866)             --               4,719                   (481)                   --
                             ------------    ------------        ----------             ----------              --------
Loss from continuing
  operations..............      (16,094)        (82,713)           (243,007)              (416,401)              (41,499)
(Loss) income from
  discontinued
  operations..............          237          (1,010)             (6,477)                (6,477)                 (477)
                             ------------    ------------        ----------             ----------              --------
Net loss..................      (15,857)        (83,723)           (249,484)              (422,878)              (41,976)
Preferred stock
  dividends...............           --              --              (5,879)               (45,806)                   --
                             ------------    ------------        ----------             ----------              --------
Net loss applicable to
  common stockholders.....     $(15,857)       $(83,723)          $(255,363)             $(468,684)             $(41,976)
                             ------------    ------------        ----------             ----------              --------
BASIC AND DILUTED LOSS PER
  SHARE:
  Loss per common share
    from continuing
    operations............     $  (0.71)       $  (2.96)          $   (7.49)             $  (13.81)             $  (1.27)
  (Loss) income per common
    share from
    discontinued
    operations............         0.01           (0.04)              (0.19)                 (0.19)                (0.02)
                             ------------    ------------        ----------             ----------              --------
  Net loss per common
    share outstanding.....     $  (0.70)       $  (3.00)          $   (7.68)             $  (14.00)             $  (1.29)
                             ------------    ------------        ----------             ----------              --------
  Weighted average common
    shares outstanding....       22,770          27,911              33,249                 33,469                32,610
 

<CAPTION>
                                      THREE MONTHS ENDED
                                           MARCH 31,
                            ----------------------------------------
                                   1998              PRO FORMA(B)
                            ------------------    ------------------
<S>                          <C>                  <C>
STATEMENT OF OPERATIONS
  DATA:
  Net sales:
    Telecommunications....       $ 35,487             $   39,259
    Information
      services............         11,949                 11,949
                                 --------             ----------
      Total net sales.....         47,436                 51,208
  Operating income (loss):
    Telecommunications....        (49,889)               (50,291)
    Information
      services............         (1,425)                (1,425)
    General corporate.....         (9,035)                (9,035)
                                 --------             ----------
      Total operating
        loss..............        (60,349)               (60,751)
Interest expense..........        (28,656)               (39,413)
Interest income...........          4,928                  4,928
Other (expenses) income,
  net(c)..................          1,100                  1,100
                                 --------             ----------
Loss from continuing
  operations..............        (82,977)               (94,136)
(Loss) income from
  discontinued
  operations..............         (1,982)                (1,982)
                                 --------             ----------
Net loss..................        (84,959)               (96,118)
Preferred stock
  dividends...............         (8,198)               (11,192)
                                 --------             ----------
Net loss applicable to
  common stockholders.....       $(93,157)            $ (107,310)
                                 --------             ----------
BASIC AND DILUTED LOSS PER
  SHARE:
  Loss per common share
    from continuing
    operations............       $  (2.54)            $    (2.92)
  (Loss) income per common
    share from
    discontinued
    operations............          (0.06)                 (0.06)
                                 --------             ----------
  Net loss per common
    share outstanding.....       $  (2.60)            $    (2.98)
                                 --------             ----------
  Weighted average common
    shares outstanding....         35,899                 35,971
</TABLE>

                                       8

<PAGE>

<TABLE>
<CAPTION>
                              TEN MONTHS                                     YEAR ENDED                    THREE MONTHS ENDED
                                ENDED         YEAR ENDED                 DECEMBER 31, 1997                     MARCH 31,
                             DECEMBER 31,    DECEMBER 31,    ------------------------------------------    ------------------
                                 1995            1996              ACTUAL              PRO FORMA(A)               1997
                             ------------    ------------    -------------------    -------------------    ------------------
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
OTHER FINANCIAL DATA:
<S>                          <C>             <C>             <C>                    <C>                    <C>
  Ratio of earnings from
    continuing operations
    to combined fixed
    charges and preferred
    stock dividends(d)....           --              --                  --                     --                    --
  Capital
    expenditures(e).......     $  8,123        $ 47,842           $ 222,300              $ 222,300              $ 32,380
 
<CAPTION>
                                   1998              PRO FORMA(B)
                            ------------------    ------------------
OTHER FINANCIAL DATA:
<S>                          <C>                  <C>
  Ratio of earnings from
    continuing operations
    to combined fixed
    charges and preferred
    stock dividends(d)....             --                     --
  Capital
    expenditures(e).......       $ 29,641             $   29,641
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                                 AS OF MARCH 31, 1998
                                                                                                 --------------------
<S>                                                                                              <C>
BALANCE SHEET DATA:
  Cash, cash equivalents and short-term investments...........................................       $    853,365
  Property and equipment, net.................................................................            304,074
      Total assets............................................................................          1,648,413
  Current portion of long-term debt and capital lease obligations.............................             14,287
  Long-term debt and capital lease obligations, less current portion..........................          1,284,061
  Series C Exchangeable Redeemable Preferred Stock............................................            181,779
  Series D Convertible Redeemable Preferred Stock.............................................            200,000
  Common and preferred stock and additional paid-in capital...................................            310,625
  Stockholders' deficit.......................................................................           (148,852)
</TABLE>
 
- - ------------------
 
(a) Gives effect to (i) a private placement of $100.0 million of units,
    consisting of 6% Series A Cumulative Convertible Preferred Stock ('Series A
    Preferred Stock') and warrants ('Warrants'), completed in February 1997
    ('February 1997 Preferred Stock Placement'), (ii) a private placement in
    March 1997 ('March 1997 Debt Placement') of $100.0 million 14 1/2% Senior
    Deferred Interest Notes Due 2005 of the Company ('1997 Senior Notes') and
    $200.0 million 12 1/2% Guaranteed Senior Secured Notes Due 2004 ('WEC
    Notes') of WinStar Equipment Corp., a wholly owned subsidiary of the Company
    ('WEC'), (iii) a private placement in August 1997 ('August 1997 Debt
    Placement') by WinStar Equipment II Corp., a wholly owned subsidiary of the
    Company ('WEC II'), of $50.0 million aggregate principal amount of its
    12 1/2% Guaranteed Senior Secured Notes Due 2004 (the 'WEC II Notes'), (iv)
    a private placement in October 1997 ('October 1997 Debt Placement') of
    $100.0 million 15% Senior Subordinated Deferred Interest Notes Due 2007 of
    the Company ('1997 Senior Subordinated Notes' and, together with the 1997
    Senior Notes, WEC Notes and WEC II Notes, the '1997 Notes'), (v) the US ONE
    Asset Acquisition, (vi) a private placement (the 'December 1997 Preferred
    Stock Placement') of $175.0 million principal amount of 14 1/4% Senior
    Cumulative Exchangeable Preferred Stock Due 2007 ('Series C Preferred
    Stock'), including $25.3 million of dividends on the Series C Preferred
    Stock in the year ended December 31, 1997, (vii) the Midcom Asset
    Acquisition, (viii) the 1998 Debt Placement, and (ix) the Preferred Stock
    Placement, each as if they occurred as of January 1, 1997. The transactions
    set forth in clauses (i) through (ix) are referred to herein collectively as
    the 'Pro Forma Transactions.' Interest expense has been (A) increased to
    include approximately $81.3 million of interest on such debt and
    amortization of debt offering costs and other related fees in the year ended
    December 31, 1997, but not to include interest income earned on additional
    available cash and (B) reduced by approximately $5.8 million for the year
    ended December 31, 1997 to reflect the repayment of approximately $62.3
    million borrowed in connection with the US ONE Asset Acquisition and repaid
    from the proceeds of the December 1997 Preferred Stock Placement.
    Depreciation expense has been adjusted to include approximately $5.1 million
    for the year ended December 31, 1997 of depreciation on certain of the
    assets acquired in the US ONE Asset Acquisition, assuming straight line
    depreciation over the expected useful lives of the assets which will
    ultimately be placed in service. Preferred stock dividends have been
    adjusted to include approximately $14.0 million of dividends on the Series D
    Preferred Stock (assuming the dividends are paid in Dividend Shares).
 
(b) Gives effect to (i) the MidCom Asset Acquisition, (ii) the March 1998 Debt
    Placement and (iii) the Preferred Stock Placement, each as if they occurred
    on January 1, 1998. Interest expense has been increased to include
    approximately $10.8 million of interest on such debt and amortization of
    debt offering costs and other related
 
                                              (Footnotes continued on next page)
 
                                       9

<PAGE>

(Footnotes continued from previous page)
    fees in the three months ended March 31, 1998, but not to include interest
    income earned on additional available cash. Preferred stock dividends have
    been adjusted to include approximately $3.0 million of dividends on the
    Series D Preferred Stock (assuming the dividends are paid in dividend
    shares).
 
(c) The year ended December 31, 1997 and the three months ended March 31, 1998
    include deferred income tax benefits of $2.5 million and $1.1 million
    respectively.
 
(d) For the ten months ended December 31, 1995, the years ended December 31,
    1996 and 1997, and the three months ended March 31, 1997 and 1998, earnings
    from continuing operations were insufficient to cover combined fixed charges
    and dividends on the Company's Series A, Series C and Series D Preferred
    Stock by approximately $16.3 million, $83.0 million and $255.6 million,
    $42.5 million and $90.6 million, respectively. On a pro forma basis, giving
    effect to the Pro Forma Transactions, earnings from continuing operations
    were insufficient to cover combined fixed charges and dividends on preferred
    stock by $468.9 million and $106.9 million for the year ended December 31,
    1997 and the three months ended March 31, 1998, respectively. Fixed charges
    consist of interest charges and amortization of debt expense and discount or
    premium related to indebtedness, whether expended or capitalized, and that
    portion of rent expense that the Company believes to be representative of
    interest.
 
(e) Excludes Midcom capital expenditures for the year ended December 31, 1997
    and the three months ended March 31, 1998.
 
                           FORWARD-LOOKING STATEMENTS
 
     This Prospectus and the documents incorporated by reference herein contain
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the financial condition, results
of operations and business of the Company. These forward-looking statements
involve certain risks and uncertainties. The words 'anticipate,' 'believe,'
'estimate,' 'expect,' 'plan,' 'intend' and similar expressions, as they relate
to the Company, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions. No
assurance can be given that any of such expectations will be realized. Factors
that may cause actual results to differ materially from those contemplated by
such forward-looking statements include, among others, the factors described
under 'Risk Factors,' including the following: (a) the Company's ability to
service its debt or to obtain financing for the buildout of its
telecommunications network; (b) the Company's ability to attract and retain a
sufficient revenue-generating customer base; (c) competitive pressures in the
telecommunications industry; and (d) general economic conditions.
 
                                       10

<PAGE>

                                  RISK FACTORS
 
     Prospective purchasers of the Series D Preferred Stock, Dividend Shares,
Conversion Shares or Selling Stockholder Shares offered hereby should carefully
consider the risk factors set forth below, as well as the other information
appearing in or incorporated by reference into this Prospectus, before making an
investment in any such securities.
 
HISTORICAL AND PROJECTED NET AND OPERATING LOSSES
 
     The Company has historically incurred significant and growing operating
losses and net losses, including net losses of approximately $15.9 million for
the ten months ended December 31, 1995, $83.7 million for the year ended
December 31, 1996, $249.5 million for the year ended December 31, 1997, $42.0
million and $85.0 million for the three months ended March 31, 1997 and 1998,
respectively. After giving effect to the Pro Forma Transactions, the Company
would have a net loss of $422.9 million and $96.1 million for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively.
 
     The Company expects to continue to experience significant operating losses
and net losses while it seeks to establish a sufficient revenue-generating
customer base and build its network infrastructure. There can be no assurance
that the Company will ever achieve (or if achieved, maintain) operating income
or profitability or that the Company and its subsidiaries will have sufficient
financial resources to make principal and interest payments on their outstanding
debt or to redeem the Company's outstanding preferred stock, including the
Series D Preferred Stock, or to make any cash dividend payments thereon.
Further, any failure by the Company to achieve operating income and
profitability will ultimately have an adverse effect on the market value of its
Common Stock and preferred stock, including the Series D Preferred Stock.
 
GOVERNMENT REGULATION
 
     The telecommunications services business is highly regulated at the
federal, state and local levels. In addition, the regulatory environment is
subject to continual changes as a result of new legislation, the regulations
adopted from time to time by the applicable regulatory authorities and
litigation. The Company's competitive position is affected by this regulatory
environment directly in terms of the services it is able to offer, the rates,
terms and conditions of those services, and the rates, terms and conditions of
necessary underlying services it must secure from other telecommunications
providers. The Company's competitive position is also affected indirectly in
terms of such regulatory environment's effect on companies that offer competing
services. The Company is not able to predict the extent to which current laws
and regulations or any changes therein may affect its business. However, as in
any regulated industry, changes in law, regulations and interpretations could
have a significant adverse impact on the ability of the Company to operate and
achieve its business objectives.
 
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.
 
     Telecommunications Markets.  The voice and data telecommunications markets
(including the Internet access and frame relay data markets) are intensely
competitive and currently are dominated by the ILECs and the IXCs. These
entities 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
ILECs and IXCs over the Company in certain respects. In addition to competition
from the established carriers, the Company also faces competition from a growing
number of new market entrants, such as other CLECs and dedicated data
transmission service providers. Further, sales of the Company's Carrier Services
are typically made to other telecommunications providers that may compete with
the Company. The Company also may face competition in the provision of local
telecommunications services from cable companies, electric utilities and ILECs
operating outside their current local service areas. Moreover, the consolidation
of telecommunications companies and the formation of strategic alliances within
the telecommunications industry, which have accelerated, could give rise to
significant new or stronger competitors.
 
                                       11

<PAGE>

The Company also faces competition from other entities which offer, or are
licensed to offer, 38 GHz services 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 (including 2 GHz, 4.6 GHz, 18
GHz, 24 GHz, 28 GHz, 31 GHz and 47 GHz), as well as from providers using
proposed global broadband satellite systems or unlicensed wireless services.
 
     As competition increases in the local telecommunications market, the
Company anticipates that general pricing competition and pressures will increase
significantly. The Company has not obtained significant market share in any of
the areas where it offers its services, nor does it expect to do so given the
size of its telecommunications services markets, the intense competition therein
and the diversity of customer requirements. There can be no assurance that the
Company will be able to compete effectively in any of its markets.
 
     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 production and distribution channels. There can be no assurance that
the Company will be able to compete successfully in the emerging new media
industry.
 
RISKS RELATED TO STRATEGY
 
     The Company is pursuing an accelerated strategy to expand its presence in
the local telecommunications services market in the metropolitan areas in which
it has Wireless Licenses and to develop and obtain the facilities necessary to
provide its own switched services. The Company has limited experience providing
local telecommunications services, and there can be no assurance that the
Company's strategy will be successful. In addition, local telecommunications
service providers in the United States never have utilized 38 GHz wireless-based
systems as a significant segment of their service facilities, and there can be
no assurance that the Company will be successful in implementing its Wireless
Fiber-based system. The Company's strategy is subject to risks relating to the
receipt of necessary regulatory approvals, the negotiation and implementation of
resale agreements with other local service providers, the negotiation and
implementation of interconnection agreements with ILECs and other providers, the
failure of ILECs and other providers to honor interconnection agreements and
their FCC-mandated obligations, the ability of third-party equipment providers
and installation and maintenance contractors to meet the Company's buildout
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 through delivery of high-quality services, the potential adverse
reaction to the Company's services by the Company's carrier customers, which may
view the Company as a competitor, and the Company's ability to manage the
simultaneous implementation of its plan in multiple markets. In addition, the
Company is subject to the risk of unforeseen problems inherent in being a
relatively new entrant in a rapidly evolving industry.
 
     Much of the Company's telecommunications revenues in prior years has been
derived from the resale of long distance services to residential customers. As
part of its strategy, the Company is marketing its long distance services to
businesses and is no longer actively marketing such services to residential
customers. As a result, revenues from the provision of long distance services to
residential customers have substantially declined and are expected to continue
to substantially decline through attrition of the Company's long distance
residential customer base.
 
     The Company's strategy requires significant capital investment related to
the purchase and installation of numerous switches and the interconnection of
these facilities to customers' buildings and local networks of other providers,
including the installation of Wireless Fiber links and the buildout of other
facility infrastructure in advance of generating material revenues.
 
                                       12

<PAGE>

     As the Company continues to build its telecommunications operations, it
will continue to experience 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 sufficient volumes of traffic; (ii) the Company
has installed a switch and a sufficient number of Wireless Fiber links so that a
substantial portion of the Company's traffic in that city can be originated and
terminated over the Company's Wireless Fiber facilities instead of ILEC or other
CLEC facilities; and (iii) higher margin-enhanced services are sought by,
provided to and accepted by customers. While the Company believes that the
unbundling and resale of ILEC services and the implementation of local telephone
number portability (which will permit customers to retain their telephone
numbers when switching carriers), 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 telecommunications operations will become profitable due to, among
other factors, lack of customer demand, competition from other CLECs and pricing
pressure from the ILECs and other CLECs.
 
UNCERTAINTY OF MARKET ACCEPTANCE OF WIRELESS FIBER SERVICES
 
     The Company has been marketing its Wireless Fiber services since December
1994. 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 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. There can be no
assurance that substantial markets will develop for wireless local
telecommunications 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 and 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 target markets 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.
 
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 (and other spectrum-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 or unlicensed spectrum. 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 operations and financial condition of the Company.
 
                                       13

<PAGE>

ABILITY TO PAY CASH DIVIDENDS ON AND REDEEM THE SERIES D PREFERRED STOCK
 
     The Company's ability to pay any dividends is subject to applicable
provisions of state law, and its ability to pay cash dividends is subject to the
terms of the indentures governing the Company's existing debt ('Indentures') and
any other indebtedness of the Company then outstanding. The terms of the
Indentures currently prohibit the Company from paying cash dividends on any
preferred stock, including the Series D Preferred Stock. The ability of the
Company in the future to pay cash dividends on the Series D Preferred Stock will
depend on the Company meeting certain financial criteria, which in turn will
require significant improvements in the Company's EBITDA and consolidated net
worth. There can be no assurance that the Company will be able to meet such
financial criteria in order to pay cash dividends on the Series D Preferred
Stock. Further, the terms of the Series D Preferred Stock provide that cash
payments thereon will not be made by the Company until certain outstanding
indebtedness of the Company has been paid. Moreover, under Delaware law, the
Company is permitted to pay dividends on its capital stock, including the Series
D Preferred Stock, only out of its surplus, or in the event that it has no
surplus, out of its net profits for the year in which a dividend is declared or
for the immediately preceding fiscal year. Surplus is defined as the excess of a
company's total assets over the sum of its total liabilities plus the par value
of its outstanding capital stock. In order to pay dividends in cash, the Company
must have surplus or net profits equal to the full amount of the cash dividends
at the time such dividend is declared. The Company cannot predict what the value
of its assets or the amount of its liabilities will be in the future and,
accordingly, there can be no assurance that the Company will be able to redeem
the Series D Preferred Stock or pay cash dividends thereon. See 'Description of
Capital Stock--Preferred Stock-- Series D Preferred Stock.'
 
     The Indentures limit, but do not prohibit, the incurrence of additional
indebtedness by the Company and its subsidiaries, and the Company may incur
substantial additional indebtedness during the next few years to finance the
buildout of its telecommunications networks and operations. All additional
indebtedness of the Company will rank senior in right of payment to any payment
obligations with respect to the Series D Preferred Stock. The debt service
requirements of any additional indebtedness would make it more difficult for the
Company to pay cash obligations with respect to the Series D Preferred Stock. In
addition, the terms of the Indentures restrict the ability of the Company to
redeem the Series D Preferred Stock. The ability of the Company to redeem or
repurchase the Series D Preferred Stock will depend on its meeting certain
financial criteria, which in turn will require significant improvements in the
Company's consolidated net worth.
 
ABILITY TO SERVICE SUBSTANTIAL INDEBTEDNESS AND TO COVER FIXED CHARGES;
REFINANCING RISK

     At March 31, 1998, the Company had, on a consolidated basis,
approximately $1,303.8 million of indebtedness, including capitalized lease
obligations. The Company also had outstanding, at March 31, 1998, $181.8 million
carrying value of Series C Preferred Stock and $200.0 million stated value of
Series D Preferred Stock. The accrual of interest on the Cash-Pay Notes and on
the 1997 Notes, the accrual of dividends on the Series C Preferred Stock and
Series D Preferred Stock and the accretion of original issue discount on the 14%
Convertible Senior Subordinated Discount Notes due 2005 (the 'Convertible
Notes') and the Company's 14% Senior Discount Notes due 2005 (the '1995 Senior
Notes' and, together with the Convertible Notes, the '1995 Notes') will
significantly increase the Company's liabilities and obligations (except to the
extent that the Convertible Notes are converted into Common Stock). The Company
may also need to incur additional indebtedness in the future. Although the
Indentures and the Certificate of Designations governing the Series C Preferred
Stock ('Series C Certificate of Designations') place certain limitations on the
incurrence of additional indebtedness by the Company and its subsidiaries, under
certain circumstances permitted by the Company's debt instruments, such
additional indebtedness could be substantial. Additionally, the Indentures do
not limit the amount of indebtedness that may be incurred by the Company's new
media and consumer products subsidiaries or other Unrestricted Subsidiaries (as
defined in the Indentures).
 
     The level of the Company's indebtedness could have important consequences
for holders of the Series D Preferred Stock, including the following: (i) the
combined debt service requirements of the 1995 Notes, 1997 Notes and the 1998
Notes, and the Company's obligations respecting the Series C Preferred Stock
will make it more difficult for the Company to make payments when due with
respect to the Series D Preferred Stock; (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)
beginning in 2001, a substantial portion of the
 
                                       14

<PAGE>

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 or for repurchase of the Series D
Preferred Stock or payment of cash dividends thereon; (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 would make it more vulnerable in the event
of a downturn in its business or if operating cash flow does not significantly
increase. In addition, a substantial portion of the Company's indebtedness will
mature in accordance with its terms and mandatory redemption payments will be
required with respect to the Series C Preferred Stock prior to the maturity date
of the Series D Preferred Stock. The Company anticipates that earnings will be
insufficient to cover fixed charges and preferred stock dividends for at least
the next several years. In order for the Company to meet its debt service
obligations and make mandatory redemption payments with respect to its preferred
stock, including the Series D Preferred Stock, the Company will need to
substantially improve its operating results. There can be no assurance that the
Company's operating results will be sufficient to enable the Company to meet
such debt service obligations or make such redemption payments. In the absence
of significantly improved operating results, the Company could face substantial
liquidity problems and might be required to raise additional financing through
the issuance of debt or equity securities, although there can be no assurance
that the Company would be successful in raising such financing.
 
     A substantial amount of the Company's indebtedness begins to require cash
payments of interest thereon starting in 2001 and begins to mature starting in
2004. The Company may not have sufficient cash flow to make such interest or
principal payments. The Company expects that it will need to refinance such
indebtedness on or prior to its maturity dates. However, the Company's ability
to obtain financing at such time may be limited by the financial condition or
operating results of the Company or financial markets at such time. There can be
no assurance that the Company will be able to refinance such indebtedness or
what the terms of such refinancing will be. If the Company is unable to make the
required debt service payments, the Company may be in default under its other
outstanding indebtedness, and, depending on the circumstances, the holders of
such indebtedness could elect to accelerate their indebtedness. In such event,
it is unlikely that all of the obligations of the Company, including with
respect to the Series D Preferred Stock, would be paid in full.
 
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 spectrum
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 near-term capital expenditure requirements. Under its current
plans to expand to 40 markets by the end of 1999, the Company plans to spend
approximately $300.0 million in each of 1998 and 1999 for capital equipment,
which may require the Company to seek additional financing from financial
institutions or equipment vendors or in the financial markets. The Company
anticipates, based on current plans and assumptions relating to its operations,
that its existing financial resources, together with additional equipment and
accounts receivable financing arrangements that the Company intends to seek,
will be sufficient to fund the Company's operations and capital requirements for
approximately 18 to 24 months from the date of this Prospectus. In the event
that the Company's assumptions change or prove to be inaccurate, the Company
consummates any acquisitions of significant businesses or assets (including
spectrum licenses other than those won by the Company in the FCC's recently
completed auction of LMDS Licenses), the Company accelerates its plan and enters
markets more rapidly, or the Company fails to secure additional equipment
financing arrangements, 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 financing, sales of nonstrategic
assets and other financing arrangements. There can be no assurance that
additional financing will be available or, if 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 financial condition.
 
                                       15

<PAGE>

PRO FORMA FINANCIAL INFORMATION; MIDCOM
 
     The Pro Forma Financial Information gives effect to the Pro Forma
Transactions, including the Midcom Asset Acquisition, and relies upon the
historical financial statements of Midcom. Midcom's financial statements for the
year ended December 31, 1997 (and, consequently, the Pro Forma Financial
Information) include Midcom's operations during the 10-month period in 1997
prior to Midcom's bankruptcy filing in November 1997 and, therefore, do not
accurately reflect the state of the business actually acquired by the Company in
January 1998. Additionally, the historically results of Midcom for the period
January 1, 1998 through January 21, 1998 is based pro rata on the actual
operating results of the Midcom operations for the period January 22, 1998
through March 31, 1998. In addition, one of the significant assets acquired by
the Company in the acquisition was Midcom's customer base, all of whom now must
be notified by the Company of the transfer of their accounts to the Company and
have the option to replace the Company as their service provider. Although the
Company expects that a significant number of customers will elect to terminate
their service and move to other carriers, the Pro Forma Financial Information
does not give effect to the loss of any Midcom customers. Moreover, the Pro
Forma Financial Information does not purport to represent what the Company's
results of operations or financial condition would actually have been had the
Midcom Asset Acquisition in fact occurred on January 1, 1997 or to project the
Company's results of operations or financial condition for any future period or
date. Although the Company believes the assets it acquired from Midcom were
purchased on attractive terms, the Company believes that investors in any of the
Securities offered hereby should not place any reliance on the pro forma
operating results contained in the Pro Forma Financial Information, as they
relate to Midcom.
 
RISKS ASSOCIATED WITH RAPID EXPANSION AND ACQUISITIONS
 
     The Company is pursuing a strategy of aggressive and rapid growth,
including the accelerated rollout of its telecommunications services,
acquisitions of businesses and assets, including additional spectrum licenses,
and the hiring of additional management, technical and marketing personnel, all
of which will result in higher capital expenditures and 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, information
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 business, financial condition and results of operations of
the Company, the value of the Company's securities, including the Securities
offered hereby, and the ability of the Company and its subsidiaries to make
principal and interest payments on their outstanding debt and of the Company to
repurchase or redeem its preferred stock, including the Series D Preferred
Stock, as required. As part of its strategy, the Company may acquire
complementary assets or businesses. 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 other
acquisitions or integrate any business or assets which it may acquire into its
operations.
 
     Recently, the Company consummated the US ONE Asset Acquisition, the GoodNet
Acquisition and the Midcom Asset Acquisition. There can be no assurance that the
acquired assets can be effectively integrated into the Company's operations or
that the Company will realize the benefits it expects to achieve through these
acquisitions. Two of the sellers, Midcom and US ONE, were in bankruptcy at the
time of acquisition and there can be no assurance that the Company will be able
to exploit these assets with more success than previous managements. Moreover, a
portion of Midcom's customers and independent sales agents have elected not to
continue with the Company. In addition, the conversion of Midcom customers and
carrier identification codes to the Company's system is subject to regulation by
the FCC, and the assignment of Midcom's customers may be subject to approval by
government regulators. In the event that the FCC determines that, despite
specific bankruptcy court approval, the Company engaged in improper practices in
converting such customers and codes, the FCC may impose substantial penalties on
the Company.
 
                                       16

<PAGE>

FINITE INITIAL TERM OF WIRELESS LICENSES; POTENTIAL LICENSE RENEWAL COSTS;
FLUCTUATIONS IN THE VALUE OF WIRELESS LICENSES; TRANSFER OF CONTROL
 
     As described in the FCC's Report and Order and Second Notice of Proposed
Rulemaking, released on November 3, 1997 (the '38 GHz Order'), the FCC's policy
is to align the expiration dates of all 38 GHz licenses granted such that they
mature concurrently on February 1, 2001, and, upon expiration, to renew all such
licenses for ten years if the FCC's 'substantial service' buildout requirements
have been met. 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. The failure of the Company
to meet the buildout requirements and obtain a renewal of its Wireless Licenses
would have a material adverse effect on the Company.
 
     In the 38 GHz Order, the FCC ruled, among other things and in addition to
the expiration and renewal policy described above, that (i) it would impose no
limits on the accumulation of licenses in the 38 GHz band, (ii) the 39.5-40.0
GHz portion of this band would not be reserved for use by satellite operations,
(iii) licensees should be permitted great flexibility in use of this spectrum,
including use for point-to-multipoint and mobile services (subject to the
development of inter-licensee and inter-services standards), and (iv) currently
unlicensed channels in the 38 GHz band will be auctioned.
 
     The Company anticipates that the 38 GHz Order, or portions thereof, will be
contested by various parties and the outcome of such proceedings is uncertain.
Therefore, while the Company views the majority of the FCC's determinations in
the 38 GHz Order as favorable to its operations and business plan, there can be
no assurance that such rulings will not be repealed or altered as a result of
such proceedings. On March 9, 1998, several parties filed petitions for
reconsideration (the 'Petitions') of the 38 GHz Order alleging, among other
things, that the FCC's February 10, 1998 grants to WinStar of additional
channels in 11 markets were in violation of the FCC's processing rules. Such
Petitions were made available to the public on March 10, 1998. At least one of
these parties has stated its intent to file a separate pleading on this issue.
There can be no assurance that the Petitions will not result in such additional
channel grants being rescinded.
 
     The Wireless Licenses are integral assets 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 and by valuations placed on
such licenses in any current or future auction of spectrum, such as the FCC's
auction for spectrum in the 28 GHz spectrum which currently is taking place. 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 qualifications of
the transferee and requires 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.
 
     The Company has entered into agreements to acquire a number of additional
38 GHz licenses. 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, nationality, background and the legal
and financial qualifications of the transferee and the satisfaction of certain
other regulatory requirements. There can be no assurance that the FCC will
approve all or any of the proposed acquisitions.
 
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 IXCs 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 ILECs and
other local exchange service providers to carry its customers' local telephone
calls. The Company has agreements with MCI, Sprint and others that provide it
with access to such carriers' networks and has entered or is entering into
interconnect agreements with various ILECs, and other CLECs, to access their
local exchange facilities. Although the Company believes
 
                                       17

<PAGE>

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 ILECs 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 could require the Company to significantly
curtail or cease its operations and could have an adverse effect on the value of
the Company's securities, including the Series D Preferred Stock, the ability of
the Company and its subsidiaries to make principal and interest payments on
their outstanding debt and of the Company to repurchase or redeem its preferred
stock, including the Series D Preferred Stock, as required. Further, the
Company's CLEC operations will rely to some extent upon network elements which
the ILECs must provide pursuant to the Telecommunications Act and the
Interconnection Order. These facilities often use copper wire for 'last mile'
access to end users. To the extent that the Company relies upon ILEC facilities
that use copper wire, the Company may not be able to offer potential customers
the benefits of Wireless Fiber with respect to high transmission capacity and
quality. 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 unusual 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.
 
     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 other telecommunications providers
that 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
to provide field service for, and network monitoring of, the Company's Wireless
Fiber facilities and another agreement with Lucent for the purchase by the
Company of telecommunications switches and related equipment. 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 and its ability to service its customers. The Company has
approached a number of major telecommunications service providers to solicit
interest in entering into a multi-year, multi-region network transaction in
which the Company would build and maintain a co-exclusive network utilizing
Wireless Fiber for providing access to their customer base. Although there can
be no assurance that such a transaction will be entered into, the Company
believes that such a transaction would be attractive to a number of these
providers and is in various stages of discussions with them.
 
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 up to five miles
(although the Company generally maintains link distances of less than three
miles, or shorter distances in certain areas, to meet its internally established
performance standards). Weather conditions may necessitate even shorter
distances 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 the quality or
reliability of 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 or to establish a
system of interconnected hub sites. 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 required to service 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 expand its Wireless Fiber services in its potential markets or in obtaining
any construction, zoning, franchises or other
 
                                       18

<PAGE>

governmental permits that may be necessary for the Company to provide Wireless
Fiber service to its customers in its markets at reasonable costs or on
favorable terms, or at all. The Company's prequalification activities may
require the payment of option fees to the owners of buildings that are being
prequalified. 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.
 
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS
 
     The Indentures and the Series C Certificate of Designations impose
significant operating and financial restrictions on the Company, affecting, and
in certain cases limiting, among other activities, 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. 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, the value of the Company's securities, including the Series D
Preferred Stock, and the ability of the Company and its subsidiaries to make
principal, interest and dividend payments on their outstanding debt and
preferred stock, including the Series D Preferred Stock.
 
CERTAIN TAX CONSIDERATIONS RELATING TO THE SERIES D PREFERRED STOCK
 
     Distributions on the Series D Preferred Stock will be taxable for United
States federal income tax purposes as ordinary dividend income (and eligible for
the dividends-received deduction for certain United States corporate holders)
only to the extent paid out of current or accumulated earnings and profits of
the Company as determined for federal income tax purposes and otherwise will be
treated in the manner described under 'Certain United States Federal Income Tax
Considerations--Tax Considerations for U.S. Holders of Series D Preferred
Stock--Distributions in General.' However, the Company does not currently have
any current or accumulated earnings and profits and cannot accurately predict at
what point it will have current or accumulated earnings and profits. In the
absence of current or accumulated earnings and profits of the Company, it is
anticipated that distributions on the Series D Preferred Stock will constitute
tax-free returns of capital to the extent of the holder's tax basis in the
Series D Preferred Stock and thereafter capital gain, and will not be eligible
for the dividends-received deduction.
 
     In the case of a distribution on the Series D Preferred Stock that is paid
in the form of shares of Common Stock, the fair market value of the distributed
shares on the distribution date will be taxable for United States federal income
tax purposes in the same manner as a cash distribution on the distribution date
notwithstanding that the cash attributable to such distribution will not be
received by the holder until a subsequent period. See 'Certain United States
Federal Income Tax Considerations.'
 
RANKING OF THE SERIES D PREFERRED STOCK
  
     The Company's obligations with respect to the Series D Preferred Stock do
not constitute indebtedness for borrowed money and with respect to right of
payment rank junior to all present and future indebtedness and other payment
obligations of the Company and its subsidiaries and all future Senior Stock (as
defined in the Series C Certificate of Designations), pari passu with the Series
C Preferred Stock and senior to the Series A Preferred Stock. Further, the
claims of creditors of the Company's subsidiaries will be effectively senior to
all payments, including dividends and redemption, on the Series D Preferred
Stock. As of March 31, 1998, the Company had (on an unconsolidated basis)
approximately $1,273.6 million of indebtedness (including capitalized lease
obligations and approximately $393.9 million of outstanding indebtedness and
other liabilities, including trade payables, of the Company's subsidiaries), all
of which would have been senior in right of payment to the Series D Preferred
Stock. In the event of bankruptcy, liquidation or reorganization of the Company,
the assets of the Company will be available to pay obligations on the Series D
Preferred Stock only after all indebtedness of the Company and all Senior Stock,
if any, has been paid, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Series D Preferred Stock then outstanding. See
'Description of Capital Stock-- Preferred Stock--Series D Preferred Stock.'
  
                                       19

<PAGE>

HOLDING COMPANY STRUCTURE
  
     The Company is a holding company and its only material assets consist of
the common stock of its subsidiaries and the proceeds raised from the sale of
its equity and debt securities, all of which the Company has loaned or
contributed, or intends to loan or contribute, to its subsidiaries. The Company
may have to rely upon dividends and other payments from its subsidiaries to
generate the funds necessary to repurchase the Series D Preferred Stock and to
make cash dividend payments, if any. The subsidiaries, however, are legally
distinct from the Company and have no obligation, contingent or otherwise, to
pay amounts due pursuant to the Series D Preferred Stock, or to make funds
available for such payment. The ability of the Company's subsidiaries to make
such dividends and other payments to the Company is subject to, among other
things, the availability of funds, the terms of such subsidiaries' indebtedness
and applicable state laws. Claims of creditors of the Company's subsidiaries,
including trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of the Company, the holders of the Company's
indebtedness and the holders of preferred stock, including the Series D
Preferred Stock. Accordingly, the Company's obligations with respect to the
Series D Preferred Stock are effectively subordinated to all liabilities
(including trade payables) of the subsidiaries of the Company. At March 31,
1998, the subsidiaries of the Company had approximately $393.9 million of
liabilities (including trade payables and $287.0 million of indebtedness
guaranteed by the Company). See 'Description of Capital Stock--Preferred
Stock--Series D Preferred Stock.'
  
POTENTIAL ADVERSE EFFECTS OF ISSUANCE OF SENIOR PREFERRED STOCK
 
     The Company is authorized to issue preferred stock in one or more series,
the terms of which may be determined at the time of issuance by the Board of
Directors. In certain instances, subject to the approval of the holders of at
least two-thirds of the outstanding shares of the Series D Preferred Stock, such
series of preferred stock could include voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and
liquidation, conversion and redemption rights senior to the Series D Preferred
Stock, and in all instances, senior to the Common Stock. Accordingly, future
issuance of such preferred stock, depending upon the rights, preferences and
designations thereof, could effectively diminish or supersede the dividends and
liquidation preferences of the Series D Preferred Stock and adversely affect the
Common Stock and the rights of the holders thereof.
 
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. See 'Price Range of Common Stock.' 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. Accordingly, there can be no assurance that, at any time in the future,
the market price for the Common Stock will exceed the effective conversion price
of the Series D Preferred Stock.
 
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND OTHER CONVERTIBLE SECURITIES
 
     As of March 31, 1998, there were outstanding (i) options with respect to an
aggregate of approximately 13,316,088 shares of Common Stock at per-share
exercise prices ranging from $1.50 to $44.75, (ii) the Convertible Notes, (iii)
the Series A Preferred Stock, (iv) warrants pursuant to which 2,000,000 shares
of Common Stock may be issued and (v) obligations to issue a number of shares of
Common Stock having an aggregate market value of $24.2 million for the purchase
of additional spectrum licenses. Substantially all of the shares of Common Stock
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 an additional 1,155,501 shares of Common Stock may be
granted. The exercise of outstanding stock options and warrants and the
conversion of other convertible securities will dilute the percentage ownership
of the Company's current
 
                                       20

<PAGE>

stockholders, and any sales in the public market of shares of Common Stock
issuable upon the exercise or conversion of such stock options, warrants and
convertible securities may adversely affect prevailing market prices for the
Common Stock.
 
LACK OF PUBLIC MARKET FOR THE SERIES D PREFERRED STOCK
 
     There is currently no active trading market for the Series D Preferred
Stock. The Series D Preferred Stock is designated eligible for trading in the
PORTAL Market. The Series D Preferred Stock may trade, if at all, at a discount
from its initial offering price, depending upon the market for similar
securities and other factors, including general economic conditions and the
financial condition of, performance of, and prospects for the Company. The
Company does not intend to apply for listing of the Series D Preferred Stock or
to seek approval for quotation through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Series D Preferred Stock or any securities issued in exchange
therefor. If such a market were to develop, the Series D Preferred Stock may
trade at prices that may be higher or lower than the initial offering prices.
Such markets may be subject to disruptions that historically have caused
substantial volatility in the prices of similar securities. Such disruptions
could materially and adversely affect liquidity and trading of the Series D
Preferred Stock, independent of the financial performance of, and prospects for,
the Company.
 
                                       21

<PAGE>

                          PRICE RANGE OF COMMON STOCK
 
     The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol 'WCII.'
 
     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. The quotes represent 'inter-dealer' prices without adjustment or
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
 
<TABLE>
<CAPTION>
PERIOD ENDING                                                                               HIGH       LOW
- - ---------- ------------------------------------------------------------------------------   ----       ---
<S>                                                                                        <C>         <C>
March 31, 1996..........................................................................   $18 1/2     $13 3/8
June 30, 1996...........................................................................    32 1/4      16
September 30, 1996......................................................................    29          15 3/4
December 31, 1996.......................................................................    23 7/8      16 1/2
March 31, 1997..........................................................................    20 1/4      11 5/8
June 30, 1997...........................................................................    14 5/8      10 1/8
September 30, 1997......................................................................    19 3/16     14 1/4
December 31, 1997.......................................................................    29 1/4      21 1/4
March 31, 1998..........................................................................    44 11/16    24 5/8
</TABLE>

     The last sale price of the Common Stock on June 16, 1998 was $41.313 per
share. As of June 16, 1998, the Company had 38,804,791 shares of Common Stock
outstanding held by more than 1,000 beneficial holders.

                                       22

<PAGE>

            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
     The following is a general discussion of the material United States federal
income tax considerations applicable to holders of the Series D Preferred Stock
resulting from their purchase, ownership and disposition. This discussion is
based on the Internal Revenue Code of 1986, as amended (the 'Code'), regulations
of the Treasury Department ('Treasury Regulations'), administrative rulings and
pronouncements of the Internal Revenue Service ('IRS') and judicial decisions,
all of which are subject to change, possibly with retroactive effect. This
discussion does not purport to address all the United States federal income tax
consequences that may be applicable to particular holders, including dealers in
securities, financial institutions, insurance companies and tax-exempt
organizations. In addition, except as provided below with respect to Non-U.S.
Holders, this discussion is limited to U.S. persons who will hold the Series D
Preferred Stock and the Common Stock as a 'capital asset' within the meaning of
Section 1221 of the Code. As used in the discussion which follows, the term
'U.S. Holder' means any person or entity which is (a) a citizen or resident (as
defined in Section 7701(b)(1) of the Code) of the United States, (b) a
corporation or other entity taxable as a corporation created or organized in or
under the laws of the United States or of any state thereof (including the
District of Columbia) or (c) an estate or trust that is described in Section
7701(a) (30) of the Code, and a 'Non-U.S. Holder' means any holder of the Series
D Preferred Stock and the Common Stock that is not a U.S. Holder.
 
     PROSPECTIVE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO ANY
FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES TO THEM OF PURCHASING,
OWNING AND DISPOSING OF SERIES D PREFERRED STOCK.
 
TAX CONSIDERATIONS FOR U.S. HOLDERS OF SERIES D PREFERRED STOCK
 
     Distributions in General
 
     Distributions with respect to the Series D Preferred Stock, whether paid in
cash or in shares of Common Stock, will be treated as dividends (taxable as
ordinary income) to the extent of the current and accumulated earnings and
profits of the Company. The amount of any distribution with respect to the
Series D Preferred Stock will be equal to the amount of cash distributed or, in
the case of a distribution in the form of Common Stock, the fair market value of
the shares of Common Stock on the date of the distribution. The Company does not
anticipate paying cash dividends on the Series D Preferred Stock in the
foreseeable future. To the extent that the amount of a distribution with respect
to the Series D Preferred Stock exceeds the current and accumulated earnings and
profits of the Company, it will be treated first as a tax-free return of capital
to the extent of the holder's basis in the Series D Preferred Stock, and
thereafter as capital gain from the sale of the Series D Preferred Stock
(taxable as described below under '--Sale, Redemption or Other Taxable
Disposition of Series D Preferred Stock'). The Company does not currently have
any current or accumulated earnings and profits, and cannot accurately predict
when it will have earnings and profits. A holder's tax basis in shares of Common
Stock received as a distribution on the Series D Preferred Stock will be the
fair market value of such shares on the date of the distribution. A holder's
holding period for such shares of Common Stock will commence on the day
following the date of distribution and will not include such holder's holding
period for the shares of Series D Preferred Stock with respect to which the
shares of Common Stock were distributed.
 
     Dividends to Corporate Holders
 
     A U.S. Holder that is a corporation otherwise entitled to the
dividends-received deduction as provided in Section 243 of the Code will be
entitled to that deduction (generally at a 70% rate) with respect to amounts
treated as dividends on the Series D Preferred Stock but will not be entitled to
that deduction with respect to amounts treated as a return of capital or capital
gain. In addition, the benefit of a dividends-received deduction may be reduced
by the corporate alternative minimum tax. In determining entitlement to the
dividends-received deduction, corporate holders should also consider the
provisions of Sections 246(c), 246A and 1059 of the Code and Treasury
Regulations promulgated thereunder, and IRS rulings and administrative
pronouncements relating to such Code provisions. Under current law as amended by
the Taxpayer Relief Act of 1997 ('TRA 1997'), Section 246(c) of the Code
disallows the dividends-received deduction in its entirety if the holder does
not satisfy the applicable holding period requirement for the dividend-paying
stock for a period immediately before or immediately after such holder becomes
entitled to receive each dividend on the stock. Section 246(c)(4) of the Code
provides that a holder may not count toward this minimum holding period any
period in which the holder
 
                                       23

<PAGE>

(i) has, among other things, an option to sell Series D Preferred Stock which it
owns, (ii) is under a contractual obligation to sell Series D Preferred Stock
which it owns, (iii) has made (and not closed) a short sale of substantially
identical stock or securities, or (iv) has diminished its risk of loss by
holding one or more positions with respect to substantially similar or related
property. For purposes of (ii) above, the obligation to sell upon the Company's
exercise of its option to redeem Series D Preferred Stock is not considered a
contractual obligation to sell by a corporate holder. Under certain
circumstances, Section 1059 of the Code (a) reduces the tax basis of stock by a
portion of any 'extraordinary dividends' that are eligible for the
dividends-received deduction and (b) to the extent that the basis reduction
would otherwise reduce the tax basis of the Series D Preferred Stock below zero,
requires immediate recognition of gain, which is treated as gain from the sale
or exchange of the stock. In the case of the Series D Preferred Stock, an
'extraordinary dividend' would include any amount treated as a dividend with
respect to a redemption that is not pro rata to all stockholders (or meets
certain other requirements), without regard to either the relative amount of the
dividend or the holder's holding period for the Series D Preferred Stock.
Section 246A of the Code contains the 'debt-financed portfolio stock' rules,
under which the dividends-received deduction could be reduced to the extent that
a holder incurs indebtedness directly attributable to its investment in the
Series D Preferred Stock.
 
     Receipt of Common Stock Upon Conversion of the Series D Preferred Stock
 
     Gain or loss will not be recognized by a holder upon the conversion of the
Series D Preferred Stock into Common Stock if no cash is received. A holder who
receives cash in lieu of a fractional share of Common Stock will in general be
treated as having received such fractional share and having exchanged it for
cash in a redemption, which would be treated in the manner described under
'--Sale, Redemption or other Taxable Disposition of the Series D Preferred
Stock.' As discussed therein, a holder who cannot qualify for sale or exchange
treatment under the rules applicable to redemptions will generally be taxable on
the cash received in lieu of a fractional share as a distribution described in
'--Distributions in General' above.
 
     Generally, a holder's basis in the Common Stock received upon the
conversion of the Series D Preferred Stock will equal the adjusted tax basis of
the converted Series D Preferred Stock (other than the portion of such Series D
Preferred Stock, the conversion of which resulted in the recognition of gain or
loss due to the receipt of cash in lieu of fractional shares). The holding
period of such Common Stock will include the holding period of the converted
Series D Preferred Stock.
 
     Adjustment of Conversion Price in Respect of Series D Preferred Stock
 
     Adjustments to the conversion price ratio of Common Stock to take into
account a stock dividend or stock split will not be taxable. However, an
adjustment to the conversion price ratio to reflect the Company's issuance of
certain rights, warrants, evidences of indebtedness, securities or other assets
to holders of Common Stock (an 'Adjustment') may result in constructive
distributions to the holders of the Series D Preferred Stock. The amount of any
such constructive distribution would be the fair market value on the date of the
Adjustment of the number of shares of Common Stock which, if actually
distributed to holders of Series D Preferred Stock, would produce the same
increase in the proportionate interests of such holders in the assets or
earnings and profits of the Company as that produced by the Adjustment. The
distribution would be treated in the manner described above under
'--Distributions in General' and '--Dividends to Corporate Holders.'
 
     Excessive Redemption Price
 
     Under Section 305 of the Code and Treasury Regulations authorized
thereunder, if the redemption price of Series D Preferred Stock exceeds its
issue price (i.e., its fair market value at its date of original issue) by more
than a de minimis amount, such excess may be treated as a constructive
distribution that will be treated in the same manner as distributions described
above under 'Distributions in General.' A holder of such Series D Preferred
Stock would be required to treat such excess as a constructive distribution
received by the holder over the life of such stock under a constant interest
(economic yield) method that takes into account the compounding of yield. It is
anticipated that the mandatory redemption price of the Series D Preferred Stock
will not exceed its issue price by more than a de minimis amount.
 
                                       24

<PAGE>

     Accrued Dividends on the Series D Preferred Stock
 
     Any unpaid dividends on the Series D Preferred Stock will accrue and will
be payable upon the optional or mandatory redemption of the Series D Preferred
Stock. The tax treatment of such accruing dividends ('Accrued Dividends') is not
free from doubt. Under current law, it appears that Accrued Dividends would not
be treated as having been received by holders of the Series D Preferred Stock
until such Accrued Dividends were actually paid in cash, at which time such
amounts would be taxable for United States federal income tax purposes in the
same manner as distributions described above under 'Distributions in General.'
The Company intends to take this position and will report to the IRS on that
basis.
 
     In addition, to the extent of available funds therefor, the Company will be
obligated under the Certificate of Designation to declare a dividend on the
Series D Preferred Stock prior to an optional or mandatory redemption thereof in
an amount equal to any Accrued Dividends on the Series D Preferred Stock.
 
     Prospective purchasers of Preferred Stock are urged to consult their own
tax advisors as to the tax treatment of Accrued Dividends.
 
     Sale, Redemption or other Taxable Disposition of the Series D Preferred
Stock
 
     Upon a sale or other taxable disposition a holder generally (except upon
certain redemptions as discussed below) will recognize capital gain or loss for
United States federal income tax purposes in an amount equal to the difference
between (i) the sum of the amount of cash and the fair market value of any
property received upon such sale or other taxable disposition and (ii) the
holder's adjusted tax basis in the Series D Preferred Stock being disposed. Such
gain or loss will be long-term capital gain or loss if the Series D Preferred
Stock has been held by the holder for more than one year at the time of
disposition. Under TRA 1997, capital gain or loss on the sale or other taxable
disposition of the Series D Preferred Stock held by noncorporate taxpayers for
(i) more than one year but not more than 18 months shall be subject to a maximum
tax rate of 28 percent, and (ii) more than 18 months shall be subject to a
maximum tax rate of 20 percent.
 
     A holder's initial tax basis in the Series D Preferred Stock generally will
be the price such holder paid for such Series D Preferred Stock.
 
     Gain or loss recognized by a holder on a redemption of the Series D
Preferred Stock would be treated as a sale or exchange and therefore qualify for
the treatment described above if, taking into account stock that is actually or
constructively owned under the constructive ownership rules of Section 318 of
the Code by such holder, either (i) the holder's interest in the stock of the
Company is completely terminated as a result of the redemption, (ii) such
holder's percentage ownership of the Company's voting stock immediately after
the redemption is less than 80% of such holder's percentage ownership
immediately before the redemption or (iii) the redemption is 'not essentially
equivalent to a dividend.' Under Section 318 of the Code, a person generally
will be treated as the owner of stock of the Company owned by certain related
parties or certain entities in which the person owns an interest and stock that
a holder could acquire through exercise of an option. For this purpose, an
option would include the conversion right under the Series D Preferred Stock.
Whether a redemption is not essentially equivalent to a dividend depends on each
holder's facts and circumstances, but in any event requires a 'meaningful
reduction' in such holder's equity interest in the Company. A holder of the
Series D Preferred Stock who sells some or all of the stock of the Company owned
by it may be able to take such sales into account to satisfy one of the
foregoing conditions. Conversely, a holder who purchases additional shares of
stock of the Company may be required to take such shares into account in
determining whether any of the foregoing conditions are satisfied.
 
     If none of the above conditions is satisfied to qualify for sale or
exchange treatment, the entire amount of the cash (or property) received on a
redemption will be treated as a distribution (without offset by the holder's tax
basis in the redeemed shares), which will be treated in the same manner as
distributions described above under '--Distributions in General.' In such case,
the holder's basis in the redeemed the Series D Preferred Stock would be
transferred to the holder's remaining shares of the Company's stock (if any). If
the holder does not retain any shares of the Company's stock, but dividend
treatment arises because of the constructive ownership rules, such basis will be
entirely lost to the holder.
 
                                       25

<PAGE>

     Information Reporting and Backup Withholding on U.S. Holders
 
     Information reporting and backup withholding may apply with respect to
payments by the Company of dividends on the Series D Preferred Stock and to
certain payments of proceeds on the sale or redemption of the Series D Preferred
Stock. Such payments will be subject to backup withholding at a rate of 31
percent unless the beneficial owner of such security furnishes the payor or its
agent with a taxpayer identification number, certified under penalties of
perjury, and certain other information, or otherwise establishes, in the manner
prescribed by law, an exemption from backup withholding. In addition, if the
Series D Preferred Stock is sold to (or through) a 'broker,' the broker may be
required to withhold 31 percent of the entire sales price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information. Such a sale must also be reported by the broker to the IRS, unless
the broker determines that the seller is an exempt recipient. The term 'broker'
as defined by Treasury Regulations includes all persons who, in the ordinary
course of their business, stand ready to effect sales made by others.
 
     Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against the holder's United States federal
income tax, which may entitle the holder to a refund, provided that the holder
furnishes the required information to the IRS. In addition, certain penalties
may be imposed by the IRS on a holder who is required to supply information but
does not do so in the proper manner.
 
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF SERIES D PREFERRED STOCK
 
     Dividends
 
     Dividends paid to a Non-U.S. Holder of Series D Preferred 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, 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 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 above (unless the payor has knowledge to
the contrary) and, under the current interpretation of Treasury Regulations, for
purposes of determining the applicability of a tax treaty. However, under final
Treasury Regulations issued October 6, 1997, in the case of dividends paid after
December 31, 1998 (December 31, 1999 in the case of dividends paid to accounts
in existence prior to December 31, 1998), 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 Series D Preferred 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 IRS, provided that the required information is furnished to the IRS.
 
     See above '--Tax Considerations for U.S. Holders of Series D Preferred
Stock' for when distributions will be treated as dividends.
 
                                       26

<PAGE>

     Gain on Disposition of Series D Preferred 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 taxable
disposition of Series D Preferred 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 Series D
Preferred 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 and former residents, 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 Series D Preferred
Stock. If the Company currently is, or were to become, a U.S. real property
holding corporation, gains realized upon a disposition of Series D Preferred
Stock by a Non-U.S. Holder which did not directly or indirectly own more than 5%
of the Series D Preferred Stock during the shorter of the periods described
above generally would not be subject to United States federal income tax so long
as the Series D Preferred Stock is 'regularly traded' on an established
securities market. The Company believes that it 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 Series D
Preferred 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)
of the first sentence 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.
 
     No United States federal income tax will be imposed on a Non-U.S. Holder
upon the conversion of the Series D Preferred Stock into Common Stock if no cash
is received. See '--Tax Considerations for U.S. Holders of Series D Preferred
Stock--Receipt of Common Stock Upon Conversion of the Series D Preferred Stock.'
 
     Federal Estate Tax
 
     Series D Preferred 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
the individual's gross estate for the 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 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%
 
                                       27

<PAGE>

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 final Treasury Regulations issued October 6, 1997, in the
case of dividends paid after December 31, 1998 (December 31, 1999 in the case of
dividends paid to accounts in existence prior to December 31, 1998), a Non-U.S.
Holder generally would be subject to backup withholding at 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 Series D
Preferred Stock to beneficial owners that are not 'exempt recipients' and that
fail to provide in the manner required certain identifying information.
 
     Payment by a United States office of a broker of the proceeds of a sale of
Series D Preferred Stock, or the proceeds of a redemption of Series D Preferred
Stock that are not treated as a dividend 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 and information reporting generally will not apply to payment
of the proceeds of a sale 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
certification conditions are met, or (ii) the beneficial owner otherwise
establishes an exemption, provided such broker does not have actual knowledge
that the payee is a United States person.
 
     Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a credit against such holder's
United States federal income tax liability, which may entitle such holder to a
refund, provided the required information is furnished to the IRS.
 
     THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT MAY
BE RELEVANT TO A PARTICULAR PURCHASER OR HOLDER OF SERIES D PREFERRED STOCK IN
LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. ACCORDINGLY,
EACH PURCHASER OR HOLDER OF THE SERIES D PREFERRED STOCK SHOULD CONSULT WITH ITS
OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH PURCHASER OR HOLDER
FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES D PREFERRED STOCK,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
 
                                       28

<PAGE>

                          DESCRIPTION OF CAPITAL STOCK
 
COMMON STOCK
 
     The authorized capital stock of the Company includes 200 million shares of
Common Stock, $0.01 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 cash
dividends on the Common Stock (and is restricted from doing so by the
Indentures), 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 all liabilities and the liquidation preferences of any
outstanding 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 non-assessable.
 
     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. 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.
 
PREFERRED STOCK
 
     Series A Preferred Stock
 
     In February 1997, the Company and a wholly-owned subsidiary sold in the
February 1997 Preferred Stock Placement an aggregate of 4,000,000 shares of
Series A Preferred Stock and Warrants to purchase 1,600,000 shares of the
Company's Common Stock for an aggregate purchase price of $100.0 million.
 
     Each share of Series A Preferred Stock has a stated value of $25 ('Stated
Value') and entitles the holder thereof to receive from the Company dividends at
a rate per annum equal to 6% of the Stated Value. Dividends accrue and are
cumulative from the date of issuance and are payable in arrears quarterly as of
March 31, June 30, September 30 and December 31 of each year. The Company may,
at its election, pay such dividends in cash or through the issuance of
additional shares of Series A Preferred Stock.
 
     The shares of Series A Preferred Stock are convertible into that number of
shares of Common Stock derived by dividing the aggregate Stated Value of the
Series A Preferred Stock being converted by $25 (subject to adjustment). On
February 11, 2002, any Series A Preferred Stock still outstanding shall be
automatically converted into shares of Common Stock, unless the Company elects
to pay cash therefor in an amount equal to the Stated Value plus all accrued and
unpaid dividends thereon (the 'Liquidation Preference'). Unless paid for in
cash, such conversion will be effected by delivery of shares of Common Stock
having a value, based upon the closing bid prices for the Common Stock for the
20 consecutive trading days ending one trading day prior to such conversion
date, equal to the Liquidation Preference.
 
     The Warrants entitle the holders thereof to purchase an aggregate of
1,600,000 shares of Common Stock for $25 per share (subject to adjustment) at
any time until February 11, 2002. The Company may accelerate the expiration date
at any time after February 11, 2000 if the Common Stock trades at $40 or more
for a period of 20 consecutive days.
 
     The Company and the purchasers of the Series A Preferred Stock also entered
into a Registration Rights Agreement, dated February 6, 1997 (the 'Preferred
Stock Registration Rights Agreement'), pursuant to which the Company currently
maintains an effective registration statement under the Securities Act,
registering (i) the
 
                                       29

<PAGE>

resale of the Series A Preferred Stock and Warrants and (ii) the issuance by the
Company of the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the Warrants.
 
     As of June 9, 1998, after giving effect to conversions of Series A
Preferred Stock into Common Stock and the issuance of shares of Series A
Preferred Stock as dividends, there were 3,910,466 shares of Series A Preferred
Stock outstanding.
 
     Rights to Purchase Series B Preferred Stock
 
     The following is a summary of the Rights Agreement dated as of July 2, 1997
(the 'Rights Plan'), between the Company and Continental Stock Transfer & Trust
Company, as Rights Agent, which was adopted by the Board of Directors of the
Company on July 2, 1997. This summary of the Rights Plan does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Rights Plan.
 
     Under the Rights Plan, holders of Common Stock of the Company received, as
a dividend, preferred stock purchase rights (the 'Rights') at the rate of one
Right for each share of Common Stock held as of the close of business on July
14, 1997. One Right will also attach to each share of Common Stock issued
thereafter. Currently the Rights are not separate from the Common Stock and are
not exercisable, and the Rights will only separate from the Common Stock and
become exercisable if a person or group acquires 10% or more of the Company's
outstanding Common Stock (an 'Acquiring Person') or launches a tender or
exchange offer that would result in ownership of 10% or more the Company's
outstanding Common Stock. Each Right that is not owned by an Acquiring Person
entitles the holder of the Right to buy one one-thousandth of one share (a
'Unit') of Series B Preferred Stock which will be issued by the Company. If any
person becomes an Acquiring Person, or if an Acquiring Person engages in certain
transactions involving conflicts of interest or in a business combination in
which the Company's Common Stock remains outstanding, then the Rights Plan
provides that each Right, other than any Right held by the Acquiring Person,
entitles the holder to purchase, for $70, Units with a market value of $140.
However, if the Company is involved in a business combination in which the
Company itself is not the survivor, or if the Company sells 50% or more of its
assets or earning power to another person, then the Rights Plan provides that
each Right entitled the holder to purchase, for $70, shares of the common stock
of the Acquiring Person's ultimate parent having a market value of $140.
 
     At any time until ten days following the date on which a person acquires
10% or more of the Company's Common Stock, the Company may redeem all (but not
less than all) of the Rights for $0.0001 per Right. The Rights expire in July
2002. The Series B Preferred Stock will have dividend and liquidation
preferences over the Common Stock of the Company, but junior to any other series
of preferred stock of the Company.
 
     In January 1998, a stockholder suit, purported to be a class action, was
commenced against the Company, its directors (and certain former directors) and
one non-director officer in the Delaware Chancery Court seeking, among other
things, to invalidate certain portions of the Rights Plan and to recover
unspecified damages and attorneys' fees. The complaint alleges that certain
provisions of the Rights Plan, particularly the so-called 'Continuing Directors'
provision, are not permitted under the Delaware General Corporation Law and the
Company's Certificate of Incorporation. The Company believes that these
allegations are without merit and that the Rights Plan was properly adopted and
is valid in its entirety. The Company is reviewing its available alternatives
with regard to responding to this action. 
 
     Series C Preferred Stock
 
     On December 17, 1997, the Company sold in a private placement an aggregate
of 175,000 shares of Series C Preferred Stock for an aggregate purchase price of
$175.0 million.
 
     Dividends on the Series C Preferred Stock accrue from December 22, 1997 at
the rate per share of 14 1/4% of the Accumulated Amount (as defined) per annum,
compounded semiannually on each June 15 and December 15, but will not be payable
in cash, except as set forth in the next sentence. Commencing on the first June
15 or December 15 (each a 'Dividend Payment Date') which is at least six months
after the later of December 15, 2002, and the Specified Debt Satisfaction Date
(as defined) (the 'Cash Payment Date'), dividends on the Series C Preferred
Stock will be payable in cash at a rate per annum equal to 14 1/4% of the
Accumulated Amount as of the Dividend Payment Date preceding such date. In the
event that the Specified Debt Satisfaction Date shall not have occurred before
December 15, 2002, the rate otherwise applicable to the Series C Preferred Stock
shall be increased by 150 basis points from December 15, 2002, until the
Dividend Payment Date falling on or after the Specified Debt Satisfaction Date.
 
                                       30

<PAGE>

     The Series C Preferred Stock ranks (i) senior to all existing and future
Junior Stock (as defined), including the Series A Preferred Stock; (ii) on a
parity with all existing and future Parity Stock (as defined), including the
Series D Preferred Stock; and (iii) junior to all future Senior Stock (as
defined). In addition, as equity, the Series C Preferred Stock will rank junior
in right of payment to all indebtedness of the Company and its subsidiaries.
 
     The Series C Preferred Stock will not be redeemable prior to December 15,
2002. On or after December 15, 2002, the Series C Preferred Stock will be
redeemable at the option of the Company, in whole or in part, at specified
redemption prices plus accumulated and unpaid dividends, if any, to the date of
redemption. On December 15, 2007, the Company will be required to redeem the
Series C Preferred Stock at a price equal to the Accumulated Amount thereof plus
accumulated and unpaid dividends, if any, out of funds legally available
therefor.
 
     On any scheduled Dividend Payment Date following the Specified Debt
Satisfaction Date, the Company may, at its option, exchange all but not less
than all of the shares of Series C Preferred Stock then outstanding for 14 1/4%
Senior Subordinated Deferred Interest Notes Due 2007 ('Exchange Debentures') in
an aggregate Accumulated Amount equal to the aggregate Accumulated Amount of the
shares of Series C Preferred Stock outstanding at the time of such exchange,
plus accumulated and unpaid dividends to the date of exchange.
 
     Until the Cash Payment Date, interest on the Exchange Debentures will
accrue at a rate of 14 1/4% of the Accumulated Amount per annum and will be
compounded semiannually on each June 15 and December 15 (each an 'Interest
Payment Date') but will not be payable in cash except as set forth in the next
sentence. Commencing on the first Interest Payment Date following the later of
the Exchange Date (as defined) or the Cash Payment Date, interest will be
payable in cash at a rate per annum equal to 14 1/4% of the Accumulated Amount
as of the Exchange Date. The Exchange Debentures, if issued, will be unsecured,
senior subordinated obligations of the Company, subordinated in right of payment
to all Senior Indebtedness of the Company and to all indebtedness and other
liabilities (including trade payables) of the Company's subsidiaries, and will
rank pari passu with the Notes, 1997 Senior Subordinated Notes and the
Convertible Notes. The Exchange Debentures, if issued, will not be redeemable
prior to December 15, 2002. On or after December 15, 2002, the Exchange
Debentures are redeemable at the option of the Company, in whole or in part, at
the redemption prices set forth herein plus accrued and unpaid interest, if any,
to the date of redemption.
 
     Series D Preferred Stock
 
     On March 17, 1998, the Company and a wholly-owned subsidiary sold in the
Preferred Stock Placement an aggregate of 4,000,000 shares of the Series D
Preferred Stock for an aggregate purchase price of $200.0 million.
 
     Ranking.  The Series D Preferred Stock, with respect to dividend rights and
rights on liquidation, winding-up and dissolution, ranks (i) senior to all
classes of Common Stock and to the Series A Preferred Stock and to each other
class of capital stock or series of preferred stock established hereafter by the
Board of Directors the terms of which do not expressly provide that it ranks
senior to, or on a parity with, the Series D Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as 'Junior Stock'); (ii) on a parity with the Series C Preferred Stock
and each class of capital stock or series of preferred stock established
hereafter by the Board of Directors, the terms of which expressly provide that
such class or series will rank on a parity with the Series D Preferred Stock as
to dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as 'Parity Stock'); and (iii) junior to each class of
capital stock or series of preferred stock established hereafter by the Board of
Directors, the terms of which expressly provide that such class or series will
rank senior to the Series D Preferred Stock as to dividend rights and rights
upon liquidation, winding-up and dissolution of the Company (collectively
referred to as 'Senior Stock').
 
     While any shares of Series D Preferred Stock are outstanding, the Company
may not authorize, create or increase the authorized amount of any class or
series of stock (i) that ranks senior to the Series D Preferred Stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up, or (ii) that is on a parity with the Series D Preferred Stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up and that has a mandatory redemption earlier, or an average life less,
than that of the Series D Preferred Stock, in each case without the consent of
the holders of at least 66 2/3% of the outstanding shares of Series D Preferred
Stock. However, without the consent of any holder of Series D Preferred Stock,
the Company may create additional classes of stock, increase the authorized
number of shares of preferred stock or issue series of a stock that ranks on a
parity with, or junior to, the Series D Preferred Stock with respect, in each
 
                                       31

<PAGE>

case, to the payment of dividends and amounts upon liquidation, dissolution and
winding up (subject, in the case of Parity Stock, to the preceding sentence).
See '--Voting Rights.'
 
     Dividends.  Holders of shares of Series D Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors of the Company out
of funds of the Company legally available for payment, cumulative dividends at
the rate per annum of 7% per share on the liquidation preference thereof of
$50.00 per share of Series D Preferred Stock (equivalent to $3.50 per annum per
share). Dividends on the Series D Preferred Stock will be payable quarterly on
March 15, June 15, September 15 and December 15 of each year commencing
September 15, 1998, at such annual rate and shall accrue from the most recent
date as to which dividends shall have been paid or, if no dividends have been
paid, from the date of the original issuance of the Series D Preferred Stock.
Each such dividend will be payable to holders of record as they appear on the
stock records of the Company at the close of business on the Business Day next
preceding such quarterly dividend payment date. Dividends will be cumulative
from such date, whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such dividends.
Accumulations of dividends on shares of Series D Preferred Stock will not bear
interest. Dividends payable on the Series D Preferred Stock for any period
greater or less than a full quarterly dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
 
     Any dividend on the Series D Preferred Stock shall be, at the option of the
Company, payable (i) in cash or (ii) through the issuance of a number of
Dividend Shares (rounded up or down to the nearest whole share) equal to the
dividend amount divided by the Discounted Current Market Value of the Common
Stock; provided, however, that the Company shall not pay any dividends on the
Series D Preferred Stock in cash prior to the date all obligations under each of
the Specified Indentures shall have been satisfied in full (the 'Specified Debt
Satisfaction Date'). With respect to shares of Series D Preferred Stock that are
'restricted securities' as defined in Rule 144 under the Securities Act ('Rule
144') on a record date for the payment of dividends, all such Dividend Shares
distributed on the related dividend payment date in payment of dividends on the
Series D Preferred Stock will be treated as 'restricted securities' will bear a
legend to such effect and will not be transferable by the recipient thereof
except pursuant to an effective registration statement or pursuant to an
exemption from the registration requirements of the Securities Act. All such
Dividend Shares will be issued in physical certificated form and will not be
eligible for receipt in global form through the facilities of the Depositary.
Certificates for such Dividend Shares will be mailed or made available at the
office of the Transfer Agent for the Series D Preferred Stock on or as soon as
possible after the relevant dividend payment date to those beneficial holders of
Series D Preferred Stock shown on the records of the Depositary which shall be
delivered to the Company at the close of business on the relevant record date.
As a result of the requirement for physical delivery of such Dividend Shares,
holders who have not made arrangements with the Depositary, the Transfer Agent
and the Company prior to a dividend payment date for the delivery of such
physical certificates on such dividend payment date may not receive such
physical delivery until several days after such dividend payment date. See
'--Registration Rights.' With respect to shares of Series D Preferred Stock that
are no longer 'restricted securities' on a record date for the payment of
dividends, either as a result of a resale of the Series D Preferred Stock
pursuant to the Shelf Registration Statement or otherwise, all Dividend Shares
distributed on the related dividend payment date in payment of dividends will be
freely transferable without restriction under the Securities Act (other than by
affiliates), and such shares will be eligible for receipt in global form through
the facilities of the Depositary.
 
     'Specified Indentures' means the Indentures governing the 1995 Notes and
the 1997 Notes and the Exchangeable Debentures.
 
     No dividend whatsoever shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Series D Preferred Stock.
 
     The Company will not (i) declare, pay or set apart funds for the payment of
any dividend or other distribution with respect to any Junior Stock or (ii)
redeem, purchase or otherwise acquire for consideration any Junior Stock through
a sinking fund or otherwise, unless (A) all accrued and unpaid dividends with
respect to the Series D Preferred Stock and any Parity Stock at the time such
dividends are payable have been paid or funds have been set apart for payment of
such dividends and (B) sufficient funds have been paid or set apart for the
 
                                       32

<PAGE>
payment of the dividend for the current dividend period with respect to the
Series D Preferred Stock and any Parity Stock.
 
     No dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been paid on the Series D Preferred Stock for all
prior dividend periods; provided, however, if accrued dividends on the Series D
Preferred Stock for all prior dividend periods have not been paid in full then
any dividend declared on the Series D Preferred Stock for any dividend period
and on any Parity Stock will be declared ratably in proportion to accrued and
unpaid dividends on the Series D Preferred Stock and such Parity Stock.
 
     Notwithstanding anything herein to the contrary, the Company may declare
and pay dividends on Parity Stock or Junior Stock which are payable solely in
shares of Parity Stock or Junior Stock (in the case of Parity Stock) or of
Junior Stock (in the case of Junior Stock) or by the increase in the liquidation
value of Parity Stock or Junior Stock, as applicable, or repurchase, redeem or
otherwise acquire Junior Stock in exchange for Junior Stock and Parity Stock in
exchange for Parity Stock or Junior Stock.
 
     The Company's ability to pay cash dividends with respect to the Series D
Preferred Stock is limited by the terms of the Company's outstanding
indebtedness. See 'Risk Factors--Ability to Pay Cash Dividends on and Redeem the
Series D Preferred Stock.'
 
     Optional Redemption.  The Series D Preferred Stock will not be redeemable
at the option of the Company prior to March 20, 2001. Thereafter, each share of
the Series D Preferred Stock will be redeemable, at the Company's option, in
whole or in part, at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's
registered address, at the following redemption prices, payable in cash, plus
accumulated and unpaid dividends, if any (including a prorated dividend for any
partial dividend period).
 
     If redeemed during the period commencing March 20, 2001 through March 14,
2002, the redemption price shall be $51.75.
 
     If redeemed during the 12-month period commencing on March 15 of the years
set forth below, the redemption prices shall be:
<TABLE>
<CAPTION>
                                                                REDEMPTION
PERIOD                                                            PRICE
- - -------------------------------------------------------------   ----------
<S>                                                             <C>
2002.........................................................     $51.17
2003.........................................................      50.58
2004 and thereafter..........................................      50.00
</TABLE>
 
     In the case of any partial optional redemption, selection of the Series D
Preferred Stock for redemption will be made by the Company in compliance with
the requirements of the principal national securities exchange, if any, on which
the Series D Preferred Stock is listed, or if the Series D Preferred Stock is
not listed on a national securities exchange, on a pro rata basis, by lot or
such other method as the Company, in its sole discretion, shall deem fair and
appropriate; provided, however, that the Company may redeem all the shares held
by holders of fewer than 100 shares (or all of the shares held by the holders
who would hold fewer than 100 shares as a result of such redemption) as may be
determined by the Company.
 
     In the case of a redemption date falling after a dividend payment record
date and prior to the related payment date, the holders of the Series D
Preferred Stock at the close of business on such record date will be entitled to
receive the dividend payable on such shares on the corresponding dividend
payment date, notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the preceding sentence,
no payment or allowance will be made for accrued dividends on any shares of
Series D Preferred Stock called for redemption.
 
     The Company's ability to redeem the Series D Preferred Stock at its option
is limited by the terms of the Company's outstanding indebtedness. The Company
may not be able to redeem the Series D Preferred Stock at its option unless it
simultaneously redeems or repays such indebtedness. See 'Risk Factors--Ability
to Pay Cash Dividends on and Redeem the Series D Preferred Stock.'
 
     Mandatory Redemption.  On March 15, 2010, the Company will be required to
redeem in cash (subject to the legal availability of funds therefor) all
outstanding shares of Series D Preferred Stock at a price in cash equal to
$50.00 per share, plus accumulated and unpaid dividends (including an amount in
cash equal to a prorated dividend for any partial dividend period), if any, to
the date of redemption. The Company will not be required to make sinking fund
payments with respect to the Series D Preferred Stock. The Certificate of
Designations
 
                                       33

<PAGE>

provides that the Company will take all actions required or permitted under
Delaware law to permit such redemption.
 
     Liquidation Preference.  Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, each holder of Series D Preferred
Stock will be entitled to be paid, out of the assets of the Company available
for distribution to stockholders, an amount equal to the liquidation preference
of $50.00 per share of Series D Preferred Stock held by such holder, plus
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up before any distribution is made on any Junior Stock,
including Common Stock of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the Series D Preferred Stock and all other Parity Stock are not paid
in full, the holders of the Series D Preferred Stock and the Parity Stock will
share equally and ratably in any distribution of assets of the Company in
proportion to the full liquidation preference and accumulated and unpaid
dividends to which each is entitled. After payment of the full amount of the
liquidation preference and accumulated and unpaid dividends to which they are
entitled, the holders of shares of Series D Preferred Stock will not be entitled
to any further participation in any distribution of assets of the Company.
However, neither the sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Company nor the consolidation or merger of the Company
with one or more entities shall be deemed to be a liquidation, dissolution or
winding-up of the Company.
 
     The Certificate of Designations does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Series D
Preferred Stock even though it is substantially in excess of the par value
thereof.
 
     Voting Rights.  The holders of Series D Preferred Stock, except as
otherwise required under Delaware law or as provided in the Certificate of
Designations, are not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
 
     The Certificate of Designations provides that if dividends on the Series D
Preferred Stock are in arrears and unpaid for six or more dividend periods
(whether or not consecutive), or if the Company shall fail to redeem all the
Series D Preferred Stock in cash on the mandatory redemption date, then the
holders of the outstanding shares of Series D Preferred Stock, voting together
as a class with the holders of any other series of preferred stock upon which
like rights have been conferred and are exercisable, will be entitled to elect
to serve on the Board of Directors the lesser of (x) two additional members to
the Board of Directors or (y) that number of directors constituting at least 25%
of the members of the Board of Directors, and the number of members of the Board
of Directors will be immediately and automatically increased by such number.
Such voting rights of the Series D Preferred Stock will continue until such time
as all dividends in arrears on the Series D Preferred Stock, or the mandatory
redemption price, as the case may be, are paid in full at which time the term of
any directors elected pursuant to the provisions of this paragraph (subject to
the right of holders of any other preferred stock to elect such directors) shall
terminate.
 
     The Certificate of Designations also provides that, except as expressly set
forth above under '--Ranking,' (a) the creation, authorization or issuance of
any shares of Junior Stock, Parity Stock or Senior Stock, including the
designation of a series thereof within the existing class of Series D Preferred
Stock, or (b) the increase or decrease in the amount of authorized Capital Stock
of any class, including any preferred stock, shall not require the consent of
the holders of Series D Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
Series D Preferred Stock.
 
     Conversion Rights.  Shares of Series D Preferred Stock are convertible, in
whole or in part, at the option of the holders thereof, into Conversion Shares
initially at the conversion price stated on the cover page of this Prospectus,
subject to adjustment as described below ('Conversion Price'). The right to
convert shares of Series D Preferred Stock called for redemption will terminate
at the close of business on the relevant redemption date.
 
     Conversion of shares of Series D Preferred Stock, or a specified portion
thereof, may be effected by delivering certificates evidencing such shares,
together with written notice of conversion and a proper assignment of such
certificates to the Company or in blank, to the office or agency to be
maintained by the Company for that purpose. Initially such office will be
located at 230 Park Avenue, New York, New York.
 
     Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
D Preferred Stock shall have been surrendered and notice (and if applicable,
payment of an amount equal to the dividend payable on such shares) received by
the Company as
 
                                       34

<PAGE>

aforesaid. The Company will issue a certificate evidencing the Conversion Shares
as soon as reasonably practical after the conversion date.
 
     With respect to any shares of Series D Preferred Stock that are 'restricted
securities' on the conversion date, the shares of Conversion Shares distributed
upon conversion will be treated as 'restricted securities,' will bear a legend
to such effect and will not be transferable by the recipient thereof except
pursuant to an effective registration statement or pursuant to an exemption from
the registration requirements of the Securities Act. All such shares will be
issued in physical certificated form and will not be eligible for receipt in
global form through the facilities of the Depositary. With respect to shares of
Series D Preferred Stock that are no longer 'restricted securities' on a
conversion date, either as a result of a resale of the Series D Preferred Stock
pursuant to a registration statement or otherwise, all shares of Conversion
Shares distributed upon conversion will be freely transferable without
restriction under the Securities Act (other than by affiliates), and such shares
will be eligible for receipt in global form through the facilities of the
Depositary.
 
     Holders of shares of Series D Preferred Stock at the close of business on a
dividend payment record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date notwithstanding the
conversion of such shares following such dividend payment record date and prior
to such dividend payment date. However, shares of Series D Preferred Stock
surrendered for conversion during the period between the close of business on
any dividend payment record date and the opening of business on the
corresponding dividend payment date (except shares converted after the issuance
of a notice of redemption with respect to a redemption date during such period,
which will be entitled to such dividend) must be accompanied by payment of an
amount equal to the dividend payable on such shares on such dividend payment
date. A holder of shares of Series D Preferred Stock on a dividend payment
record date who (or whose transferee) tenders any such shares for conversion
into Conversion Shares on such dividend payment date will receive the dividend
payable by the Company on such shares of Series D Preferred Stock on such date,
and the converting holder need not include payment of the amount of such
dividend upon surrender of shares of Series D Preferred Stock for conversion.
Except as provided above, the Company will make no payment or allowance for
unpaid dividends, whether or not in arrears, on converted shares or the
dividends on the shares of Common Stock issued upon such conversion.
 
     Fractional shares of Common Stock need not be issued upon conversion but,
in lieu thereof, the Company may pay a cash adjustment based on the current
market price of the Common Stock on the day prior to such conversion date.
 
     The Conversion Price will be subject to adjustment, under certain
circumstances, upon the occurrence of certain events, including: (i) the payment
of dividends (and other distributions) of Common Stock on outstanding shares of
Common Stock; (ii) the issuance to all holders of Common Stock of rights,
warrants or options entitling them to subscribe for or purchase Common Stock at
less than the current market price (as defined) thereof; (iii) subdivisions and
combinations of Common Stock; (iv) distributions to all holders of Common Stock
of evidences of indebtedness of the Company, shares of capital stock,
securities, cash or property (excluding any rights, warrants or options referred
to in clause (ii) above and any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in clause (i) above); (v)
distributions consisting exclusively of cash to all holders of Common Stock in
an aggregate amount that, together with (A) other all-cash distributions made
within the preceding 12 months and (B) any cash and the fair market value, as of
the expiration of the tender or exchange offer referred to below, of
consideration payable in respect of any tender or exchange offer by the Company
or a subsidiary of the Common Stock concluded within the preceding 12 months,
exceeds 12.5% of the Company's aggregate market capitalization (such aggregate
market capitalization being the product of the current market price of the
Common Stock multiplied by the number of shares of Common Stock then
outstanding) on the date of such distribution; and (vi) the successful
completion of a tender or exchange offer made by the Company or any subsidiary
for the Common Stock which involves an aggregate consideration that, together
with (X) any cash and the fair market value of other consideration payable in
respect of any tender or exchange offer by the Company or a subsidiary for the
Common Stock concluded within the preceding 12 months and (Y) the aggregate
amount of any all-cash distributions to all holders of the Company's Common
Stock made within the preceding 12 months, exceeds 12.5% of the Company's
aggregate market capitalization on the expiration of such tender or exchange
offer. No adjustment of the Conversion Price will be required to be made until
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted.
 
                                       35

<PAGE>

     Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Change in Control (as defined) occurs, then the Conversion
Price in effect will be adjusted immediately after such Change in Control as
described below. In addition, in the event of a Common Stock Change in Control
(as defined), each share of the Series D Preferred Stock shall be convertible
solely into common stock of the kind received by holders of Common Stock as the
result of such Common Stock Change in Control.
 
     A 'Change in Control' shall be deemed to have occurred at such time as (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all the assets of the Company and its subsidiaries taken as a
whole to any 'person' (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including any merger or
consolidation) the result of which is that any 'person' (as defined above),
other than certain present officers, directors and stockholders of the Company
and their affiliates, becomes the beneficial owner (as such term is defined in
Rules 13d-3 and 13d-5 promulgated under the Exchange Act, except that a person
will be deemed to have beneficial ownership of all shares that such person has
the right to acquire whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the voting
stock of the Company or (iv) the first day on which a majority of the members of
the board of directors are not Continuing Directors (as defined in the
Certificate of Designations).
 
     The term 'Common Stock Change in Control' means any Change in Control in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock of another company that for each of the 10
consecutive Trading Days referred to in the definition of 'Applicable Price'
below has been admitted for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on the Nasdaq National
Market; provided, however, that a Change in Control shall not be a Common Stock
Change in Control unless either (i) the Company continues to exist after the
occurrence of such Change in Control and the outstanding shares of Series D
Preferred Stock continue to exist as outstanding shares of Series D Preferred
Stock, or (ii) not later than the occurrence of such Change in Control, the
outstanding shares of Series D Preferred Stock are converted into or exchanged
for shares of Series D Preferred Stock of a corporation succeeding to the
business of the Company, which Series D Preferred Stock has powers, preferences
and relative, participating, optional or other rights, and qualifications,
limitations and restrictions, substantially similar to those of the Series D
Preferred Stock.
 
     The term 'Non-Stock Change in Control' means any Change in Control other
than a Common Stock Change in Control.
 
     The term 'Applicable Price' means (i) in the event of a Non-Stock Change in
Control in which the holders of the Common Stock receive only cash, the amount
of cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Change in Control or any Common Stock Change in
Control, the average of the closing bid prices for the Common Stock during the
10 Trading Days prior to and including the record date for the determination of
the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Non-Stock Change in Control or Common Stock
Change in Control or, if there is no such record date, the date upon which the
holders of the Common Stock shall have the right to receive such cash,
securities, property or other assets or the date upon which such Non-Stock
Change in Control is deemed to have occurred, as the case may be, in each case
as adjusted in good faith by the Board of Directors to appropriately reflect any
of the events referred to in clauses (i) through (vi) of the sixth paragraph of
this subsection.
 
     For purposes of calculating any adjustment to be made in the event of a
Change in Control, immediately after such Change in Control:
 
          (i) in the case of a Non-Stock Change in Control, the Conversion Price
     will thereupon become the lower of (A) the Conversion Price in effect
     immediately prior to such Non-Stock Change in Control, but after giving
     effect to any other prior adjustments, and (B) the result obtained by
     multiplying the greater of the Applicable Price and the then applicable
     Reference Market Price (as defined) by a fraction of which the numerator
     will be $50.00 and the denominator will be the then current redemption
     price per share or, prior to March 20, 2001, an amount per share of Series
     D Preferred Stock determined by the Company in its sole discretion, after
     consultation with an investment banking firm, to be the equivalent of the
     hypothetical redemption price that would have been applicable if the Series
     D Preferred Stock had been redeemable
 
                                       36

<PAGE>

     during such period; provided, however, that if, as a result of the
     operation of this clause, (i) the cumulative number of shares of Common
     Stock issued or issuable upon conversion of the Series D Preferred Stock,
     after giving effect to the adjustment described in this clause (i) and all
     prior conversions of Series D Preferred Stock, would exceed a number (the
     'Threshold Number') equal to 20% of the outstanding shares of Common Stock
     as of the issue date of the Series D Preferred Stock, then until and unless
     the Company obtains the approval of its common stockholders for the
     issuance of any shares of Common Stock in excess of the Threshold Number,
     the Conversion Price shall be adjusted pursuant to this clause (i) to that
     price that would entitle the holders of Series D Preferred Stock to receive
     in the aggregate, upon conversion of all the Series D Preferred Stock
     (including all prior conversions of Series D Preferred Stock), no more than
     the Threshold Number of shares of Common Stock; and
 
          (ii) in the case of a Common Stock Change in Control, the Conversion
     Price in effect immediately prior to such Common Stock Change in Control,
     but after giving effect to any other prior adjustments, will thereupon be
     adjusted by multiplying such Conversion Price by a fraction, of which the
     numerator will be the Purchaser Stock Price (as defined) and the
     denominator will be the Applicable Price; provided, however, that in the
     event of a Common Stock Change in Control in which (A) 100% of the value of
     the consideration received by a holder of Common Stock is common stock of
     the successor, acquiror or other third party (and cash, if any, is paid
     with respect to any fractional interests in such common stock resulting
     from such Common Stock Change in Control) and (B) all the Common Stock will
     have been exchanged for, converted into, or acquired for, common stock (and
     cash with respect to fractional interests) of the successor, acquiror or
     other third party, the Conversion Price in effect immediately prior to such
     Common Stock Change in Control will thereupon be adjusted by multiplying
     such Conversion Price by a fraction, of which the numerator will be one (1)
     and the denominator will be the number of shares of common stock of the
     successor, acquiror, or other third party received by a holder of one share
     of Common Stock as a result of such Common Stock Change in Control.
 
     The foregoing Conversion Price adjustments in the event of a Non-Stock
Change in Control will apply in situations whereby a Change in Control not
involving a change in beneficial ownership of the Common Stock has occurred or
whereby all or substantially all of the Common Stock is acquired in a
transaction in which 50% or less of the value received by holders of Common
Stock consists of common stock that has been admitted for listing on a national
securities exchange or quoted on the Nasdaq National Market. If the market price
of the Common Stock immediately prior to a Non-Stock Change in Control is lower
than the applicable Conversion Price then in effect, the Conversion Price will
be adjusted as described in (i) above and the holders of the Series D Preferred
Stock will be entitled to receive the amount and kind of consideration that
would have been received if the Series D Preferred Stock had been converted into
Conversion Shares, prior to the Non-Stock Change in Control after giving effect
to such adjustment.
 
     The foregoing Conversion Price adjustments in the event of a Common Stock
Change in Control will apply in situations whereby more than 50% of the value
received by holders of Common Stock consists of common stock of another company
that has been admitted for listing on a national securities exchange or quoted
on the Nasdaq National Market, in which case the Series D Preferred Stock will
become convertible into shares of common stock of the other company. If
consideration for the Common Stock consists partly of common stock of another
company and partly of other securities, cash or property, each share of Series D
Preferred Stock will be convertible solely into a number of shares of such
common stock determined so that the initial value of such shares (measured as
described in the definition of Purchaser Stock Price) equals the value of the
Conversion Shares into which such share of Series D Preferred Stock was
convertible immediately before the transaction (measured as described in the
definition of Applicable Price). If consideration for Common Stock is solely
common stock of another company, each share of Series D Preferred Stock will be
convertible into the same number of shares of such common stock receivable by a
holder of the number of Conversion Shares into which such share of Series D
Preferred Stock was convertible immediately before such transaction.
 
     The term 'Purchaser Stock Price' means, with respect to any Common Stock
Change in Control, the product of (i) the number of shares of common stock
received as consideration in such Common Stock Change of Control for each share
of Common Stock, and (ii) the average of the per share Closing Prices for the
common stock received as consideration in such Common Stock Change in Control
for the 10 consecutive Trading Days prior to and including the record date for
the determination of the holders of Common Stock entitled to receive such common
stock, or if there is no such record date, the date upon which the holders of
the Common Stock
 
                                       37

<PAGE>

shall have the right to receive such common stock, in each case, as adjusted in
good faith by the Board of Directors to appropriately reflect any of the events
referred to in clauses (i) through (vi) of the sixth paragraph of this
subsection; provided, however, that is no such Closing Prices exist, then the
Purchaser Stock Price shall be set at a price determined in good faith by the
Board of Directors of the Company.
 
     The term 'Reference Market Price' shall initially mean $26.46 (which is an
amount equal to 66 2/3% of the reported last sale price for the Common Stock on
the Nasdaq National Market on March 11, 1998), and in the event of any
adjustment to the Conversion Prices other than as a result of a Change in
Control, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of $26.46 to the initial
Conversion Price set forth on the cover page of this Prospectus.
 
     Depending upon whether the Change in Control is a Non-Stock Change in
Control or Common Stock Change in Control, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Change in
Control, the holder has the right to convert each share of the Series D
Preferred Stock into the kind and amount of the shares of stock and other
securities or property or assets receivable by a holder of the number of shares
of Common Stock issuable upon conversion of such share of the Series D Preferred
Stock immediately prior to such Non-Stock Change in Control, but after giving
effect to the adjustment described above. However, in the event of a Common
Stock Change in Control in which less than 100% of the value of the
consideration received by a holder of Common Stock is common stock of the
acquiror or other third party, a holder of a share of Series D Preferred Stock
who converts a share following the Common Stock Change in Control will receive
consideration in the form of such common stock only, whereas a holder who has
converted his share prior to the Common Stock Change in Control will receive
consideration in the form of common stock as well as any other securities or
assets (which may include cash) receivable thereupon by a holder of the number
of shares of Common Stock issuable upon conversion of such share of Series D
Preferred Stock immediately prior to such Common Stock Change in Control.
 
     In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which the Common Stock is
converted into the right to receive other securities, cash or other property,
each share of Series D Preferred Stock then outstanding would, without the
consent of any holders of Series D Preferred Stock, become convertible only into
the kind and amount of securities, cash and other property receivable upon the
transaction by a holder of the number of shares of Common Stock which would have
been received by a holder immediately prior to such transaction if such holder
had converted its share of Series D Preferred Stock.
 
     If at any such time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for
federal income tax purposes (for example, distributions or evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for capital stock) and, pursuant to the antidilution
provisions described above, the Conversion Price of the Series D Preferred Stock
is reduced, such reduction may be deemed to be the receipt of taxable income by
holders of the Series D Preferred Stock.
 
     Consolidation, Merger and Sale of Assets.  The Certificate of Designations
provides that the Company, without the consent of the holders of any of the
outstanding Series D Preferred Stock, may consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person or may permit any Person to
consolidate with or merge into, or transfer or lease its properties
substantially as an entirety to, the Company; provided, however that (a) the
successor, transferee or lessee is organized under the laws of any United States
jurisdiction; (b) the shares of Series D Preferred Stock shall become shares of
such successor, transferee or lessee, having in respect of such successor,
transferee or lessee the same powers, preferences and relative participating,
optional or other special rights and the qualification, limitations or
restrictions thereon, the Series D Preferred Stock had immediately prior to such
transaction; and (c) certain other conditions are met.
 
     Under any consolidation by the Company with, or merger by the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety as described in the preceding
paragraph, the successor resulting from such consolidation or into which the
Company is merged or the transferee or lessee to which such conveyance, transfer
or lease is made, will succeed to, and be substituted for, and may exercise
every right and power of, the Company under the shares of Series D Preferred
Stock, and
 
                                       38

<PAGE>

thereafter, except in the case of a lease, the predecessor (if still in
existence) will be released from its obligations and covenants with respect to
the Series D Preferred Stock.
 
     Restrictions on Transfer.  The Series D Preferred Stock, the Dividend
Shares and the Conversion Shares may not be sold or otherwise transferred until
the expiration of two years following the date of payment for and delivery of
the Series D Preferred Stock, except pursuant to registration under the
Securities Act or in accordance with Rule 144 (if available), Rule 144A (if
available) or Rule 904 thereunder, and will bear a legend to this effect.
 
     SEC Reports and Reports to Holders.  Whether or not the Company is required
to file reports with the SEC, if any shares of Series D Preferred Stock are
outstanding, the Company shall file with the SEC all such reports and other
information as it would be required to file with the SEC by Sections 13(a) or
15(d) under the Exchange Act. See 'Available Information.' The Company shall
supply each Holder of Series D Preferred Stock, upon request, without cost to
such Holders, copies of such reports or other information.
 
DIVIDEND POLICY
 
     The Company has not declared or paid any dividends on the Common Stock. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business. Accordingly, the Company anticipates that no
dividends will be paid on the Common Stock in the foreseeable future and that
dividends with respect to the Series A Preferred Stock will be paid by the
issuance of additional shares of Series A Preferred Stock and with respect to
the Series D Preferred Stock will be paid by the issuance of Dividend Shares.
Further, certain covenants in the Indentures currently effectively prohibit the
Company from declaring or paying cash dividends. The terms of the Series A, C
and D Preferred Stock provide that such Preferred Stock ranks senior to the
Common Stock with respect to the payment of dividends. Accordingly, in the event
the Company is no longer restricted from declaring cash dividends under its
Indentures and determines to do so, no holders of Common Stock will receive any
such dividend until such time as all holders of the Preferred Stock have
received payment of the entire dividend to which they are entitled under the
terms of the Preferred Stock, and then only if, and to the extent that, there is
sufficient cash remaining to pay dividends to the holders of the Common Stock.
 
REGISTRAR AND TRANSFER AGENT
 
     The registrar and transfer agent for the Series A, Series C Preferred Stock
and Series D Preferred Stock and Common Stock is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004.
 
                                       39

<PAGE>

                SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
 
     This Prospectus relates to the resale by the Selling Securityholders of the
securities listed below. All of the securities being registered under the
Registration Statement of which this Prospectus forms a part are being so
registered pursuant to certain registration rights granted by the Company to the
Selling Securityholders. None of the Selling Securityholders has had a material
relationship with the Company or any of its predecessors or affiliates within
the past three years, except as described in the footnotes below or otherwise in
this Prospectus.
 
Series D Preferred Stock
 
<TABLE>
<CAPTION>
                                                                       BENEFICIAL OWNERSHIP OF     NUMBER OF SHARES OF
NAME OF                                                                SERIES D PREFERRED STOCK    SERIES D PREFERRED
SELLING SECURITYHOLDER(1)                                                 AS OF MAY 1, 1998         STOCK TO BE SOLD
- - --------------------------------------------------------------------   ------------------------    -------------------
<S>                                                                    <C>                         <C>
Bank of New York....................................................            416,400                  416,400
Bankers Trust Company...............................................            125,400                  125,400
Bear, Stearns Securities Corp.......................................            147,500                  147,500
Boston Safe Deposit and Trust Company...............................            220,600                  220,600
Brown Brothers Harriman & Co........................................            220,000                  220,000
Chase Manhattan Bank................................................            118,300                  118,300
CoreStates Bank, N.A................................................             68,000                   68,000
Credit Suisse First Boston Corporation..............................            347,440                  347,440
Custodial Trust Company.............................................            100,000                  100,000
DB Clearing Services (Deutsche Morgan Grenfell).....................            201,250                  201,250
First Tennessee Bank N.A. Memphis...................................             20,000                   20,000
Fleet Bank of Massachusetts, N.A....................................              2,000                    2,000
Goldman, Sachs & Co.................................................            108,830                  108,830
Investors Fiduciary Trust Company/SSB...............................              2,000                    2,000
Investors Bank & Trust/M.F. Custody.................................             25,000                   25,000
Investors Bank & Trust Company......................................              3,000                    3,000
Lehman Brothers, Inc................................................            100,000                  100,000
Lehman Brothers International (Europe)--Prime Broker................            276,250                  276,250
Mercantile--Safe Deposit & Trust Company............................             26,500                   26,500
Morgan Stanley & Co. Incorporated...................................            210,000                  210,000
Nationsbanc Montgomery Securities LLC/San Francisco.................            100,000                  100,000
Northern Trust Company (The)........................................             14,800                   14,800
PNC Bank, National Association......................................            200,000                  200,000
SBC Warburg Dillon Read Inc.........................................            270,000                  270,000
SSB--Custodian......................................................            676,730                  676,730
</TABLE>
 
                                       40

<PAGE>

Common Stock
 
<TABLE>
<CAPTION>
                                                                          BENEFICIAL OWNERSHIP      NUMBER OF SHARES OF
NAME OF                                                                    OF COMMON STOCK AS          COMMON STOCK
SELLING SECURITYHOLDER(1)                                                    OF MAY 1, 1998             TO BE SOLD
- - ---------------------------------------------------------------------   ------------------------    -------------------
<S>                                                                     <C>                         <C>
Altron Communications, L.C.(2).......................................              91,831                   91,831
J. Daniel Bariault(2)................................................              26,046                   26,046
Beada & Sala, Inc.(3)(4).............................................             205,986                   41,197
Bear Stearns International Limited(2)................................             350,000                  350,000
Beltron Communications, Inc.(2)......................................               4,973                    4,973
BizTel, Inc.(2)......................................................             157,276                  157,276
Linda Chester(2).....................................................              43,787                   43,787
Neal R. Coffey(2)....................................................              39,931                   39,931
Columbus Wireless Ltd.(2)............................................             220,834                  220,834
Linda Davidson(2)....................................................              66,622                   66,622
Edward Dunay(2)......................................................              66,622                   66,622
Robert P. Edwards(2).................................................              26,046                   26,046
Michael Ferro(3)(4)..................................................                 829                      176
Nancy Franco(2)......................................................             113,415                  113,415
Shawn Freeman(3)(4)..................................................                 829                      176
Jonathan Goldman(5)..................................................              10,000                   10,000
Perry W. or Judith K. Haddon(2)......................................              61,759                   61,759
Kirkland & Associates(2).............................................              13,938                   13,938
Hicap Networks, Inc.(2)..............................................               2,767                    2,767
William Lampson(2)...................................................              26,046                   26,046
Richard Landy(2).....................................................             116,588                  116,588
Paul R. Likins(2)....................................................              67,203                   67,203
Richard Lorber(6)....................................................              30,738                   30,738
David Lund(3)(4).....................................................               1,832                      366
New England Digital Distribution, Inc.(2)............................              37,275                   37,275
James J. Pinto(7)....................................................             694,847                  252,272
Jeffrey Pitts(3)(4)..................................................              21,910                    4,382
Rusell Richie(2).....................................................              53,189                   53,189
Cornelius T. Ryan(2).................................................              31,424                   31,424
Ronna L. Sauro(2)....................................................              61,773                   61,773
Steven Seiter(2).....................................................              71,603                   71,603
The Seiter Living Trust(2)...........................................               5,715                    5,715
The Seiter Charitable Remainder Unitrust(2)..........................              17,146                   17,146
SMC Associates(2)....................................................              36,024                   36,024
Walter H. Sonnenfeldt(2).............................................              42,403                   42,403
Southfield Communications, Inc.(2)...................................              68,376                   68,376
Telesoft Corp.(3)(4).................................................             479,387                  479,387
Vexler Ltd.(2).......................................................               5,822                    5,822
Darin Wayrynen(3)(4).................................................              21,910                    4,382
Susan J. Wolff(2)....................................................              23,591                   23,591
Laurence S. Zimmerman(7).............................................           1,273,029                1,273,029
                                                                             ------------           -------------------
Total................................................................           4,744,422                4,046,130 
</TABLE>
 
- - ------------------
(1) Each Record Holder holds such Preferred Stock for one or more beneficial
    owners ('Beneficial Holder'). This Prospectus covers the sale of the Series
    D Preferred Stock by each Record Holder and each Beneficial Holder and also
    covers the sale by each such holder of any and all Dividend Shares that may
    be issued in lieu of cash dividends on such Series D Preferred Stock during
    the term of the Series D Preferred Stock and any and all Conversion Shares
    issued upon conversion of the Series D Preferred Stock. Beneficial Holders
    include, but are not limited to:
 
         David Lipscomb University General Endowment
         Equitable Life Assurance Separate Account--Balanced
         Equitable Life Assurance Separate Account--Convertibles
         OCM Convertible Trust
         State Employees Retirement Fund of the State of Delaware
         State of Connecticut Combined Investment Funds
         Chrysler Corporation Master Retirement Trust
         Vanguard Convertible Securities Fund, Inc.
         Security Insurance Company of Hartford
 
                                       41

<PAGE>

         Deutsche Bank AG London
         The First Foundation
         Northwestern Mutual Life
         McMahan Securities Company, L.P.
         Memphis Light, Gas and Water Retirement Fund
         MFS Series Trust I (MFS Convertible Securities Fund)
         Ameritech Pension Plan
         FJH Absolute Return Fund L.P.
         Fidelity Financial Trust (Fidelity Convertible Securities Fund)
         Hudson River Trust Growth Investors
         Hudson River Trust Growth and Income Account
         Hudson River Trust Balanced Account
         Delaware Group Equity Funds V, Inc. (Retirement Income Fund Series)
         Delaware Group Premium Fund, Inc. (Convertible Securities Series)
         V.I. Global Utilities
         V.I. Growth and Income
         Aim Charter Fund
         Aim Balanced Fund
 
    The foregoing list of Beneficial Holders shall not in any way limit any
    Beneficial Holders not listed therein from selling its Series D Preferred
    Stock, Dividend Shares of Conversion Shares under this Prospectus.
 
(2) The shares of Common Stock set forth above were issued in consideration of
    38 GHz licenses and related assets purchased by the Company.
 
(3) The shares of Common Stock set forth above were issued by the Company as
    consideration in the GoodNet Acquisition.
 
(4) The holder may not sell more than 50% of any of his or its shares set forth
    above in any single calendar month until July 1998.
 
(5) The shares of Common Stock set forth above were issued in connection with
    the acquisition by the Company of the remaining equity interest of The
    Winning Line, a producer of sports programming, that it did not already own.
 
(6) The shares of Common Stock set forth above were issued in connection with
    the acquisition by the Company of the remaining equity interest of
    G.F.L Communications, Inc., the parent company of Fox/Lorber Associates, 
    Inc., a television and film distribution company, that it did not already 
    own.
 
(7) The shares of Common Stock set forth above were issued by the Company as
    consideration in the ART Equity Purchase.
 
     The shares of Series D Preferred Stock, Dividend Shares and Selling
Stockholder Shares may be offered and sold from time to time by the Selling
Securityholders or by their pledgees, donees, transferees or other successors in
interest, and the Conversion Shares, if and when issued, may be offered and sold
from time to time by the holders thereof or by their pledgees, donees,
transferees or other successors in interest, as market conditions permit in the
over-the-counter market, including the Nasdaq National Market, in negotiated
transactions or otherwise, at prices and terms then prevailing or at prices
related to the then-current market price, or in negotiated transactions. The
Securities may be sold by one or more of the following methods, without
limitation: (i) transactions on one of any of the exchanges or in the
over-the-counter; (ii) through the writing of options on, or settlement of short
sales; (iii) a block trade in which a broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; (iv) purchases by a broker or dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus: (v) ordinary brokerage transactions and transactions in which
the broker solicits purchases; (vi) transactions between sellers and purchasers
without a broker/dealer; (vii) unregistered transactions exempt from
registration requirements, including sales under Rule 144; (viii) underwritten
offerings and (ix) through securities lending programs. In effecting sales,
brokers or dealers may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Securityholders in amounts to be negotiated. Such brokers and dealers and any
other participating brokers and dealers may be deemed to be 'underwriters'
within the meaning of the Securities Act, in connection with such sales.
 
                                       42

<PAGE>

     Under the securities laws of certain states, the Securities may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the Securities may not be sold unless the Securities have been
registered or qualified for sale in such state or any exemption from
registration or qualification is available and is complied with.

     The Company will pay all of the expenses incident to the registration,
offering and sale of the Securities to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
The Company has agreed to indemnify the Selling Securityholders and any
underwriters against certain liabilities, including liabilities under the
Securities Act. The Company will not receive any of the proceeds from the sale
of any of the Securities by the Selling Securityholders.
 
                                 LEGAL MATTERS

     The legality of the issuance of the Dividend Shares and Conversion Shares
will be 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.
 
                                    EXPERTS

     The consolidated financial statements of (i) the Company as of December 31,
1996 and 1997 and for the years ended December 31, 1996 and December 31, 1997,
and the ten months ended December 31, 1995, and (ii) Midcom as of and for the
year ended December 31, 1997, each of which is incorporated by reference into
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. The financial statements of Midcom Communications, Inc. as of December
31, 1995 and December 31, 1996 and for each of the three years in the period
ended December 31, 1996, incorporated by reference into this Prospectus, have
been audited by Ernst & Young LLP, independent auditors, to the extent and for
the periods indicated in their report thereon.
 
                             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 http:\\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 on Form S-3 (No. 333-50575) with respect to the securities
offered hereby. 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 Statements, 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.
 
                                       43

<PAGE>

                          INDEX TO UNAUDITED PRO FORMA

                  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
Unaudited Pro Forma Condensed Consolidated Financial Statements............................................    F-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations, Three Months Ended March 31, 1998......    F-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations, Year Ended December 31, 1997...........    F-4
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations...............................    F-5
</TABLE>
 
                                      F-1

<PAGE>

                 WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
                         UNAUDITED PRO FORMA CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS
 
     The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1997 gives effect to the February
1997 Preferred Stock Placement, the issuance of the March 1997 Notes in the
March 1997 Debt Placement, the WEC II Equipment Notes issued in the August 1997
Debt Placement, the Senior Subordinated Notes issued in the October 1997 Debt
Placement, the US ONE Asset Acquisition and Financing, the issuance of the
Exchangeable Preferred Stock in the December 1997 Exchangeable Preferred Stock
Placement (the 'Financing Transactions'), the Midcom Asset Purchase, the
Preferred Stock Placement and the 1998 Debt Placement (collectively, the 'Pro
Forma Transactions') as if they occurred as of January 1, 1997.

     The following unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 1998 gives effect to the Midcom
Asset Purchase, the Preferred Stock Placement and the 1998 Debt Placement,
as if they occurred as of January 1, 1998.

     The Pro Forma Financial Statements do not purport to represent what the
Company's results of operations or financial condition would actually have been
had the Pro Forma Transactions in fact occurred on such date or to project the
Company's results of operations or financial condition for any future period or
date.
 
     These pro forma financial statements should be read in conjunction with the
notes to the unaudited pro forma condensed consolidated financial statements.
 
     The Pro Forma Financial Information gives effect to the Pro Forma
Transactions, including the Midcom Asset Acquisition, and relies upon the
historical financial statements of Midcom (which are incorporated by reference
into this Prospectus). Midcom's financial statements for the year ended December
31, 1997 (and, consequently, the Pro Forma Financial Information) include
Midcom's operations during the 10-month period in 1997 prior to Midcom's
bankruptcy filing in November 1997 and, therefore, do not accurately reflect the
state of the business actually acquired by the Company in January 1998. See Note
A to the Midcom Consolidated Financial Statements. In addition, one of the
significant assets acquired by the Company in the acquisition was Midcom's
customer base, all of whom now must be notified by the Company of the transfer
of their accounts to the Company and have the option to replace the Company as
their service provider. Although the Company expects that a significant number
of customers will elect to terminate their service and move to other carriers,
the Pro Forma Financial Information does not give effect to the loss of any
Midcom customers. Moreover, the Pro Forma Financial Information does not purport
to represent what the Company's results of operations or financial condition
would actually have been had the Midcom Asset Acquisition in fact occurred on
January 1, 1997 or to project the Company's results of operations or financial
condition for any future period or date. Although the Company believes the
assets it acquired from Midcom were purchased on attractive terms, the Company
believes that investors in any of the Securities offered hereby should not place
any reliance on the pro forma operating results contained in the Pro Forma
Financial Statements as they relate to Midcom.
 
                                      F-2

<PAGE>

                 WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 1998
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                               ADJUSTMENTS
                                                                                                 FOR THE
                                                                            PRO FORMA        PREFERRED STOCK
                                               THE                           FOR THE            PLACEMENT
                                            COMPANY,       MIDCOM,           MIDCOM           AND THE 1998
                                           HISTORICAL     HISTORICAL(g) ASSET ACQUISITION    DEBT PLACEMENT     PRO FORMA
                                           -----------    ----------    -----------------    ---------------    ----------
<S>                                        <C>            <C>           <C>                  <C>                <C>
Operating revenues
  Telecommunications services...........    $  35,487      $  3,772         $  39,259           $               $   39,259
  Information services..................       11,949                          11,949                               11,949
                                           -----------    ----------    -----------------    ---------------    ----------
Total operating revenues................       47,436         3,772            51,208                               51,208
                                           -----------    ----------    -----------------    ---------------    ----------
 
Operating expenses
  Cost of services and products.........       42,775         3,321            46,096                               46,096
  Selling, general and administrative
    expenses............................       53,611           695            54,306                               54,306
  Depreciation and amortization.........       11,399           158            11,557                               11,557
                                           -----------    ----------    -----------------    ---------------    ----------
Total operating expenses................      107,785         4,174           111,959                              111,959
                                           -----------    ----------    -----------------    ---------------    ----------
    Operating loss......................      (60,349)         (402)          (60,751)                             (60,751)
 
Other expenses
  Interest expense......................      (28,656)                        (28,656)            (10,757)(e)      (39,413)
  Interest income.......................        4,928            --             4,928                                4,928
                                           -----------    ----------    -----------------    ---------------    ----------
Loss from continuing operations before
  income tax benefit....................      (84,077)         (402)          (84,479)            (10,757)         (95,236)
Income tax benefit......................        1,100                           1,100                                1,100
                                           -----------    ----------    -----------------    ---------------    ----------
Loss from continuing operations.........      (82,977)         (402)          (83,379)            (10,757)         (94,136)
Loss from discontinued operations.......       (1,982)                         (1,982)                              (1,982)
                                           -----------    ----------    -----------------    ---------------    ----------
Net loss................................      (84,959)         (402)          (85,361)            (10,757)         (96,118)
 
Less preferred stock dividends..........       (8,198)           --            (8,198)             (2,994)(f)      (11,192)
                                           -----------    ----------    -----------------    ---------------    ----------
Net loss applicable to common stock
  holders...............................    $ (93,157)     $   (402)        $ (93,559)          $ (13,751)      $ (107,310)
                                           -----------    ----------    -----------------    ---------------    ----------
                                           -----------    ----------    -----------------    ---------------    ----------
Loss applicable to common stock per
  share from continuing operations......    $   (2.54)                      $   (2.55)                          $    (2.92)
 
Loss per share from discontinued
  operations............................        (0.06)                          (0.06)                               (0.06)
                                           -----------                  -----------------                       ----------
Net loss applicable to common stock per
  share.................................    $   (2.60)                      $   (2.61)                          $    (2.98)
                                           -----------                  -----------------                       ----------
                                           -----------                  -----------------                       ----------
 
Weighted average shares outstanding.....       35,899                          35,899                  72           35,971
                                           -----------                  -----------------    ---------------    ----------
                                           -----------                  -----------------    ---------------    ----------
</TABLE>

                                      F-3

<PAGE>

                 WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                ADJUSTMENTS
                                                                      THE         FOR THE
                                                                   COMPANY,      PRO FORMA      PRO FORMA FOR THE       MIDCOM,
                                                                  HISTORICAL    FINANCINGS    FINANCING TRANSACTIONS   HISTORICAL
                                                                  -----------   -----------   ----------------------   ----------
<S>                                                               <C>           <C>           <C>                      <C>
Operating revenues
  Telecommunications services...................................   $  38,277     $                  $   38,277         $   98,283
  Information services .........................................      41,354                            41,354
                                                                  -----------   -----------         ----------         ----------
Total operating revenues........................................      79,631                            79,631             98,283
                                                                  -----------   -----------         ----------         ----------
Operating expenses
  Cost of services and products.................................      81,017                            81,017             72,440
  Selling, general and administrative expenses..................     156,959                           156,959             86,004
  Depreciation and amortization.................................      29,701         5,062 (a)          34,763             17,168
                                                                  -----------   -----------         ----------         ----------
Total operating expenses........................................     267,677         5,062             272,739            175,612
                                                                  -----------   -----------         ----------         ----------
  Operating loss................................................    (188,046)       (5,062)           (193,108)           (77,329)
Other expense
  Interest expense..............................................     (77,257)      (25,905)(a)        (103,162)            (9,929)
  Interest income...............................................      17,577                            17,577                 --
  Reorganization items..........................................                                                          (11,310)
  Other income (expense)........................................       2,219                             2,219             (5,200)
                                                                  -----------   -----------         ----------         ----------
Loss from continuing operations before income tax benefit.......    (245,507)      (30,967)           (276,474)          (103,768)
Income tax benefit..............................................       2,500                             2,500
                                                                  -----------   -----------         ----------         ----------
Loss from continuing operations.................................    (243,007)      (30,967)           (273,974)          (103,768)
Loss from discontinued operations...............................      (6,477)                           (6,477)
                                                                  -----------   -----------         ----------         ----------
Net loss........................................................    (249,484)      (30,967)           (280,451)          (103,768)
Less preferred stock dividends..................................      (5,879)      (25,927)(a)          (31,806)
                                                                  -----------   -----------         ----------         ----------
Net loss applicable to common stockholders......................   $(255,363)    $ (56,894)         $ (312,257)        $ (103,768)
                                                                  -----------   -----------         ----------         ----------
                                                                  -----------   -----------         ----------         ----------
Loss applicable to common stock per share from continuing
  operations....................................................   $   (7.49)                       $    (9.20)
Loss per share from discontinued operations.....................       (0.19)                            (0.19)
                                                                  -----------                       ----------
Net loss applicable to common stock per share...................   $   (7.68)                       $    (9.39)
                                                                  -----------                       ----------
                                                                  -----------                       ----------
Weighted average shares outstanding ............................      33,249                            33,249
                                                                  -----------                       ----------
                                                                  -----------                       ----------
 
<CAPTION>
                                                                                                ADJUSTMENTS
                                                                                                  FOR THE
                                                                  ADJUSTMENTS    PRO FORMA       PREFERRED
                                                                    FOR THE       FOR THE     STOCK PLACEMENT
                                                                    MIDCOM        MIDCOM          AND THE
                                                                     ASSET         ASSET           1998
                                                                  ACQUISITION   ACQUISITION   DEBT PLACEMENT    PRO FORMA
                                                                  -----------   -----------   ---------------   ---------
<S>                                                               <C>           <C>           <C>               <C>
Operating revenues
  Telecommunications services...................................   $             $ 136,560       $              $136,560
  Information services .........................................                    41,354                        41,354
                                                                  -----------   -----------   ---------------   ---------
Total operating revenues........................................          --       177,914                       177,914
                                                                  -----------   -----------   ---------------   ---------
Operating expenses
  Cost of services and products.................................                   153,457                       153,457
  Selling, general and administrative expenses..................         714 (b)   243,677                       243,677
  Depreciation and amortization.................................       5,139 (b)    56,741                        56,741
                                                                        (329)(b)
                                                                  -----------   -----------   ---------------   ---------
Total operating expenses........................................       5,524       453,875                       453,875
                                                                  -----------   -----------   ---------------   ---------
  Operating loss................................................      (5,524)     (275,961)                     (275,961)
Other expense
  Interest expense..............................................       9,929 (b)  (103,162)        (49,590) (d) (152,752)
  Interest income...............................................      (4,784)(b)    12,793                        12,793
  Reorganization items..........................................      11,310 (b)        --
  Other income (expense)........................................                    (2,981)                       (2,981)
                                                                  -----------   -----------   ---------------   ---------
Loss from continuing operations before income tax benefit.......      10,931      (369,311)        (49,590)     (418,901)
Income tax benefit..............................................                     2,500                         2,500
                                                                  -----------   -----------   ---------------   ---------
Loss from continuing operations.................................      10,931      (366,811)        (49,590)     (416,401)
Loss from discontinued operations...............................                    (6,477)                       (6,477)
                                                                  -----------   -----------   ---------------   ---------
Net loss........................................................      10,931      (373,288)        (49,590)     (422,878)
Less preferred stock dividends..................................                   (31,806)        (14,000)(c)   (45,806)
                                                                  -----------   -----------   ---------------   ---------
Net loss applicable to common stockholders......................   $  10,931     $(405,094)      $ (63,590)     (468,684)
                                                                  -----------   -----------   ---------------   ---------
                                                                  -----------   -----------   ---------------   ---------
Loss applicable to common stock per share from continuing
  operations....................................................                 $  (11.99)                     $ (13.81)
Loss per share from discontinued operations.....................                     (0.19)                        (0.19)
                                                                                -----------                     ---------
Net loss applicable to common stock per share...................                 $  (12.18)                     $ (14.00)
                                                                                -----------                     ---------
                                                                                -----------                     ---------
Weighted average shares outstanding ............................                    33,249             220        33,469
                                                                                -----------   ---------------   ---------
                                                                                -----------   ---------------   ---------
</TABLE>
 
                                      F-4

<PAGE>

                 WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
 
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997

     (a) To record the Financing Transactions as if they occurred as of January
         1, 1997, including preferred stock dividends and amortization of debt
         offering costs and other related fees, but not to include interest
         income earned on unused cash, as follows:
 
         Preferred Stock dividends on the Preferred Stock issued by the Company
           in the February 1997 Preferred Stock Placement ($654).

         Interest expense on the debt issued in the March 1997 Debt Placement
           ($8,476).

         Interest expense on the debt issued in the August 1997 Debt Placement
           ($4,018).

         Interest expense on the Senior Subordinated Notes issued in the October
           1997 Debt Placement ($12,336).

         Depreciation expense on the assets acquired in the US ONE Asset
           Acquisition, ($5,062) and the interest expense on the related
           financing ($6,877).

         Preferred Stock dividends on the Exchangeable Redeemable Preferred
           Stock issued in the December 1997 Preferred Stock Placement
           ($25,273).

         Eliminate the pro forma interest expense ($6,877) related to the US ONE
           Asset Financing and to record the interest expense ($1,075) related
           to the write-off of the related financing fees.
 
     (b) To record the MIDCOM Asset Acquisition as follows:

         Amortization of the excess of the purchase price over Seller's
           historical basis of the assets acquired in the Midcom Asset
           Acquisition over ten years ($5,139).

         Eliminate the interest expense recorded on the Midcom debt, which was
           not assumed in the Midcom Asset Acquisition ($9,929).

         Eliminate interest income on the purchase price of the Midcom
           Acquisition, as if the Midcom Acquisition had occurred as of January
           1, 1997 ($4,784).

         Eliminate depreciation expense ($329) related to the Midcom assets not
           purchased by the Company and to record rental expense ($714) for the
           Midcom assets leased by the Company.

         Eliminate Reorganization items related to the Midcom bankruptcy
           ($11,310).
 
     (c) To reflect Preferred Stock dividends (assuming the dividends are paid
         in Common Stock) as if the Preferred Stock Placement had been completed
         as of January 1, 1997.
 
     (d) To record interest expense on the 1998 Debt Placement, including
         amortization of debt offering costs and other related fees, as if the
         Notes issued in the 1998 Debt Placement, were issued as of January 1,
         1997, but not to include interest income earned on available cash.
 
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
 
     (e) To record interest expense on the 1998 Debt Placement, including
         amortization of debt offering costs and other related fees, as if the
         Notes issued in the 1998 Debt Placement, were issued as of January 1,
         1998, but not to include interest income earned on available cash.
 
     (f) To reflect Preferred Stock dividends (assuming the dividends are paid
         in Common Stock) as if the Preferred Stock Placement had been completed
         as of January 1, 1998.

     (g) The historical results of Midcom for the period January 1, 1998
         through January 21, 1998 is based pro-rata on the actual operating
         results of the Midcom operations for the period January 22, 1998
         through March 31, 1998.
 
                                      F-5

<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:
  
<TABLE>
<S>                                                                                             <C>
SEC registration fee.........................................................................   167,312
Printing and engraving expenses..............................................................    85,000
Legal fees and expenses......................................................................    75,000
Accounting fees and expenses.................................................................    45,000
Miscellaneous................................................................................    27,688
Total........................................................................................   400,000
</TABLE>
  
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 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.
 
                                      II-1

<PAGE>

     (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 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.
 
                                      II-2

<PAGE>

ITEM 16.
 
      (a)  Exhibits
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION
- - -------  -----------------------------------------------------------------------------------------------------------
<S>      <C>
  5.1    --    Opinion of Graubard Mollen & Miller*
 12.1    --    Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
 23.1    --    Consent of Grant Thornton LLP
 23.2    --    Consent of Grant Thornton LLP
 23.3    --    Consent of Graubard Mollen & Miller (included in its opinion filed as Exhibit 5.1)
 23.4    --    Consent of Ernst & Young LLP
</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.
 
          (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.
 
     (c)  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
 
                                      II-3

<PAGE>

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-4

<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 AMENDMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON THIS 5TH DAY OF JUNE, 1998.
 

                                          WINSTAR COMMUNICATIONS, INC.

 
                                          By:     /s/ WILLIAM J. ROUHANA, JR.
                                              ----------------------------------
                                                   William J. Rouhana, Jr.
                                             Chairman of the Board of Directors
                                                and Chief Executive Officer
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, 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.          Chairman of the Board of Directors and               June 5, 1998
- - ------------------------------------------  Chief Executive Officer (and principal
         William J. Rouhana, Jr.            executive officer)

                    *                       President, Chief Operating Officer and               June 5, 1998
- - ------------------------------------------  Director
              Nathan Kantor

                    *                       Vice Chairman of the Board of Directors              June 5, 1998
- - ------------------------------------------
             Steven G. Chrust

                    *                       Executive Vice President and Chief                   June 5, 1998
- - ------------------------------------------  Financial Officer (and principal accounting
            Charles T. Dickson              officer)

                    *                       Director                                             June 5, 1998
- - ------------------------------------------
            Bert W. Wasserman

                    *                       Director                                             June 5, 1998
- - ------------------------------------------
         William J. vanden Heuvel

                    *                       Director                                             June 5, 1998
- - ------------------------------------------
             Steven B. Magyar

                    *                       Director                                             June 5, 1998
- - ------------------------------------------
              James I. Cash
</TABLE>
 
- - ------------------
*by power of attorney
 
                                      II-5

<PAGE>
                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER    DESCRIPTION
- - -------   -------------------------------------------------------------------------------------------------
<S>       <C>   <C>                                                                                          
   5.1     --   Opinion of Graubard Mollen & Miller
  12.1     --   Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
  23.1     --   Consent of Grant Thornton LLP
  23.2     --   Consent of Grant Thornton LLP
  23.3     --   Consent of Graubard Mollen & Miller (included as part of Exhibit 5.1)
  23.4     --   Consent of Ernst & Young LLP
</TABLE>

 
                                      II-6



<PAGE>
                                                                     EXHIBIT 5.1
 
                                          April 17, 1998
 
WinStar Communications, Inc.
230 Park Avenue
Suite 2700
New York, New York 10169
 
Gentlemen:
 
     It is our opinion that the securities being registered for issuance by the
registrant with the Securities and Exchange Commission, pursuant to the
Registration Statement of WinStar Communications, Inc. on Form S-3, as amended,
when sold and paid for, will be legally issued, fully paid and non-assessable.
 
     We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement and further consent to the reference made to us under the
caption 'Legal Matters' in the Prospectus constituting a part of such
Registration Statement.
 
                                          Very truly yours,
                                          /s/ GRAUBARD MOLLEN & MILLER


<PAGE>
                                                                    EXHIBIT 12.1
                          WINSTAR COMMUNICATIONS, INC.
                      RATIO OF EARNINGS TO COMBINED FIXED
                     CHARGES AND PREFERRED STOCK DIVIDENDS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                                             THREE
                                                                                                                             MONTHS
                                                        TEN MONTHS                                           THREE MONTHS    ENDED
                                                          ENDED        YEAR ENDED     YEAR ENDED DECEMBER       ENDED        MARCH
                           YEAR ENDED FEBRUARY 28,     DECEMBER 31,   DECEMBER 31,         31, 1997           MARCH 31,     31, 1998
                         ---------------------------   ------------   ------------   ---------------------   ------------   --------
                          1993      1994      1995         1995           1996        ACTUAL     PRO FORMA       1997        ACTUAL
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------   --------
<S>                      <C>       <C>       <C>       <C>            <C>            <C>         <C>         <C>            <C>
Earnings:
 Loss from continuing
   operations before
   income taxes........  $(4,594)  $(8,205)  $(7,226)    $(16,094)      $(82,713)    $(245,507)  $(418,901)     (41,499)   $(81,877)
 Adjustments to
   earnings:
   Fixed charges, as
     detailed below....      674       915       900        8,063         38,520        85,324    160,819        12,382      29,989
   Interest
     capitalized.......       --        --        --           --           (320)       (4,200)    (4,200 )      (1,050)       (505)
   Extraordinary
     item..............       --      (194)       --           --             --            --         --            --          --
   Minority interest in
     WinStar Gateway
     Network...........       --      (155)       --           --             --            --         --            --          --
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
 Earnings as
   adjusted............  $(3,920)  $(7,639)  $(6,326)    $ (8,031)      $(44,513)    $(164,383)  $(262,282)    $(30,167)   $(52,393)
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
Fixed charges:
   Interest expense....  $   567   $   793   $   733     $  7,715       $ 36,834     $  77,257   $152,752      $ 10,798    $ 28,656
   Capitalized
     interest..........       --        --        --           --            320         4,200      4,200         1,050         505
   Portion of rental
     expense which is
     representative of
     interest..........      107       122       167          348          1,366         3,867      3,867           534         828
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
   Total fixed
     charges...........      674       915       900        8,063         38,520        85,324    160,819        12,382      29,989
Preferred stock
 dividends.............       85        68        62          216             --         5,879     45,806            --       8,198
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
Combined fixed charges
 and preferred stock
 dividends.............  $   759   $   983   $   962     $  8,279       $ 38,520     $  91,203   $206,625      $ 12,382    $ 38,187
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
Deficiency in earnings
 to cover combined
 fixed charges and
 preferred stock
 dividends.............  $(4,679)  $(8,622)  $(7,288)    $(16,310)      $(83,033)    $(255,586)  $(468,907)    $(42,459)   $(90,580)
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
                         -------   -------   -------   ------------   ------------   ---------   ---------   ------------  --------
 
<CAPTION>
                           THREE
                           MONTHS
                           ENDED
                           MARCH
                         31, 1998
                         ---------
                         PRO FORMA
                         ---------
<S>                      <C>
Earnings:
 Net loss from
   continuing
   operations before
   income taxes........  $(95,236)
 Adjustments to
   earnings:
   Fixed charges, as
     detailed below....    40,746
   Interest
     capitalized.......      (505)
   Extraordinary
     item..............        --
   Minority interest in
     WinStar Gateway
     Network...........        --
                         ---------
 Earnings as
   adjusted............  $(54,995)
                         ---------
                         ---------
Fixed charges:
   Interest expense....  $ 39,413
   Capitalized
     interest..........       505
   Portion of rental
     expense which is
     representative of
     interest..........       828
                         ---------
   Total fixed
     charges...........    40,746
Preferred stock
 dividends.............    11,192
                         ---------
Combined fixed charges
 and preferred stock
 dividends.............  $ 51,938
                         ---------
                         ---------
Deficiency in earnings
 to cover combined
 fixed charges and
 preferred stock
 dividends.............  $(106,933)
                         ---------
                         ---------
</TABLE>




<PAGE>
                                                                    EXHIBIT 23.1
 
              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
We have issued our reports dated February 12, 1998, accompanying the
consolidated financial statements of Winstar Communications, Inc. and
Subsidiaries appearing in the 1997 Annual Report of the Company to its
shareholders and accompanying the schedule included in the Annual Report on Form
10-K for the year ended December 31, 1997, which are incorporated by reference
in this Registration Statement and Prospectus. We consent to the incorporation
by reference in the Registration Statement and Prospectus of the aforementioned
reports and to the use of our name as it appears under the caption 'Experts.'
 
GRANT THORNTON LLP

New York, New York
June 15, 1998



<PAGE>
                                                                    EXHIBIT 23.2
                        CONSENT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS
 
We have issued our report dated March 6, 1998, accompanying the consolidated
financial statements of Midcom Communications Inc. and Subsidiaries for the year
ended December 31, 1997 included in Form 8-K, filed on March 12, 1998, which is
incorporated by reference in this Registration Statement and Prospectus. We
consent to the incorporation by reference in the Registration Statement and
Prospectus of the aforementioned report and to the use of our name as it appears
under the caption 'Experts.'

GRANT THORNTON LLP


Detroit, Michigan
 June 12, 1998
 


<PAGE>
                                                                    EXHIBIT 23.4
 
                        CONSENT OF INDEPENDENT AUDITORS
 
     We consent to the reference to our firm under the caption 'Experts' in the
Registration Statement on Form S-3 and related Prospectus of Winstar
Communications Inc. for the registration of 4,000,000 shares of its Series D 7%
Senior Cumulative Convertible Preferred Stock Due 2010 and 8,077,575 shares of
its Common Stock and to the incorporation by reference therein of our report
dated March 21, 1997, with respect to the consolidated financial statements and
schedules of Midcom Communications Inc. as of Decemebt 31, 1996 and 1995, and
for each of the three years in the period ended December 31, 1996, included in
the Current Report on Fomr 8-K/A of Winstar Communications, Inc. dated February
5, 1998, filed with the Securities and Exchange Commission.
 
                                          /s/ ERNST & YOUNG LLP
Detroit, Michigan


June 17, 1998



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