NUCENTRIX BROADBAND NETWORKS INC, S-1/A, 1999-12-16

NUCENTRIX BROADBAND NETWORKS INC
S-1/A, 1999-12-16
CABLE & OTHER PAY TELEVISION SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1999

REGISTRATION NO. 333-80929

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
NUCENTRIX BROADBAND NETWORKS, INC.

(Exact name of Registrant as Specified in its Charter)

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DELAWARE 4841 73-1435149
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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CARROLL D. MCHENRY
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
NUCENTRIX BROADBAND NETWORKS, INC.
200 CHISHOLM PLACE, SUITE 200 200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075 PLANO, TEXAS 75075
(972) 423-9494 (972) 423-9494
(Address, Including Zip Code, and Telephone (Name and Address, Including Zip Code, and
Number, including Area Code, of Registrant's Telephone Number, Including Area Code, of Agent
Principal Executive Offices) For Service)
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Copies of All Communications to:

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RODNEY L. MOORE, ESQ. J. CURTIS HENDERSON, ESQ.
VINSON & ELKINS L.L.P. NUCENTRIX BROADBAND NETWORKS, INC.
2001 ROSS AVENUE, SUITE 3700 200 CHISHOLM PLACE, SUITE 200
DALLAS, TEXAS 75201 PLANO, TEXAS 75075
TELEPHONE: (214) 220-7700 TELEPHONE: (972) 423-9494
FACSIMILE: (214) 220-7716 FACSIMILE: (972) 633-0074
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.

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, please check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) 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 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED AMOUNT REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
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Common Stock, $0.001 par value... 3,363,536 $30.00(2) $100,906,080(2) $28,052(2)(3)
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Common Stock, $0.001 par value... 479,057 $24.25(4) $11,617,132(4) $3,067(4)
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(1) Estimated solely for the purpose of computing the amount of the registration
fee.

(2) Pursuant to Rule 457(c), the registration fee for these shares was computed
on the basis of the last sale price ($30) for the common stock as reported
on the over-the-counter bulletin board quotation system on June 15, 1999, as
reflected in the original filing of this Form S-1 Registration Statement on
June 17, 1999.

(3) Remitted with original filing of this Form S-1 Registration Statement on
June 17, 1999.

(4) Pursuant to Rule 457(c), the registration fee for these shares was computed
on the basis of the last sale price ($24.25) for the common stock as
reported on the Nasdaq National Market on December 14, 1999, and is being
remitted simultaneously with this filing.

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 THEREAFTER SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED DECEMBER 16, 1999

3,842,593 SHARES

[NUCETRIX LOGO]

NUCENTRIX BROADBAND NETWORKS, INC.
COMMON STOCK
---------------------

This prospectus relates to the offer and sale by the selling stockholders
identified in this prospectus of up to 3,842,593 shares of our common stock. We
are not selling any shares of our common stock in this offering and we will not
receive any proceeds from the sale. The aggregate proceeds to the selling
stockholders from the sale of any shares of common stock will be the purchase
price of the shares sold less the applicable discounts and commissions, if any.
The selling stockholders may offer and sell their shares of common stock covered
by this prospectus from time to time, at prevailing prices or at privately
negotiated prices, in one or more transactions, including the following:

- transactions on the Nasdaq National Market, or any other securities
exchange or quotation system on which the common stock is then traded,

- over-the-counter market transactions,

- privately negotiated transactions other than the over-the-counter market,
or

- in combination of any of the foregoing transactions.

The selling stockholders also may sell the shares from time to time
directly, or indirectly through agents, dealers or underwriters designated from
time to time, on terms to be determined at the time of sale. To the extent
required, the respective purchase prices, public offering prices, names of such
agents, dealers or underwriters, and any applicable commissions or discounts
with respect to a particular offer will be set forth in an accompanying
prospectus supplement. In addition, any shares that qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather than
pursuant to this prospectus.

The selling stockholders acquired the shares of common stock covered by
this prospectus in connection with our reorganization under Chapter 11 of the
U.S. Bankruptcy Code. Under our plan of reorganization, we agreed to register
the offer and resale by the selling stockholders of the shares of our common
stock that they acquired pursuant to our reorganization. The registration
statement of which this prospectus is a part may remain effective for up to
three years after the date of this prospectus and, for so long as the
registration statement remains effective, the selling stockholders may sell
their shares of common stock covered by this prospectus from time to time in
transactions as described above. However, the registration of this common stock
does not necessarily mean that the selling stockholders will actually sell any
or all of their shares of common stock. See "Reorganization."

Our common stock is quoted on the Nasdaq National Market under the symbol
"NCNX." On December 13, 1999, the last reported sale price for our common stock
on the Nasdaq National Market was $24.75.

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INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
7.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these shares of stock or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 1999
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TABLE OF CONTENTS

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PAGE
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Prospectus Summary.................... 1
Risk Factors.......................... 7
Forward-Looking Statements............ 16
Reorganization........................ 17
Price Range of Common Stock and
Dividend Policy..................... 19
Selected Historical Financial and
Other Data.......................... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 36
Glossary.............................. 59
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Management............................ 61
Certain Transactions.................. 67
Security Ownership of Principal
Stockholders and Management......... 69
Description of Capital Stock.......... 71
Shares Eligible for Future Sale....... 72
Selling Stockholders.................. 73
Plan of Distribution.................. 77
Legal Matters......................... 78
Experts............................... 78
Where You Can Find More Information... 78
Index to Financial Statements......... F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT.

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PROSPECTUS SUMMARY

This summary highlights information that we present in more detail in the
other portions of this prospectus. This summary may not contain all of the
information that is important to you in deciding whether to invest in our
company. To understand this offering fully, you should read the entire
prospectus carefully, including the "Risk Factors" and our financial statements
appearing elsewhere in this prospectus. Unless the context otherwise requires,
references in this prospectus to "Nucentrix," "us," "we" or "our" refer to
Nucentrix Broadband Networks, Inc., and its subsidiaries.

OVERVIEW OF OUR BUSINESS

GENERAL

We provide wireless broadband, or high capacity, network services in medium
and small markets in the central United States. We control up to 196 megahertz
("MHz") of radio spectrum in the 2.1 to 2.7 gigahertz ("GHz") band (commonly
referred to as Multichannel Multipoint Distribution Service, or "MMDS") licensed
by the Federal Communications Commission ("FCC") in 87 markets. We also lease
the rights to an additional 20 MHz of spectrum at 2.3 GHz in 19 markets.
Historically, we have used our spectrum to provide wireless subscription
television services, commonly referred to as "wireless cable." We currently are
the largest operator of wireless cable systems in the United States, with
149,000 subscribers in 58 markets in nine states at December 1, 1999, including
about 22,000 subscribers who receive DIRECTV programming sold by us. Going
forward, our goal is to become a leading provider of wireless broadband services
in our markets, while expanding into additional medium markets through the
acquisition of additional MMDS spectrum licenses. We also intend to explore
acquisitions of, and strategic alliances with, other providers of Internet
access, broadband and telephony services, such as traditional Internet service
providers ("ISPs"), direct subscriber line ("DSL") providers, other fixed or
mobile wireless providers in licensed or unlicensed frequencies and competitive
local exchange carriers ("CLECs").

We currently provide always-on, high-speed Internet access to over 100
medium-sized and small businesses, small offices/home offices ("SOHOs") and
telecommuters in Austin and Sherman-Denison, Texas under temporary developmental
licenses from the FCC. We market this service directly and through third parties
such as value added resellers ("VARs") and other ISPs. Customers use our
high-speed Internet access service to improve productivity, reduce costs,
advertise and engage in electronic commerce. We believe our high-speed Internet
access service offers superior value by providing access speeds ranging from 256
Kbps up to 1.54 Mbps, or up to 25 times greater than the speeds typically
available to our target customer base, at prices substantially lower than or
comparable to those typically offered by our competitors. Subject to our ability
to finalize long-term supply sources and a technology platform for wireless
modems by the end of the second quarter of 2000, we currently plan to launch
high-speed Internet access in 18 additional markets by the end of 2001.

Our business strategy is designed to increase the value of our broadband
spectrum by growing our wireless high-speed Internet access business and adding
wireless local loop and Voice over Internet Protocol, or "VoIP" services. We
currently market our wireless broadband network services to medium-sized and
small businesses, SOHOs and telecommuters. We expect the demand for dedicated
high-speed Internet access by medium-sized and small businesses to grow faster
than the total Internet access market.

Two significant events have provided us the opportunity to exploit this
growing demand for high-speed Internet access. First, Nucentrix and several
other MMDS companies successfully demonstrated the commercial viability of
providing high-speed Internet access using MMDS radio spectrum. MMDS spectrum
has the capability to serve customers within a radius of up to 35 miles from a
single base station at aggregate data rates of up to 30 Mbps per six-MHz channel
and can be deployed in less time and at significantly lower cost than other
broadband systems. Second, in September 1998 the FCC authorized the full,
two-way use of these frequencies for digital two-way communications services.
Before September 1998, the FCC had limited the use of MMDS spectrum to one-way
transmissions. The FCC finalized its

1
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two-way rules in July 1999. The FCC authorization of two-way communications
across MMDS spectrum now allows us, for the first time, to completely bypass the
local telephone company in providing access to the Internet and other
telecommunications services.

We believe that these two developments position us to use our MMDS spectrum
to satisfy the growing demand for high-speed Internet access. We believe that
medium-sized and small businesses, SOHOs and telecommuters in our markets
generally do not have competing high-speed Internet access alternatives readily
available or, if alternatives are available, they have the following
limitations:

- most ISPs traditionally have not offered access speeds comparable to
ours,

- in medium markets, new technology for existing telephone lines, such as
DSL service, often is limited in performance, if available at all,

- hardwire cable TV networks, which also offer Internet access services,
typically have been constructed to serve residential customers and offer
limited access to most businesses, SOHOs and telecommuters, and

- other wireless spectrum is not as cost effective in medium and small
markets as MMDS spectrum, primarily because of its distance limitations.

THE NUCENTRIX SOLUTION

Our wireless solution meets the growing demand for high-speed Internet
access in medium and small markets by providing:

Superior Value. We offer higher bandwidth digital connections than
Internet access alternatives available in our target markets at prices
substantially lower than or comparable to those alternatives. For business
Internet users, our mid-range Internet access services are two to three
times the speed of integrated services digital network ("ISDN") systems at
monthly rates comparable to prevailing ISDN rates. Our higher-end services
offer speeds of 768 Kbps up to 1.54 Mbps, or the equivalent of a T1
telephone line, at rates substantially less than prevailing T1 rates in our
markets. Additionally, our customers can upgrade their access speeds
without adding additional hardware.

Always-On Service. Our Internet access networks provide 24-hour,
always-on connectivity, which dial-up modem, ISDN and alternative local
area network remote access systems do not provide.

Full Service 24-Hour Internet Access/Support. We are a full service
24-hour ISP and, through third parties, provide ancillary value added
services such as e-mail, web design, web hosting and domain name
maintenance. In the future we expect to provide wireless local loop
services, VoIP and virtual private networking.

Reliability. We have engineered our wireless point to multipoint radio
path links to provide 99.99% reliability. We also offer two separate and
diverse routes to the nearest Internet backbone connection to ensure our
customers maximum network reliability.

Experienced Management Team. We are led and managed by a team of
professionals with extensive experience in information technology as well
as wireless, data, video and general telecommunications industries. Leading
our team is Carroll D. McHenry, President and Chief Executive Officer, who
has 32 years experience in the telecommunications and information systems
industries.

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OUR BUSINESS STRATEGY

Our goal is to become a leading provider of wireless broadband network
services in our markets. Our strategy includes the following key elements:

Exploit the increasing demand for affordable high-speed Internet
access. Our target customers are medium-sized and small businesses, SOHOs
and telecommuters, whose high-speed alternatives, if available, generally
have performance, distance or price limitations.

Achieve "first to market" status. We believe we can complete a
substantial portion of our facilities and begin reaching our target
customer base faster than our competitors. For example, DSL technology
generally requires arrangements with local exchange carriers to co-locate
in multiple central offices. Other fixed-wireless providers at higher
frequencies such as 24 GHz, 28 GHz and 38 GHz have much shorter
transmission paths and, therefore, require more base stations than we
require to cover an entire market. As a result, these technologies will
require additional time and capital expense to reach our target customers.

Take advantage of our existing high capacity and wide coverage
spectrum. Our spectrum is capable of transmitting at aggregate data rates
of up to 30 Mbps per six-MHz channel, or the equivalent of approximately 20
T1 telephone lines. We control an average of 27 six-MHz channels in our
existing markets. Our spectrum typically has a 35-mile coverage radius from
a single base station, or approximately 3,800 square miles, compared to a
one to three-mile radius, or three to 28 square miles, for other wireless
broadband service providers and a two to five-mile radius from the
telephone company's central office, or 13 to 80 square miles, for DSL.

Expand into residential market. As equipment prices decline, we plan
to actively market our high-speed Internet access services to residential
customers.

Offer telephony services. To enhance the value of our assets in the
future, we plan to offer wireless local loop and VoIP services, which can
connect customers directly to the public switched telephone network.

Expand through acquisitions and strategic alliances. We plan to pursue
strategic acquisitions of MMDS spectrum that increase our geographic
service areas and enable us to accelerate our market penetration and expand
our customer base. We also intend to explore acquisitions of, and strategic
alliances with, other providers of Internet access, broadband and telephony
services, such as traditional ISPs, DSL providers, other fixed or mobile
wireless providers in licensed or unlicensed frequencies and CLECs.

CORPORATE INFORMATION

Nucentrix was incorporated under the laws of the State of Delaware in
October 1993 under the name Heartland Wireless Communications, Inc. Nucentrix
emerged from a reorganization under Chapter 11 of the U.S. Bankruptcy Code on
April 1, 1999, and we changed our name on that date to Nucentrix Broadband
Networks, Inc. See "Reorganization." Our executive offices are located at 200
Chisholm Place, Suite 200, Plano, Texas 75075, and our telephone number is (972)
423-9494.

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THE OFFERING

All of the shares of common stock offered hereby will be offered by the
selling stockholders as described in "Selling Stockholders." Because all of the
shares of common stock are being offered by the selling stockholders, we will
not receive any of the proceeds from the sale of these shares.

Common stock outstanding at December
1, 1999(1).......................... 10,099,717 shares

Common stock offered by the selling
stockholders...................... 3,842,593 shares

Nasdaq National Market symbol....... "NCNX"
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(1) Excludes (1) 722,000 shares of common stock issuable upon exercise of
options outstanding under our 1999 Share Incentive Plan, of which options to
purchase 389,980 shares currently are exercisable at an exercise price of
$12.50 per share, (2) 93,000 additional shares of common stock available for
issuance under our 1999 Share Incentive Plan, (3) 825,000 shares of common
stock issuable upon exercise of outstanding warrants, all of which currently
are exercisable at an exercise price of $27.63 per share, subject to
downward adjustment in the event of a sale of our company, (4) 275,000
shares of common stock reserved for issuance, also at an exercise price of
$27.63 per share, subject to downward adjustment in the event of a sale of
our company, pursuant to warrants that we are obligated to issue under our
plan of reorganization and (5) additional shares of common stock, which we
believe will not exceed 75,000, that we may become obligated to issue to
settle certain claims under our plan of reorganization. See
"Reorganization."

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SUMMARY FINANCIAL AND OTHER DATA

The following table presents summary historical financial and other data
for Nucentrix. As a result of the application of Fresh Start Reporting,
financial information as of September 30, 1999, and for the period from April 1,
1999, effective date of our plan of reorganization under Chapter 11 of the U.S.
Bankruptcy Code (the "Effective Date") to September 30, 1999 (the "Successor
Period"), is presented on a different basis than the financial information as of
and for the period ended December 31, 1998, for the nine months ended September
30, 1998, and for the period from January 1, 1999, to the Effective Date
(collectively, the "Predecessor Period"). Historically, we have used our
spectrum only to deliver subscription television services. Therefore, our
historical results are not necessarily indicative of our future results as we
implement our business strategy as described in "Business." You should read the
information set forth below together with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial
statements, including the notes thereto, included elsewhere in this prospectus.

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PREDECESSOR SUCCESSOR PREDECESSOR
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YEAR PERIOD FROM PERIOD FROM NINE MONTHS
ENDED EFFECTIVE DATE TO JANUARY 1, 1999 TO ENDED
DECEMBER 31, SEPTEMBER 30, EFFECTIVE SEPTEMBER 30,
1998 1999 DATE 1998
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 73,989 $ 33,388 $ 18,086 $ 55,934
Operating expenses:
System operations.................. 35,790 16,229 8,599 27,071
Selling, general and
administrative.................. 36,367 17,246 9,156 27,774
Depreciation and
amortization(1)(2).............. 39,550 11,528 5,953 34,681
Impairment of long-lived
assets(1)....................... 105,791 -- -- 105,791
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Total operating expenses... 217,498 45,003 23,708 195,317
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Operating loss....................... (143,509) (11,615) (5,622) (139,383)
Interest income (expense), net..... (34,436) 163 102 (27,868)
Equity in losses of affiliates..... (30,340) -- -- (30,340)
Other income (expense)............. (10) 521 2 (10)
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Loss before reorganization costs..... (208,295) (10,931) (5,518) (197,601)
Reorganization costs(2).............. (3,266) (602) (2,311) (1,242)
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Loss before extraordinary item....... -- (11,533) (7,829) (198,843)
Extraordinary item: gain on debt
forgiveness..................... -- -- 173,783 --
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Net income (loss).................... $ (211,561) $ (11,533) $ 165,954 $ (198,843)
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Net loss per new common share --basic
and diluted(3)..................... N/A $ (1.15) N/A N/A
========== ========== ========== ==========
OTHER DATA:
EBITDA(4)............................ $ 1,832 $ (87) $ 331 $ 1,089
Net cash used in operating
activities......................... (8,377) (91) (98) (5,655)
Net cash used in investing
activities......................... (2,038) (3,660) (2,412) (1,471)
Net cash provided by (used in)
financing activities............... (1,730) 115 (576) (1,100)
Capital expenditures................. 13,473 3,818 2,550 10,438
</TABLE>

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PREDECESSOR SUCCESSOR
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AS OF AS OF
DECEMBER 31, SEPTEMBER 30,
1998 1999
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(DOLLARS IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 30,676 $ 23,954
Restricted assets........................................... 1,011 626
System and equipment, net................................... 61,037 53,101
License and leased license investment, net.................. 79,703 74,868
Total assets................................................ 186,032 163,917
Long-term debt, including current portion................... 16,277 14,760
Liabilities subject to compromise(2)........................ 322,781 --
Total stockholders' equity (deficit)........................ (165,090) 135,520
</TABLE>

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(1) During the second and third quarters of 1998, in accordance with SFAS No.
121, we wrote down channel licenses and leases, systems and equipment and
other long-lived assets to estimated fair value, which resulted in a
non-cash impairment charge of $105.8 million. See Note 3 to the consolidated
financial statements.

(2) We filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code on December 4, 1998. Our plan of reorganization was
confirmed on March 15, 1999, and became effective on April 1, 1999.
Accordingly, we have reclassified our Old Senior Notes and Old Convertible
Notes, which were subject to compromise in the reorganization, to
"Liabilities Subject to Compromise" at December 31, 1998. See Note 8 to the
consolidated financial statements. Expenses related to our reorganization,
such as professional fees and administrative expenses, are classified as
"Reorganization costs."

(3) Loss per basic and dilutive common share for each period presented has been
calculated using the provisions of SFAS No. 128, "Earnings per Share."
Earnings per share information has not been presented for the Predecessor
Period because Nucentrix was recapitalized on the Effective Date, in
connection with the plan of reorganization and, accordingly, per share
amounts are not comparable between the Predecessor Period and the Successor
Period. See Note 1(n) to the consolidated financial statements.

(4) "EBITDA" represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness.
However, EBITDA is not a financial measure determined under generally
accepted accounting principles and should not be considered as an
alternative to net income as a measure of operating results or to cash flows
from operations as a measure of funds available for discretionary or other
liquidity purposes. EBITDA may be calculated differently from company to
company.

(5) All operating data and references to subscribers refer to our television
video subscription business. We do not currently have a sufficient number of
Internet access customers to provide meaningful information on this business
segment.

(6) "System EBITDA" means net income (loss) plus interest expense, income tax
expense, depreciation and amortization expense and all other non-cash
charges, less any non-cash items which have the effect of increasing net
income or decreasing net loss, for a system. System EBITDA includes all
selling, general and administrative expenses attributable to employees
employed in that system, and, to more accurately reflect operations at the
system level, we also allocate to each operating system expenses related to
billing, collections, telemarketing, our call center and information
systems.

(7) Represents our estimates of the approximate number of total households in
our service areas. We calculated this information using a commercially
available population software program, which is based on 1990 census bureau
data and includes an average annual growth rate of 1% based on census bureau
data released in March 1998. See "Business -- Existing and Unconstructed
Markets."

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RISK FACTORS

The value of an investment in Nucentrix will be subject to the significant
risks inherent in our business. You should consider carefully the risks and
uncertainties described below and the other information included in this
prospectus before you decide to purchase any shares of our common stock. The
occurrence of any one or more of the risks or uncertainties described below
could have a material adverse effect on our financial condition, results of
operations and cash flows.

WE ARE PURSUING A NEW BUSINESS THAT WE HAVE NOT PREVIOUSLY OPERATED. WE MAY NOT
BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY OR CORRECT OUR HISTORY
OF LOSSES.

We historically have used our spectrum to provide wireless subscription
television services and sustained substantial operating and net losses from
these operations. While we plan to maintain subscription television services in
our existing markets for the foreseeable future, the principal focus of our
business strategy is to expand the use of our radio spectrum to provide wireless
broadband network services, such as high-speed Internet access. We have launched
high-speed Internet access service in only two of our markets, and the revenues
that we have received in these two initial markets are immaterial. We intend to
increase our capital expenditures to develop and launch wireless broadband
services in additional markets, and we expect operating expenses from our
wireless broadband operations to exceed revenues from those operations until our
customer base increases. As a result, we anticipate that our net and operating
losses will continue unless we successfully implement our business strategy. We
cannot assure you that we can develop, market and expand our wireless broadband
network services in the two initial markets or any additional markets to the
extent necessary to successfully compete in the broadband network services
industry. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Future Cash Requirements," and our consolidated
financial statements, including the notes thereto, appearing elsewhere in this
prospectus.

WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NECESSARY TO IMPLEMENT OUR
BUSINESS STRATEGY ON SATISFACTORY TERMS AND CONDITIONS.

To implement our long-term business strategy, we will need additional
capital for capital expenditures, operating expenses for system development and
acquisition costs, including debt that may be assumed in future acquisitions. We
plan to finance these activities by debt or equity financings, secured or
unsecured credit facilities, joint ventures or other arrangements. On August 4,
1999, we filed a registration statement with the Securities and Exchange
Commission relating to the proposed public offering by us of 2 million shares of
our common stock. We have not yet requested acceleration of the effectiveness of
the registration statement and have not determined when, or if, we will request
acceleration of or effect an offering pursuant to the registration statement. We
may determine to delay the offering or withdraw the registration statement
depending on, among other things, market conditions and equipment financing
opportunities. We cannot assure you that we will be able to obtain the financing
we will need to fund the implementation of our business strategy on satisfactory
terms and conditions, if at all. If we incur additional debt, we may have to
dedicate a substantial portion of our cash flow from operations to the payment
of principal and interest, which may cause us to be more vulnerable to
competitive pressures and economic downturns. If we fail to obtain additional
financing in a timely manner and on acceptable terms, we may have to delay,
reduce or eliminate the launch of new high-speed Internet access systems. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Future Cash Requirements" and "Business -- Business Strategy."

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THE INTERNET ACCESS MARKET IS HIGHLY COMPETITIVE. BECAUSE MANY COMPETITORS IN
OUR MARKETS ARE WELL-ESTABLISHED AND HAVE RESOURCES SIGNIFICANTLY GREATER THAN
THOSE AVAILABLE TO US, WE MAY NOT BE ABLE TO ESTABLISH A SIGNIFICANT NUMBER OF
INTERNET ACCESS CUSTOMERS IN OUR MARKETS.

As we enter the high-speed Internet access market, we will be forced to
compete with numerous service providers, including the following:

- other ISPs,

- incumbent and competitive local exchange carriers,

- inter-exchange carriers,

- enhanced copper wire-based providers, such as DSL service providers,

- cable modem service providers, and

- other fixed-wireless and satellite data service providers.

Many of our competitors are well-established and have larger and better
developed networks and systems, longer-standing relationships with customers and
suppliers, greater name recognition and significantly greater financial,
technical and marketing resources than we have. Many of these companies can
subsidize competing services with revenues from other services and have ready
access to capital markets. As competition increases in the high-speed Internet
access market, we anticipate intensified downward pricing pressure for our
services. We have not obtained significant market share in either of the markets
where we currently offer high-speed Internet access services. We cannot assure
you that we will be able to compete effectively in any of our markets. Our
failure to establish a significant number of Internet access customers in our
markets would adversely affect our ability to successfully implement our
business strategy. See "Business -- Competition."

WE CANNOT PREDICT WHETHER WE WILL BE SUCCESSFUL IN IMPLEMENTING OUR BUSINESS
STRATEGY BECAUSE IT INCLUDES OPERATIONS THAT HAVE NOT BEEN WIDELY DEPLOYED ON A
COMMERCIAL BASIS. OUR FAILURE TO ACHIEVE OR SUSTAIN MARKET ACCEPTANCE COULD
IMPAIR OUR ABILITY TO ACHIEVE PROFITABILITY.

Our primary business strategy of providing wireless broadband network
services over MMDS spectrum has not been widely deployed on a commercial basis.
The success of our business strategy depends on our ability to develop and
market our high-speed Internet access service at profitable rates. We will face
a number of the difficulties and uncertainties generally associated with new
businesses, such as:

- lack of consumer acceptance,

- difficulty in obtaining financing,

- competition from providers using more traditional and commercially proven
sources for these services,

- advances in competing technologies, and

- changes in laws and regulations.

We have launched our high-speed Internet access service in only two of our
existing markets, and we cannot assure you that consumers will accept our
service as a commercially viable alternative to other means of Internet access.

To date we have not conducted tests involving wireless local loop or VoIP
services over our spectrum. We have had discussions with several prospective
manufacturers of network platforms for our spectrum that would be capable of
delivering both high-speed Internet access and telephony services. We cannot
assure you that a system can be designed to deliver telephony services over our
spectrum on a commercial basis or, if such a system can be designed, that we
will receive the requisite regulatory approvals to offer such services or that
we will be able to deploy such services in a commercially successful manner or
at all.

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<PAGE> 12

LIMITED SUPPLY OF CUSTOMER PREMISES MODEMS FOR HIGH-SPEED INTERNET SERVICE MAY
RESTRICT OR DELAY OUR GROWTH.

Our business strategy assumes substantial growth of high-speed Internet
access services over our spectrum. Hybrid Networks, Inc. ("Hybrid"), currently
is the primary provider of wireless broadband Internet modems to MMDS operators.
In January 1999, Hybrid notified us that to ensure sufficient cash to continue
operations, customer support and product availability, Hybrid would begin
allocating the supply of modems. In June 1999, Hybrid resumed shipment of modems
without allocation restrictions.

In addition to Hybrid, we have identified other suppliers that we believe
will become sources of modems by the end of the second quarter of 2000. If
Hybrid fails to supply or limits the supply of high-speed modems, and one or
more additional vendors do not come to market with a reliable supply of wireless
modems on satisfactory terms and conditions before the end of the second quarter
of 2000, then a shortage of available modems may occur. A shortage of available
modems could delay our planned launch of additional high-speed Internet markets,
which could have a material adverse effect on our ability to implement our
business plan in a timely manner. See "Business -- Suppliers -- Internet Access
Equipment."

OUR NETWORK SCALABILITY, SPEED AND INFRASTRUCTURE FOR INTERNET ACCESS SERVICE IS
UNCERTAIN. IF WE ARE UNABLE TO PROVIDE RELIABLE HIGH-SPEED INTERNET ACCESS, THEN
DEMAND FOR OUR SERVICES AND OUR ABILITY TO IMPLEMENT OUR BUSINESS STRATEGY COULD
BE ADVERSELY AFFECTED.

Due to the limited deployment of our high-speed Internet access service,
the ability of our wireless systems to connect and manage a substantial number
of on-line subscribers at high transmission speeds is uncertain. The actual
channel capacity and data transmission speeds will depend on a variety of
factors, including content, Internet traffic, the number of active customers on
a channel, the number of channels that we can use to provide our service, the
capability of high-speed modems used, the capacity and service quality of
third-party Internet backbone providers and a customer's system configuration.
We can not assure you that we will be able to expand or adapt our network
infrastructure to respond to a growth in the number of customers served, an
increased demand to transmit larger amounts of data or changes to our customers'
product and service requirements. Our failure to achieve or maintain reliable
high-speed data transmission capabilities could significantly reduce consumer
demand for our services.

AN INABILITY TO EFFECTIVELY MANAGE OUR RAPID GROWTH COULD ADVERSELY AFFECT OUR
OPERATIONS.

Our business strategy contemplates rapid expansion in the foreseeable
future. This growth will increase our operating complexity and require that we,
among other things:

- accurately assess the market for our new services,

- expand our employee base with highly-skilled personnel,

- develop additional financial and management controls and systems,

- control expenses related to our business strategy, and

- obtain and maintain necessary regulatory approvals.

We cannot assure you that we will be able to successfully undertake or
manage these activities or determine the effect that our failure to do so may
have on our operations.

WE ARE SUBJECT TO EXTENSIVE FEDERAL LAWS, RULES AND REGULATIONS. THE LAWS, RULES
AND REGULATIONS TO WHICH WE ARE SUBJECT COULD CHANGE AT ANY TIME IN AN
UNPREDICTABLE MANNER.

Our continued ability to acquire and maintain MMDS spectrum licenses, which
are vital to our operations, is subject to extensive regulation. These
regulations directly affect the breadth of services we are able to offer, as
well as the rates, terms and conditions of those services. We also are affected
indirectly by the effect of other governmental regulations on companies that
offer competing services.
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Regulations and their application are subject to continual change as a result of
new legislation, regulations adopted from time to time by regulatory authorities
and judicial interpretation of these laws and regulations. We are not able to
predict the extent to which any such change in the regulatory environment could
affect our business. We cannot assure you that changes in legislation,
regulations and interpretations would not have a significant adverse impact on
our ability to implement our business strategy. See "Business -- Government
Regulation" for a further discussion of the regulations applicable to our
operations.

Aside from the use of spectrum, the FCC has held that the terms and
conditions of providing Internet and Internet access services are not subject to
FCC regulation. Nevertheless, the FCC has held that the provision of Internet
access is an interstate service subject to FCC jurisdiction. There can be no
certainty that the providing of Internet access services will continue to be
free from FCC regulation. Moreover, if we begin providing wireless local loop
services, we will be subject to FCC and state regulation of our interstate and
intrastate services, respectively.

WE DEPEND ON FCC-REGULATED LICENSES AND CHANNEL LEASES. THE FAILURE TO MAINTAIN
CHANNEL RIGHTS IN CERTAIN MARKETS COULD ADVERSELY AFFECT OUR ABILITY TO TIMELY
IMPLEMENT OUR BUSINESS STRATEGY.

We depend upon licenses granted to us by the FCC and leases with other FCC
license holders for access to channel capacity necessary to operate our Internet
and video businesses. These licenses are subject to renewal as determined by the
FCC. FCC licenses also specify channel construction deadlines by which channel
transmissions must begin, which, if not met, would permit the FCC to revoke the
license. We cannot assure you that:

- the FCC will renew our licenses as their initial terms expire,

- our channel lessors will continue to hold valid licenses for their
channels,

- we will be able to renew our channel leases on terms acceptable to us, or

- the FCC will grant requests for extensions of construction deadlines.

The failure to maintain FCC licenses and channel leases will reduce the total
number of channels available for our use. If we fail to maintain sufficient FCC
licenses or channel leases in markets where we operate or in which we intend to
launch two-way Internet access service, then the resulting reduction in channel
capacity could have a material adverse effect on our ability to:

- serve our existing Internet access and subscription television customer
base,

- serve increasing customer demand for high-speed Internet access service,
and

- add services such as VoIP or wireless local loop services.

We cannot assure you that we will be able to obtain replacement MMDS spectrum or
other acceptable alternatives in a market if we lose an FCC license or channel
lease in that market. See "Business -- MMDS Licenses and Leases" and
"Business -- Government Regulation."

In addition, the majority of our channel leases do not currently
contemplate two-way use of our spectrum. We intend to initially use licenses
that we own for our Internet access customers. We plan to negotiate amendments
to certain of our channel leases to provide for two-way use of the leased
channels to the extent we determine that we need additional channel capacity. We
cannot assure you that we will be able to negotiate amendments to those leases
to permit two-way Internet or other two-way services on terms and conditions
that are acceptable to us.

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<PAGE> 14

TWO-WAY SYSTEMS REQUIRE REGULATORY APPROVAL. WE WILL BE REQUIRED TO OBTAIN
REGULATORY APPROVAL FOR OUR CURRENT AND FUTURE TWO-WAY SYSTEMS. IF WE DO NOT
OBTAIN REQUISITE APPROVALS FOR A MARKET, THEN WE WILL NOT BE PERMITTED TO
OPERATE A TWO-WAY SYSTEM IN THAT MARKET.

In September 1998 the FCC approved broad authority for flexible two-way use
of MMDS spectrum. This spectrum previously could be used only for one-way
transmissions. The new rules require the filing with the FCC of applications to
receive authorization for two-way use of our MMDS spectrum. We expect the first
opportunity to file these applications, or "filing window," to occur in the
second quarter of 2000. The application process will require us to engineer a
network configuration and channel-use plan for the use of our frequencies in
each market where we intend to launch a two-way system, including Austin and
Sherman-Denison, Texas, which we currently operate under temporary developmental
authorizations from the FCC. The applications must meet FCC interference
protection rules or contain the consent of other MMDS licensees in these markets
and adjacent markets. We cannot assure you that:

- we will be able to complete the necessary processes to enable us to file
two-way applications for each of our markets,

- applications filed will not be preempted or otherwise limited by
previously or concurrently filed applications of other operators, or

- we will be able to obtain the necessary cooperation and consents from
channel licensees in our markets or adjacent markets to enable us to use
our spectrum for two-way communication services.

If we do not receive all required consents in a particular market or we are not
able to design a two-way system that will meet the FCC's interference protection
rules, we will be unable to obtain authorization to implement a two-way system
in that market. See "Business -- Government Regulation."

ACQUISITION OF ADDITIONAL MMDS SPECTRUM DEPENDS ON FCC APPROVAL TO THE TRANSFER
OR ASSIGNMENT OF MMDS LICENSES TO US.

From time to time we acquire channel rights and licenses through
acquisitions and joint ventures. The FCC must consent to the assignment or
transfer of control of FCC licenses. The FCC's failure to approve the transfer
or assignment of licenses to us could adversely affect our growth and our
ability to implement our business strategy. See "Business -- Government
Regulation."

OUR BASIC TRADING AREA, OR BTA, AUTHORIZATIONS ARE SUBJECT TO FORFEITURE IF WE
DEFAULT ON OUR PURCHASE PRICE PAYMENTS OR FAIL TO MEET CERTAIN SERVICE
REQUIREMENTS. THE COSTS OF THE BUILD-OUT TO SATISFY OUR BTA SERVICE REQUIREMENTS
COULD BE MATERIAL.

We acquired authorizations for 93 BTAs in August 1996 at a total cost of
approximately $19.8 million, $13.7 million in principal amount of which remains
payable quarterly through August 2006. Each BTA is subject to an individual
installment note. If we fail to make one or more scheduled installment payments
on a BTA note after any applicable grace period, that BTA authorization may be
forfeited to the FCC.

To retain a BTA authorization, we must provide a required level of service
in the BTA by August 2001. We will satisfy the service requirement for a BTA if
our signal in the BTA is capable of reaching at least two-thirds of the BTA
population outside of the service areas of other MMDS operators within our BTAs.
If we fail to meet this requirement, then the BTA authorization for the portion
of the BTA that is not capable of being served may be subject to forfeiture.
Constructing MMDS channels capable of providing service to the required
population in unconstructed BTAs could require substantial capital expenditures.
See "Business -- Government Regulation -- BTA Auction and Service Requirements."

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<PAGE> 15

WE DEPEND ON CERTAIN KEY PERSONNEL, AND WILL REQUIRE ADDITIONAL KEY PERSONNEL TO
IMPLEMENT OUR BUSINESS STRATEGY. IF WE LOSE OUR CHIEF EXECUTIVE OFFICER OR ARE
NOT ABLE TO HIRE AND RETAIN EMPLOYEES WITH THE REQUIRED TECHNICAL SKILLS, OUR
ABILITY TO DEVELOP AND LAUNCH HIGH-SPEED INTERNET ACCESS AND RELIABLE SERVICE
COULD BE ADVERSELY AFFECTED.

Our future success largely depends on the expertise of Carroll D. McHenry,
our Chief Executive Officer, President and Chairman of the Board, and other
members of senior management. We have employment agreements with Mr. McHenry and
other members of senior management, but do not maintain a key person life
insurance policy on the life of Mr. McHenry or other members of senior
management.

We also believe that our future success will depend in large part on our
ability to hire and retain highly skilled, knowledgeable and qualified
managerial, professional, technical and sales personnel with skills and talents
required to develop and operate our wireless broadband network services. To
implement our business strategy and manage our planned growth successfully, we
will need to hire and retain a substantial number of additional employees. We
have experienced significant competition in attracting and retaining personnel
who possess the skills that we are seeking. As a result of this competition, we
may experience a shortage of qualified personnel.

PURSUING ACQUISITION OR OTHER STRATEGIC OPPORTUNITIES WILL INVOLVE MANAGEMENT
TIME AND EXPENSE AND COULD ADVERSELY AFFECT OUR OPERATIONS.

Part of our growth strategy involves acquiring additional MMDS spectrum
licenses to increase our scale and geographic service area. We also intend to
explore alliances with traditional ISPs, DSL providers, other fixed-wireless
providers and CLECs. The pursuit of acquisition or other strategic opportunities
will place significant demands on the time and attention of our senior
management and will involve considerable financial and other costs relating to:

- identifying and investigating acquisition candidates or strategic
partners,

- negotiating acquisition or other agreements,

- integrating acquired businesses with our existing operations, and

- operating new technologies.

In addition, employees and customers of acquired businesses may sever their
relationship with these businesses during or after such an acquisition. We
cannot assure you that we will be able to successfully consummate any
acquisitions or successfully integrate into our operations any business or
assets which we may acquire.

INTENSE COMPETITION EXISTS IN THE SUBSCRIPTION TELEVISION MARKET. WE MAY NOT BE
ABLE TO COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED INDUSTRY COMPETITORS
WITH SIGNIFICANTLY GREATER FINANCIAL RESOURCES. OUR FAILURE TO MAINTAIN AND
EXPAND OUR WIRELESS CABLE SUBSCRIBER BASE COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.

The subscription television business also is highly competitive, and many
of our competitors have significantly greater resources and channel capacity
than we have. Our principal subscription television competitors consist of
traditional hardwire or franchised cable operators, direct to home/direct
broadcast satellite providers and private cable operators. Wireless cable
providers, including our subscription television service, have only
approximately a 1.3% share of the national subscription television market. In
addition, local off-air VHF/UHF broadcast television stations, such as
affiliates of ABC, NBC, CBS and Fox, continue to be a primary source of free
video programming for the public. Our failure to maintain our existing wireless
cable subscriber base and expand this subscriber base could adversely affect our
results of operations. We cannot assure you that we will be able to maintain or
expand our subscriber base for our wireless cable services.

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<PAGE> 16

LOSS OF DIRECTV CONTRACTS COULD ADVERSELY AFFECT THE DEMAND FOR OUR WIRELESS
CABLE SERVICE.

Our business strategy assumes growth of our DIRECTV offerings, either
independently or in combination with our MMDS video offering. Because certain of
our DIRECTV offerings generate more favorable returns than our stand-alone MMDS
offering, and our DIRECTV offerings allow us to use MMDS spectrum for other
purposes, we have shifted the focus of our sales and marketing efforts to
emphasize sales of DIRECTV service. We depend on our contracts with DIRECTV to
provide DIRECTV service. Our single-family unit ("SFU") and multiple-dwelling
unit ("MDU") contracts with DIRECTV expire in April 2003 and October 2004,
respectively. A cancellation or nonrenewal of our contracts with DIRECTV could
have a material adverse effect on our ability to maintain or expand our wireless
cable subscriber base. See "Business -- Suppliers."

OUR WIRELESS BROADBAND SERVICES HAVE LINE OF SIGHT LIMITATIONS. THESE LINE OF
SIGHT LIMITATIONS MAY REDUCE THE NUMBER OF CUSTOMERS WE CAN SERVE IN A MARKET OR
INCREASE OUR COST OF OPERATIONS.

Our wireless broadband services require a direct line of sight between our
base station and the antenna at the customer's site. Our average coverage radius
of a single-cell base station is approximately 35 miles, depending on local
conditions. However, our transmission paths can be obstructed by foliage,
terrain and buildings, among other things. As a result, we may not be able to
supply service to all potential customers in a market from a single base
station. While in certain instances we can employ additional equipment to
overcome line of sight obstructions, we may not always be able to secure the
required FCC approval necessary to achieve the desired signal coverage. Adding
this equipment in some instances also could increase our costs of service. While
these costs may not be significant in all cases, they may cause our wireless
broadband services to become less economical in certain markets.

BUILDING OWNERS CONTROL ACCESS TO CERTAIN STRATEGIC RECEIVE SITES.

We may be required to obtain rights from building owners to install our
antennas and other equipment to provide service to our business customers. We
cannot assure you that we will be able to obtain, at costs or on terms
acceptable to us, the access rights necessary to expand our services as planned.

OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGY CHANGES.

The high-speed Internet access industry is subject to rapid technological
change, frequent new service introductions and evolving industry standards. We
believe that our future success will depend largely on our ability to anticipate
or adapt to such changes and to offer, on a timely basis, services that meet
evolving standards. We cannot predict the extent to which competitors using
existing or currently undeployed methods of delivery of Internet access services
will compete with our services. We cannot assure you that:

- existing, proposed or undeveloped technologies will not render our
fixed-wireless systems less profitable or less viable,

- we will have the resources to acquire new technologies or to introduce
new services that could compete with future technologies, or

- we will be successful in responding to technological changes in a timely
and cost effective manner.

YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR OPERATIONS.

We depend heavily on information technology and other systems and functions
for all phases of our operations, including transmission of data and video
programming, billing and collections and customer service functions. Computer
software, hardware, microprocessor chips and other computer equipment use two
digits to identify a particular year and some of these may not recognize the
number "00" or may recognize it as a year prior to 1999. Unless these computer
equipment and software programs are modified or upgraded to correct these Year
2000 problems prior to January 1, 2000, errors and malfunctions could result. We
believe, based on information currently available and the current status of our
efforts to identify
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<PAGE> 17

and correct Year 2000 problems, that the worst case scenarios that could affect
our operations as a result of Year 2000 problems are an inability to:

- transmit and receive data,

- transmit and receive video programming, and

- produce and send invoices.

Although we have evaluated and taken actions intended to correct Year 2000
problems in our mission-critical and other systems, we cannot assure you that we
will not experience Year 2000 problems with our mission-critical or other
systems or that other significant Year 2000 problems that we are not currently
aware of will not arise. If Year 2000 issues arise with respect to our systems,
or if a material supplier is adversely affected by Year 2000 problems and, as a
result is unable to provide services or materials to us, then our ability to (1)
provide Internet access or wireless cable services or (2) implement our business
strategy on a timely basis could be adversely affected. See "Management's
Discussion and Analysis of Financial Condition -- The Year 2000."

VIRUSES, BREAK-INS AND OTHER SECURITY BREACHES COULD CAUSE INTERRUPTIONS, DELAYS
OR A CESSATION OF THE SERVICES WE PROVIDE TO OUR INTERNET CUSTOMERS.

Despite the implementation of network security measures, the core of any
Internet network infrastructure is vulnerable to computer viruses, break-ins and
similar disruptive problems. We may experience future interruptions in service
as a result of the actions of Internet users, current and former employees or
others. Unauthorized use could also potentially jeopardize the security of our
computer systems and the computer systems of our customers. Although we intend
to continue to implement security measures to prevent this, the possibility
exists that the measures we implement will be circumvented in the future. In
addition, eliminating such viruses and remedying such security problems may
cause interruptions, delays or cessation of service to our Internet customers.
If our security measures fail, we may lose customers or be sued, resulting in
additional expenses.

WE MAY BE LIABLE FOR INFORMATION SENT THROUGH OUR NETWORK.

The law relating to the liability of Internet access providers for
information carried on, stored on or disseminated through their network is
unsettled. Several private lawsuits seeking to impose liability upon Internet
access providers currently are pending. In addition, legislation has been
enacted and new legislation has been proposed that imposes liability for the
transmission of or prohibits the transmission of certain types of information on
the Internet, including sexually explicit and gambling information. While no one
has ever filed a claim against us relating to this issue, someone may file a
claim of that type in the future and may be successful in imposing liability on
us. Although we carry Internet liability insurance, it may not be adequate to
compensate claimants or may not cover us if we become liable for information
carried on or disseminated through our networks.

CONCENTRATION OF OWNERSHIP MAY AFFECT CORPORATE ACTIONS AND MARKET PRICE FOR OUR
COMMON STOCK.

Based on reports filed with the Securities and Exchange Commission, five
ownership groups own or control approximately 65% of our outstanding common
stock. Two of these groups have a representative on our board of directors and
collectively own or control approximately 29.6% of our outstanding common stock.
See "Security Ownership of Principal Stockholders and Management." As a result
of their stock ownership, these groups may be able to influence the outcome of
stockholder votes on various matters, including the election of directors,
extraordinary corporate transactions and certain business combinations. The
concentration of ownership of our common stock by these groups also could
significantly impair the liquidity and adversely affect the market price of our
common stock. Other investors in the public market may avoid making an
investment in Nucentrix because of such concentration of ownership.

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<PAGE> 18

SHARES ELIGIBLE FOR FUTURE SALE MAY AFFECT THE MARKET PRICE FOR OUR COMMON
STOCK.

The 3,842,593 shares covered by this prospectus constitute approximately
38% of our outstanding common stock. The selling stockholders may sell all or
any portion of these shares into the public market at any time pursuant to this
prospectus. Sales of substantial amounts of securities, or the perception that
such sales could occur, could adversely affect the market price of our common
stock. In addition, the 6,257,124 remaining shares of common stock outstanding
are freely tradeable under the Securities Act. See "Reorganization" and "Shares
Eligible For Future Sale."

WE MAY ENCOUNTER DIFFICULTIES DUE TO OUR RECENT EMERGENCE FROM CHAPTER 11
BANKRUPTCY PROCEEDINGS.

We emerged from reorganization under Chapter 11 of the U.S. Bankruptcy Code
on April 1, 1999. Our recent emergence from Chapter 11 may adversely affect our
ability to negotiate favorable trade terms with manufacturers and other vendors.
See "Reorganization."

WE DO NOT INTEND TO PAY CASH DIVIDENDS.

We anticipate that our earnings in the near term will be used to fund
current operations and costs and expenses incurred in developing and
implementing our business strategy. Accordingly, we do not anticipate paying
cash dividends in the foreseeable future. Our future dividend policy will depend
on our earnings, capital requirements, financial condition, restrictions that
may be imposed under future bank or other credit facilities and other factors
considered relevant by the Board of Directors.

OUR ABILITY TO ISSUE "BLANK CHECK" PREFERRED STOCK MAY DELAY OR PREVENT A
POTENTIAL CHANGE IN CONTROL OF NUCENTRIX AND MAY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK.

Our Amended and Restated Certificate of Incorporation authorizes our Board
of Directors, without any further vote or action by our stockholders, to issue
up to 15,000,000 shares of preferred stock from time to time in one or more
series upon such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine at the time of issuance.
The rights of the holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of preferred stock that may be
issued in the future. Any such issuance also could have the effect of delaying,
deferring or preventing a change in control of Nucentrix and could make the
removal of the present management of Nucentrix more difficult. Any future
issuances of preferred stock, as well as the availability of authorized and
unissued shares of preferred stock, also could adversely affect the market price
of the common stock. See "Description of Capital Stock -- Preferred Stock."

COMMITMENTS FOR FUTURE ISSUANCES OF COMMON STOCK CREATE THE POTENTIAL FOR
DILUTION.

There are outstanding warrants and options to purchase an aggregate of
1,547,000 shares of our common stock and we will issue warrants to purchase
another 275,000 shares of our common stock under our plan of reorganization.
Substantially all of the shares of common stock underlying these securities will
be freely tradeable when issued. The exercise or conversion of outstanding
warrants and stock options will dilute the percentage ownership of our other
stockholders. In addition, any sales in the public market of shares of our
common stock issuable upon the exercise or conversion of these warrants and
stock options, or the perception that such sales could occur, may adversely
affect the prevailing market price of our common stock. See "Reorganization" and
"Shares Eligible For Future Sale."

TWO FORMER STOCKHOLDERS HAVE FILED A MOTION TO REVOKE THE ORDER OF THE U.S.
BANKRUPTCY COURT CONFIRMING OUR PLAN OF REORGANIZATION. IF THE ORDER IS REVOKED,
THE DISCHARGE OF OUR DEBT MAY BECOME INEFFECTIVE AND WE COULD BE PLACED BACK IN
REORGANIZATION UNDER CHAPTER 11 OF THE U.S. BANKRUPTCY CODE.

On December 4, 1998, we filed a voluntary, prenegotiated plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. On March 15, 1999,
the bankruptcy court confirmed our plan of reorganization, which was approved by
all classes of claims that voted on the plan (including stockholders)

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and became effective April 1, 1999. In September 1999 we received notice that
two former stockholders had filed a motion pro se to revoke the order confirming
our plan of reorganization, asserting that we obtained the order by fraudulently
undervaluing our assets. The bankruptcy court may grant the motion and revoke
the order of confirmation if and only if the order was procured by fraud. If the
bankruptcy court grants this motion, then the court has broad authority to
revoke the Order Confirming Plan of Reorganization, grant relief to protect any
entity that acquired rights in good faith reliance on the order, and to revoke
the discharge of our debt. If the court revoked the discharge of our debt, we
could be placed back in reorganization under Chapter 11 of the U.S. Bankruptcy
Code. We have filed a motion to dismiss the motion to revoke, believe the motion
to revoke is without merit and intend to vigorously oppose the motion to revoke.
Our motion to dismiss the motion to revoke is under consideration by the
bankruptcy court. See "Reorganization" and "Business -- Legal Proceedings."

FORWARD-LOOKING STATEMENTS

This prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
our financial condition, results of operations, business strategy and financial
needs. The words "may," "will," "expect," "believes," "plans," "intends,"
"anticipates," "estimates," "continue" and similar expressions, as they relate
to us, as well as discussions of strategy, are intended to identify
forward-looking statements. Such statements reflect our current view with
respect to future events and are based on our assessment of, and are subject to,
a variety of factors, contingencies, risks, assumptions and uncertainties deemed
relevant by management, including:

- business and economic conditions in our existing markets,

- competitive technologies, products and services,

- regulatory and interference issues, including grant of two-way
transmission authorizations,

- the emergence of one or more national manufacturers of customer premises
equipment for MMDS spectrum, and

- those matters discussed specifically under "Risk Factors" and elsewhere
herein.

We cannot assure you that any of our expectations will be realized, and actual
results and occurrences may differ materially from our expectations as stated in
this prospectus. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

16
<PAGE> 20

REORGANIZATION

On December 4, 1998, we filed a voluntary, prenegotiated plan of
reorganization and disclosure statement under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the District of Delaware (In re Heartland
Wireless Communications, Inc., Case No. 98-2692 (JJF)). We filed the
reorganization plan with the prepetition agreement from the holders of more than
70% in principal amount of our $115 million 13% senior notes (the "Old 13%
Notes") and $125 million 14% senior notes (the "Old 14% Notes" and, together
with the Old 13% Notes, the "Old Senior Notes") to support the plan.

On March 15, 1999, the bankruptcy court confirmed our plan of
reorganization, which received the support of the holders of 99% in principal
amount of the Old Senior Notes voting on the plan. All classes of claims that
voted on the plan of reorganization approved the plan. The plan of
reorganization became effective on April 1, 1999 (the "Effective Date"), when we
changed our name from Heartland Wireless Communications, Inc., to Nucentrix
Broadband Networks, Inc.

As of the Effective Date:

- all previously issued and outstanding common stock, options granted under
our stock option plans, warrants and any other equity interests in
Nucentrix were canceled,

- holders of the Old Senior Notes received 9,700,000 shares of newly issued
common stock, and

- holders of our $40.2 million convertible subordinated notes ("Old
Convertible Notes") received 300,000 shares of newly issued common stock
and warrants to purchase 825,000 shares of common stock at an exercise
price of $27.63 per share.

The selling stockholders received all of their shares of common stock covered by
this prospectus from us under our plan of reorganization.

We also are obligated under the plan of reorganization to issue warrants to
acquire an additional 275,000 shares of common stock at an exercise price of
$27.63 per share. These warrants will be allocated (1) first, to pre-petition
bondholder litigation claims, to the extent any of these claims are allowed by
the bankruptcy court and exceed any corporate liability insurance proceeds that
are available to satisfy such claims after satisfaction of certain
indemnification obligations as described under "Business -- Legal
Proceedings -- Securities Litigation," and (2) second, pro rata, based on the
equity interests in Nucentrix represented by such claims, among (A) pre-petition
stockholder litigation claims, to the extent any of these claims are allowed by
the bankruptcy court and exceed any corporate liability insurance proceeds
available after satisfaction of pre-petition bondholder litigation claims, and
(B) to holders of common stock prior to the Effective Date. These warrants will
be distributed (1) with respect to pre-petition bondholder litigation claims,
after the allowed amounts of such claims and the number of warrants, if any,
that will be required to satisfy such claims are determined by the bankruptcy
court and (2) with respect to pre-petition stockholder litigation claims and to
holders of common stock prior to the Effective Date, after the allowed amounts
of pre-petition stockholder litigation claims and the number of warrants, if
any, that will be required to satisfy such claims is determined by the
bankruptcy court. See "Business -- Legal Proceedings -- Securities Litigation."

If we merge with another company or sell all or substantially all of our
assets or stock before April 1, 2004, in exchange for (1) cash or (2) cash and
notes, the exercise price of all of the 1,100,000 warrants will be adjusted
downward according to the following schedule:

<TABLE>
<CAPTION>
DATE OF TRANSACTION EXERCISE PRICE
- ------------------- --------------
<S> <C>
from April 1, 1999 until April 1, 2000................. $12.37
from April 2, 2000 until April 1, 2001................. $15.46
from April 2, 2001 until April 1, 2002................. $18.56
from April 2, 2002 until April 1, 2003................. $21.65
from April 2, 2003 until April 1, 2004................. $24.74
after April 1, 2004.................................... $27.63
</TABLE>

17
<PAGE> 21

If we merge with another company or sell all or substantially all of our assets
or stock before April 1, 2004, in exchange for a combination of cash or notes
and other consideration, each warrant will be divided into an "A warrant" and a
"B warrant." The number of shares of common stock that may be purchased under
the A warrant and the B warrant will be allocated pro rata based on the value of
the transaction represented by cash and the value represented by other
consideration. The A warrant will be exercisable at the reduced exercise price
listed above to purchase that portion of the common stock covered by the
original warrant equal to the portion of the value of the transaction
represented by the cash or notes. The B warrant will be exercisable to purchase
the remaining shares of common stock covered by the original warrant at an
exercise price of $27.63.

Also under the plan of reorganization, we adopted a new 1999 Share
Incentive Plan and terminated our 1994 Employee Stock Option Plan and our 1994
Stock Option Plan for Non-Employee Directors. See "Management -- Compensation of
Executive Officers -- 1999 Share Incentive Plan."

Finally, we may be required to issue additional shares of common stock to
settle miscellaneous unsecured claims under our plan of reorganization, to the
extent these claims are allowed by the bankruptcy court. These miscellaneous
unsecured claims include (1) tort claims, except for tort claims for personal
injury or wrongful death for which a proof of claim was timely filed, to the
extent there is no available coverage under our liability insurance (including
any self-insured retention), (2) claims under executory contracts and unexpired
leases that we specifically rejected under the plan and (3) other unsecured
claims arising from contract or other disputes, except for administrative
expense claims, priority claims, Old Convertible Note claims, Old Senior Note
claims, and securities litigation claims. Based on information currently
available to us, we believe we will be required to issue up to a maximum of
75,000 shares of common stock to settle these miscellaneous unsecured claims, if
these claims are allowed by the bankruptcy court. As of December 1, 1999, we had
issued 9,757 additional shares of our common stock to settle some of these
claims.

In September 1999, we received notice that a Motion to Revoke Order of
Confirmation had been filed pro se in the U.S. Bankruptcy Court for the District
of Delaware by two former stockholders of Heartland Wireless Communications,
Inc., seeking to revoke the order of the bankruptcy court confirming our plan of
reorganization. The motion asserts that we procured the order confirming our
plan of reorganization by fraudulently undervaluing our enterprise value, and
seeks to set aside the order. We have filed a motion to dismiss the motion to
revoke, believe the motion to revoke is without merit and intend to vigorously
oppose the motion to revoke. Our motion to dismiss the motion to revoke is under
consideration by the bankruptcy court.

18
<PAGE> 22

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

MARKET INFORMATION

As discussed under "Reorganization," all shares of our common stock
outstanding as of the April 1, 1999, Effective Date of our plan of
reorganization were canceled and we issued 10,000,000 shares of common stock to
certain creditors. Beginning April 5, 1999, our newly issued common stock began
trading on the over-the-counter bulletin board quotation system under the symbol
"NCNX." On August 10, 1999, the common stock was approved for quotation on the
Nasdaq National Market, where it began trading on August 12, 1999, under the
symbol "NCNX."

The low and high bid prices of the common stock on the over-the-counter
bulletin board quotation system for the period April 5, 1999, through August 11,
1999, were as follows:

<TABLE>
<CAPTION>
LOW HIGH
------ ------
<S> <C> <C>
April 5, 1999 -- June 30, 1999.............................. $13.00 $39.25
July 1, 1999 -- August 11, 1999............................. $24.00 $30.25
</TABLE>

The low and high bid prices of the common stock as reported on the Nasdaq
National Market for the period August 12, 1999, through December 13, 1999, were
as follows:

<TABLE>
<CAPTION>
LOW HIGH
------ ------
<S> <C> <C>
August 12, 1999 -- September 30, 1999....................... $24.00 $28.13
October 1, 1999 -- December 13, 1999........................ $19.63 $25.88
</TABLE>

The last reported sale price of the common stock on the Nasdaq National
Market on December 13, 1999, was $24.75. In October 1998, our common stock,
traded under the symbol HART, was delisted from the Nasdaq National Market
because of our failure to maintain net tangible assets and bid price
requirements under the NASD Marketplace Rules. We have not provided market price
information for periods before April 5, 1999, because, as a result of our
reorganization, our capital structure and financial condition before the
Effective Date was substantially different than after the Effective Date. We
believe market price information prior to April 5, 1999, is not indicative of or
comparable to the value of our common stock after the Effective Date and is not
material to investors.

The current concentration of ownership of our common stock, the shares of
common stock currently eligible for future sale and our commitments for future
issuances of common stock, could adversely affect the market price of our common
stock. See "Risk Factors -- Concentration of ownership may affect corporate
actions and market price for common stock," "Risk Factors -- Shares eligible for
future sale may affect the market price for our common stock" and "Risk
Factors -- Commitments for future issuances of common stock create the potential
for dilution."

HOLDERS

The number of record holders of common stock as of December 1, 1999, was
approximately 9, although we believe there are over 1,000 beneficial owners of
our common stock.

DIVIDENDS

We do not intend to pay cash dividends in the foreseeable future. Our Board
of Directors may reexamine our dividend policy from time to time. However, if we
raise capital in the future through financings obtained from outside sources,
the terms of these financings may restrict or prohibit us from paying any
dividends on our common stock.

19
<PAGE> 23

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

The following table presents summary historical financial and other data
for Nucentrix. As a result of the application of Fresh Start Reporting,
financial information as of September 30, 1999, and for the period from the
Effective Date to September 30, 1999 (the "Successor Period"), is presented on a
different basis than the financial information as of and for each of the years
in the five year period ended December 31, 1998, for the nine months ended
September 30, 1998, and for the period from January 1, 1999, to the Effective
Date (collectively, the "Predecessor Period"). See "Reorganization." The
selected historical financial data presented below as of and for each of the
years in the five year period ended December 31, 1998, is derived from the
audited consolidated financial statements of Nucentrix. The selected historical
financial data presented below as of September 30, 1999, for the period from
January 1, 1999, to the Effective Date, the period from the Effective Date to
September 30, 1999, and for the nine months ended ended September 30, 1998, is
derived from unaudited consolidated financial statements of Nucentrix which, in
the opinion of management, include all adjustments, none of which were other
than normal recurring adjustments, necessary for a fair presentation of
financial position and results of operations for such periods. The financial
information for the period from January 1, 1999, to the Effective Date, the
period from the Effective Date to September 30, 1999, and for the nine months
ended September 30, 1998, is not necessarily indicative of the results of
operations for subsequent periods or a full fiscal year. Historically, we have
used our spectrum only to deliver subscription television services and,
therefore, our historical results are not necessarily indicative of our future
results as we implement our business strategy as described in "Business." You
should read the financial data below together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with Nucentrix's
consolidated financial statements, including the notes thereto, included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------------

YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 73,989 $ 78,792 $ 56,017 $ 15,300 $ 2,229
Operating expenses:
System operations.... 35,790 39,596 21,255 4,893 762
Selling, general and
administrative..... 36,367 42,255 42,435 11,887 4,183
Depreciation and
amortization(1)(2)... 39,550 65,112 39,323 6,234 1,098
Impairment of long-
lived assets(2).... 105,791 -- -- -- --
--------- --------- -------- -------- -------
Total operating
expenses............. 217,498 146,963 103,013 23,014 6,043
--------- --------- -------- -------- -------
Operating loss......... (143,509) (68,171) (46,996) (7,714) (3,814)
Interest income
(expense), net....... (34,436) (34,321) (18,166) (10,857) (210)
Equity in losses of
affiliates........... (30,340) (32,037) (18,612) (1,369) (387)
Other income
(expense)............ (10) (54) 4,981 (247) (227)
--------- --------- -------- -------- -------
Loss before
reorganization costs,
income taxes and
extraordinary item... (208,295) (134,583) (78,793) (20,187) (4,638)
Reorganization
costs(3)............. (3,266) -- -- -- --
--------- --------- -------- -------- -------
Loss before income
taxes and
extraordinary item... (211,561) (134,583) (78,793) (20,187) (4,638)
Income tax benefit..... -- -- 28,156 4,285 1,595
--------- --------- -------- -------- -------
Loss before
extraordinary item... (211,561) (134,583) (50,637) (15,902) (3,043)
Extraordinary item..... -- -- 10,424 -- --
--------- --------- -------- -------- -------
Net income (loss)...... $(211,561) $(134,583) $(61,061) $(15,902) $(3,043)
========= ========= ======== ======== =======
Net loss per new common
share -- basic and
diluted(4)........... N/A N/A N/A N/A N/A
========= ========= ======== ======== =======

<CAPTION>
SUCCESSOR PREDECESSOR
----------------- ----------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
EFFECTIVE DATE TO JANUARY 1, 1999, ENDED
SEPTEMBER 30, TO SEPTEMBER 30,
1999 EFFECTIVE DATE 1998
----------------- ------------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 33,388 $ 18,086 $ 55,934
Operating expenses:
System operations.... 16,229 8,599 27,071
Selling, general and
administrative..... 17,246 9,156 27,774
Depreciation and
amortization(1)(2)... 11,528 5,953 34,681
Impairment of long-
lived assets(2).... -- -- 105,791
-------- -------- ---------
Total operating
expenses............. 45,003 23,708 195,317
-------- -------- ---------
Operating loss......... (11,615) (5,622) (139,383)
Interest income
(expense), net....... 163 102 (27,868)
Equity in losses of
affiliates........... -- -- (30,340)
Other income
(expense)............ 521 2 (10)
-------- -------- ---------
Loss before
reorganization costs,
income taxes and
extraordinary item... (10,931) (5,518) (197,601)
Reorganization
costs(3)............. (602) (2,311) (1,242)
-------- -------- ---------
Loss before income
taxes and
extraordinary item... (11,533) (7,829) (198,843)
Income tax benefit..... -- -- --
-------- -------- ---------
Loss before
extraordinary item... (11,533) (7,829) (198,843)
Extraordinary item..... -- 173,783 --
-------- -------- ---------
Net income (loss)...... $(11,533) $165,954 $(198,843)
======== ======== =========
Net loss per new common
share -- basic and
diluted(4)........... $ (1.15) N/A N/A
======== ======== =========
</TABLE>

20
<PAGE> 24

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
--------------------------------------------------- -----------------
PERIOD FROM
YEAR ENDED DECEMBER 31, EFFECTIVE DATE TO
--------------------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995 1994 1999
------- -------- -------- -------- -------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(5)................ $ 1,832 $ (3,059) $ (7,673) $ (1,480) $ (2,716) $ (87)
Net cash provided by
(used in) operating
activities............. (8,377) (41,646) (22,754) (6,474) 711 (91)
Net cash provided by
(used in) investing
activities............. (2,038) 6,826 (34,169) (96,703) (46,500) (3,660)
Net cash provided by
(used in) financing
activities............. (1,730) (1,955) 113,376 114,334 56,960 115
Capital Expenditures..... 13,473 29,712 95,680 46,034 15,769 3,818

<CAPTION>
PREDECESSOR
-----------------------------------
PERIOD FROM NINE MONTHS
JANUARY 1, 1999, TO ENDED
EFFECTIVE SEPTEMBER 30,
DATE 1998
------------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OTHER DATA:
EBITDA(5)................ $ 331 $ 1,089
Net cash provided by
(used in) operating
activities............. (98) (5,655)
Net cash provided by
(used in) investing
activities............. (2,412) (1,471)
Net cash provided by
(used in) financing
activities............. (576) (1,100)
Capital Expenditures..... 2,550 10,438
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
---------------------------------------------------- -------------------
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------- -------------------
1998 1997 1996 1995 1994 1999
--------- -------- -------- -------- ------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents......... $ 30,676 $ 42,821 $ 79,596 $ 23,143 $11,986 $ 23,954
Restricted assets..... 1,011 10,333 30,007 18,739 -- 626
System and equipment,
net................. 61,037 122,653 145,797 60,649 16,765 53,101
License and leased
license investment,
net................. 79,703 123,369 129,725 60,421 16,740 74,868
Total assets.......... 186,032 372,134 515,364 205,405 77,921 163,917
Long-term debt,
including current
portion............. 16,277 308,196 303,538 141,652 40,506 14,760
Liabilities subject to
compromise(3)....... 322,781 -- -- -- -- --
Total stockholders'
equity (deficit).... (165,090) 46,408 180,847 51,688 30,081 135,520

<S> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.........
Restricted assets.....
System and equipment,
net.................
License and leased
license investment,
net.................
Total assets..........
Long-term debt,
including current
portion.............
Liabilities subject to
compromise(3).......
Total stockholders'
equity (deficit)....
</TABLE>

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

(1) We changed the useful lives for depreciating the nonrecoverable portion of
subscriber installation costs in 1997 and 1996, and for amortizing license
and leased license costs and excess of cost over fair value of net assets
acquired in 1996. See Notes 1(g), 1(h) and 1(i) to the consolidated
financial statements.

(2) During the second and third quarters of 1998, in accordance with SFAS No.
121, we wrote down channel licenses and leases, systems and equipment and
other long-lived assets to estimated fair value, which resulted in a
non-cash impairment charge of $105.8 million. See Note 3 to the consolidated
financial statements.

(3) We filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code on December 4, 1998. Our plan of reorganization was
confirmed on March 15, 1999, and became effective on April 1, 1999.
Accordingly, we have reclassified our Old Senior Notes and Old Convertible
Notes, which were subject to compromise in the reorganization, to
"Liabilities Subject to Compromise" at December 31, 1998. See Note 8 to the
consolidated financial statements. Expenses related to our reorganization,
such as professional fees and administrative expenses, are classified as
"Reorganization costs."

(4) Loss per basic and dilutive common share for each period presented has been
calculated using the provisions of SFAS No. 128, "Earnings per Share," which
is effective for periods ending after December 15, 1997, and requires
restatement of all prior period loss per share data. Earnings per share
information has not been presented for the Predecessor Period because
Nucentrix was recapitalized on the Effective Date, in connection with the
plan of reorganization, and accordingly, per share amounts are not
comparable between the Predecessor Period and the Successor Period. See Note
1(n) to the consolidated financial statements.

(5) "EBITDA" represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness.
However, EBITDA is not a financial measure determined under generally
accepted accounting principles and should not be considered as an
alternative to net income as a measure of operating results or to cash flows
as a measure of funds available for discretionary or other liquidity
purposes. EBITDA may be calculated differently from company to company.

21
<PAGE> 25

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

OVERVIEW

Our business strategy is to provide wireless broadband network services
using our high-capacity radio spectrum in medium and small markets. We presently
offer high-speed Internet access under temporary developmental FCC licenses in
two of our 87 markets. We launched our first such Internet market,
Sherman-Denison, Texas, in June 1998 followed by our second market, Austin,
Texas, in May 1999.

Historically, we have used our spectrum to provide subscription television
services. Our business strategy contemplates limited, if any, growth of this
business which, coupled with anticipated improvements in operating costs, we
expect should provide enough revenues to cover substantially all operating costs
of the subscription television business (excluding certain unallocated corporate
overhead) while we develop and expand other wireless broadband businesses. Our
historical results are not necessarily indicative of our future results as we
implement our business strategy as described in "Business -- Business Strategy."

Reorganization. On April 1, 1999, we consummated a plan of reorganization
to convert, among other things, approximately $325 million of senior and
subordinated debt and accrued interest into common stock. See "Reorganization."

Revenues. Our revenues currently consist primarily of monthly fees paid by
wireless cable subscribers for basic programming, premium programming equipment,
rental and other miscellaneous fees, as well as fees generated from start-up
Internet operations in Austin and Sherman-Denison. Unless the context requires
otherwise, all references to "subscribers" or "systems" are to our wireless
cable subscribers and systems.

System Operations Expenses. System operations expenses include wireless
cable programming costs, channel lease payments, labor and overhead, costs of
service calls and churn, transmitter site and tower rentals and certain repairs
and maintenance expenditures. Programming costs, with the exception of minimum
payments, and channel lease payments, with the exception of certain fixed
payments, are variable expenses based on the number of subscribers.

Depreciation and Amortization Expense. Depreciation and amortization
expense includes depreciation of systems and equipment, amortization of license
and leased license investment and amortization of the excess of cost over fair
value of net assets acquired. Our policy is to capitalize the excess of direct
costs of subscriber installations over installation fees. These direct costs
include reception materials and equipment on subscriber premises and
installation labor and, prior to 1998, certain overhead charges and direct
commissions. These direct costs are capitalized as systems and equipment in the
condensed consolidated balance sheet included elsewhere in this prospectus.

EBITDA. EBITDA, or earnings before interest, taxes, depreciation and
amortization, is widely used by analysts, investors and other interested parties
in the Internet, cable television and telecommunication industries. EBITDA is
also widely accepted as a financial indicator of a company's ability to incur
and service indebtedness. EBITDA is not a financial measure determined by
generally accepted accounting principles and should not be considered an
alternative to net income as a measure of operating results or to cash flows as
a measure of funds available for discretionary or other liquidity purposes.
EBITDA may not be comparably calculated from one company to another.

22
<PAGE> 26

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1998

As a result of the application of Fresh Start Reporting, financial
information in the accompanying unaudited condensed consolidated financial
statements as of September 30, 1999, and for the period from the Effective Date
to September 30, 1999 (the "Successor Period"), is presented on a different
basis than the financial information as of December 31, 1998, for the nine
months ended September 30, 1998, and for the period January 1, 1999, to the
Effective Date (collectively, the "Predecessor Period"). Accordingly, such
information is not comparable. However, for purposes of comparison discussions
below, the nine months ended September 30, 1999, represents the combined amounts
for the period January 1, 1999, through the Effective Date and the period from
the Effective Date through September 30, 1999. The Predecessor Period includes
operations through March 31, 1999, plus the gain on debt forgiveness recognized
on the Effective Date. The Successor Period includes operations for the
Effective Date through September 30, 1999. The most significant impact of Fresh
Start Reporting on our operating results is decreased depreciation, amortization
and interest expense.

Revenues. Our revenues for the nine months ended September 30, 1999, were
$51.5 million, compared to $55.9 million for the nine months ended September 30,
1998. At September 30, 1999, we had approximately 154,000 subscribers, compared
to approximately 167,000 subscribers at September 30, 1998. Although we believe
we continue to attract a higher quality of subscribers, the number of
subscribers has declined since the third quarter of 1998 due to:

- our first system-wide price increase in the fourth quarter of 1998,

- decreased marketing of MMDS subscription television services and overall
increased competition for cable television services, and

- loss of subscribers in Austin in the second quarter of 1999 as a result
of a technology conversion that caused some existing subscribers to fall
outside of the coverage range of the new technology.

Average monthly recurring revenue per subscriber was $33.75 for the nine
months ended September 30, 1999, compared to $33.78 for the same period last
year. Year-to-date average revenue per subscriber was essentially flat compared
to the same period last year, as the increases caused by a greater percentage of
customers purchasing premium services was offset by a higher proportion of
DIRECTV customers. Internet service revenues for the nine months ended September
30, 1999, were not material.

System Operations Expense. System operations expense for the nine months
ended September 30, 1999, was $24.8 million, or 48.2% of revenues, compared to
$27.1 million, or 48.4% of revenues, for nine months ended September 30, 1998.
The decrease in system operations expense was primarily due to lower programming
costs and lower service call expense as a result of fewer subscribers and a
larger proportion of DIRECTV subscribers, which have lower programming costs. In
addition, disconnect expense was reduced as average monthly churn decreased to
3.1% for the nine months ended September 30, 1999, compared to 3.5% for the nine
months ended September 30, 1998.

Selling, General and Administrative (SG&A) Expense. Selling, general and
administrative expense for the nine months ended September 30, 1999, decreased
to $26.4 million, or 51.3% of revenues, from $27.8 million, or 49.7% of
revenues, for the nine months ended September 30, 1998. SG&A expense for the
nine months ended September 30, 1999, included $1.0 million in costs associated
with our Internet operations, which primarily included labor and marketing
expenses incurred to launch the Austin and Sherman-Denison markets. Excluding
Internet costs and revenues, SG&A would have been 49.3% of revenues for the nine
months ended September 30, 1999. SG&A expense decreased for the nine months
ended September 30, 1999, due to decreased marketing costs and savings from
consolidation of certain market offices and management, slightly offset by
increased expenditures to improve service at our customer care center and
start-up costs for the Internet service business.

Depreciation and Amortization. Depreciation and amortization expense was
$17.5 million for the nine months ended September 30, 1999, compared to $34.7
million for the nine months ended September 30,

23
<PAGE> 27

1998. The decrease was due to a write down of certain long-lived assets to
estimated fair market value during 1998 in accordance with Statement of
Financial Accounting Standards No. 121.

Operating Loss. We generated operating losses of $17.2 million for the nine
months ended September 30, 1999, compared to $139.4 million for the nine months
ended September 30, 1998. Excluding the write-down of long-lived assets to
estimated fair market value in the second and third quarters of 1998, operating
loss for the nine months ended September 30, 1999, improved $16.3 million from
the prior year. This was primarily due to lower programming costs, as well as
lower depreciation expense resulting from the write-down of long-lived assets
during 1998, partially offset by the decrease in revenues between periods.
Consolidated EBITDA, excluding the impairment of long-lived assets charge
recorded in 1998, was $244,000 for the nine months ended September 30, 1999, as
compared to $1.1 million for the nine months ended September 30, 1998. EBITDA
decreased during the 1999 nine-month period presented due to lower revenues
resulting from fewer subscription television subscribers and higher SG&A
expenses related to the launch of our Internet operations.

Interest Income. Interest income was $1.2 million during the nine months
ended September 30, 1999, compared to $2.1 million for the nine months ended
September 30, 1998. The decrease in interest income was due to higher interest
earnings in the first quarter of 1998 on larger escrowed balances segregated for
the payment of interest on the Old Senior Notes, which were paid in April 1998,
combined with lower overall cash balances in the current year due to payment of
reorganization costs.

Interest Expense. Interest expense was $902,000 during the nine months
ended September 30, 1999, compared to $30.0 million during the nine months ended
September 30, 1998. Interest expense decreased in 1999 because we discontinued
the accrual of interest and the amortization of deferred debt issuance costs on
our Old Senior Notes and Old Convertible Notes upon filing the voluntary
petition under Chapter 11 of the U.S. Bankruptcy Code on December 4, 1998. See
"Reorganization." If interest had continued to be accrued, total interest
expense would have been $12.6 million for the period from January 1, 1999,
through the Effective Date.

Equity in Losses of Affiliates. We had equity in losses of affiliates of
$30.3 million for the nine months ended September 30, 1998, and zero during the
nine months ended September 30, 1999. During the nine months ended September 30,
1998, we owned approximately 20% of the outstanding common stock of Wireless
One, Inc. and approximately 36% of the outstanding common stock of CS Wireless
Systems, Inc. Losses recorded in prior years for Wireless One reduced our
investment balance to zero in November 1997. During the nine months ended
September 30, 1998, we wrote off $6.8 million of our excess cost in CS Wireless
and our remaining investment balance of $11.7 million based on losses incurred
by CS Wireless. In December 1998 we sold our 36% equity interest in CS Wireless
to CAI Wireless Systems, Inc. Accordingly, no losses from affiliates were
recorded in the nine months ended September 30, 1999. See "Business -- Recent
Transactions -- CS Wireless Transaction."

Other Income/Expense. Other income increased during the nine months ended
September 30, 1999, over the nine months ended September 30, 1998, as a result
of cash settlements from certain litigation matters.

Reorganization Costs. During the nine months ended September 30, 1999, we
incurred $2.9 million in expenses related to our reorganization under Chapter 11
of the U.S. Bankruptcy Code. These costs were for financial and legal advisors,
accountants and administrative costs. See "Reorganization."

Gain on Debt Forgiveness. In connection with our reorganization under
Chapter 11, on the Effective Date we recorded an extraordinary gain of
approximately $174 million reflecting the extinguishment of liabilities subject
to compromise in exchange for common stock and warrants. Upon consummation of
our plan of reorganization on April 1, 1999, our Old Senior Notes and Old
Convertible Notes totaling approximately $318.0 million, including the interest
accrued thereon and associated unamortized discounts and debt issuance costs,
were canceled and exchanged for 10 million shares of newly-issued common stock
and warrants to acquire 825,000 shares of common stock, with a combined
estimated fair value of $144.2 million as of the Effective Date. This
extraordinary gain is not taxable to us pursuant to Federal

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<PAGE> 28

income tax law because it arose in connection with our recapitalization under
Chapter 11 of the U.S. Bankruptcy Code. It will, however, result in a permanent
Tax Attribute Reduction. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Effects of Reorganization."

Net Loss. We have recorded net losses since our inception. Excluding the
extraordinary gain on debt forgiveness discussed above, we incurred a net loss
of $7.8 million for the period from January 1, 1999 to the Effective Date and a
net loss of $11.5 million for the period from the Effective Date to September
30, 1999. For the nine months ended September 30, 1998, we incurred a net loss
of $198.8 million. The improvement in net loss resulted primarily from lower
depreciation expense related to the nonrecurring impairment charges, lower
interest expense due to the cancellation of approximately $318.0 million in debt
in our financial restructuring, cost savings from consolidation of certain
market offices and management, and decreased video marketing expenses. Earnings
per share information has not been presented for the Predecessor period as the
Company was recapitalized on the Effective Date, in connection with our plan of
reorganization, and accordingly, per share amounts are not comparable between
the Predecessor period and the Successor period.

RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1998

Revenues. Our revenues were $74.0 million in 1998, $78.8 million in 1997
and $56.0 million in 1996, representing a 6% decrease in 1998 from 1997 and a
41% increase in 1997 from 1996. The decrease in revenues in 1998 was due
primarily to a decrease in average subscribers from 184,000 in 1997 to 170,000
in 1998. This decline in subscribers resulted from:

- stricter credit policies for approving new customers which, although
contributing to a decline in revenues, reduced churn and bad debt
expense,

- slower than anticipated sales force hirings,

- the delayed launch of our marketing plan for our combined DIRECTV
offerings until the third quarter of 1998,

- an increase as of January 1, 1998, and November 1, 1998, in our
equivalent basic unit or "EBU" conversion rate for calculating MDU
subscribers, and

- the transfer of one operating system, and its associated revenues, to CS
Wireless in December 1997.

Although total revenues and subscribers decreased from 1997 to 1998,
average monthly recurring revenue per subscriber increased to $33.95 in 1998,
from $33.52 in 1997 and $30.22 in 1996. This was due to a greater percentage of
our subscribers purchasing premium packages and pay-per-view services at higher
average subscription rates as lower-priced wireless cable packages were replaced
with upgraded offerings. At December 31, 1998, we had approximately 160,000
subscribers compared with approximately 187,000 at December 31, 1997, and
approximately 181,000 at December 31, 1996. We had 57 operating systems at
December 31, 1998, compared to 58 at December 31, 1997, and 54 at December 31,
1996.

The increase in revenues in 1997 from 1996 was primarily due to the
acquisition or launch of 20 net new operating systems during 1996, which had a
full year of operating results in 1997. We also were able to add and retain
subscribers at overall higher subscription rates, and we received increased
revenues for premium services from customers retained after the expiration of
certain free-service promotions.

System Operations Expense. System operations expenses were $35.8 million,
$39.6 million and $21.3 million for the years ended December 31, 1998, 1997 and
1996, respectively. As a percentage of revenues, system operations expenses were
48% in 1998, 50% in 1997 and 38% in 1996. The decrease in system operations
expense in 1998 from 1997 was due primarily to lower programming costs as a
percent of revenues as more subscribers migrated to our combination DIRECTV/MMDS
offering which has lower programming costs or to our DIRECTV-only offering which
has no programming costs. This decrease was

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<PAGE> 29

slightly offset by programming rate increases from certain providers. In
addition, compared to 1998, we experienced higher service call and disconnect
expense during 1997 due to:

- installation corrections at certain subscriber households,

- recovery of equipment from disconnected subscribers, and

- higher churn in 1997.

System operations expenses increased in 1997 from 1996 due primarily to:

- increased programming costs resulting from expanded channel offerings in
certain markets,

- the promotion of special programming packages which carried lower margins
than our basic programming package,

- higher overall programming rates,

- increased service call expense related to installation corrections, and

- a significant increase in labor and overhead expense related to our
attempts to recover equipment from disconnected subscribers.

Selling, General and Administrative Expense. Selling, general and
administrative expense was $36.4 million in 1998, $42.3 million in 1997 and
$42.4 million in 1996. As a percent of revenues, selling, general and
administrative expense was 49% for 1998, 54% for 1997 and 76% for 1996. The
decrease in selling, general and administrative expense since 1996 was due to:

- lower bad debt expense resulting from improved credit screening and
collections procedures, and

- labor savings and efficiencies realized from field operational
improvements and consolidation of management and staff in certain
markets.

Depreciation and Amortization. Depreciation and amortization expense was
$39.6 million in 1998, $65.1 million in 1997 and $39.3 million in 1996. The
substantially higher depreciation and amortization expense in 1997 compared to
1996 and 1998 is partially due to a nonrecurring charge to depreciation expense
of $9.0 million during the third quarter of 1997. This charge was comprised of
three components:

- $6.1 million related to the third quarter 1997 write-off of equipment not
recovered from subscriber homes,

- $1.7 million related to the write-off of obsolete subscriber equipment
that was not available for future use, and

- $1.2 million related to the effects of a reduction in the estimated
useful life of the nonrecoverable portion of subscriber installation
costs from four years in 1996 to three years in the third quarter of
1997.

Depreciation and amortization expense also increased in 1997 from 1996 as
we began amortizing the cost of the BTAs that were acquired in December 1996.

In addition to the reasons outlined above, depreciation and amortization
decreased in 1998 compared to 1997 as the carrying value of certain assets were
reduced by:

- an impairment charge of $17.7 million to writedown the carrying value of
our undeveloped licenses to estimated fair market value during the second
quarter of 1998,

- an impairment charge of $6.8 million to reduce our excess basis in our
36% equity interest in CS Wireless during the second quarter of 1998,

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<PAGE> 30

- an impairment charge of $18.9 million to write down the carrying value of
our operating licenses and leased license investments to estimated fair
market value during the third quarter of 1998,

- an impairment charge of $44.5 million to write down the carrying value of
our systems and equipment to estimated fair market value during the third
quarter of 1998, and

- an impairment charge of $24.7 million to write down the carrying value of
our excess of cost over fair value to estimated fair market value during
the third quarter of 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations
for the Three Years Ended December 31, 1998 -- Impairment of Long-Lived
Assets" below.

The amortization periods related to the nonrecoverable portion of
installation costs for new subscribers over the periods presented reflect our
best estimates of the expected useful lives of such costs at the time of
implementation. Our original estimate of six years was based in part on the
assumption that a primarily rural operating strategy could contribute to
subscription terms that were significantly higher than the hard-wire industry,
because of a perceived higher degree of stability, lower amounts of transiency
and less competition for multichannel video programming alternatives in a rural
subscriber base. In the fourth quarter of 1996, we reassessed our policy and
determined, in light of increased disconnect rates in 1996, to reduce our
estimate of useful lives to four years. In the third quarter of 1997, we again
reassessed our estimate of useful lives and reduced our estimate to three years.
We based this reduction primarily on cumulative results of operation through
September 30, 1997, that indicated a lower than anticipated retention rate of
subscribers in markets where we offered 20 channels or less and in markets where
prior promotional campaigns had begun to expire. A three-year useful life is the
equivalent of a 2.8% churn rate. We currently believe that a consolidated
monthly churn rate of 2.8% to 3.0% can be achieved and maintained in our
existing markets.

Impairment of Long-Lived Assets. We continually review components of our
business for possible impairment of assets based on, among other things, changes
in technology, competition, consumer habits and business climate. We adopted
SFAS No. 121 effective January 1, 1996. SFAS No. 121 addresses the accounting
for impairment of long-lived assets to be disposed of and certain identifiable
intangibles and goodwill related to those assets, provides guidelines for
recognizing and measuring impairment losses, and requires that the carrying
amount of impaired assets be reduced to estimated fair value.

During the second quarter of 1998, we reviewed the assets associated with
certain undeveloped markets including certain of the markets listed in the table
in "Business -- Existing and Unconstructed Markets" and concluded that:

- cash flows from operations would not be adequate to fund the capital
outlay required to build out such markets, and

- because of our default on our interest payment on the 13% Old Senior
Notes in the second quarter of 1998, outside financing for the build-out
of these markets was not readily available prior to the consummation of a
financial restructuring.

Therefore, in accordance with SFAS No. 121, the channel licenses and leases
in these undeveloped markets were individually evaluated and written down to
estimated fair value, resulting in a non-cash impairment charge of $17.7 million
in the second quarter of 1998.

Throughout the second and third quarters of 1998, we analyzed various
recapitalization and restructuring alternatives with the assistance of our
financial advisors, Wasserstein Perella and Co., Inc., including consensual,
out-of-court alternatives. In October 1998, we announced that we intended to
pursue a prenegotiated plan of reorganization by filing a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code. This event caused us to evaluate
all of our long-lived assets for impairment, according to the requirements of
SFAS No. 121 and to write those assets down to fair market value. We retained
the services of another third party to assist in performing the allocation of
fair market value. This resulted in a non-cash impairment charge of $88.1
million for the third quarter of 1998. The impairment

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<PAGE> 31

included write-downs of systems and equipment in the amount of $44.5 million,
license and leased license investment in the amount of $18.9 million and the
excess of cost over fair value in the amount of $24.7 million.

Operating Loss. We generated operating losses of $143.5 million, $68.2
million and $47.0 million for the years ended December 31, 1998, 1997 and 1996,
respectively.

Interest Income. Interest income was $2.7 million in 1998, $5.5 million in
1997 and $3.8 million in 1996. The increase in interest income from 1996 to 1997
was due to higher interest earned on notes receivable and average cash and cash
equivalents subsequent to the receipt of approximately $53.3 million in cash
related to the formation of CS Wireless in February 1996 and the issuance of
$125.0 million of the Old 14% Notes in December 1996.

Interest income decreased from 1997 to 1998 due to higher interest earnings
during 1997 on larger escrowed balances segregated for the payment of interest
on the Old Senior Notes and higher interest earnings on a note receivable that
was partially repaid during the second and third quarters of 1997.

Interest Expense. We incurred interest expense of $37.1 million in 1998,
$39.9 million in 1997 and $22.0 million in 1996. The increase in interest
expense from 1996 to 1997 was due to increases in borrowed funds. Average
borrowings increased from $176.0 million during 1996 to $307.0 million during
1997. Interest expense during the periods presented consisted primarily of:

- non-cash interest related to the Old Convertible Notes,

- interest on our Old 13% Notes issued March 1995,

- interest on our Old 14% Notes issued December 1996,

- interest related to a short-term senior secured credit facility repaid in
December 1996, and

- interest on debt incurred in conjunction with the BTA auction.

The slight decrease in interest expense from 1997 to 1998 resulted from our
filing of a voluntary petition for relief under Chapter 11 of the U.S.
Bankruptcy Code on December 4, 1998, at which time interest ceased to accrue on
the impaired debt (the Old Convertible Notes and the Old Senior Notes). See
"Reorganization." If interest had continued to be accrued, total interest
expense would have been $39.9 million for the year ended December 31, 1998.

Equity in Losses of Affiliates. During 1996, 1997 and part of 1998, we
owned approximately 36% of the outstanding common stock of CS Wireless, which we
acquired on February 23, 1996, and 20% of the outstanding common stock of
Wireless One, which we acquired in October 1995. We had equity in losses of
affiliates of $30.3 million in 1998, $32.0 million in 1997 and $18.6 million in
1996. The increase in losses from affiliates from 1996 to 1997 reflects actual
higher net losses incurred by CS Wireless and Wireless One during 1997. Losses
recorded for Wireless One reduced our investment balance to zero in November
1997. During the second quarter of 1998 we wrote off $6.8 million of our excess
basis in CS Wireless, and during the third quarter of 1998 we wrote off $11.7
million of our remaining investment in CS Wireless after learning in the third
quarter of 1998 that CS Wireless had recorded an asset impairment charge on its
financial statements of $46 million related to goodwill. In December 1998 we
sold our 36% equity interest in CS Wireless to CAI Wireless. See
"Business -- Recent Transactions."

Income Tax Benefit. At December 31, 1998, we had an estimated $324 million
net operating loss carry forward for income tax purposes. No income tax benefit
was recorded for the years ended December 31, 1997 and 1998. As discussed more
fully in Note 11 of the notes to the consolidated financial statements, we
recognized income tax benefits related to our losses before income taxes and
extraordinary items of $28.2 million for 1996.

Reorganization Costs. During 1998, we incurred $3.3 million in expenses
related to our plan of reorganization under Chapter 11 of the U.S. Bankruptcy
Code. See "Reorganization." These costs are for

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<PAGE> 32

services of financial and legal advisors, accountants and other consultants as
well as printing and mailing costs for documents relating to the plan of
reorganization.

Extraordinary Item. In December 1996, we recognized an extraordinary loss
of $11.5 million, net of tax of $1.1 million. This extraordinary loss resulted
from a substantive modification of the terms of the Old 13% Notes upon the
issuance of the Old 14% Notes. For financial reporting purposes, the Old 13%
Notes were treated as extinguished and reissued at their fair market value upon
the sale of the Old 14% Notes. The extraordinary loss is comprised of the
associated write-off of $5.3 million debt issuance costs related to the Old 13%
Notes, the consent payments of $6.9 million, the decrease in the Old 13% Notes
by $1.1 million to reflect their estimated fair value and other costs of
$400,000.

Net Loss. We have recorded net losses since our inception. We incurred net
losses of $211.6 million, or $10.72 per basic and diluted common share, during
1998, $134.6 million or $6.85 per basic and diluted common share, during 1997
and $61.1 million, or $3.31 per basic and diluted common share, during 1996.

BALANCE SHEET AS OF DECEMBER 31, 1998, COMPARED TO THE BALANCE SHEET AS OF
DECEMBER 31, 1997

Investment in Affiliates. As discussed above, we wrote off $18.5 million of
our investment in CS Wireless during the second and third quarters of 1998,
including $6.8 million of goodwill representing our basis in excess of its
equity in the net assets of CS Wireless, and $11.7 million of our share of asset
impairment charges recorded by CS Wireless, thus reducing its investment balance
to zero. In December 1998, we sold our investment in CS Wireless to CAI
Wireless. See "Business -- Recent Transactions" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations for the Three Years Ended December 31, 1998 -- Equity in Losses of
Affiliates."

Long-Lived Assets (Systems and Equipment, License and Leased License
Investment and Excess of Cost Over Fair Value of Net Assets Acquired). As
previously discussed, in accordance with the requirements of SFAS No. 121, we
evaluated all of our long-lived assets for impairment during the second and
third quarters of 1998. Based upon the results of a fair market valuation
performed by a third party, we recorded non-cash impairment charges of $105.8
million during 1998. The impairments included write-downs of systems and
equipment ($44.5 million), license and leased license investment ($36.6 million)
and the excess of cost over fair value of net assets acquired ($24.7 million).

CHANGES IN METHOD FOR REPORTING SUBSCRIBERS

Periodically, we may implement price increases or create new program
offerings that upgrade our basic program price structure. Upon such occurrence
we also may update our methodology for reporting subscribers in MDUs who are
billed in bulk to the MDU owner. These "bulk" MDU subscribers are converted to
SFU subscribers for reporting purposes using an equivalent basic unit ("EBU")
rate that corresponds to our most utilized current pricing tier for basic
programming for SFU subscribers. This rate is divided into the total revenue
from bulk subscribers to get an "equivalent" number of subscribers for reporting
purposes. Consequently, when this rate is increased, the number of equivalent
subscribers will change and normally decrease. The following EBU rate revisions
occurred during the periods presented herein:

- at December 31, 1996, our EBU rate of $9.05 was increased to $17.95. This
resulted in a decrease of 26,300 reported subscribers,

- effective March 31, 1998, our EBU rate was increased to $24.99, resulting
in a decrease of approximately 4,000 reported subscribers, and

- on November 1, 1998, in conjunction with our first system-wide price
increase, the EBU rate was increased to $26.99, resulting in a decrease
of approximately 600 reported subscribers.

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LIQUIDITY AND CAPITAL RESOURCES

The wireless broadband network business is capital-intensive. Since
inception, we have spent funds to lease or otherwise acquire MMDS channel rights
in various markets and operating systems, to construct operating systems and to
finance initial system operating losses. Our primary sources of capital have
been subscription fees, debt financing, the sale of common stock and the sale of
MMDS channel rights that were not essential to our business strategy. The
approval by the FCC of the use of MMDS spectrum for digital two-way
communications services allows us to use our spectrum to provide wireless
broadband services such as high-speed Internet access services, VoIP and
wireless local loop services. The growth of our business by using our spectrum
to provide two-way communications services will require substantial investment
in capital expenditures for the development and launch of wireless broadband
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Future Cash Requirements," "Business -- Business
Strategy" and "Business -- Government Regulation."

We used cash in operations of $189,000 during the nine months ended
September 30, 1999, compared to cash used in operations of $5.7 million during
the nine months ended September 30, 1998. During the second quarter of 1998, we
paid $8.8 million in interest on our Old Senior Notes. No interest was paid on
these notes after that time, as we discontinued accruing interest on our Old
Senior Notes when we filed our bankruptcy petition on December 4, 1998. The debt
was discharged effective April 1, 1999, upon confirmation of our plan of
reorganization. In addition, we received approximately $700,000 in settlement of
certain litigation matters. This increase in cash provided by operations was
partially offset by an increase in cash paid of $1.9 million for reorganization
costs and lower revenues resulting from fewer subscribers in 1999, net of
savings from lower programming costs. Cash used in operations was $8.4 million
in 1998, $41.6 million in 1997 and $22.8 million in 1996. The reduction in cash
used in operations in 1998 compared to 1997 was primarily due to:

- nonpayment in 1998 of accrued interest on the Old Senior Notes,

- lower programming costs as a result of fewer subscribers,

- improved subscriber receivable collection experience, and

- labor savings and efficiencies at the market level.

These reductions in cash used in operations were partially offset by lower
revenues. The increase in cash used in operations in 1997 compared to 1996 was
primarily due to increased systems operations expense due to increased
subscribers and interest expense, partially offset by a 41% increase in
revenues.

Cash used in investing activities increased to $6.1 million during the nine
months ended September 30, 1999, from $1.5 million during the same period in
1998. Cash provided by investing activities during 1998 included $8.7 million
from the sale of debt securities held in our escrow account for payment of
interest on our Old Senior Notes. Cash used for the purchase of systems and
equipment decreased $4.1 million during the none months ended September 30,
1999, due to fewer subscriber installs in 1999 as well as tower equipment
purchases in 1998 related to channel construction in certain markets. Cash used
in investing activities was $2.0 million in 1998 and $34.2 million in 1996. Cash
provided by investing activities was $6.8 million in 1997. Cash provided by/used
in investing activities principally relates to the construction of additional
operating systems, the acquisition and installation of subscriber equipment, the
upgrade of transmission equipment in certain markets and the acquisition of
wireless cable channel rights and operating systems, partially offset by the
sale of wireless cable channel rights that are not a part of our strategic plan.
During 1998 cash used by investing activities included the sale of debt
securities held in our escrow account for payment of interest on the Old 14%
Notes, the sale of our equity interest in CS Wireless for $1.5 million,
purchases of subscriber equipment, the upgrade of transmission equipment and
purchases of new equipment for additional channels authorized by the FCC in
certain markets. During 1997, investing activities included receipt of
approximately $15.0 million in cash for payment on a note receivable from CS
Wireless, $3.5 million in cash from the sale of a partial interest in

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our investment in a Mexican wireless cable company, sales of debt securities
totaling $19.9 million, and the acquisition of two operating systems in Oklahoma
for $1.6 million.

Our purchases of systems and equipment decreased from 1996 to 1997 due to
(1) the launch of 16 systems during 1996 compared to two systems in 1997, (2)
our acquisition of the Champaign, Illinois and Gainesville, Texas operating
systems and (3) payments related to the BTA auction and out-of-pocket expenses
related to the acquisition of the businesses of CableMaxx, Inc. and American
Wireless Systems, Inc., assets of Fort Worth Wireless Cable TV Associates,
Wireless Cable T.V. Associates #38 and certain of the wireless cable television
assets of Three Sixty Corp., formerly Technivision, Inc. (collectively, the
"CableMaxx Acquisitions"). These uses of cash were partially offset by the
receipt of approximately $58.3 million in cash from CS Wireless in connection
with our contribution of wireless cable assets to CS Wireless, and sale of
wireless cable channel rights in Tennessee, California, Texas, Illinois and
Georgia for total proceeds of approximately $23.8 million.

Cash used in financing activities was $461,000 during the nine months ended
September 30, 1999 and $1.1 million in the nine months ended September 30, 1998.
Cash used in 1998 was for principal payments on capital lease obligations and
other notes payable, several of which have been fully repaid. Payments on
long-term debt in 1999 represent principal payments on our BTA debt, which
commenced in the fourth quarter of 1998. Current year debt payments were largely
offset by $1.1 million in cash proceeds from the exercise of employee stock
options. Net cash used in financing activities was $1.7 million in 1998 and $2.0
million in 1997. Net cash provided by financing activities was $113.4 million in
1996. Cash used during 1998 and 1997 was primarily for principal payments on
obligations related to capital leases and various prior period cable system
acquisitions. As discussed more fully in Notes 7 and 9 of the notes to the
consolidated financial statements, cash provided by financing activities during
1996 includes the net proceeds from the sale of $125 million of the Old 14%
Notes and $15.0 million of the Old 13% Notes, partially offset by payments on
long-term debt assumed in the CableMaxx Acquisitions and the repayment of
certain short-term borrowings.

At December 1, 1999, we had approximately $23.0 million of unrestricted
cash and cash equivalents and $650,000 in restricted cash representing
collateral securing various outstanding letters of credit to certain of our
vendors.

FUTURE CASH REQUIREMENTS

Our goal is to become a leading provider of wireless broadband network
services in our markets. To implement our business strategy we intend to:

- launch high-speed Internet access service to medium-sized and small
businesses in 18 additional markets by the end of 2001,

- increase our geographic scope for wireless broadband network services by
acquisitions or business combinations,

- offer telephony services, including wireless local loop and VoIP
services, and

- maintain the subscriber base in our wireless cable business, which
coupled with anticipated improvements in operating costs we expect should
provide revenues sufficient to cover substantially all operating costs of
this business (excluding certain unallocated corporate overhead) while we
develop and expand other wireless broadband businesses.

We estimate that a launch of a new wireless broadband network system
providing high-speed Internet access in a typical non-operating market will
involve the initial expenditure of approximately $500,000 to $750,000 for
network equipment depending upon the system design and type and sophistication
of the equipment, assuming that we are able to lease rooftop or tower space
rather than constructing new towers. We believe that incremental base station
costs to launch an Internet service in one of our existing systems will be
$300,000 to $600,000. In addition, we estimate that the acquisition and
installation of each new Internet subscriber will cost approximately $1,700.
This includes charges for equipment, labor, overhead

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<PAGE> 35

and direct commissions. This may be offset partially by installation and other
up-front fees. Other launch costs include the cost of securing adequate space
for marketing facilities in markets not previously operating a wireless cable
video business, as well as costs related to employees. As a result of these
costs, operating losses are likely to be incurred by a system during the
start-up period.

In October 1999 we signed a definitive agreement for the sale and leaseback
of 34 of our communications towers, under which we expect to receive $7.0
million in the fourth quarter of 1999. This transaction is subject to customary
closing conditions, and the purchase price is subject to reduction if closing
conditions for some of the sales are not satisfied and, therefore, those sites
are excluded from the sale. We also expect to receive approximately $4.5 million
in the fourth quarter of 1999 in exchange for our equity interest in Wireless
One, Inc., which announced confirmation of its plan of reorganization in
November 1999.

On August 4, 1999, we filed a registration statement with the Securities
and Exchange Commission relating to the proposed offering by us of 2 million
shares of our common stock. We have not yet requested acceleration of the
registration statement, and have not determined when, or if, we will request
acceleration of or effect an offering pursuant to our registration statement. We
may determine to delay the offering or withdraw the registration statement
depending upon, among other things, market conditions and equipment financing
opportunities.

Although we do not expect to generate sufficient cash flow to fully
implement our long-term business strategy without additional capital or
financing, we currently expect that cash on hand and cash generated from
operations, the tower sale-leaseback and the Wireless One equity exchange will
be sufficient to fund operations and capital requirements at least until the end
of 2000. We may seek additional capital or financing in 2000 if:

- we accelerate our business strategy,

- we consummate any significant acquisitions or alliances,

- we determine that market conditions are appropriate for such financing,
or

- our current operating assumptions are inaccurate.

In any event, we likely will seek additional capital or financing before
the end of 2001 to enable us to fully implement our long-term business strategy.
Options include the sale of debt or equity securities, including pursuant to our
registration statement, borrowings under secured or unsecured loan arrangements,
including vendor equipment financing, and sales of assets. We cannot assure you
that such financing will be available in a timely manner and on satisfactory
terms.

EFFECTS OF REORGANIZATION

Our company and certain of our subsidiaries file a consolidated federal
income tax return. Subsidiaries in which we own less than 80% of the voting
stock will file separate federal income tax returns. We have had no material
state or federal income tax expense since inception. As of December 31, 1998, we
had approximately $324 million in net operating losses for U.S. federal income
tax purposes, expiring in years 2013 through 2018. We estimate that
approximately $38.0 million of the above losses relate to various acquisitions
and as such are subject to certain limitations.

Although the impact of the reorganization on various federal tax attributes
has not been fully determined, some portion of our net operating loss carry
forwards likely will be reduced and may be completely eliminated pursuant to our
bankruptcy discharge. Furthermore, the deductibility of net operating loss carry
forwards arising before the Effective Date of the plan of reorganization will be
limited by the product of the long-term tax exempt rate times our fair market
value after discharge of debt.

We adopted Fresh Start Reporting on the April 1, 1999, Effective Date of
our reorganization in accordance with American Institute of Certified Public
Accountants Statement of Position 90-7. Fresh Start Reporting resulted in a new
reporting entity with assets and liabilities adjusted to fair value and
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<PAGE> 36

beginning retained earnings set to zero. Liabilities subject to compromise also
were adjusted to zero in the debt discharge portion of the Fresh Start Reporting
entry. In addition, on the Effective Date our outstanding common stock was
canceled and newly issued shares of common stock was distributed to certain
creditors in satisfaction of their claims against us.

THE YEAR 2000

We have established an employee team to identify and correct Year 2000
compliance issues. Information technology ("IT") systems with non-compliant code
have been identified and modified or replaced with systems that are Year 2000
compliant. Similar actions have been taken with respect to non-IT systems,
primarily systems embedded in office, communications and other facilities.
Progress of our team's efforts is being monitored by our senior management and
periodically is reported to the audit committee of our Board of Directors.

We recognize the need to remediate and test our mission-critical systems to
ensure that individually the systems are Year 2000 compliant and that
collectively they operate in a manner that ensures Year 2000 functionality.

We have evaluated our systems and have identified the following systems and
functions as mission-critical:

- headend equipment/addressable systems, related to the receipt and
transmission of programming and data,

- billing and collection systems, and

- telecommunications systems in our customer service facility.

Headend Equipment/Addressable Systems. We have evaluated these systems and
completed remediation of certain identified features that were not Year 2000
compliant through software and hardware upgrades, including all hardware and
software related to satellite relays.

Billing and Collection Systems. We have verified Year 2000 compliance with
our billing and collections software vendor and completed additional testing on
this software during the third quarter of 1999.

Telecommunications System in Customer Care Facility. We have upgraded our
system software to be Year 2000 compliant and we have obtained documentation
from the software supplier verifying Year 2000 compliance.

Although we believe that we have identified and remediated any Year 2000
problems in our mission-critical systems, if other significant Year 2000
problems are not discovered or are not remediated in a timely manner,
significant failures of these functions could occur and could have material
adverse consequences for our operations. We believe, based on information
currently available and the current status of our efforts to identify and
correct Year 2000 problems, that the worst case scenarios that could affect our
operations as a result of Year 2000 problems are an inability to:

- transmit and receive data,

- transmit and receive video programming, and

- produce and send invoices.

While we have tested our own mission-critical systems for Year 2000
problems, we do not control the systems of our suppliers. We have received
assurance from our suppliers regarding the Year 2000 readiness of their systems.
We also conducted interoperability testing (where practical) to determine
whether our suppliers' systems will accurately provide our systems with date,
data and functionality into and beyond the new millennium. This testing and
evaluation was completed in the third quarter of 1999. Notwithstanding these
measures, there is some risk that the interoperation of our systems with those
of our suppliers,

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<PAGE> 37

including video programming suppliers, may be affected by the Year 2000 date
change. Any such impact could have a material adverse effect on our financial
condition, results of operations or cash flows.

Having identified our mission-critical and business-critical systems of our
key suppliers, and the associated risks of failure of those systems to be Year
2000 compliant, we have devised contingency plans which will be implemented if
we determine that any of those systems will not be made Year 2000 compliant in a
timely manner. These contingency plans include implementation of emergency
backup, recovery, redundancy and/or response procedures and schedules for all
mission-critical systems.

We do not believe the costs related to our Year 2000 compliance project
will be material to our financial condition, results of operations or cash
flows. We did not have any material expenditure prior to 1999 for Year 2000
compliance projects. During 1999 we have spent approximately $175,000 for Year
2000 compliance initiatives, which we believe are substantially complete.
Unanticipated failures by critical vendors, as well as the failure by us to
execute our own identification, remediation and/or contingency efforts, could
have a material adverse effect on the success and cost of the project, as well
as its estimated completion date. As a result, there can be no assurance that
these forward-looking results will be achieved, and the actual cost and effects
on our operations and financial condition, results of operations or cash flows
could differ materially from these estimates.

COMMITMENTS AND CONTINGENCIES

Certain current and former directors and officers of Nucentrix, to whom we
may have indemnity obligations, are defendants in two securities lawsuits, one
of which is a purported class action lawsuit. These actions allege, among other
things, various violations of federal and state securities laws. Nucentrix also
is a party to two purported class action lawsuits alleging that Nucentrix
overcharged its customers for administrative late fees. Nucentrix intends to
vigorously defend the above matters. While it is not feasible to predict or
determine the final outcome of these proceedings or to estimate the amounts or
potential range of loss with respect to these matters, and while management does
not expect such an adverse outcome, management believes that an adverse outcome
in one or more of these proceedings that exceeds or otherwise is excluded from
applicable insurance coverage could have a material adverse effect on the
consolidated financial condition, results of operations or cash flows of
Nucentrix. We also received notice in September 1999 that a motion to revoke the
order confirming our plan of reorganization had been filed in U.S. Bankruptcy
Court by two former stockholders of Heartland Wireless Communications. We intend
to vigorously oppose the motion, and it is not possible at this time to predict
the effect of any action by the Bankruptcy Court to revoke the plan. See "Risk
Factors," "Reorganization" and "Business -- Legal Proceedings."

INFLATION

We do not believe that inflation has had or is likely to have any
significant impact on our operations. We believe that we will be able to
increase subscriber rates, if necessary, to keep pace with inflationary
increases in costs.

RECENTLY ISSUED ACCOUNTING PRINCIPLES

On January 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
This Statement requires changes in disclosure only and it does not affect
results of operations or financial position. Comprehensive income (loss) for the
years ended December 31, 1998, 1997 and 1996, and for the three-month periods
ended March 31, 1999 and 1998, is equal to net income (loss) reported for such
periods.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." SFAS 131
is effective for fiscal years beginning after December 31, 1997. This statement
establishes standards for the way that public companies report information about
segments in annual and interim financial statements. While the effective
adoption of
34
<PAGE> 38

SFAS 131 has not had a material impact on our consolidated financial statements
and related disclosures, segment disclosures may become necessary as our
Internet access business becomes significant.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activity" which requires that
all derivatives be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented pursuant to the
provisions of SFAS No. 133. In July 1999, the Financial Accounting Standards
Board issued SFAS No. 137, which delayed the effective date of SFAS No. 133.
SFAS 133 is now effective for all fiscal quarters and for all fiscal years
beginning after June 15, 2000. We expect that the adoption of SFAS 133 will not
have an impact on our results of operations, financial condition or cash flows.

In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting the Costs of Start-Up Activities."
Statement 98-5 provides guidance on the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. Statement 98-5 is effective for
fiscal years beginning after December 15, 1998. The adoption of Statement 98-5
did not have an impact on our results of operations, financial position or cash
flows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to material future earnings or cash flow fluctuations
from changes in interest rates on long-term debt. Our long-term debt, which
consists primarily of $13.7 million relating to the acquisition of certain BTAs
in March 1996, bears a fixed interest rate. To date, we have not entered into
any derivative financial instruments to manage interest rate risk and are
currently not evaluating the future use of any such financial instruments.

35
<PAGE> 39

BUSINESS

OVERVIEW

We use our high-capacity radio spectrum to provide wireless broadband
network services in medium and small markets in the central United States. We
control up to 196 MHz of radio spectrum in the 2.1 to 2.7 GHz band licensed by
the FCC in 87 markets. We currently provide always-on, high-speed Internet
access service under temporary developmental FCC licenses in two markets,
primarily to medium-sized and small businesses, small offices/home offices
("SOHOs") and telecommuters, and plan to expand this service into 18 additional
markets by the end of 2001. Historically, we have used our spectrum to provide
wireless subscription television services, commonly referred to as "wireless
cable," and currently provide these services in 58 markets in nine states. Going
forward, our goal is to become a leading provider of wireless broadband services
in our markets, while expanding into additional medium markets through the
acquisition of additional MMDS spectrum rights. We also intend to explore
acquisitions of, and strategic alliances with, other providers of Internet
access, broadband and telephony services, such as traditional ISPs, DSL
providers, other fixed or mobile wireless providers in licensed or unlicensed
frequencies and CLECs.

We use our spectrum to transmit and receive signals between a base station
and transmit/receive equipment at each customer's location. Our radio spectrum,
commonly and collectively referred to as "MMDS," is comprised of the following
channels:

- MDS (Multipoint Distribution Service) -- 2 channels in the 2150-2160 MHz
band and 3 channels in the 2650-2680 MHz band,

- ITFS (Instructional Television Fixed Service) -- 20 channels in the
2500-2686 MHz band, and

- MMDS (Multichannel Multipoint Distribution Service) -- 8 channels in the
2596-2644 MHz band.

Our MMDS spectrum has demonstrated capability to transmit at aggregate data
rates of up to 30 Mbps per six-MHz channel and, unlike other fixed-wireless
providers, covers a service area radius of up to 35 miles from a single base
station. We also lease the rights to 20 MHz of Wireless Communications Service
("WCS") spectrum at 2.3 GHz in 19 markets.

We presently have television transmission facilities constructed and
operating in 58 of our 87 markets. We currently are the largest operator of
wireless cable systems in the United States, with about 149,000 subscribers at
December 1, 1999, including about 22,000 subscribers who receive DIRECTV
programming sold by us, either alone or with our MMDS programming. We have added
high-speed Internet access service in two of our 58 markets, serving over 100
medium-sized and small businesses, SOHOs and telecommuters in Austin and
Sherman-Denison, Texas. We plan to add this service to 18 additional markets by
the end of 2001.

INDUSTRY OVERVIEW AND MARKET OPPORTUNITY

Internet access is one of the fastest growing segments of the
telecommunications industry. Data communication capabilities provided by the
Internet allow medium-sized and small businesses to streamline e-commerce and
communications among employees, customers and suppliers. To fully take advantage
of the efficiency provided by the Internet's capabilities, businesses need
high-speed Internet connectivity. We also expect the demand for high-speed
Internet access from SOHOs and telecommuters to increase as companies encourage
an increasing number of employees to work in remote offices or their homes. We
believe there are approximately 45-50 million telecommuters and SOHO-based
workers in the United States, approximately 60% of which need access to
corporate networks, the Internet or both for a variety of applications,
including e-mail databases and corporate intranets. We also believe that the
annual growth rate for this market will be 12% to 15% over the next three years.

Traditionally, medium-sized and small businesses, telecommuters and SOHOs
have relied on low-speed Internet access using existing telephone lines. Most
telephone networks today are fiber, capable of
36
<PAGE> 40

high-capacity and high-speed transporting of data. However, the portion of the
networks that ultimately connects to the customer premises, commonly referred to
as the "local loop" or "last mile," generally is narrowband copper wire with
service speeds limited to 56-128 Kbps. This limitation currently constrains the
capacity and speed of the Internet to most users. As a result, users are seeking
affordable higher-speed access alternatives.

The higher speed Internet access alternatives offered by our competitors
have the following limitations:

- T1 service, at 1.54 Mbps, is a fast but relatively expensive solution,
typically available at approximately $2,000 per month in our markets,
plus installation and equipment costs of approximately $3,000.

- DSL service is delivered across the incumbent local exchange carrier's
("ILEC") existing copper wire system. While this service is capable of
delivering very high speeds, DSL suffers performance limitations the
farther the customer premises are from the central office of the ILEC.
Distances are limited to about four to five miles from a central office
for the lowest speed solutions and 10,000 feet or less for the fastest.

- High-speed cable networks may be capable of high-speed data transmission.
However, we estimate that cable passes only 40% of businesses in our
markets and, therefore, does not serve a large portion of our targeted
customer base. In addition, we believe that a majority of existing cable
systems in our markets have not been retrofitted to enable two-way
high-speed data transmission. Moreover, cable is a shared medium and the
more subscribers loaded on the network, the slower the per subscriber
speed becomes.

- Other high-speed wireless providers, such as those using 24 GHz, 28 GHz
and 38 GHz spectrum, have concentrated on the more densely populated
urban areas because of transmission distance limitations. Signals using
these radio frequencies are generally limited to a one to three-mile
radius, or three to 28 square miles, which makes application in less
densely populated areas less economical.

- Satellite networks, such as direct broadcast satellite, currently offer
only one-way Internet access, with upstream access limited to existing
copper telephone lines.

THE NUCENTRIX SOLUTION

In 1998, Nucentrix and several other MMDS companies demonstrated the
commercial viability of providing high-speed Internet access using MMDS
spectrum. However, the FCC historically had limited the use of MMDS spectrum to
one-way transmissions. In September 1998, the FCC authorized the use of MMDS
spectrum to provide two-way services, including high-speed data, voice and video
communications. The FCC finalized its ruling in July 1999. With this approval,
we believe we will be able to meet the needs of business users in medium and
small markets by providing:

Superior Value. We offer higher bandwidth digital connections than
Internet access alternatives available in our target markets at prices
substantially lower than or comparable to those alternatives. For business
Internet users, our mid-range Internet access services are two to three
times the speed of ISDN systems at monthly rates approximately equivalent
to prevailing ISDN rates. Our higher-end services offer speeds of 768 Kbps
up to 1.54 Mbps, or the equivalent of a T1 telephone line, at rates
substantially less than prevailing T1 rates in our markets. Additionally,
our customers can upgrade their access speeds at any time without adding
hardware.

Always-On Service. Our Internet access networks provide 24-hour,
always-on connectivity, which dial-up modem, ISDN and alternative local
area network remote access systems do not provide.

Full Service 24-Hour Internet Access/Support. We are a full service
24-hour ISP and, through third parties, provide ancillary value added
services such as e-mail, web design, web hosting and

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<PAGE> 41

domain name maintenance. In the future, we expect to provide additional
services like wireless local loop services, VoIP and virtual private
networking.

BUSINESS STRATEGY

Our goal is to become a leading primary provider of high-speed wireless
broadband network services in our markets. Our strategy includes the following
key elements:

Exploit the increasing demand for affordable high-speed Internet
access. We plan to focus initially on medium-sized and small businesses,
SOHOs and telecommuters in medium markets, where we believe the demand for
high-speed Internet access is the greatest and alternatives, if available,
have performance or distance limitations or are relatively expensive.

Achieve "first to market" status. We believe that a significant
percentage of our target business customers currently are unpassed by
broadband cable or fiber network providers. Even considering the time to
build out a non-operating market, we believe we can complete a substantial
portion of our facilities and begin reaching our target customer base
faster than our competitors. For example, DSL technology generally requires
arrangements with local exchange carriers to co-locate in multiple central
offices. Other fixed-wireless providers at higher frequencies such as 24
GHz, 28 GHz and 38 GHz have much shorter transmission paths than we do and,
therefore, require more base stations than we require to cover an entire
market. As a result, these technologies will require additional time and
capital expense to reach our target customers.

Take advantage of our existing high capacity and wide coverage
spectrum. We expect to benefit from our MMDS radio spectrum, which allows
us to provide broadband services over large geographic areas. Our MMDS
spectrum is capable of transmitting at aggregate data rates of up to 30
Mbps per six-MHz channel, or the equivalent of approximately 20 T1
telephone lines. We control an average of 27 six-MHz channels in our
existing markets. In addition, our MMDS spectrum has a typical coverage
radius for a single base station design of up to 35 miles for high-speed
Internet access service, or approximately 3,800 square miles compared to a
one to three-mile radius, or three to 28 square miles, for other wireless
broadband service providers and a two to a five-mile radius from the local
exchange carrier's central office, or 13 to 80 square miles, for DSL. This
will allow us to reach businesses in office parks, suburbs, strip shopping
centers and along interstate highways that other fixed wireless and DSL
providers currently may be unable to serve.

Leverage our existing investment in MMDS infrastructure, including
base stations and other transmission facilities. Although we may elect to
construct multi-cell systems to provide two-way Internet access service in
some or all of our markets, we believe we will be able to use existing base
stations as part of our network design in a majority of our top 20
projected Internet markets. Thirteen of our projected 20 Internet markets
to be launched by the end of 2001 are fully operational in the delivery of
wireless cable service and, therefore, a portion of the capital required
for Internet access delivery in these markets already has been invested. We
believe the incremental cost to upgrade an existing wireless cable system
to add Internet access service capabilities is about $300,000 to $600,000
per base station and the time to retrofit a base station is 30-60 days
following receipt of necessary regulatory approvals. We estimate the
buildout of an unconstructed market to deliver high-speed Internet access
service will require an initial expenditure of approximately $500,000 to
$750,000

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<PAGE> 42

for network equipment, depending upon the system design and type and
sophistication of the equipment, assuming that we are able to lease rooftop
or tower space rather than being required to construct new towers.

Expand into residential market. MCI and Sprint have announced
acquisitions of MMDS spectrum covering over 70 million total homes. As
these companies build out their markets, we expect demand for wireless
modems and other customer premises equipment to increase, putting downward
pressure on the price of the equipment. As equipment prices decline, we
plan to actively market our high-speed Internet access services to
residential customers.

Offer telephony services. To enhance the value of our assets in the
future, we plan to implement telephony services over our MMDS spectrum in
selected markets. This will consist of wireless local loop and VoIP
services, which will connect customers directly to the public switched
telephone network.

WIRELESS BROADBAND SERVICES

High-Speed Internet Access. In July 1998, we entered our first market in
Sherman-Denison, Texas on a developmental basis as a retail business high-speed
ISP. We initially offered a one-way wireless Internet access service using a
six-MHz MMDS channel for downstream transmission and a standard telephone line
connection for an upstream path. In August 1998 we received a temporary
developmental authorization from the FCC to conduct two-way operations in this
market and, in February 1999, we began offering two-way Internet access services
over our MMDS spectrum.

We have upgraded our wireless cable headend facility in Austin, Texas and
successfully completed testing for Internet access over this system in the
second quarter of 1999. We launched this service in May 1999, also under a
temporary developmental authorization from the FCC. We currently offer a variety
of Internet services in Austin and Sherman-Denison, Texas for medium-sized and
small businesses, telecommuters and SOHOs, which include:

- Internet access at speeds from 256 Kbps to 1.54 Mbps, or up to 53 times
faster than traditional dial-up speeds of 28.8 Kbps and up to 12 times
faster than ISDN speeds of 128 Kbps,

- technical support available 24 hours a day, 7 days a week,

- e-mail,

- Web design and hosting,

- domain name registration, and

- domain name and maintenance changes.

The following table summarizes our current service offerings:

<TABLE>
<CAPTION>
1-YR CONTRACT
NO. OF MONTHLY
PRODUCT SPEED USERS PRICE
- ------- ---------------- ------ -------------
<S> <C> <C> <C>
SOHO/Telecommuter Pack......................... 256 Kbps 1 $129.95
SOHO/Telecommuter Pack Plus.................... 384 Kbps 1 $159.95
Cyber Wave M256K............................... 256 Kbps 2-10 $139.95
Cyber Wave M384K............................... 384 Kbps 2-10 $169.95
Cyber Wave M768K............................... 768 Kbps to 1.54 2-10 $249.95
</TABLE>

Our current installation fee is $199.95.

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<PAGE> 43

We expect our customers' needs will evolve over time, resulting in demand
for faster connections. We can increase our customers' access speeds without
upgrading the equipment located at their premises. Remote upgrades allow
customers to improve performance without service interruptions or additional
equipment investment.

Subscription Television Business. Through our wireless cable programming,
we generally offer our subscribers local off-air VHF/UHF channels from
affiliates of ABC, NBC, CBS and Fox and other local independent broadcast
stations, as well as HBO, HBO2, Cinemax, Showtime, Disney, ESPN, CNN, USA, WTBS,
Discovery, the Nashville Network, A&E and other cable programming. The channels
and programming that we offer in each market will vary depending upon the amount
of spectrum capacity controlled in such market.

Currently, wireless cable providers can offer a maximum of 33 channels of
analog video programming. Because we historically have not used equipment that
converts signals over the MDS-1 channel, and the MDS-2A channel will not
accommodate color video programming satisfactorily, we can offer a maximum of 31
channels of video programming in our markets. We have supplemented our analog
channel capacity by entering into cooperative marketing arrangements with
DIRECTV and DIRECTV distributors, which allow us to market up to 185 channels of
digital programming in 51 markets in combination with our MMDS offering or as a
stand-alone offering. See "Business -- Suppliers." Our business strategy
currently does not include the launch of any new wireless cable-only markets, or
adding wireless cable programming to any of our unconstructed markets that we
intend to build out for Internet services.

MMDS LICENSES AND LEASES

We hold the licenses for approximately 75% of our MMDS and MDS channels. We
lease from third-party license holders the rights to (1) the remaining 25% of
our MMDS and MDS channels and (2) all of our ITFS channels, which generally
comprise 20 of the 33 channels available in each market. All MDS and MMDS
licenses expire in either 2001 or 2006. Approximately 50% of our MDS/MMDS
licenses are for "incumbent" channels that expire in 2001; the other 50% are BTA
channels that expire in 2006. ITFS licenses generally have a term of 10 years.
All licenses are subject to renewal by the FCC as described in
"Business -- Government Regulation." Although FCC custom and practice establish
a presumption of granting renewals of licenses, the presumption requires that
the licensee substantially comply with its regulatory obligations during the
license period.

Each of our channel leases typically covers four ITFS channels or one to
four MMDS or MDS channels. The terms of the leases for ITFS channels typically
expire five to ten years after the license grant date but in any event may not
exceed 15 years. The terms of the leases for MMDS and MDS channels typically
expire five to 10 years from the lease execution date. The remaining initial
terms of most of our operating channel leases range from two to six years,
although substantially all of these leases renew automatically or upon notice
from us. Although we do not believe that the termination of or failure to renew
a single channel lease would adversely affect us, several terminations or
failures to renew in one or more operating systems could have a material adverse
effect on our operations.

EXISTING AND UNCONSTRUCTED MARKETS

The following tables provide information as of December 1, 1999, regarding
the 87 markets in which we operate a wireless cable system or Internet business,
own the BTA authorization or have acquired, or expect to acquire, MMDS channel
rights. Certain of our channel rights are subject to pending applications for
new channel licenses or modifications to existing channel licenses, and must be
reviewed by the FCC's engineering and legal staff. We cannot assure you of the
number of applications that will be granted.

"Estimated Total Households" represents our current estimates of the
approximate number of households that may be served from existing or projected
tower sites. Total household information is based on 1990 census bureau data
from a commercially available population software program, and includes an
average annual growth rate of 1%, based on census bureau data released in March
1998. Historically, MMDS companies have provided information on total households
to present basic information about their
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<PAGE> 44

markets. The following table does not include information on the number of
businesses in our markets. We estimate that our wireless transmissions can be
received by an average of 85% of the homes in our markets using our current
network design.

<TABLE>
<CAPTION>
NUMBER OF VIDEO
ESTIMATED SUBSCRIBERS NUMBER OF
TOTAL DECEMBER 1, CHANNELS
EXISTING MARKETS HOUSEHOLDS 1999 AVAILABLE(1)
- ---------------- ---------- --------------- ------------
<S> <C> <C> <C>
Abilene, TX................................................. 63,808 2,895 22
Ada, OK..................................................... 48,591 2,860 32
Ardmore, OK................................................. 53,076 3,387 32
Austin, TX.................................................. 437,358 8,778 33
Beloit, KS.................................................. 20,481 542 33
Bucyrus, OH................................................. 236,856 774 21
Champaign, IL............................................... 104,533 2,284 23
Chanute, KS................................................. 56,155 4,002 33(2)
Corpus Christi, TX.......................................... 167,864 9,213 33(3)
Corsicana/Athens, TX........................................ 95,753 2,063 29
Enid, OK.................................................... 40,118 3,681 32
Freeport, IL................................................ 139,485 979 20
Gainesville, TX............................................. 40,444 942 33
George West, TX............................................. 23,237 2,099 23(4)
Greenville, PA.............................................. 339,291 578 20
Hamilton, TX................................................ 31,443 2,573 33
Jacksonville, IL............................................ 48,060 482 26
Jourdanton/Charlotte, TX.................................... 101,132 1,545 29
Kerrville, TX............................................... 37,046 430 33
Kingsville/Falfurrias, TX................................... 32,484 1,442 23(4)
Laredo, TX.................................................. 51,136 3,149 33
Lawton, OK.................................................. 81,960 5,546 33
Lindsay, OK................................................. 58,730 2,483 29
Lubbock, TX................................................. 112,235 2,964 33
Macomb/Walnut Grove, IL..................................... 84,209 1,738 20
Manhattan, KS............................................... 52,720 1,767 33
Marion, KS.................................................. 55,069 871 21(5)
McAlester, OK............................................... 38,986 576 20
McLeansboro, IL............................................. 88,485 1,165 31
Medicine Lodge/Anthony, KS.................................. 30,022 1,166 22
Midland, TX................................................. 118,372 5,391 33
Monroe City/Lakenan, MO..................................... 70,196 1,291 32
Montgomery City, MO......................................... 91,080 689 23
Mt. Pleasant, TX............................................ 57,951 2,001 24
Muskogee, OK................................................ 79,972 850 20
O'Donnell, TX............................................... 66,006 518 22
Olney, IL................................................... 71,074 1,491 20
Olton, TX................................................... 27,333 653 33
Paragould, AR............................................... 142,470 2,288 20
Paris, TX................................................... 42,897 2,727 26
Peoria, IL.................................................. 204,681 1,533 29
Radcliffe/Story City, IA(6)................................. 75,788 1,538 27
Sherman/Denison, TX......................................... 110,559 7,846 29
Sikeston, MO................................................ 100,564 2,437 20
Sterling, KS................................................ 45,447 633 24(7)
Stillwater, OK.............................................. 81,586 5,469 33
Strawn/Ranger, TX........................................... 42,856 1,287 33
Taylorville, IL............................................. 166,567 1,433 20
Temple/Killeen, TX.......................................... 138,825 9,486 33(3)
Texarkana, TX............................................... 80,871 1,178 29
Tulsa, OK................................................... 324,859 9,055 33(3)
Uvalde/Sabinal, TX.......................................... 18,528 1,373 33
Vandalia, IL................................................ 93,998 1,546 20
Waco, TX.................................................... 113,247 5,120 33(8)
Watonga, OK................................................. 23,946 893 33(7)
Weatherford, OK............................................. 28,994 737 33
Wichita Falls, TX........................................... 65,257 4,303 33
Woodward, OK................................................ 14,180 2,260 33
--------- ------- -----
Total -- Existing Markets........................... 5,268,871 149,000 1,619
========= ======= =====
</TABLE>

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

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<PAGE> 45

(1) Unless otherwise noted, the number of channels available includes MMDS, MDS
and ITFS channels that are either licensed to us or leased to us from other
license holders. The number of channels available includes leased channels
that may not currently be available for two-way broadband wireless services.

(2) Eight MMDS channels are currently authorized under a special temporary
authorization from the FCC. These channels are subject to pending
applications for permanent authority at the FCC that we believe are
available for grant.

(3) One MDS channel is available for license through our ownership of the BTA.

(4) We have leases with two prospective ITFS applicants for eight additional
ITFS channels that we believe will be available in the FCC's next ITFS new
station filing window.

(5) Four ITFS channels are subject to pending proceedings at the FCC and we
believe will be granted pursuant to an agreement with the wireless cable
operator of the adjacent Salina, Kansas market. We have the right to lease
one MDS channel that is subject to a pending application that we believe is
available for grant.

(6) We operate the Radcliffe/Story City, Iowa market under a management
agreement with CS Wireless Systems, Inc., which is terminable on 30 days
notice by either party. CS Wireless has agreed to assign to us its rights to
the assets and channel leases for this market upon FCC approval of the
assignment of certain other MMDS and WCS spectrum rights and the closing of
a master agreement with CS Wireless. See "Business -- Recent
Transactions -- CS Wireless Transaction."

(7) One MDS channel is subject to a pending application at the FCC that we
believe is available for grant.

(8) Two MDS channels are available for license through our ownership of the BTA.

<TABLE>
<CAPTION>
TOTAL CHANNELS
UNCONSTRUCTED MARKETS HOUSEHOLDS EXPECTED(1)
- --------------------- ---------- -----------
<S> <C> <C>
Altus, OK................................................... 27,256 33
Amarillo/Borger, TX......................................... 132,984 29
Bartlesville/Ponca City, OK................................. 128,271 33
Burnet, TX.................................................. 50,850 32
Casper, WY.................................................. 31,242 13
Charleston, WV.............................................. 183,746 4
Cheyenne, WY................................................ 33,940 13
Columbia, MO................................................ 118,199 21
Des Moines, IA.............................................. 225,319 33
El Dorado, AR............................................... 79,031 16
El Paso, TX................................................. 235,243 29
Elk City, OK................................................ 26,010 25
Fischer, TX................................................. 439,639 25
Flagstaff, AZ............................................... 45,693 6
Forrest City, AR............................................ 172,317 20
Great Bend, KS.............................................. 53,865 33
Hays, KS.................................................... 29,040 33
Holdenville, OK............................................. 48,575 33
Kossuth, TX................................................. 71,964 33
Lake City, FL............................................... 51,277 16
Lenapah, OK................................................. 56,147 33
Lufkin, TX.................................................. 70,954 13
Magnolia, AR................................................ 58,421 22
Ottawa/LaSalle, IL.......................................... 238,510 16
Paducah/Mayfield, KY........................................ 76,393 33
Searcy, AR.................................................. 76,935 33
Springfield, MO............................................. 143,756 33
Topeka, KS.................................................. 112,540 33
Tyler, TX................................................... 174,025 21
--------- -----
Total -- Unconstructed Markets...................... 3,192,142 717
Total -- All Company Markets........................ 8,461,013 2,336
========= =====
</TABLE>

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

(1) The number of channels expected includes channels (a) that are either
licensed to us or leased to us from other license holders, (b) for which we
have filed or because of our BTA ownership have the exclusive right to file
license applications with the FCC which we expect to be granted in 2000, or
(c) to which we otherwise expect to acquire license or lease rights in 2000.

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<PAGE> 46

WCS SPECTRUM TO BE ACQUIRED FROM CS WIRELESS

<TABLE>
<CAPTION>
ESTIMATED
BANDWIDTH TOTAL
MARKETS(1) (MHZ) HOUSEHOLDS
- ---------- ----- ----------
<S> <C> <C>
Abilene, TX................................................. 20 63,808
Amarillo, TX................................................ 20 132,984
Austin, TX.................................................. 20 437,358
Gainesville, TX............................................. 20 40,444
Hamilton, TX................................................ 20 31,443
Longview/Marshall, TX....................................... 20 151,641
Lubbock, TX................................................. 20 112,235
Midland/Odessa, TX.......................................... 20 118,372
Mt. Pleasant, TX............................................ 20 57,951
O'Donnell, TX............................................... 20 66,006
Olton, TX................................................... 20 27,333
Paris, TX................................................... 20 42,897
Sherman/Denison, TX......................................... 20 110,559
Shreveport, LA.............................................. 20 160,163
Temple/Killeen, TX.......................................... 20 138,825
Texarkana, TX............................................... 20 80,871
Tyler, TX................................................... 20 174,025
Waco, TX.................................................... 20 113,274
Wichita Falls, TX........................................... 20 65,247
---------
Total............................................... 2,125,436
=========
</TABLE>

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

(1) CS Wireless and Nucentrix are parties to an agreement under which CS
Wireless agreed to assign the WCS spectrum listed above to us. We currently
lease this spectrum under an exclusive lease agreement with CS Wireless.
Assignment of the WCS spectrum is subject to FCC approval and closing our
agreement with CS Wireless. See "Business -- Recent Transactions -- CS
Wireless Transaction."

NETWORKS

We transmit signals through the air via microwave frequencies from
transmission facilities, referred to as a "headend" or "base station," to an
antenna and other customer premises equipment at each customer's location. Each
base station includes a transmission tower, transmit and receive antennas,
transmitters, waveguide and other transmission equipment. A "point of presence,"
which may be located at a base station, houses other equipment related to our
Internet business. Each point of presence includes (1) a transceiver to transmit
and receive response or downstream data, (2) a wireless data converter that
converts a wireless signal to a wireline signal (and vice versa), (3) an
Ethernet switch that provides the electrical connection for electronic devices
at the base station or other point of presence and (4) a gateway router that
directs the traffic to the proper Internet address and connects to the Internet
backbone. Satellite reception equipment is required to receive video programming
if the headend serves our wireless cable business.

Microwave transmissions generally require direct, unobstructed
line-of-sight from the base station to the customer's transmit/receive equipment
because the microwave signals used will not pass through trees, hills, buildings
or other obstructions. However, certain signal blockages can be overcome with
the use of additional equipment. Our operating systems transmit at from 10 to
100 watts of power from a base station that has a typical coverage radius of 35
miles. We control up to 196 MHz of MMDS spectrum in each of our markets.

Internet access. We provide our two-way, high-speed Internet access by
transmissions between our base stations and transmit/receive equipment at the
customer's premises. A transceiver, which transmits and receives data traffic,
is connected to the customer's antenna and a "wireless" modem/router by coaxial
cable. The modem/router interfaces to the customer's personal computer through
an Ethernet card connection or to a network through an Ethernet hub. Upstream
and downstream transmission is provided

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<PAGE> 47

by two or more separate MMDS channels, and Internet connectivity is maintained
by our base stations through two separate and diverse connections to national
Internet backbone providers.

We plan to use a sectorized, single or multi-cell design for our two-way
Internet access service. With traditional MMDS transmissions, the signal is
transmitted in a 360 degree omni-directional pattern. Sectorizing transmissions
in a cell design (either single or multi-cell) will divide channel service areas
into pie-shaped sections, or sectors, and allow re-use of each frequency in
non-adjacent sectors, increasing the bandwidth capacity for each channel used in
the network design. For example, if we have two channels authorized for response
transmissions in a four-sector cell, and allocate each channel into every other
sector of four possible sectors, the first channel could be re-used for response
transmissions in sectors 1 and 3, while the second channel could be reused for
response transmissions in sectors 2 and 4. Cellularization of channels in
certain markets could increase both the number of households our signal can
reach and the market's available bandwidth capacity; however, this type of
system design is more expensive to construct than a single-cell system.

Wireless cable. Wireless cable programming is received by the base station
from satellite transmissions and then retransmitted to receiving equipment
located at the subscriber's premises. At the subscriber's premises, the
microwave signals are converted to frequencies that can pass through
conventional coaxial cable into an addressable descrambling converter and then
to a television set. Our customers who subscribe to DIRECTV receive DIRECTV
programming from an orbiting satellite with an 18-inch parabolic dish located at
the customers' premises. The DIRECTV signal is converted through a separate set
top box at the customers' premises.

CUSTOMER SUPPORT

Customer support for our Internet service is provided 24 hours a day, seven
days a week through a toll free access telephone number. We provide
Nucentrix-branded Internet customer service through a contract with ISP
Alliance, Inc. ("ISPA"), an Internet customer service provider in Atlanta,
Georgia, which allows us to deliver this customized service on a "pay as used"
basis. There is no additional charge to the customer beyond their monthly
service fee. ISPA's on line customer service system is available to us through
an Internet connection, and allows us to monitor the call volume and specific
service activity for remedial action. Using this approach has allowed us to
defer building and training an internal customer service organization until our
business volume justifies this expense. Customer problems called in to ISPA are
handled within a traditional six-level customer service escalation procedure. An
unresolved problem is referred by ISPA to the appropriate market's wireless
specialist who will typically visit the customer site and provide support and
oversight through problem resolution. ISPA provides us with an on-line customer
service call and resolution history, and post-help customer feedback through the
use of customer satisfaction questionnaires.

We provide field and technical support to the Internet and video business
through our existing base of technical services personnel. We provide our
wireless cable subscribers support 24 hours a day, seven days a week, through a
centralized customer care center and our existing base of technical services
personnel.

SALES AND MARKETING

We attract customers by offering a range of affordably-priced Internet
access and subscription television services and high quality customer care. We
market our services through a combination of direct sales, alternative sales
channels, direct marketing and traditional media advertising.

Internet Access Service. For our Internet access business, we use both a
direct sales team and indirect sales agents. Our direct sales team includes a
telemarketing sales group which makes outbound sales calls and pre-qualifies
leads for our direct sales force. The direct sales force provides more
customized sales contact with targeted prospects and larger businesses in each
market.

The indirect sales agents consist of other Internet service providers,
value added resellers ("VARs") and systems integrators. We believe other ISPs
will comprise an important part of our sales force as we

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<PAGE> 48

provide a high-speed alternative to their traditional narrowband connections
over the last mile. VARs are participating in our sales efforts because our
service is complementary to their business, which often includes the design and
implementation of a LAN (local area network), Web site or similar technical
support activity. Systems integrators perform many of the same functions as
VARs, but they also implement a broader solution designed for the customer who
desires to use the Internet as a core part of its business. In the markets we
serve we believe that we are the only ISP that will form partnerships with all
three of these indirect sales channels.

Our direct Internet marketing activities include establishing Nucentrix
brand recognition within each market and supporting our sales campaigns with
appropriate advertising, product launch promotions and supporting marketing
materials. Our marketing campaigns have been developed around a high-speed,
high-value and high-reliability theme. The campaigns include the use of targeted
direct mail and traditional media advertising in high technology magazines as
well as in business sections of local newspapers. We sponsor seminars covering
such topics as Introduction to the Internet for Small Business and Profiting
from the Internet to support our marketing efforts.

Subscription Television Service. Our subscription television service is
marketed under our "Heartland Cable Television" brand, often in association with
DIRECTV programming. Our marketing is designed to take advantage of DIRECTV's
national campaigns and heavy use of national media. Our campaigns include direct
mail and selected outdoor materials to link the Heartland Cable Television brand
with DIRECTV. All responses are directed to our national call center which
provides 24 hour a day, 7 days a week sales coverage. We also market the
Heartland/DIRECTV service through a direct sales force that works door-to-door.

SUPPLIERS

Internet Customer Service and Support. We have entered into an agreement
with ISPA, a leading supplier of systems and operational support for ISPs, to
provide 24 hours a day, seven days a week customer service and support for our
Internet access customers, under the Nucentrix brand. ISPA provides our
technical support, e-mail, Web design and hosting, domain name registration and
maintenance on a "pay as used" basis. ISPA also provides us with a network
monitoring system, a customer service tracking system and an administrative
management system for adding, deleting, modifying accounts and producing
reports. Our contract with ISPA expires in May 2000, unless both parties agree
to renew the contract.

Internet Access Equipment. MMDS Internet access equipment and CPE such as
routers, Ethernet switches, wireless data converters and transceivers currently
are available from a variety of sources such as Cisco, Lucent, Conifer
Corporation and California Amplifier, Inc. Hybrid Networks currently is the
primary provider of wireless Internet modems to MMDS operators. In August 1999,
Sprint announced that it had agreed to buy $11.0 million of convertible
debentures in Hybrid, as well as $10.0 million of equipment from Hybrid to be
used in Sprint's MMDS wireless broadband service. We believe that Sprint's
announcement should facilitate Hybrid's production of wireless Internet modems.

In addition to Hybrid, we have identified other suppliers that we believe
will become sources of modems by the end of the second quarter of 2000.
Furthermore, in October 1999, Cisco announced that it intended to work with 10
high-tech companies to develop an open technology standard for two-way
transmission of data, voice and video over wireless spectrum, including MMDS
spectrum. The announced companies included Broadcom Corp., Motorola, Inc., Pace
Micro Technology, Samsung, Texas Instruments, Inc. and a unit of Toshiba. We
believe that Cisco's announcement, as well as the recent announcements by MCI
and Sprint of the acquisition of MMDS spectrum covering a total of over 70
million homes, should accelerate the production of wireless modems from multiple
vendors. However, we cannot assure you that additional vendors will come to
market with an adequate supply of reliable wireless modems of satisfactory terms
and conditions in a timely manner. A lack of available modems could have a
material adverse effect on our ability to implement our business strategy in a
timely manner. See "Risk Factors."

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<PAGE> 49

We currently are in negotiations with a potential vendor to develop and
supply to us network and customer premises equipment to be used in our wireless
broadband Internet business and future telephony business. These negotiations
currently involve, among other things, an agreement for a long-term equipment
supply, equipment financing, and technical, sales and marketing support.
Although we believe we will reach a definitive agreement on this transaction by
the end of the first quarter of 2000, we cannot assure you that we will be able
to conclude an agreement with this potential supplier by such time or at all. If
we do not reach a definitive agreement with this vendor, we believe other
vendors will be able to supply our anticipated needs through the end of 2001 and
beyond.

Wireless Cable Equipment. We use subscriber and headend equipment for our
wireless cable and DIRECTV business from a variety of suppliers, including
California Amplifier, General Instrument Corporation, Scientific-Atlanta, Inc.,
ADC Telecommunications, Inc., Conifer, Passive Devices, Inc. and PerfectTen
Satellite Distributing, Inc. We also use subscriber and headend equipment
supplied by Pacific Monolithics, Inc. in 22 of our 58 operating markets. Pacific
Monolithics filed for protection under Chapter 11 of the U.S. Bankruptcy Code on
October 13, 1998, and has discontinued production and service of such equipment.
In response, we and eight other MMDS wireless cable providers have reached an
agreement with an alternate supplier to provide the equipment, software and
technical assistance necessary to support the Pacific Monolithics systems.

DIRECTV. In April 1998 we entered into a five-year agreement with DIRECTV
which allows us to market up to 185 channels of DIRECTV digital programming to
SFU subscribers, either alone or in combination with our local and premium MMDS
programming, referred to as a "combo" package. DIRECTV pays us a commission for
each SFU subscriber to whom we sell a DIRECTV programming package, as well as
equipment and marketing subsidies. We believe these subsidies materially reduce
the capital expenditure costs required for such new subscribers. We currently
market DIRECTV programming to SFU subscribers in 51 markets.

In October 1997 we entered into a seven-year agreement with DIRECTV to
provide DIRECTV programming to MDUs, such as apartment buildings and condominium
complexes. The MDU agreement is substantially similar to the SFU agreement for
this programming. We believe this additional programming offering will allow us
to target higher income properties and renegotiate existing and renewing
contracts with more advantageous economic terms. We currently offer DIRECTV
programming to residential MDUs in 50 markets. DIRECTV is a registered trademark
of DIRECTV, Inc., a subsidiary of the Hughes Electronics unit of General Motors
Corporation.

Video Programming. We generally offer our subscribers local off-air VHF/UHF
channels from affiliates of ABC, NBC, CBS and Fox and other local independent
broadcast stations, as well as HBO, HBO2, Cinemax, Showtime, Disney, ESPN, CNN,
USA, WTBS, Discovery, the Nashville Network, A&E and other cable programming.
The channels and programming that we offer in each market varies depending upon
the amount of spectrum capacity controlled in each market. We are required to
obtain the consent of local network affiliates to retransmit their signals.
Additionally, we are required to maintain contracts with cable programmers like
HBO and ESPN, which generally require payment on a per subscriber basis.

COMPETITION

High-Speed Internet Competition

The Internet access market is highly competitive. We will face competition
from many Internet access and service providers with significantly greater
financial resources, well-established brand names and

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<PAGE> 50

large, existing customer bases. Moreover, we expect the level of competition to
intensify in the future. We expect significant competition from:

ISPs. ISPs provide Internet access to residential and business customers.
These companies can:

- provide Internet access over ILECs' networks at or below ISDN speeds,

- offer DSL-based access using their own DSL services, or DSL services
offered by ILECs and others, and

- have significant and sometimes nationwide marketing presences and combine
these with strategic or commercial alliances with DSL-based competitive
carriers. Significant ISPs include Concentric Network Corporation,
Mindspring Enterprises, Inc., PSINet Inc. and Verio, Inc..

Incumbent Local Exchange Carriers. ILECs, such as SBC Communications, Inc.,
GTE Corp., Ameritech Corp. and US WEST, Inc. have existing metropolitan area
networks and circuit-switched local access networks. Most incumbent carriers
have announced deployment of commercial DSL services in certain areas and are
combining their DSL service with their own Internet access services. In October
1999, SBC announced plans to invest $6 billion to upgrade its telephone networks
to offer DSL service to 77 million customers by 2002. The incumbent carriers
generally have an established brand name in their service areas and possess
sufficient capital to deploy DSL services rapidly.

Inter-exchange Carriers. Many of the inter-exchange carriers, such as AT&T
Corp., MCI WORLDCOM, Inc. and Sprint are expanding their capabilities to support
high-speed, end-to-end networking services. These carriers have deployed large
scale networks, have large numbers of existing business and residential
customers and enjoy strong name recognition. These companies increasingly are
bundling their services to include high-speed local access combined with
metropolitan and wide area networks, and a full range of Internet services and
applications. In March 1999, AT&T merged with TeleCommunications, Inc., the
largest cable operator in the United States, and in April 1999 announced plans
to acquire MediaOne Group, Inc., one of the largest cable operators in the
United States. Also, in October 1999, MCI and Sprint announced plans to merge,
creating one of the largest telecommunications companies in the world, and the
largest owner of MMDS spectrum in the United States. We expect companies such as
these to offer combined data, voice and video services. They also could deploy
DSL services in combination with their current fiber networks.

Competitive Local Exchange Carriers. Certain CLECs, including NorthPoint
Communications, Inc., and Covad Communications Group, Inc., have begun offering
DSL-based data services. Other competitive carriers are likely to do so in the
future.

Cable Modem Service Providers. Cable modem service providers, like
Roadrunner, @Home Networks and @Work Networks and their cable partners,
currently offer to consumers and are preparing to offer to businesses high-speed
Internet access over hybrid fiber coaxial cable networks. Where deployed, these
networks provide local access services similar to our services, and in some
cases at higher speeds.

Other Wireless and Satellite Service Providers. We also may face
competition from other fixed-wireless services, including 24 GHz licensees such
as Teligent, Inc., 28 GHz licensees such as NEXTLINK Communications, Inc. and 38
GHz licensees such as Winstar Communications, Inc. AT&T has also announced plans
to expand its fixed-wireless network to compete for voice and high-speed data
customers in businesses and residences. We also may face competition from
satellite-based systems. Motorola Satellite Systems, Inc., Hughes
Communications, Inc. (a subsidiary of General Motors Corporation), Teledesic LLC
and others have filed applications with the FCC for global satellite networks
that can be used to provide ubiquitous two-way broadband voice and data services
to fixed locations.

Many of these competitors are offering, or may soon offer, technologies and
services that will directly compete with some or all of our service offerings.
We may not be able to compete effectively, especially

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<PAGE> 51

against established industry competitors with significantly greater financial
resources. Some of the competitive factors we face include:

- transmission speed,

- reliability of service,

- ability to bundle services,

- price performance,

- customer support,

- brand recognition,

- operating experience, and

- capital availability.

Other Telephony Services

We also will face intense competition from other providers of telephony
transmission services as we implement wireless local loop services and VoIP.
This competition will be increased because MMDS spectrum traditionally has not
been used to deliver telephony services, and consumer acceptance of such
services delivered across MMDS spectrum is unknown at this time. Many of the
existing providers of telephony services, such as regional Bell operating
companies and other local exchange carriers, have significantly greater
financial and other resources than us and better established brand awareness in
their service areas.

Subscription Television Competition

Hardwire Cable. Our principal subscription television competitors are
traditional hardwire cable operators such as AT&T Broadband & Internet Services
(formerly TeleCommunications, Inc.), and Time Warner Entertainment. Hardwire
cable companies generally are well established and known to our potential
customers and have significantly greater financial and other resources than we
have. In addition, these competitors are also bundling additional services with
their cable TV services, such as high-speed Internet access, to enhance their
products.

Direct Broadcast Satellite ("DBS"). DBS service is available from DIRECTV,
Inc., which is a subsidiary of the Hughes Electronic unit of General Motors
Corporation and Echostar Communications Corporation. We compete with many retail
distributors of DIRECTV and other DBS service. In November 1999, Congress
enacted legislation allowing DBS providers to offer local television stations.
We do not expect DBS providers to offer local stations into a majority of our
existing local markets for some time, if at all, because of the size of these
markets; however, the growth of DBS service has been significant since it was
first launched, and we expect that the DBS service providers will continue to be
significant competitors for video programming customers.

Inter-exchange Carriers. We expect that AT&T will combine its current
consumer long-distance, wireless and Internet services units with TCI's cable,
telecommunications and high-speed Internet access businesses. With this ability
to bundle high-speed services with cable programming, we expect that AT&T will
be a significant competitor to our MMDS and DIRECTV programing services.

Private Cable. Private cable is a multi-channel subscription television
service where the programming is received by satellite receiver and then
transmitted via coaxial cable throughout private property, often MDUs, without
crossing public rights of way. FCC rules permit point-to-point delivery of video
programming by private cable operators and other video delivery systems in the
18 GHz band. Private cable operators compete with us for exclusive rights of
entry into larger MDUs.

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<PAGE> 52

Local Off-Air VHF/UHF Broadcasts. Local off-air VHF/UHF broadcast
television stations (such as affiliates of ABC, NBC, CBS and Fox) provide free
programming to the public. Potential customers may forego subscription
television and only receive free off-air programming.

GOVERNMENT REGULATION

General. MDS, MMDS and ITFS services are subject to regulation by the FCC
under the Communications Act of 1934, as amended. The Communications Act
authorizes the FCC, among other things, to

- issue, revoke, modify and renew station licenses,

- approve the assignment and/or transfer of control of such licenses,

- approve the location and technical parameters of MDS, MMDS and ITFS
transmission facilities (headends and base stations),

- regulate the kind, configuration and operation of equipment used by MDS,
MMDS and ITFS systems, and

- impose certain equal employment opportunity and other periodic reporting
requirements on MDS, MMDS and ITFS operators.

MDS, MMDS and ITFS Licenses. In our markets, a total of 32 six-MHz channels
and one four-MHz channel are available in the MDS, MMDS and ITFS frequency
bands. The FCC can license the 13 MDS and MMDS channels directly to commercial
entities for full-time operation without programming restrictions. Except in
limited circumstances, the FCC generally can license 20 ITFS channels only to
qualified non-profit educational organizations. Each of the ITFS channels must
broadcast programming for educational purposes a minimum of 20 hours per week.
The remaining air time on ITFS channels may be leased for commercial use,
without further programming restrictions except that the ITFS license holder, at
its option, must be entitled to recapture up to an additional 20 hours of air
time per channel per week for educational programming.

The FCC began the establishment of the MMDS spectrum in 1974 with the
allocation of two channels (MDS-1 and MDS-2/2A). In 1983, the FCC reallocated a
total of eight ITFS channels to the MMDS spectrum to satisfy a growing demand
for the delivery of video entertainment programming to subscribers and to
provide competition to hard-wired cable television systems. Simultaneous with
this reallocation of spectrum, the FCC amended its rules for the remaining ITFS
channels to permit ITFS licensees, subject to their meeting certain educational
programming requirements, to lease excess capacity to commercial MMDS service
providers. ITFS channels originally had been allocated solely for educational
purposes.

In 1985, the FCC established a lottery procedure for awarding MDS and MMDS
station licenses. In 1990, the FCC shifted to a one-day cut-off period
application process, under which all mutually exclusive MDS and MMDS licenses
were issued on essentially a first-come, first-served basis. In 1995, the FCC
adopted rules under which MDS and MMDS applications for new stations would be
subject to a competitive bidding process, or spectrum auction. The FCC generally
considers applications to be mutually exclusive if their conflicts are such that
the grant of one application would effectively preclude the grant of one or more
of the other applications due to interference that cannot be avoided through
cooperation of the parties. Using the competitive bidding process, in 1996 the
FCC auctioned off one MMDS authorization for each of the 493 basic trading areas
("BTAs"). Each BTA authorization holder is permitted to apply for, and following
FCC grant, construct facilities to provide services over any non-previously
licensed MDS or MMDS channel within the BTA, and has preferred rights to the
available ITFS frequencies and ITFS lease agreements within the BTA. The MDS and
MMDS licenses issued or applied for before the BTA auction are commonly referred
to as "incumbent" MDS/MMDS licenses, while the MDS and MMDS station
authorizations issued pursuant to BTA ownership are commonly referred to as
"BTA" MDS/MMDS licenses.
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<PAGE> 53

The application and licensing process for ITFS stations is different from
those for MDS and MMDS stations. In 1995, the FCC adopted a national filing
window system. Under this system the FCC accepts applications for licenses for
new ITFS stations or major changes to existing ITFS licenses only if they are
filed within specific windows, typically five days, set by the FCC. Applications
filed in a particular window are subject only to competing proposals filed in
that same window. Where two or more applications are filed within the same
window and are predicted to cause each other harmful electrical interference,
licenses are awarded by the FCC pursuant to a comparative selection process.

In 1998, the FCC, acting pursuant to the Balanced Budget Act of 1997,
tentatively concluded that competing ITFS applications should be subject to
auction, or competitive bidding. However, because the FCC was uncertain at the
time whether its conclusion correctly reflected Congress's intent with regard to
the treatment of competing ITFS applications, it decided not to proceed
immediately with the auction of ITFS applications and to first seek
Congressional guidance on the matter. In April 1999, having received no specific
guidance from Congress, the FCC reaffirmed its previous decision to use spectrum
auctions to resolve competing ITFS applications. The FCC did, however, state
that it would amend its rules regarding ITFS auctions if Congress were to
specify a change to the FCC's auction authority in this regard.

Generally, in the case of MDS, MMDS and ITFS stations, the FCC issues the
station licensee a conditional license, allowing construction of the station to
commence. The station may be constructed and operated only in accordance with
the parameters set forth in the license. Channel transmission generally must
begin within one year of grant of the conditional license in the case of
incumbent MDS/MMDS licenses, 18 months in the case of ITFS licenses and five
years for BTA MDS/MMDS licenses. If channel construction deadlines for a license
are not met, then (1) the FCC may revoke the license or (2) in the case of the
BTA licenses, reduce the license service area if less than two-thirds of the
population of the BTA service area is capable of being reached by a station
signal by the expiration of the five-year BTA build-out period. Although FCC
rules permit parties to request extensions of channel construction deadlines,
the FCC is not required to grant extensions. We believe that we have satisfied
all construction deadlines relating to our licensed stations except for those
licenses for which the deadline has not yet passed or for which we have received
an extension.

MDS, MMDS and ITFS licenses generally have terms of 10 years. All
"incumbent" MDS/MMDS licenses expire on May 1, 2001. All BTA MDS/MMDS licenses
expire on March 28, 2006. Licenses may be renewed through applications filed
with the FCC within a certain period before expiration of the license term, and
petitions to deny applications for renewal may be filed by other parties during
certain periods following the filing of such applications. The FCC may revoke or
cancel licenses for violations of the Communications Act or the FCC's rules and
policies. Conviction of certain criminal offenses may also render a licensee or
applicant unqualified to hold a license. Although FCC custom and practice
establish a presumption granting renewals of licenses, the presumption requires
that the licensee substantially comply with its regulatory obligations during
the license period.

FCC rules generally prohibit the sale for profit of an incumbent MDS or
MMDS conditional license or of a controlling interest in the conditional license
holder before construction of the station or, in certain instances, prior to the
completion of one year of operation. However, access to channels may be obtained
during these prohibited periods through the leasing of an MDS or MMDS license
holder's channel capacity. The granting of options to purchase a controlling
interest in a licensee or an option to purchase a license is also permitted
during these prohibited periods. During the lifetime of any such lease or option
agreement, the licensee must remain in control of its FCC license to avoid
violating FCC transfer-of-control rules. Our lease agreements with license
holders typically require the license holders, at our expense, to use their best
efforts, in cooperation with us, to make various required filings with the FCC
in connection with the maintenance and renewal of licenses. We believe this
reduces the likelihood that the FCC will revoke, cancel or fail to renew a
license.

BTA Auction and Service Requirements. In March 1996 the FCC concluded its
first auction of available commercial MMDS spectrum in the 493 BTAs. The winner
of a BTA has the exclusive right to apply for and develop the available MDS and
MMDS frequencies in the BTA, subject to certain specified

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interference criteria that protect incumbent MDS and MMDS stations. Incumbent
licensees also must protect the BTA licensees from system interference caused by
modifications to incumbent stations, including power increases or base station
relocations.

BTA auction winners with MMDS spectrum rights have a five-year "build-out"
period. During the build-out period, a BTA holder can initiate or expand service
within its BTA without competition from other MMDS spectrum applicants except in
those areas and on those channels for which there is an incumbent MDS or MMDS
licensee. After the five-year period, a BTA holder can retain its authorization
for an entire BTA if its signal is capable of covering at least two-thirds of
the population within its BTA service area, excluding those who are located
within the protected service areas of incumbent MDS/MMDS stations licensed to
others. If the BTA holder fails to meet the coverage requirement after the
five-year build-out period, then the BTA license for the portion of the BTA that
is not capable of being served will be subject to forfeiture. The FCC's rules
allow BTAs to be partitioned and BTA licensees are permitted to contract with
other entities to allow them to file applications with the FCC for available
channels within the partitioned area. We expect the FCC to renew BTA licenses
after the expiration of their 10-year term if the authorization holder satisfies
the coverage requirement and is in compliance with the Communications Act and
the FCC's rules.

We acquired 93 BTAs in the March 1996 auction at a total cost of
approximately $19.8 million. Under the terms of the BTA auction, we remitted
approximately $4.0 million as down payments and deposits. The remaining $15.8
million bears interest at 9.5% and is being paid under 10-year installment notes
that began in the fourth quarter of 1996 with interest-only payments. Quarterly
payments of principal and interest began in the fourth quarter of 1998. All of
our BTA licenses have an effective date of August 16, 1996, except for one which
has an effective date of September 17, 1996. Failure to meet the above-described
installment payment schedule or the five-year construction deadlines could
result in the forfeiture of some or all of the BTA authorizations that we hold.
We believe that we have achieved, or will by the end of the BTA build-out period
achieve, sufficient coverage capability to retain our BTA authorizations in
which we intend to operate.

In October 1997, we entered into a lease and purchase option agreement with
CS Wireless for 10 BTAs and portions of four additional BTAs licensed to us.
Under this agreement, CS Wireless has agreed to reimburse us for all amounts
paid by us to the FCC for the BTAs leased to CS Wireless. The agreement also
provides CS Wireless the option to purchase the leased BTAs. See
"Business -- Recent Transactions -- CS Wireless Transaction."

WCS Licenses. In February 1997 the FCC reallocated and assigned the use of
the frequencies at 2305-2320 MHz and 2345-2360 MHz to the Wireless
Communications Services ("WCS"). WCS licensees are permitted to provide fixed,
mobile and radiolocation services throughout their 2.3 GHz band. In addition,
satellite digital audio radio service may be provided on all frequencies in the
band except for those at 2305-2310 MHz. The regulatory treatment of WCS
licensees depends on the type(s) of services they provide.

WCS licenses, which generally are awarded by the FCC through competitive
bidding, have terms of 10 years. Although the licenses carry with them a
"renewal expectancy," each WCS licensee is subject to certain "substantial
service" requirements that must be met during the initial license term.
"Substantial service" is defined by the FCC as "service which is sound,
favorable, and substantially above the level of mediocre service which just
might minimally warrant renewal." Failure by a licensee to meet this requirement
may result in a forfeiture of its license. In December 1998, CS Wireless agreed
to assign to us 20 MHz of WCS spectrum in 19 markets. See "Business -- Recent
Transactions -- CS Wireless Transaction."

Transmission. The FCC also regulates transmitter locations and signal
strengths. The operation of an MDS, MMDS and ITFS system typically requires the
co-location of a commercially viable number of channels operating with common
technical characteristics. To co-locate channels, an applicant must demonstrate
that its proposed signal does not violate interference standards in the
FCC-protected area of previously-authorized MDS, MMDS and ITFS stations. An MDS
and MMDS license holder generally is
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protected from interference from another MDS or MMDS operator within a 35-mile
radius of the base station. An ITFS license holder generally is entitled to
protection to all of its receive sites. In addition, an ITFS station is entitled
to a 35-mile protected service area (1) during the use of the station's excess
channel capacity by an MMDS operator if it has requested and received a
protected service area from the FCC or (2) from all MDS, MMDS and ITFS station
licensees that implement two-way digital operations.

Two-Way Authorization. In September 1998 the FCC amended its rules to allow
for the use of MMDS spectrum for fixed, two-way digital voice, video and data
communications. As amended, these rules are referred to as the "two-way rules."
The two-way rules became final in July 1999. Under the two-way rules, the FCC:

- permits MDS, MMDS and ITFS licensees to provide digital two-way
communications services,

- provides a number of technical parameters to mitigate the potential for
interference among service providers and to ensure interference
protection for existing MDS, MMDS and ITFS licensees,

- simplifies and streamlines the licensing process for two-way
authorizations and ITFS major modifications, and

- modifies the ITFS programming requirements in the digital environment.

The two-way rules are intended to provide licensees and operators in the
MMDS spectrum with the technical and operational flexibility to add various
digital two-way services to their current offerings. The two-way rules permit
the use of MDS, MMDS and ITFS frequencies for both downstream and response
transmissions. Two-way service is provided through the use of "response"
stations, such as at the customer's premises, and response station "hubs," or
base stations, which serve as collection points for response transmissions. The
two-way rules also permit a cellular system design using a "signal booster
station," or additional transmission site not located at the base station, which
is used either to originate or relay signals to customers and also serve as a
response station hub for those customers.

Under the two-way rules, all 33 MDS, MMDS and ITFS channels generally can
be used for upstream or downstream communications. All channels will continue to
be subject to the FCC's interference protection requirements and existing or
future channel capacity lease agreements. In addition, MDS, MMDS and ITFS
operators that operate digital two-way communications systems are permitted to
"shift" required ITFS educational programming to any MDS, MMDS or ITFS channel
within the same operating system or, subject to certain limitations, "swap"
their channels for other channels in the same market. However, channel swaps
represent changes in licensees, and require the filing of applications with the
FCC and receipt of FCC approval.

The FCC has stated that it will, by public notice, announce its plans to
hold a one-time, initial one-week filing window for two-way applications. We
expect the filing window to occur some time in the second quarter of 2000. All
applications filed during this one-week window will be considered as having been
filed on the same day. Applicants must certify that they are in compliance with
all applicable technical, interference and notification rules, including all
necessary interference consent letters. The FCC has indicated that its staff
will review the applications for completeness, but generally will not conduct
its own interference studies. The FCC will issue a public notice of its receipt
of the filed applications, after which applicants will have 60 days to resolve
engineering conflicts and amend their applications. The FCC will then issue a
second public notice accepting the applications that also sets another 60-day
period for parties to file petitions to deny.

After the initial one-week filing window, the FCC will use a "rolling"
one-day filing window for booster and hub applications. Applications will be
placed on public notice, giving parties 60 days to file petitions to deny. If no
petitions to deny are filed, the applications are granted on the 61st day.

Regulation of Internet Service Providers. Congress has passed a number of
laws that concern the Internet, including the Digital Millennium Copyright Act,
the Children's Online Privacy Protection Act, the Children's Online Protection
Act and the Protection of Children from Sexual Predators Act of 1998.

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Generally, these laws provide liability limitations for Internet service
providers that do not knowingly engage in unlawful activity. Although we do not
anticipate that compliance with these laws will have an adverse impact on us, we
may be required to implement operating guidelines to comply with the laws and
could be subject to liability if we fail to implement appropriate guidelines or
otherwise violate any of these new laws.

Aside from the use of spectrum, the FCC has held that the terms and
conditions of providing Internet and Internet access services are not subject to
FCC regulation. However, the FCC has held that the provision of Internet access
is an interstate service subject to FCC jurisdiction. There can be no certainty
that the providing of Internet access services will continue to be free from FCC
regulation. Moreover, if we begin providing wireless local loop services, we
will be subject to FCC and state regulation of our interstate and intrastate
services, respectively.

The Cable Act. On October 5, 1992, Congress passed the Cable Television
Consumer Protection and Competition Act of 1992 (the "Cable Act"). Pursuant to
the Cable Act, effective October 6, 1993, commercial broadcasters may require
cable operators to obtain their consent before retransmitting their signals. The
FCC has exempted wireless cable providers from the retransmission consent rules
if the receive-site antenna is either owned by the subscriber or within the
subscriber's control and available for purchase by the subscriber upon the
termination of service. In all other cases, wireless cable providers must obtain
consent to retransmit broadcast signals. We believe that we have obtained
substantially all consents required to retransmit local broadcast signals in our
subscription television markets. We cannot assure you that existing consents
will be maintained or renewed or that we will be able to obtain any additional
necessary consents on terms satisfactory to us, if at all. Unlike hard-wired
cable systems, wireless cable systems, are not required under the Cable Act and
the FCC's "must carry" rules to retransmit a specified number of local
commercial and non-commercial television or qualified low power television
signals.

The Cable Act and the FCC's implementing regulations are intended to insure
wireless cable operators have access to cable programming in fair and
non-discriminatory terms. If a wireless cable operator is unable to obtain
programming on what it considers to be fair and non-discriminatory terms, then
it may file a complaint with the FCC. Access to certain programming may be
impeded or delayed as a result.

Copyright. Under the Federal copyright laws, permission from the copyright
holder generally must be secured before certain video programs may be
retransmitted. Under Section 111 of the Copyright Act of 1976, certain "cable
systems," including wireless cable providers, are entitled to engage in the
secondary transmission of programming without the prior permission of the
holders of copyrights in the programming if a compulsory copyright license is
secured. Such a license may be obtained upon the filing of certain reports and
the payment of certain fees set by copyright arbitration royalty panels. We
believe we have obtained all compulsory copyright licenses required for each of
our subscription television markets.

In 1994, Congress enacted legislation that clarified the ability of
wireless cable providers to obtain the benefit of the Section 111 compulsory
copyright license. Periodically, Congress has considered proposals to phase out
the Section 111 compulsory license. In response to a request from Congress, the
U.S. Copyright Office held a public hearing on the issue of compulsory licenses
in May 1997 and endorsed eventual replacement of the statutory license by a free
market negotiated license while recommending retention of the existing license
for the near future. Congress currently is holding hearings to review this and
other recommendations. Because our wireless cable systems retransmit only a
limited number of broadcast channels, we do not believe that the termination of
the compulsory copyright license would have a material adverse effect on our
financial condition, results of operations or cash flows.

Other Regulations. MMDS operators are subject to regulation by the FAA for
the construction, maintenance and lighting of transmission towers and by certain
local zoning regulations affecting construction of towers and other facilities.
There may also be restrictions imposed by local authorities.

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RECENT TRANSACTIONS

CS Wireless Transaction. Effective December 2, 1998, Nucentrix, CAI
Wireless Systems, Inc. and CS Wireless signed a Master Agreement pursuant to
which CAI purchased our 36% equity interest in CS Wireless for $1.5 million. In
addition, CS Wireless agreed to assign to us channel rights to MDS-1 channels
(2150 MHz-2156 MHz) in Austin, Corpus Christi, El Paso and Killeen, Texas, and
WCS (2.3 GHz) frequencies in 19 markets, an operating wireless cable system in
Radcliffe/Story City, Iowa with approximately 1,600 subscribers, and certain
subscriber equipment. We also agreed to assign MMDS channel rights and related
equipment in Portsmouth, New Hampshire to CS Wireless. Following this
transaction, we retained no equity interest or corporate governance rights in CS
Wireless.

We have received FCC approval of the assignment to us of the MDS-1
channels. We have until January 3, 2000, to consummate this transfer. If we have
not consummated the transfer by that time, we intend to request an extension
from the FCC. We also have agreed with CS Wireless, upon execution of a
comprehensive two-way interference coordination agreement, to file for FCC
approval of the assignment to us of the WCS spectrum. We have executed a
spectrum lease with CS Wireless giving us the exclusive right to use the MDS-1
channels, subject to certain pre-existing leasehold interests, and the WCS
spectrum pending consummation of these assignments. Upon consummation of these
assignments, we have agreed to cancel a promissory note issued by CS Wireless to
us, the outstanding balance of which, prior to December 2, 1998, was
approximately $2.3 million.

SBA Tower Sale. In October 1999, we signed a definitive agreement with SBA
Towers, Inc. ("SBA") to sell 34 communications towers to SBA for $7.0 million.
We will lease back space on the towers from SBA for our wireless broadband
Internet and video operations. We expect the transaction to close in the fourth
quarter of 1999. The transaction is subject to customary closing conditions. The
$7.0 million purchase price is subject to reduction if closing conditions for
some of the sites are not satisfied and, therefore, those sites are excluded
from the sale.

TRADEMARKS

We own common law rights in, and have federal registrations pending in the
United States for, the marks NUCENTRIX BROADBAND NETWORKS and NUCENTRIX TELECOM,
which we use in connection with our wireless broadband network services. We
intend to use these trademarks in connection with the implementation of our
business strategy and consider these intellectual property rights important to
our business. We also own common law trademark rights in, and have federal
registrations pending in the United States for, the stylized mark HEARTLAND. We
also own common law trademark rights in and have federal registrations on the
trademarks HEARTLAND WIRELESS COMMUNICATIONS, HEARTLAND WIRELESS and design and
HEARTLAND CABLE TELEVISION in the United States. Because of the recognition of
these trademarks in the subscription television markets in which we operate, we
consider these intellectual property rights important to our business.

LEGAL PROCEEDINGS

Chapter 11 Proceeding. On December 4, 1998, we filed a plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. On March 15, 1999,
the bankruptcy court confirmed the plan, which became effective on April 1,
1999. On that date, we also changed our name to Nucentrix Broadband Networks,
Inc., from Heartland Wireless Communications, Inc. See "Reorganization."

Securities Litigation. Nucentrix and certain of its former officers and
directors are co-defendants in a stockholder action filed in February 1998 in
the United States District Court for the Northern District of Texas, styled
Coates, et al. v. Heartland Wireless Communications, Inc., et al.
(3-98-CV-0452-D). The Coates action involves federal securities laws claims
brought by two former stockholders of Nucentrix against Nucentrix and six former
officers and/or directors. The complaint asserts claims under Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, and alleges that during a period
beginning on November 14, 1996, and ending on March 20, 1997, defendants
allegedly misrepresented Nucentrix's financial condition in various press
releases and public filings. The plaintiffs seek unspecified

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damages, costs and expenses, including attorneys' and experts' fees. On November
2, 1998, the court granted the defendants' motion to dismiss the plaintiffs'
complaint. The plaintiffs filed an amended complaint on January 4, 1999. On July
8, 1999, for the second time, the court granted defendants' motion to dismiss
the plaintiffs' complaint for failure to state a claim. The court granted
plaintiffs' permission to file an amended complaint for a second time, which the
plaintiffs have filed and to which the defendants have responded.

Three of our former officers and directors are co-defendants in a purported
class action lawsuit originally filed in July 1998 in State District Court in
Kleburg County, Texas. Nucentrix originally was a named defendant in this
lawsuit, which is styled Thompson, et al. v. Heartland Wireless Communications,
Inc., et al. (98-371-D). The Thompson action seeks to represent a class
consisting of anyone who acquired the securities of Nucentrix from November 15,
1995, to March 20, 1997. On December 11, 1998, we removed the Thompson action to
the United States District Court for the Southern District of Texas (98-
CV-567). Plaintiffs in the Thompson action allege state securities laws
violations, misrepresentation, and civil conspiracy claims against Nucentrix and
three former officers and directors. The petition alleges that, during the
purported class period, Nucentrix and certain former officers and directors
misstated material facts concerning Nucentrix's subscriber base and omitted to
disclose the need for a material write-down of accounts receivable relating to
our wireless cable subscriber base. Plaintiffs' action further claims that
Nucentrix violated generally accepted accounting principles ("GAAP") by
allegedly (1) failing to recognize revenue properly, (2) failing to adequately
reserve for doubtful accounts receivable and (3) using "unrealistic"
amortization periods. The plaintiffs seek unspecified compensatory and punitive
damages, costs and expenses, including attorneys' fees and experts' fees, as
well as injunctive relief relating to any proceeds derived from defendants'
stock sales, if any. The plaintiffs have alleged in a statement of the case that
their purported class damage models indicate retention damages of $35.4 million
and selling damages of $35.1 million, for total damages of $70.5 million. In May
1999, Nucentrix was dismissed as a named defendant from the Thompson lawsuit and
the lawsuit was remanded to State District Court. Three of our former officers
and directors remain named defendants. Nucentrix's liability to these officers
and directors with respect to this lawsuit is limited under our plan of
reorganization as described below. This matter is currently set for trial in
April 2000.

Our By-Laws as in effect prior to the April 1, 1999, effective date of our
plan of reorganization provided for indemnification of our officers and
directors to the fullest extent permitted under Delaware law. Generally, Section
145 of the General Corporation Law of the State of Delaware (the "DGCL") permits
a corporation to indemnify any person who was or is a party to any action
because such person is or was a director, officer, employee or agent of such
corporation for liabilities related to any such action if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interest of such corporation. As a result, our current and
former directors and officers who are parties to the Coates or Thompson actions
may have a claim for indemnification against us to the extent they incur
liabilities resulting from or incur expenses in defending these actions. The
treatment of any such claims is provided for in our plan of reorganization.

Under Section 11.5 of our plan of reorganization, we are obligated, to the
extent permitted under the DGCL, to indemnify persons who served as officers or
directors of Nucentrix on or after April 25, 1997, for certain liabilities
arising as a result of such persons having served as an officer or director of
Nucentrix, including, subject to the limitations described below, liabilities
arising out of their being named as a defendant in the Coates or Thompson
actions. We refer to our obligation under Section 11.5 of our plan of
reorganization as "Assumed Indemnity Obligations." Our Assumed Indemnity
Obligations do not apply, however, with respect to any liability arising from
acts or omissions occurring prior to April 25, 1997, if the liability is based
on (1) a breach of their duty of loyalty to us or our stockholders, (2) acts or
omissions taken not in good faith and not in a manner they reasonably believed
to be in or not opposed to our best interest or which involve intentional
misconduct, gross negligence or a knowing violation of law or (3) any
transaction from which the director of officer derived any improper personal
benefit. Claims asserted by former directors and officers of Nucentrix which are
not covered by our Assumed Indemnity Obligations, to the extent allowed by the
bankruptcy court, would be classified as Class 6 Indemnity

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Claims under our plan of reorganization. Under Section 4.6 of our plan of
reorganization, holders of Class 6 Indemnity Claims allowed by the bankruptcy
court would be entitled to recover on account of such claims only to the extent
of any available coverage under our corporate liability insurance, including any
self-insured retention under those policies.

All of our former officers and directors of Nucentrix who are defendants in
the Coates and Thompson actions, other than two former officers and directors
who are defendants in each of the Coates and Thompson actions, served as
officers or directors after April 25, 1997, and, therefore, are beneficiaries of
the Assumed Indemnity Obligations. To the extent the two former officers and
directors who are not, or any other former or current officer or director who
otherwise is determined not to be, entitled to the benefit of the Assumed
Indemnity Obligations incur liability in any of these lawsuits, we believe that
any claim they may assert against us for indemnification, to the extent allowed
by the bankruptcy court, would be treated as Class 6 Indemnity Claims under our
plan of reorganization and their recovery would be limited to any available
proceeds of our corporate liability insurance. To the extent any of the other
former or current officers or directors incur any liability in any of these
lawsuits, we would be obligated to indemnify such persons as part of our Assumed
Indemnity Obligations, subject to the exceptions described above, to the extent
the proceeds of our corporate liability insurance are insufficient to cover such
liabilities.

To the extent plaintiffs in the Coates and Thompson actions are entitled to
any recovery from us and the bankruptcy court allows any claim they may file
against us, we believe any such claim for recovery would be classified under our
plan of reorganization as a Class 7 Bondholder Litigation Claim, which is a
claim based on the purchase or sale of our debt securities, or a Class 8
Stockholder Litigation Claim, which is a claim based on the purchase or sale of
our equity securities. Under our plan of reorganization, each holder of a
Bondholder Litigation Claim that is allowed by the bankruptcy court will be
entitled to receive, in full satisfaction of such claim, (1) a pro rata portion
of any liability insurance proceeds that remain after the satisfaction of our
Assumed Indemnity Obligations and payments made on Class 6 Indemnity Claims and
(2) if insurance proceeds are insufficient to satisfy such claim in full, a pro
rata portion of the 275,000 warrants that we are obligated to issue under our
plan of reorganization, up to the number of warrants with a value sufficient to
satisfy the allowed amount of such claim. Each holder of a Stockholder
Litigation Claim that is allowed by the bankruptcy court will be entitled to
receive, in full satisfaction of such claim, (1) a pro rata portion of any
liability insurance proceeds that remain after the satisfaction of our Assumed
Indemnity Obligations, Class 6 Indemnity Claims and Bondholder Litigation Claims
and (2) if insurance proceeds are insufficient to satisfy such claim in full, a
pro rata portion of the Stockholder Litigation Claims portion of the 275,000
warrants that we are obligated to issue under our plan of reorganization, up to
the number of warrants with a value sufficient to satisfy the allowed amount of
such claim. The Stockholder Litigation Claims Portion of these warrants will be
that portion of the warrants that remain after satisfaction of Bondholder
Litigation Claims that bears the same proportion to the total number of
remaining warrants as the number of shares of equity interests represented by
allowed Stockholder Litigation Claims bears to the number of shares of equity
interests represented by the allowed Stockholder Litigation Claims and the
allowed claims of previous holders of common stock and other equity interests in
Nucentrix prior to the Effective Date.

We intend to vigorously defend the Coates and Thompson actions. While it is
not feasible to predict or determine the final outcome of these proceedings or
to estimate the amounts or potential range of loss for these matters, and while
management does not expect such an adverse outcome, management believes that an
adverse outcome in one or more of these proceedings against one or more persons
entitled to the benefit of Assumed Indemnity Obligations which, in the
aggregate, exceeds or otherwise is excluded from applicable insurance coverage,
could have a material adverse effect on our financial condition, results of
operations or cash flows.

Late Fee Litigation. Nucentrix is a party to a purported class action
lawsuit filed in May 1998 and pending in State District Court in Brooks County,
Texas, styled Garcia, et al. v. Heartland Wireless Communications, Inc. d/b/a
Heartland Cable Television (98-60898-1). The lawsuit alleges that the
administrative late fees charged by Nucentrix are not reasonably related to the
costs incurred by Nucentrix

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as a result of late payment of accounts. The plaintiff seeks to certify a class
to represent all persons receiving cable service from Nucentrix or who have been
charged a late fee by Nucentrix. The plaintiff seeks a declaration that any
contractual provisions for Nucentrix's late fees are void or usurious, and seek
unspecified money damages, interest, attorneys' fees and costs. We believe that
the plaintiff's claims in the Garcia case are barred by, among other things, the
order confirming our plan of reorganization entered by the bankruptcy court on
March 15, 1999, for plaintiff's failure to file a proof of claim in our Chapter
11 proceedings, and that the plaintiff is entitled to no recovery under the
plan. We have filed a motion with the bankruptcy court to permanently enjoin and
dismiss this matter. The bankruptcy court has heard oral arguments on the
motion, but has not rendered a decision.

Nucentrix also is a party to a purported class action filed in December
1998 in State District Court in Nueces County, Texas styled Ysasi, et al. v.
Heartland Wireless Communications, Inc. (98-6430-B). The Ysasi action alleges
that certain provisions of our customer agreements are unconscionable, invalid
and illegal, and therefore unenforceable. The plaintiff also alleges that our
administrative late fees are unenforceable and usurious. The plaintiff seeks to
represent a class consisting of all persons who first signed a customer
agreement with Nucentrix after December 4, 1998, that contained these liquidated
damages provisions. The plaintiff seeks (1) a declaration that the liquidated
damages provisions of our customer agreements are invalid and illegal, (2) an
injunction enjoining Nucentrix from enforcing such provisions and (3) recovery
of all amounts paid under such liquidated damages provisions, attorneys' fees,
prejudgment and post-judgment interest and costs. The plaintiff in Ysasi has
moved for summary judgment against Nucentrix on grounds of usury. This motion is
scheduled for hearing February 22, 2000.

We intend to vigorously defend the late fee actions. While it is not
feasible to predict or determine the final outcome of these proceedings or to
estimate the amounts or potential range of loss with respect to these matters,
and while management does not expect such an adverse outcome, management
believes that an adverse outcome in one or more of these proceedings could have
a material adverse effect on our financial condition, results of operations or
cash flows.

Motion to Revoke Order of Confirmation. In September 1999, we received
notice that a Motion to Revoke Order of Confirmation had been filed pro se in
the U.S. Bankruptcy Court for the District of Delaware (No. 98-2692-JJF) by two
former stockholders of Heartland Wireless Communications, Inc., seeking to
revoke the order of the bankruptcy court confirming our plan of reorganization
under Chapter 11 of the U.S. Bankruptcy Code. The motion asserts that we
procured the order confirming our plan of reorganization by fraudulently
undervaluing our enterprise value, and seeks to set aside the order. While it is
not feasible to predict or determine the final outcome of this proceeding, and
while management does not expect such an outcome, an adverse outcome in this
proceeding could result in the discharge of our debt under our plan of
reorganization being revoked and we could be placed back in reorganization under
Chapter 11. We have filed a motion to dismiss the motion to revoke, believe the
motion to revoke is without merit and intend to vigorously oppose the motion to
revoke. Our motion to dismiss the motion to revoke is under consideration by the
bankruptcy court. See "Risk Factors" and "Reorganization."

Other. Nucentrix is a party, from time to time, to routine litigation
incident to our business. We do not believe that any other pending litigation
matter will have a material adverse effect on our consolidated financial
position, results of operations or cash flows.

EMPLOYEES

As of December 1, 1999, we had approximately 640 employees. None of our
employees is subject to a collective bargaining agreement. We have experienced
no work stoppages and believe that we generally have good relations with our
employees. We also presently use the services of independent service providers
to install certain components of our operating systems.

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PROPERTIES

We lease approximately 24,000 square feet of office space for our executive
offices in Plano, Texas. Approximately 1,380 square feet of this space is
subleased to CS Wireless. We lease approximately 9,600 square feet of space for
telemarketing, customer care operations and training facilities in Denison,
Texas. We believe that the facilities described above are leased at fair market
value and are adequate for the foreseeable future.

The principal physical assets of our operating systems consist of satellite
signal reception equipment, radio transmitters and transmission antennae, as
well as office space and base station and headend space. We lease office space
for our existing markets and may, in the future, purchase or lease additional
office space in other locations if we launch other systems. We also own
transmission towers or leases space on transmission towers located in our
markets. We believe that office space and space on transmission towers currently
is available on acceptable terms in the markets where we intend to operate.

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GLOSSARY

Set forth below are certain defined terms used in this prospectus.

Base stations -- Locations where wireless data transmitting and receiving
and headend equipment is installed for distribution of service to customers.

BTA or basic trading area -- Specified geographic areas used by the FCC for
purposes of allocating radio frequency spectrum. The United States is broken
down into 493 basic trading areas based on major trading areas for economic
purposes.

CLEC (Competitive Local Exchange Carrier) -- A local exchange service
provider (carrier) that competes on a selective basis for, among other things,
local exchange, long distance, data transport and/or Internet access services.
CLECs lease local loops from the ILECs at wholesale rates for resale to end
users.

CPE (Customer Premises Equipment) -- Equipment located at a customer's home
or office that is used to receive and transmit wireless communications or
wireless cable television programming.

DBS (Direct Broadcast Satellite programming) -- A satellite system which
enables the transmission of an encoded signal directly from a satellite to the
subscriber's home.

DSL (Digital Subscriber Lines) -- Digital service technology that allows
two-way communications to and from individual subscribers through an ILEC's
existing telephone lines.

Fixed wireless -- refers to wireless data transmission from a fixed
transmission facility to a fixed reception facility.

GHz (Gigahertz) -- See "Hertz, Megahertz and Gigahertz."

Headend -- Equipment necessary to receive video programming via satellite
transmission and combine the signals into a channel lineup for distribution.

Hertz, Megahertz and Gigahertz -- The dimensional unit for measuring the
frequency with which an electromagnetic signal cycles through the zero-value
state between lowest and highest states. One hertz (abbreviated Hz) equals one
cycle per second. MHz (Megahertz) stands for millions of Hertz. GHz (Gigahertz)
stands for billions of Hertz.

ILEC (Incumbent Local Exchange Carrier) -- The local exchange carrier that
was the monopoly carrier prior to the opening of local exchange services to
competition.

Internet -- A global collection of interconnected computer networks which
use a specific communications protocol.

IP (Internet protocol) -- A set of networking protocols that provide
communications access across interconnected networks. IP includes standards for
how computers communicate and conventions for connecting networks and routing
traffic.

ISDN (Integrated Services Digital Network) -- An information transfer
standard for transmitting digital voice and data over telephone lines at speeds
up to 128 KB per second.

ISP (Internet Service Provider) -- A service provider that provides access
to the Internet by sharing communications lines and equipment.

ITFS (Instructional Television Fixed Service) -- 20 radio frequency
channels in the 2500-2686 MHz band.

Kbps (Kilobits) per second -- A transmission rate. One kilobit equals 1,024
bits of information.

LEC (Local Exchange Carrier) -- Any telephone service provider offering
local exchange services. LECs include ILECs, RBOCs and CLECs.

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<PAGE> 63

LMDS (Local Multipoint Distribution Service) -- A wireless point to
multipoint communications service.

Mbps (Megabits) per second -- A transmission rate. One megabit equals 1,024
kilobits.

MHz (Megahertz) -- See "Hertz, Megahertz and Gigahertz."

MDS (Multipoint Distribution Service) -- Two radio frequency channels in
the 2150-2160 MHz range and 3 channels in the 2650-2680 MHz band.

MDU (Multiple Dwelling Unit) -- High density residential complexes such as
apartment buildings, condominiums, cooperatives, townhouses and mobile home
communities.

MMDS (Multichannel Multipoint Distribution Service) -- Eight channels in
the 2596-2644 MHz band. Also refers in general to a wireless point to multipoint
distribution system using microwave transmitting and receiving equipment using
MDS, MMDS and ITFS channels.

Modem -- Short for modulator/demodulator, a device for transmitting
information over a standard telephone line.

RBOC (Regional Bell Operating Company) -- ILECs created by the divestiture
of the local exchange business of AT&T. These include BellSouth, Bell Atlantic,
Ameritech, US WEST and SBC Communications.

SFU (Single Family Unit) -- A residence typically consisting of one family.

SOHO -- Small office/home office.

T1 -- A high-speed digital circuit typically linking high volume customer
locations to long distance carriers or other customer locations. T1 service
accommodates transmission speeds of up to 1.544 Mbps per second, which is
equivalent to 24 voice grade equivalent circuits.

VoIP (Voice over Internet Protocol) -- Technology designed to support voice
communications over packet networks such as the Internet.

WCS (Wireless Communications Services) -- A service licensed to provide
fixed, mobile and radiolocation services throughout its 2.3 GHz band.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of Nucentrix and their ages as of the
date of this prospectus are given below. Each director took office as of the
Effective Date and will serve until a successor is elected and qualified or
until his earlier resignation or removal.

<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ---- --- ----------------
<S> <C> <C>
Carroll D. McHenry.................... 56 Chairman of the Board, President,
Chief Executive Officer and Director
Marjean Henderson..................... 48 Senior Vice President and Chief
Financial Officer
Alexander R. Padilla.................. 57 Senior Vice President -- Business
Development
J. Curtis Henderson................... 37 Senior Vice President, General Counsel
and Secretary
Frank H. Hosea........................ 50 Senior Vice President -- Video
Operations
Richard B. Gold....................... 45 Director
Terry S. Parker....................... 54 Director
Mark G. Schoeppner.................... 38 Director
Neil S. Subin......................... 35 Director
R. Ted Weschler....................... 38 Director
</TABLE>

Pursuant to Nucentrix's plan of reorganization, each of the current members
of the Board of Directors was approved by the committee of unsecured creditors
appointed by the bankruptcy court in Nucentrix's Chapter 11 proceeding. As
disclosed in the disclosure statement pursuant to which votes on the plan were
solicited, the current members of the Board are entitled to serve until the next
annual meeting of stockholders of Nucentrix (unless they resign or are removed
prior to the meeting). Except as described above, there are no understandings or
arrangements pursuant to which any current member of the Board is serving or is
entitled to serve on the Board.

Carroll D. McHenry joined Nucentrix as Chairman of the Board, President,
Chief Executive Officer and Acting Chief Financial Officer in April 1997. Mr.
McHenry currently serves as Chairman of the Board, President and Chief Executive
Officer. Prior to joining Nucentrix, Mr. McHenry was a senior executive at
Alltel, Inc., a national communications holding company, most recently serving
as President of Alltel's Communications Services Group, and serving as President
of Alltel Mobile Communications, Inc., from July 1992 to May 1995. From 1991 to
1992, Mr. McHenry was Vice President of Cellular Business Development at
Qualcomm, Inc. From 1989 to 1991, Mr. McHenry was President, Chief Executive
Officer and Chairman of the Board of Celluland, Inc., a franchisor of cellular
telephone stores. From 1980 to 1989, Mr. McHenry served in various capacities
with Mobile Communications Corporation of America ("MCCA") and as President and
Chief Executive Officer of American Cellular Communications, a joint venture
between MCCA and BellSouth.

Marjean Henderson joined Nucentrix in August 1997 as Senior Vice President
and Chief Financial Officer. Ms. Henderson was appointed Assistant Secretary in
December 1997. From April 1996 to April 1997, Ms. Henderson served as Senior
Vice President and Chief Financial Officer for Panda Energy International, Inc.,
a global energy concern. From December 1993 to October 1995, Ms. Henderson
served as Senior Vice President and Chief Financial Officer for Nest
Entertainment, Inc., a home video and movies concern. From October 1987 to
December 1993, Ms. Henderson served as Vice President, Chief Financial Officer
and Treasurer for RCL Enterprises, the Lyons Group, Lyrick Studios and Big Feet
Productions.

Alexander R. Padilla joined Nucentrix in July 1998 as Senior Vice
President -- Business Development. From January 1997 to July 1998, Mr. Padilla
was Manager of Business Development for

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KPMG LLP's Enterprise Integration Services Group. From February 1995 to December
1996, Mr. Padilla was Director of Sales for Pinpoint Communications, a start-up
wireless communications concern. From October 1989 to December 1994, Mr. Padilla
was District Manager of Network Equipment Technologies, a manufacturer of wide
area network telecommunications products.

J. Curtis Henderson joined Nucentrix in May 1996 as Vice President, General
Counsel and Secretary. In September 1998, Mr. Henderson was appointed Senior
Vice President. From July 1994 to April 1996, Mr. Henderson was Senior Vice
President, General Counsel and Secretary of ZuZu, Inc., a restaurant and
franchising company in Dallas, Texas. Prior to his employment at ZuZu, Mr.
Henderson was an associate in the Corporate and Securities section of the Dallas
law firm of Locke Purnell Rain Harrell.

Frank H. Hosea joined Nucentrix in November 1998 as Senior Vice
President -- Video Operations. From June 1996 to November 1998, Mr. Hosea was
Senior Vice President and Chief Operating Officer for CS Wireless. From July
1995 to June 1996, Mr. Hosea was a marketing and operations consultant for Time
Warner. From February 1990 to July 1995, Mr. Hosea was Vice President of Sales
Field Marketing for KBLCOM, Inc., a division of Time Warner and Houston
Industries.

Richard B. Gold has been the President and Chief Executive Officer of GenOA
Corporation, a privately-held optical communications equipment company, since
January 1999. Between November 1991 and December 1998, Mr. Gold held various
senior-level executive positions with Pacific Monolithics, Inc., a supplier of
wireless communications equipment, including Vice President-Engineering, Chief
Operating Officer, and from January 1997 through December 1998, President and
Chief Executive Officer. From 1987 through 1991, Mr. Gold was Executive Director
of the Massachusetts Microelectronics Center, a non-profit education and
research consortium. On October 13, 1998, Pacific Monolithics filed a voluntary
Chapter 11 bankruptcy petition. Mr. Gold is the Chairman of the Audit Committee
of the Board of Directors.

Terry S. Parker became a director of Nucentrix in April 1998. Mr. Parker
currently is an independent consultant in the telecommunications industry. From
March 1995 to July 1996, Mr. Parker was President and Chief Operating Officer
for CellStar Corporation, a domestic cellular telecommunications distributor.
From October 1993 to March 1995, Mr. Parker was Senior Vice President for GTE
Personal Communications Services, GTE's cellular telecommunications division.
From August 1990 to October 1993, Mr. Parker was President of GTE
Telecommunications Products and Services, a diversified telecommunications
services and systems division of GTE. Mr. Parker currently is a director of
CellStar Corporation, Illinois Super Conductor, Inc., a superconductor
technology firm for the wireless telecommunications industry, and Highway Master
Corporation, which sells mobile, data and voice technology products to long-haul
trucking companies. Mr. Parker is a member of the Compensation Committee of the
Board of Directors.

Mark G. Schoeppner has been president of Quaker Capital Management Corp.
("Quaker Capital"), an investment management firm, since 1985. Mr. Schoeppner is
a chartered financial analyst, a member of the Pittsburgh Society of Financial
Analysts and a member of the Wireless Communications Association International.
Mr. Schoeppner is a member of the Audit Committee of the Board of Directors.

Neil S. Subin founded and has been the Managing Director and President of
Trendex Capital Management ("Trendex") since 1991. Trendex is a private hedge
fund focusing primarily on financially distressed companies. Prior to forming
Trendex, Mr. Subin was a private investor from 1988 to 1991 and was an associate
with Oppenheimer & Co. from 1986 to 1988. Mr. Subin is a member of the
Compensation Committee of the Board of Directors.

R. Ted Weschler has been an executive officer of Quad-C, Inc. ("Quad-C")
since its formation in 1989. Quad-C is a Charlottesville, Virginia-based
investment firm that primarily engages in the acquisition of businesses in
partnership with company management. Effective January 1, 2000, Mr. Weschler
will become Managing Partner of Peninsula Capital Advisors, LLC, a private
investment management firm in Charlottesville, Virginia. Mr. Weschler is
currently a member of the Board of Directors of WSFS Financial Corporation, a
thrift holding company based in Wilmington, Delaware; Deerfield Healthcare

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Corporation, a provider of adult day care; Collins & Aikman Floorcoverings, a
manufacturer of commercial carpeting, Virginia National Bank, a national banking
association, NWS Holdings, a national furniture retailer, and Service Partners,
a distributor of insulation materials. Mr. Weschler previously served as
director of American Quality Cable, Applied Video Technologies and Wireless
Cable of Atlanta, all of which were involved in the MMDS industry. Prior to the
formation of Quad-C, Mr. Weschler was employed by W. R. Grace & Co. as a special
projects assistant to both the Vice Chairman and Chief Executive Officer of
Grace, focusing on acquisition and divestiture activities associated with
Grace's restaurant, retailing, healthcare, natural resources and chemical
operations. Mr. Weschler is a member of the Compensation Committee of the Board
of Directors.

Executive officers of Nucentrix are appointed by the Board of Directors and
serve at the discretion of the Board. Employment agreements with the executive
officers are described in "Management -- Employment Agreements and Change in
Control Arrangements." There are no family relationships between members of the
Board of Directors or any executive officers of Nucentrix.

BOARD COMPENSATION

Cash Compensation. Each non-employee director receives an annual retainer
of $5,000 for service as a director, and reimbursement of all ordinary and
necessary expenses incurred in attending any meeting of the Board or any
committee of the Board. Employees of Nucentrix who also serve as members of the
Board of Directors do not receive any additional compensation for service as a
director, but are reimbursed for expenses.

Stock Option Awards. Members of the Board are eligible to participate in
the 1999 Share Incentive Plan at the discretion of the Board and on terms and
conditions as established by the Board. Effective April 1, 1999, each of the
five non-employee directors was granted options to purchase 2,000 shares of
common stock at an exercise price of $12.50 per share. All stock options granted
to the non-employee directors on April 1, 1999, were fully vested and
exercisable. See "Management -- 1999 Share Incentive Plan."

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the total compensation awarded to, earned by
or paid by Nucentrix to its Chief Executive Officer and its four most highly
compensated executive officers who were serving as executive officers at the end
of Nucentrix's last completed fiscal year (collectively, the "Named Executive
Officers") for services rendered in all capacities to Nucentrix during
Nucentrix's fiscal years ended

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December 31, 1998 and 1997. Except for Mr. Henderson, none of the Named
Executive Officers were employees of Nucentrix at any time during 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------
------------------------------------ RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($)(2)
- --------------------------- ---- ------- ------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carroll D. McHenry......... 1998 300,000 150,000(3) -- -- 100,000 4,384
Chairman, President and 1997 205,768(4) 204,326 -- 154,688(5) 350,000 54,364(6)
Chief Executive Officer
Marjean Henderson.......... 1998 195,385 31,500(3) -- -- -- 2,000
Senior Vice President and 1997 60,923(7) 20,000 -- 14,375(8) 100,000 --
Chief Financial Officer
J. Curtis Henderson........ 1998 146,892 24,885(3) -- -- -- --
Senior Vice President and 1997 105,992 24,469 -- -- 40,000 --
General Counsel 1996 56,423(9) -- -- -- 50,000(10) --
Alexander R. Padilla....... 1998 80,769(11) -- -- -- -- --
Senior Vice President --
Business Development
Frank H. Hosea............. 1998 22,500(12) -- -- -- -- --
Senior Vice President --
Video Operations
</TABLE>

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

(1) While the Named Executive Officer may have received certain perquisites for
such year, such perquisites did not exceed the lesser of $50,000 or 10% of
his or her salary and bonus for such year.

(2) Represents Nucentrix's 401(k) Retirement Plan contributions, except as
noted in (6) below.

(3) Paid under Nucentrix's 1998 Performance Incentive Compensation Plan.

(4) Mr. McHenry was first employed by Nucentrix on April 25, 1997, at an annual
base salary of $300,000.

(5) Restricted stock grant of 75,000 shares of common stock granted to Mr.
McHenry in connection with his hiring. The closing price of the common
stock on the Nasdaq National Market on April 23, 1997 (the day before
hiring) was $2.0625. Pursuant to the plan of reorganization, all shares of
common stock outstanding immediately prior to the Effective Date were
canceled on the Effective Date. See "Reorganization."

(6) Includes $53,347 in relocation expenses paid in 1997 in connection with Mr.
McHenry's hiring.

(7) Ms. Henderson was first employed by Nucentrix on August 27, 1997, at an
annual base salary of $180,000.

(8) Restricted stock grant of 10,000 shares of common stock granted to Ms.
Henderson. The closing price of the common stock on the Nasdaq Stock
Market's National Market on January 22, 1998 (the date of grant) was
$1.4375. Pursuant to the plan of reorganization, all shares of common stock
outstanding immediately prior to the Effective Date were canceled on the
Effective Date. See "Reorganization."

(9) Mr. Henderson was first employed by Nucentrix on May 20, 1996 at an annual
base salary of $90,000.

(10) Exchanged in August 1997 for options to purchase 12,500 shares of common
stock in connection with repricing of such options.

(11) Mr. Padilla was first employed by Nucentrix on July 13, 1998, at an annual
base salary of $175,000.

(12) Mr. Hosea was first employed by Nucentrix on November 2, 1998, at an annual
base salary of $150,000.

The following table provides information regarding stock options granted
during the fiscal year ended December 31, 1998, to each of the Named Executive
Officers. No stock appreciation rights were granted

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during 1998. Pursuant to Nucentrix's plan of reorganization, the following
options were canceled on the Effective Date. See "Reorganization."

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
NUMBER OF PERCENT POTENTIAL REALIZABLE VALUE
SECURITIES OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION FOR
OPTIONS/SARS GRANTED TO OR BASE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ ------------ -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carroll D. McHenry................ 100,000(2) 76.92 1.4375 1/20/2005 58,520.69 136,378.08
</TABLE>

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

(1) Potential realizable value is based on the assumption that the price of the
common stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the end of the five-year option term. The values are
calculated in accordance with rules promulgated by the Securities and
Exchange Commission and do not reflect Nucentrix's estimate of future stock
price appreciation.

(2) Options granted pursuant to Nucentrix's 1994 Employee Stock Option Plan at
an exercise price equal to the fair market value on the date of grant.

The following table provides information with respect to stock options held
by the Named Executive Officers during and as of the end of fiscal year 1998.
Pursuant to Nucentrix's plan of reorganization, the following options were
canceled on the Effective Date. See "Reorganization."

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------------- ---------------------
<S> <C> <C>
Carroll D. McHenry..................................... 70,000/380,000 0/0
Marjean Henderson...................................... 20,000/ 80,000 0/0
J. Curtis Henderson.................................... 13,000/ 39,500 0/0
</TABLE>

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

(1) The last sale price of the common stock on December 31, 1998, as reported on
the Over-the-Counter Bulletin Board Quotation System, was $0.02, which was
less than the exercise price of the options reported.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

Carroll D. McHenry. Nucentrix entered into an employment agreement with
Carroll D. McHenry for a term of three years, effective as of March 6, 1998.
Under the employment agreement, Nucentrix has agreed to pay Mr. McHenry an
annual base salary of not less than $300,000. On each anniversary of the
effective date of the agreement, the term is automatically extended for one
additional year unless Nucentrix or Mr. McHenry elects to forego any such
extension by giving notice to the other party at least 90 days before the
applicable anniversary of the effective date. Under the employment agreement, if
Mr. McHenry's employment is terminated by Nucentrix other than for cause, as
defined in the employment agreement, or on account of Mr. McHenry's death or
permanent disability, or if Mr. McHenry resigns for good reason, as defined in
the employment agreement, then Nucentrix has agreed to pay Mr. McHenry a
severance payment equal to his then-current annual base salary (excluding any
bonuses) for the balance of the term of his employment agreement.

Other Named Executive Officers. Nucentrix also has entered into employment
agreements with each of Marjean Henderson, Alexander R. Padilla, J. Curtis
Henderson and Frank H. Hosea. Ms. Henderson's and Mr. Henderson's employment
agreements became effective on April 8, 1998. Mr. Padilla's employment agreement
became effective on July 13, 1998. Mr. Hosea's employment agreement became
effective on November 3, 1998. Each of these employment agreements are for a
term of two years from their respective effective dates. Under the employment
agreements, Nucentrix has agreed to pay each

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officer an annual base salary of not less than: Ms. Henderson -- $200,000, Mr.
Padilla -- $175,000, Mr. Henderson -- $144,000, Mr. Hosea -- $150,000.

On each anniversary of the effective date of each employment agreement, the
term is automatically extended for one additional year unless Nucentrix or the
respective officer elects to forego any such one-year extension by giving notice
to the other party at least 90 days before such anniversary of the effective
date. Under each employment agreement, if an officer's employment is terminated
by Nucentrix other than for cause (as defined in each employment agreement) or
on account of the officer's death or permanent disability, or if the officer
resigns for good reason (as defined in each employment agreement), then
Nucentrix is required to pay the officer a severance payment equal to his or her
then-current annual base salary (excluding any bonuses) for the balance of the
term of the officer's employment agreement.

None of the employment agreements discussed above provide for a bonus
payment in addition to the officer's annual base salary. The officers are
eligible, independent of the employment agreements, to participate in and
receive bonuses or awards under Nucentrix's Performance Incentive Compensation
Plan and the 1999 Share Incentive Plan.

1999 SHARE INCENTIVE PLAN

The 1999 Share Incentive Plan provides for the granting of stock options
and stock appreciation rights for non-employee directors, officers and key
employees of, and consultants to, Nucentrix and its subsidiaries. On April 1,
1999, Nucentrix granted nonqualified stock options to purchase 300,000 shares of
common stock to Carroll McHenry, 70,000 shares to Marjean Henderson and 70,000
shares to J. Curtis Henderson. 200,100 of the 300,000 options granted to Mr.
McHenry, 46,690 of the 70,000 options granted to Ms. Henderson and 46,690 of the
70,000 options granted to Mr. Henderson currently are exercisable. Twenty
percent of the remainder of the options will become exercisable on each
anniversary of the date of grant for five years following the date of grant. See
"Security Ownership of Principal Stockholders and Management."

Pursuant to the 1999 Share Incentive Plan upon a "Change in Control" of
Nucentrix, all outstanding benefits will immediately vest and become exercisable
and all performance targets relating to outstanding benefits shall be deemed to
have been satisfied as of the time of a Change in Control. The Committee, in its
discretion, also may determine that, upon the occurrence of a Change in Control
of Nucentrix, each option outstanding under the 1999 Share Incentive Plan shall
terminate within a specified number of days after notice to the holder, and such
holder shall receive with respect to each share of New Common Stock that is
subject to an Option an amount equal to the excess of the fair market value of
such share of New Common Stock immediately prior to the occurrence of such
Change in Control over the exercise price per share of such Option. For the
purposes of the 1999 Share Incentive Plan, a "Change in Control" occurs upon any
of four situations: (1) any person (other than an employee benefit plan of
Nucentrix) acquires 50% or more of the combined voting power of Nucentrix's
outstanding securities then entitled to vote for the election of directors; (2)
during any period of two consecutive years, the individuals who at the beginning
of such period constitute the Board or any individuals who would be "Continuing
Directors" (as defined below) cease for any reason to constitute at least a
majority of the Board; (3) Nucentrix's stockholders approve a sale of all or
substantially all of the assets of Nucentrix; or (4) Nucentrix's stockholders
approve any merger, consolidation, or like business combination or
reorganization of Nucentrix, the consummation of which would result in the
occurrence of any event described in clauses (1) or (2) above, and such
transaction shall have been consummated. "Continuing Directors" means (x) the
directors of Nucentrix in office on the Effective Date and (y) any successor to
any such director and any additional director who after the Effective Date was
nominated or selected by a majority of the Continuing Directors in office at the
time of his or her nomination or selection.

OTHER COMPENSATION PLANS

Performance Incentive Compensation Plan. Effective January 1, 1998,
Nucentrix adopted a Performance Incentive Compensation Plan. The Performance
Incentive Compensation Plan provides

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incentive compensation opportunities to Nucentrix's executive officers and other
key employees based solely on achievement of predetermined financial goals (such
as EBITDA) as well as quantitative individual objectives, such as improvements
in churn, collections and service calls. Not more than 50% of a target award may
be based on individual objectives. Under the Performance Incentive Compensation
Plan, target awards for the Chief Executive Officer may range from 25% to 75% of
his or her annual salary, and between 12.5% and 52.5% of other participants'
salaries. Performance Incentive Compensation Plan bonuses are in addition to any
amounts paid under the employee retention program described below.

Employee Retention Program. Effective April 8, 1998, the Board of Directors
of Nucentrix approved an employee retention program for executive officers and
other key employees as designated by the Chief Executive Officer. Under the
employee retention program, Nucentrix offered a retention bonus of between 15%
and 25% of a participant's annual base salary if the individual remained an
employee of Nucentrix through March 31, 1999. Pursuant to this plan, in March
1999, Nucentrix paid an aggregate of $728,000 to 96 employees. No further
payments will be made under this Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1998, the following individuals served on the Compensation Committee
of the Board of Directors: Max E. Bobbit, Jack R. Crosby, John A. Sprague and L.
Allen Wheeler. Mr. Bobbit resigned from the Board and Compensation Committee on
March 6, 1998. Mr. Crosby resigned from the Board and Compensation Committee on
June 25, 1998. Mr. Sprague is the managing partner of Jupiter Partners L.P.,
which held substantially all of the Old Convertible Notes. Mr. Sprague resigned
from the Board and Compensation Committee on February 22, 1999. Mr. Wheeler
co-founded Nucentrix, held in excess of 10% of the common stock prior to the
reorganization, and was a member of the Board until November 24, 1998, when he
resigned from the Board and Compensation Committee.

At December 31, 1998, Nucentrix leased an aggregate of approximately 63,000
square feet for its operations, billing, purchasing, warehouse, administrative,
telemarketing and customer call center in Durant, Oklahoma and for office space
in Lindsay, Oklahoma from affiliates of Mr. Wheeler at an annual rent of
approximately $205,000. Nucentrix believes that such rents were at or below
market rates and the terms of such leases are at least as favorable as those
Nucentrix would be able to otherwise obtain through arms-length negotiation with
an unaffiliated third party. Effective March 31, 1999, Nucentrix terminated
approximately 56,000 square feet of these leases in connection with the plan of
reorganization. Claims of the lessors for damages were treated as miscellaneous
unsecured claims under our plan of reorganization. See "Reorganization."

Effective November 30, 1999, Nucentrix terminated the lease for the
remaining 6,300 square feet of space leased in Durant from an affiliate of Mr.
Wheeler, with no remaining obligations of either party.

CERTAIN TRANSACTIONS

Pursuant to the terms of a Registration Rights Agreement, dated the
Effective Date, among Nucentrix and the selling stockholders identified in
"Selling Stockholders," we filed with the Securities and Exchange Commission the
registration statement of which this prospectus forms a part registering the
offer and sale by the selling stockholders of the common stock received by them
pursuant to our plan of reorganization. We are obligated to use our commercially
reasonable best efforts to keep such registration statement continuously
effective for up to three years from the date of its effectiveness, subject to
our right to suspend the use of the prospectus for designated corporate purposes
specified in the Registration Rights Agreement. We also will pay substantially
all of the expenses incident to the registration, offer and sale of the shares
of common stock pursuant to this prospectus other than commissions and discounts
of underwriters, dealers or agents. Under the Registration Rights Agreement, the
selling stockholders will be indemnified by us against certain civil
liabilities, including liabilities under the Securities Act of 1933.

During 1996, Nucentrix paid to Unity Hunt, Inc., an affiliate of Hunt
Capital Group, L.L.C., management consulting fees of $120,000 for services
provided to Nucentrix by J.R. Holland Jr. Hunt

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<PAGE> 71

Capital owned approximately 20% of Nucentrix's outstanding common stock in 1996
and Mr. Holland, who served as Chairman of the Board of Directors of Nucentrix
from October 1993 until March 1997, was President of Hunt Capital in 1996.

During 1996 and 1997, Nucentrix paid approximately $97,000 and $95,000,
respectively, to an accounting firm controlled by David E. Webb for subscriber
and payroll services provided to Nucentrix. Mr. Webb served as a member of the
Board of Directors and as Chief Executive Officer of Nucentrix in 1996 and 1997
until his resignation as President and Chief Executive Officer in January 1997
and his resignation from the Board of Directors in March 1997. Mr. Webb also
owned approximately 7.1% of Nucentrix's outstanding common stock.

In 1996 and 1997, Nucentrix leased an aggregate of approximately 51,345
square feet for its operating and marketing offices and warehouse space in
Durant and Lindsay, Oklahoma from affiliates of Messrs. Webb and Wheeler at an
annual rent of $139,452 in 1996 and $156,000 in 1997. In addition, Nucentrix
leased approximately 12,430 square feet for its installation and operating
offices in Durant, Oklahoma from an affiliate of Messrs. Webb, Wheeler and
Robert R. Story, who served as Senior Vice President of Nucentrix in 1996, at an
annual rent of $62,000. In October 1996 Nucentrix purchased a paging franchise
and paging assets from an affiliate of Messrs. Webb and Wheeler for $123,250 for
multiple-site paging for Nucentrix employees.

The terms of the leases described above were determined by the parties
thereto, and Nucentrix believes that such transactions involving affiliates were
on terms no less favorable to Nucentrix than could have been obtained from
unaffiliated third parties.

In February 1997, Nucentrix, CS Wireless, Wireless One and CAI Wireless
Systems formed Wireless Programming Cooperative, LLC. This company changed its
name in August 1997 to Wireless Enterprises, LLC ("Wireless Enterprises").
Carroll D. McHenry is one of four managers of Wireless Enterprises. Wireless
Enterprises is a programming cooperative that negotiates programming and
marketing services with suppliers of programming. In 1997 and 1998, Nucentrix
paid approximately $15.5 million and 24.5 million, respectively, to Wireless
Enterprises as reimbursement of programming expenses and for other
administrative services.

68
<PAGE> 72

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

Based upon information known to Nucentrix as of December 15, 1999, the
following table sets forth the ownership of the shares of common stock issued
and outstanding as of such date by (a) each person or group or group that is the
beneficial owner of more than 5% of such shares on such date, (b) each director
or executive officer of Nucentrix on such date and (c) all directors and
executive officers of Nucentrix as a group on such date. Unless otherwise
indicated, to Nucentrix's knowledge each person holds sole voting and investment
power over the shares shown.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF OWNER OWNED CLASS(1)
- ------------- ------------ -------------
<S> <C> <C>
Wayland Investment Fund, L.L.C.............................. 1,649,794(2) 16.3%
12700 Whitewater Drive
Minnetonka, Minnesota 55343
Terrence D. Daniels
Quad-C, Inc.
Quad-C IV, LLC
Quad-C Partners IV, L.P..................................... 1,557,997(3) 15.4%
230 East High Street
Charlottesville, Virginia 22902
Quaker Capital Management Corporation....................... 1,435,499(4) 14.2%
401 Wood Street
1300 Arrott Building
Pittsburgh, Pennsylvania 15222-1824
Stephen Feinberg............................................ 1,306,266(5) 12.9%
450 Park Avenue, 28th Floor
New York, New York 10002
Richard Reiss, Jr.
Georgica Advisors LLC....................................... 651,832(6) 6.5%
1114 Avenue of the Americas
New York, New York 10036
Carroll D. McHenry.......................................... 200,100(7) 2.0%
Marjean Henderson........................................... 46,690(7) *
Alexander R. Padilla........................................ 25,000(7) *
J. Curtis Henderson......................................... 46,690(7) *
Frank H. Hosea.............................................. 25,000(7) *
Richard B. Gold............................................. 2,000(7) *
Terry S. Parker............................................. 2,000(7) *
Mark G. Schoeppner.......................................... 85,046(8) *
Neil S. Subin............................................... 80,799(9) *
R. Ted Weschler............................................. 167,615(10) 1.7%
All executive officers and directors as a group (consisting
of 10 people)............................................. 680,940(11) 6.7%
</TABLE>

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

* Less than 1%.

(1) Based on 10,099,717 shares of common stock outstanding.

(2) Based on information set forth in Schedule 13G dated April 13, 1999, as
amended by Amendment No. 1 to Schedule 13G dated April 23, 1999, Amendment
No. 2 to Schedule 13G dated April 26, 1999 and Form 4 dated July 9, 1999.

(3) Based on information set forth in Schedule 13G dated April 10, 1999 (the
"Quad-C Schedule 13G") filed by Terrence D. Daniels, Quad-C, Inc.
("Quad-C"), Quad-C IV, L.L.C. ("QCLLC"), and Quad-C Partners IV, L.P. ("QCP
IV"). Includes (A) an aggregate of 1,514,585 shares held of record by
Quad-C Partners II, L.P. ("QCP II") (287,057), Quad-C Partners III, L.P.
("QCP III") (410,078) and QCP IV (817,450), (B) 32,569 shares held directly
by Terrence D. Daniels and (C) 10,843 shares held by the Terrence Daniels
Trust. The Quad-C Schedule 13G reflects that (w) Quad-C is the sole general
partner of QCP II and is a party to management agreements with QCP III and
QCP IV and, as such, may be deemed

69
<PAGE> 73

to beneficially own the 1,514,585 shares of common stock held by QCP II,
QCP III and QCP IV, (x) QCLLC is the sole general partner of QCP IV and, as
such, may be deemed to beneficially own the 817,450 shares of common stock
held directly by QCP IV, (y) each of Quad-C, QCLLC and QCP IV has sole
voting and dispositive power with respect to the shares held directly by
QCP IV, and (z) Quad-C also has sole voting and dispositive power over the
shares held directly by QCP II and QCP III. R. Ted Weschler, Vice President
of Quad-C, is a member of the Board of Directors of Nucentrix.

The Quad-C Schedule 13G also reflects that Terrence D. Daniels (A) is the
sole manager and a controlling stockholder of QCLLC, the sole director and
majority stockholder of Quad-C, the sole manager of Quad-C II, L.L.C.
(which is the sole general partner of QCP III), and, as such, may be deemed
to beneficially own the 1,514,585 shares of common stock held directly by
QCP II, QCP III and QCP IV, (B) is the direct beneficial owner of 32,569
shares of common stock, (C) may be deemed to beneficially own 10,843 shares
of common stock through his interest in the Terrence Daniels Trust and (D)
has sole voting and dispositive power over an aggregate of 1,557,997 shares
of common stock.

(4) Based on information set forth in Schedule 13G/A dated June 30, 1999 (the
"Quaker Schedule 13G"), filed by Quaker Capital Management Corporation
("Quaker Capital"), Quaker Capital Partners I, L.L.P. ("Quaker I") and
Quaker Premiere, L.P. ("Quaker Premiere") and Form 4 filed by Quaker
Capital and Mr. Schoeppner on December 9, 1999 ("Form 4"). The Quaker
Schedule 13G and/or Form 4 reflect that (A) Quaker I is the direct
beneficial owner of 897,637 shares of common stock, Quaker Premiere is the
sole general partner of Quaker I and Quaker Capital is the sole general
partner of Quaker Premiere, (B) each of Quaker I, Quaker Premiere and
Quaker Capital has sole voting and dispositive power over the 897,637
shares of common stock beneficially owned directly by Quaker I, (C) Quaker
Capital also has sole voting and dispositive power over an additional
83,046 shares of common stock and (D) Quaker Capital may be deemed to
beneficially own, and has shared voting and dispositive power over, 454,816
shares of common stock which are held by a variety of Quaker Capital's
investment advisory clients.

(5) Based on information set forth in Schedule 13D/A dated October 26, 1999
(the "Feinberg Schedule 13D"), filed by Stephen Feinberg. The Feinberg
Schedule 13D reflects that (A) Cerberus Partners L.P. ("Cerberus") is the
holder of 302,100 shares of common stock, (B) Cerberus International, Ltd.
("International") is the holder of 606,200 shares of common stock, (C)
Cerberus Institutional Partners, L.P. ("Institutional") is the holder of
87,066 shares of common stock, (D) certain private investment funds (the
"Feinberg Funds") hold, in the aggregate, 310,900 shares of common stock
and (E) Mr. Feinberg possesses sole power to vote and direct the
disposition of all shares of common stock held by each of Cerberus,
International, Institutional and the Feinberg Funds.

(6) Based on information set forth in Schedule 13G dated June 5, 1999 (the
"Reiss 13D"), filed by Richard Reiss, Jr. and Georgica Advisors LLC
("Georgica"). According to the Reiss 13G, Mr. Reiss and Georgica have
shared voting and dispositive power over an aggregate of 651,832 shares of
common stock. Mr. Reiss is the managing member of Georgica.

(7) Consists solely of shares of common stock issuable upon the exercise of
options granted under the 1999 Share Incentive Plan which currently are
exercisable.

(8) Consists of (A) 41,523 shares held by Mr. Schoeppner, as Trustee for Trust
of Carol S. Schoeppner FBO Mark G. Schoeppner, (B) 41,523 shares of common
stock held by Ridgeview Partners, a partnership controlled by Mr.
Schoeppner and (C) 2,000 shares of common stock issuable upon the exercise
of options granted to Mr. Schoeppner under the 1999 Share Incentive Plan
which currently are exercisable. Mr. Schoeppner also is President of Quaker
Capital. See note (4) above.

(9) Consists of (A) 78,799 shares of common stock held by Condor Partners IV,
L.L.C. ("Condor") and (B) 2,000 shares of common stock issuable upon the
exercise of options granted to Mr. Subin under the 1999 Share Incentive
Plan which currently are exercisable. As Managing Director of Trendex
Capital Management, the investment advisor to Condor, Mr. Subin may be
deemed to beneficially own the 78,799 shares held by Condor.

(10) Consists of (A) 165,615 shares held directly by Mr. Weschler and (B) 2,000
shares issuable upon the exercise of options granted to Mr. Weschler under
the 1999 Share Incentive Plan which currently are exercisable. Mr. Weschler
also serves as Vice President of Quad-C. See note (3) above. Effective
January 1, 2000, Mr. Weschler will become Managing Partner of Peninsula
Capital Advisors, LLC, a private investment management firm.

(11) Includes an aggregate of 353,480 shares of common stock issuable upon the
exercise of options granted under the 1999 Share Incentive Plan which
currently are exercisable.

70
<PAGE> 74

DESCRIPTION OF CAPITAL STOCK

The Amended and Restated Certificate of Incorporation of Nucentrix
authorizes us to issue up to 30,000,000 shares of common stock, par value $.001
per share, and 15,000,000 shares of preferred stock, par value $.001 per share.
The following summary of certain provisions of our common stock does not purport
to be complete and is subject to, and qualified in its entirety by, the
provisions of the Nucentrix's Amended and Restated Certificate of Incorporation,
which is included as an exhibit to the Registration Statement of which this
prospectus is a part, and by the provisions of applicable law.

As of December 1, 1999, (1) 10,099,717 shares of common stock were issued
and outstanding, (2) 1,227,980 shares of common stock were subject to, and
reserved for issuance upon the exercise of, warrants and options outstanding and
exercisable and (3) no shares of preferred stock were issued or outstanding. The
outstanding shares of our common stock are duly authorized, legally issued,
fully paid and nonassessable.

COMMON STOCK

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. The shares of common
stock have no preemptive or conversion rights, redemption rights or sinking fund
provisions. Holders of common stock are entitled to receive ratably such
dividends as may be declared by our Board of Directors out of funds legally
available therefor. In the event of liquidation or dissolution, holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and liquidation preference of preferred stock. Holders of a
plurality of the shares of common stock voting for the election of directors can
elect all of the directors since the holders of the common stock will not have
cumulative voting rights. Nucentrix's Amended and Restated Certificate of
Incorporation provides that Nucentrix shall have the authority to create and
issue rights and options entitling the holders of such rights and options to
purchase shares of common stock or any other class or series of capital stock of
Nucentrix.

PREFERRED STOCK

Our Board of Directors is authorized, without further action by our
stockholders, to issue preferred stock from time to time in one or more series
and to fix, as to any such series, the voting rights applicable to such series
and such other designations, preferences and special rights as the Board of
Directors may determine, including dividend, conversion, redemption and
liquidation rights and preferences. Upon completion of this offering, there will
be no shares of preferred stock outstanding. The issuance of shares of preferred
stock under certain circumstances could have the effect of delaying or
preventing a change in control of Nucentrix or other corporate actions. Any such
issuances of preferred stock, as well as the availability of authorized and
unissued preferred stock, also could adversely affect the market price of our
common stock. See "Risk Factors -- Our ability to issue "blank check" preferred
stock may delay or prevent a potential change in control of Nucentrix and may
affect the market price of our common stock."

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for the common stock and preferred stock
is Harris Trust and Savings Bank, 311 West Monroe, 11th Floor, Chicago, IL
60690-2388.

71
<PAGE> 75

SHARES ELIGIBLE FOR FUTURE SALE

The market price of the common stock may be adversely affected by the sale,
or availability for sale, of substantial amounts of the common stock in the
public market. Under our plan of reorganization we:

- issued 10,000,000 shares of common stock as of the Effective Date,

- issued warrants to purchase an additional 825,000 shares of common stock,

- are obligated to issue warrants to purchase an additional 275,000 shares
of common stock, and

- are obligated to issue additional shares of common stock, which we
believe will not exceed 75,000, to satisfy miscellaneous unsecured claims
that may be allowed by the bankruptcy court. As of December 1, 1999, we
had issued 9,757 shares of our common stock to satisfy some of these
claims. See "Reorganization."

We also have issued options to purchase 807,000 shares of common stock
under the 1999 Share Incentive Plan, of which options to purchase 85,000 shares
of common stock have been exercised and options to purchase 389,980 shares of
common stock currently are exercisable at an exercise price of $12.50 per share.

All of the shares of common stock issued or to be issued under our plan of
reorganization, including the shares that may be issued under the warrants, are
freely tradeable under the Securities Act unless held by our "affiliates," as
the Securities Act defines that term or by an "underwriter" as defined in the
U.S. Bankruptcy Code. We have registered under the Securities Act the shares of
common stock to be issued pursuant to the 1999 Share Incentive Plan and,
therefore, all shares acquired upon the exercise of options granted under the
1999 Share Incentive Plan also are (or, upon issuance, will be) freely tradeable
under the Securities Act unless purchased by our affiliates.

Shares held by our affiliates may be sold subject to compliance with Rule
144 of the Securities Act without regard to the prescribed holding period under
Rule 144, as described below. In general, under Rule 144, a person, or persons
whose shares are aggregated, who has beneficially owned common stock for at
least one year is entitled to sell in any three-month period a number of shares
that does not exceed the greater of:

- one percent of the number of shares of common stock then outstanding, or

- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks immediately preceding the
date on which the notice of sale is filed with the Securities and
Exchange Commission.

Sales under Rule 144 are subject to certain requirements relating to manner
of sale, notice and availability of current public information about Nucentrix.
However, because none of our currently outstanding shares of common stock, and
none of the shares to be issued upon the exercise of outstanding warrants or
options, are "restricted securities" or defined in Rule 144, the shares may be
sold by our affiliates under Rule 144 without regard to the one-year holding
period.

The stockholders for whose benefit this shelf registration statement is
being maintained may be deemed affiliates of Nucentrix or may otherwise be
subject to limitations on their ability to sell their shares of common stock.
The 3,842,593 shares covered by the prospectus constitute approximately 38% of
our outstanding common stock. The selling stockholders may sell all or any
portion of these shares into the public market at any time pursuant to the
prospectus without regard to the volume limitations imposed by Rule 144 or
restrictions that may be imposed as a result of any selling stockholder being
deemed an underwriter as defined in the U.S. Bankruptcy Code.

72
<PAGE> 76

SELLING STOCKHOLDERS

This prospectus relates to offers and sales of our common stock by the
selling stockholders. The following table sets forth, as of December 15, 1999,
the name of each selling stockholder, all positions, offices or other material
relationships that each selling stockholder has had during the past three years
with Nucentrix, the number of shares of common stock owned by each such selling
stockholder, and the percentage of outstanding common stock held by each selling
stockholder. The shares of common stock subject to the offering and sale by the
selling stockholders pursuant to this prospectus constitute all of the shares of
our common stock owned directly by the selling stockholders. See also "Security
Ownership of Principal Stockholders and Management." Each selling stockholder
may offer and sell pursuant to this prospectus all of the shares of common stock
held by that selling stockholder as identified below and, assuming that a
selling stockholder sells all of its shares of our common stock as listed below,
such selling stockholder will no longer own any shares of our common stock.
Inclusion in the table below does not imply that any selling stockholder will
actually offer and sell any of the shares registered on behalf of the selling
stockholders.

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
OWNED BEFORE CLASS OWNED
NAME OF OWNER THE OFFERING BEFORE OFFERING
- ------------- ------------ ---------------
<S> <C> <C>
Quad-C Partners IV, L.P.(1)................................. 817,450 8.1%
Quad-C Partners III, L.P.(1)................................ 410,078 4.1%
Quad-C Partners II, L.P.(1)................................. 287,057 2.8%
Quaker Capital Partners I, L.P.(2).......................... 897,637 8.9%
Georgica Advisors LLC....................................... 651,832 6.5%
R. Ted Weschler(1).......................................... 161,878 1.6%
Condor Partners IV, L.L.C.(3)............................... 78,799 *
Trust of Carol S. Schoeppner FBO Mark G. Schoeppner(4)...... 41,523 *
Ridgeview Partners(5)....................................... 41,523 *
Michael Andretti Trust UAD 12/22/90 Michael Andretti
Trustee................................................... 2,906 *
Dr. Edwin E. Assid SEP-IRA.................................. 3,151 *
Cathleen Nimick Austin & Peter S. Austin.................... 590 *
Dr. and Mrs. Murat Bankaci.................................. 1,575 *
Murat Bankaci IRA 7/29/93................................... 984 *
Dr. Murat Bankaci Childrens' Trust.......................... 984 *
Stonecipher, Cunningham, Beard & Schmitt Pension Plan....... 7,058 *
Stonecipher, Cunningham, Beard & Schmitt PSP................ 7,058 *
Mrs. Wendy Becker Payton.................................... 9,850 *
Jerry L. Bedford............................................ 1,181 *
Behrenberg Glass Company Profit Sharing Plan................ 788 *
Michael W. and Beth A. Bowman............................... 196 *
Mrs. Shirley Brankley....................................... 393 *
Mrs. Gretchen Brown......................................... 393 *
Kelly Brown................................................. 590 *
E. Fulton Brylawski......................................... 2,166 *
Charles F. Capper IRA....................................... 3,114 *
Cardio Thoracic Surgical Assoc. Profit Sharing Trust........ 14,117 *
Ray T. Charley.............................................. 2,363 *
Ray T. & Catherine M. Charley 1993 Desc. Trustee S. Lynch... 4,334 *
Jeffrey L. Clements......................................... 1,772 *
Clinic of Orthopedic Surgery Pension Plan................... 2,757 *
Gertrude S. Cohn............................................ 1,181 *
Glenn I. Crain.............................................. 5,190 *
Diagnostic Imaging Amended & Restated Pension dtd 10/1/99... 4,030 *
</TABLE>

73
<PAGE> 77

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
OWNED BEFORE CLASS OWNED
NAME OF OWNER THE OFFERING BEFORE OFFERING
- ------------- ------------ ---------------
<S> <C> <C>
P.J. Dick Inc. Conservative Cash............................ 1,379 *
Dick Foundation............................................. 196 *
Dr. and Mrs. Nick DiGlovine................................. 196 *
Dodson Engineering Inc. Profit Sharing Plan................. 1,181 *
Joe Dumars Special Loan Acct. .............................. 1,245 *
Richard E. and Mary Lou Durr................................ 3,114 *
Durr Marketing Pension Plan DTD 12/22/72 Trustee Mary Lou
Durr...................................................... 2,906 *
Durr Marketing Associates PSP Trustees Richard & Mary Lou
Durr...................................................... 3,529 *
Robert and Ann Egan......................................... 1,772 *
Ms. Victoria Nimick Enright................................. 4,531 *
Victoria N. Enright Charitable Remainder Unit Trust......... 985 *
Evans Ivory Pooled Pension Plan............................. 4,982 *
Evans Ivory Pooled Profit Sharing Plan...................... 4,359 *
Farrell Brokerage Inc. Profit Sharing Plan.................. 6,500 *
Drs. Peter J. and Linda W. Fedyshin......................... 1,868 *
First Evangelical Lutheran Church of Greensburg............. 7,880 *
Christopher M. Fleming IRA.................................. 393 *
Helen Marie Flinner......................................... 985 *
Dr. Michelle Foltz, MD...................................... 6,851 *
Mr. John Frasco............................................. 2,491 *
Dr. Peter Gabriel IRA....................................... 787 *
Mr. Bart Gates.............................................. 787 *
Mr. Charley Gates........................................... 787 *
Dr. R. Edward Gates Cust for Lauren Gates................... 590 *
Dr. R. Edward Gates Cust for Rebecca Gates.................. 590 *
Gettig Technologies Inc. Profit Sharing Retirement Plan..... 4,530 *
William A. & Loene M. Gettig................................ 1,378 *
T&V Partners, L.P., a Pennsylvania Limited Partnership...... 3,545 *
Kurt W. Gottschalk.......................................... 1,660 *
The Kurt W. Gottschalk Irrev. Trust......................... 622 *
Dr. Robert E. Grady D.D.S., IRA............................. 4,359 *
Thomas M. and Lori Z. Hardiman.............................. 1,245 *
John J. Haverlack IRA....................................... 393 *
Heifer International Foundation Endowment................... 11,211 *
Robert E. Higgin REV TR 8/21/96 Robert & Colin Higgin,
Trustees.................................................. 1,453 *
Randy and Heather Hillier................................... 394 *
Mr. John K. Hinds IRA....................................... 196 *
Mr. Thomas Hollander........................................ 3,944 *
Barbara S. Hollander Trust.................................. 1,868 *
Dr. Barry Hootman........................................... 5,397 *
Mr. Arthur B. Hopperstead IRA............................... 787 *
Hollis T. Hurd.............................................. 2,757 *
Hollis Hurd IRA............................................. 787 *
Iron City Sash & Door Profit Sharing Plan................... 3,743 *
Dr. John A. Johnston Jr. IRA................................ 196 *
Mrs. Mina G. Johnston....................................... 393 *
James E. Johns.............................................. 1,575 *
Margaret L. Johnston........................................ 1,868 *
Nancy B. Johns.............................................. 1,969 *
</TABLE>

74
<PAGE> 78

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
OWNED BEFORE CLASS OWNED
NAME OF OWNER THE OFFERING BEFORE OFFERING
- ------------- ------------ ---------------
<S> <C> <C>
Carolyn S. Johnson IRA...................................... 5,910 *
Keystone Honing Profit Sharing.............................. 11,819 *
Douglas E. and Martha A. Knable............................. 590 *
Susan E. Kraybill........................................... 1,575 *
Susan Kraybill IRA Rollover................................. 393 *
Mr. Harold S. Larrick....................................... 1,181 *
Daniel R. and Linda K. Lattanzi............................. 1,773 *
Laurel Medical Imaging Associates Profit Sharing Plan....... 4,136 *
Laurel Medical Imaging Money Purchase Plan dtd 5/1/94....... 984 *
Dr. M. Russell Leslie Jr. IRA............................... 787 *
Oakland Ortho. Assoc. Pension Plan FBO M. Russell Leslie.... 2,757 *
Oakland Ortho. Assoc. PSP FBO M. Russell Leslie............. 393 *
John R. Lucas IRA........................................... 196 *
Dr. George & Mrs. Margaret Magovern......................... 11,626 *
Mrs. Elizabeth Anne Margiapana.............................. 196 *
Dr. Bruce A. Margulis IRA Rollover.......................... 2,076 *
Bruce A. Margulis Trust..................................... 6,228 *
R. Ralph Margulis Trust..................................... 2,491 *
Dr. Pedro A. Marquez IRA.................................... 787 *
Carmen C. Marquez, Cust. Diego S. Marquez................... 393 *
Carmen C. Marquez, Cust. Melissa T. Marquez................. 393 *
Mr. John C. Mascaro IRA..................................... 1,378 *
Mascaro Company, L.P........................................ 5,319 *
Mr. John C. Mascaro......................................... 196 *
Associates in Orthodontics Profit Sharing Plan.............. 6,303 *
Mr. Rich Mayberry........................................... 393 *
Dr. Robert H. McDonald...................................... 787 *
Mr. Sean McDonald and Ms. Elizabeth Boyle................... 2,363 *
Edward McFarland III DMD Ltd. PSP u/a dtd 10/8/81........... 1,772 *
Edward McFarland III DMD Pension Plan dtd 10/08/81.......... 787 *
Helen Messerotes............................................ 196 *
Richard Jurik & Helen Messerotes Trustee U/W George
Messerotes................................................ 787 *
Midland Mortgage Investment Corp. Emp. Savings Plan &
Trust..................................................... 4,136 *
Dr. Michael Miller and Dr. Barbara Carpenter................ 1,181 *
Paul E. Moses IRA........................................... 4,152 *
Paul E. Moses & Krina S. Moses.............................. 3,529 *
Dr. Arthur I. Murphy IRA.................................... 3,737 *
Vernon C. & Alvina B. Neal Fund............................. 4,775 *
Greater Pittsburgh Orthopaedic Associates Pension Trust..... 9,849 *
Greater Pittsburgh Orthopaedic Assoc. Profit Sharing Plan... 3,151 *
Oakland Neurosurgical Assoc. 401(K) PSP and Trust 12/4/72... 10,795 *
Susan Oberg Investments Ltd................................. 13,789 *
Orthopaedic Surgical Associates Pension Plan................ 6,698 *
Orthopaedic Surgical Associates Profit Sharing Plan......... 4,728 *
Mr. Dominic Palombo, Jr. ................................... 393 *
Palombo Assoc. Inc. Pft. Shr. Plan Trustee Dominic
Palombo................................................... 196 *
RELC Associates L.P......................................... 3,743 *
Mr. & Mrs. Peter Shaw....................................... 393 *
Charles J. and JoAnn H. Queenan............................. 2,076 *
</TABLE>

75
<PAGE> 79

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
OWNED BEFORE CLASS OWNED
NAME OF OWNER THE OFFERING BEFORE OFFERING
- ------------- ------------ ---------------
<S> <C> <C>
JoAnn H. Queenan............................................ 3,944 *
M. Reza Raji Irrevocable Trust dtd 9/26/91.................. 1,181 *
Dr. M. Reza Raji IRA Rollover............................... 1,091 *
Sandra M. Roberts........................................... 3,529 *
Mr. Thomas A. Rohrich....................................... 787 *
Ms. Janice Rosenberg........................................ 3,546 *
Harry W. Rosenberg Trust.................................... 2,560 *
Florence Kris Rosenberg Trust............................... 2,560 *
St. Andrew's Church......................................... 6,643 *
Jean-Pierre Sakey........................................... 393 *
Mr. Richard J. Scarton IRA Rollover......................... 1,575 *
Joel R. Segel & Barbara L. Segel............................ 590 *
Dr. Theodore A. Severyn..................................... 5,813 *
The Shingler Family Trust Trustee Mr. & Mrs. Shingler....... 984 *
Mr. Myron Swetiltz IRA Rollover............................. 1,181 *
Harold Swensen IRA.......................................... 7,092 *
Nancy M. Swensen MD IRA..................................... 10,047 *
Kenton C. and Linda T. Tekulve.............................. 2,561 *
Dr. John E. and Susan M. Tiano.............................. 985 *
Ms. Miriam Mendelson........................................ 393 *
Trumbull Corp. Conservative Cash............................ 394 *
Trumbull Profit Sharing Savings Plan........................ 19,699 *
Mrs. Mary K. Ware........................................... 196 *
Dr. Linda Wellner........................................... 1,869 *
Charles J. and Louise B. Weschler........................... 1,575 *
Mr. Richard V. Westerhoff Esq. IRA.......................... 705 *
Barbara A. Westerhoff Family Trust dtd 10/31/91............. 2,076 *
Richard V. Westerhoff Revocable Trust dtd 3/7/88............ 1,370 *
Pearl E. Williams Living Trust Trustee Donald M. Williams... 1,575 *
Mr. Michael Wolff........................................... 393 *
West. PA Anesthesia Employee Pension........................ 5,515 *
Richard A. Zappala.......................................... 8,927 *
Zappala Family Foundation................................... 2,906 *
--------- ---
3,842,593 38%
========= ===
</TABLE>

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

* Less than 1%.

(1) See note 3 of the table in "Security Ownership of Principal Stockholders and
Management." R. Ted Weschler, Vice President of Quad-C, Inc., has been a
member of the Board of Directors of Nucentrix since April 1, 1999. Quad-C,
Inc. served as a member of the Ad Hoc Committee formed by the holders of Old
Senior Notes to participate in negotiating Nucentrix's plan of
reorganization and was a member of the committee of unsecured creditors (the
"Creditors Committee") appointed by the bankruptcy court to consult with
Nucentrix concerning the plan of reorganization and administration of the
Nucentrix's chapter 11 proceeding. See "Reorganization."

(2) See note 4 of the table in "Security Ownership of Principal Stockholders and
Management." Mark G. Schoeppner, President of Quaker Capital Management
Corporation, has been a member of the Board of Directors of Nucentrix since
April 1, 1999. Quaker Capital Management also served as a member of the Ad
Hoc Committee and the Creditors Committee.

(3) Neil Subin is Managing Director of Trendex Capital Management, investment
advisor to Condor Partners IV, L.L.C. Mr. Subin has been a member of the
Board of Directors since April 1, 1999. Condor Partners IV, L.L.C. served as
a member of the Ad Hoc Committee and the Creditors Committee.

(4) Mr. Schoeppner is a director of Nucentrix.

(5) Mr. Schoeppner controls Ridgeview Partners.

76
<PAGE> 80

PLAN OF DISTRIBUTION

The selling stockholders may offer and sell their shares of common stock
covered by this prospectus from time to time, at prevailing prices or at
privately negotiated prices, in one or more transactions including the
following:

- transactions on the Nasdaq National Market, or any other securities
exchange or quotation system on which the common stock is then traded,

- over-the-counter market transactions,

- privately negotiated transactions other than the over-the-counter market,
and

- in combination of any of the foregoing transactions.

These transactions may be at market price, at prices related to the market
price, at negotiated prices, at fixed prices or at varying prices. If the
selling stockholders use the services of an underwriter, broker, dealer or agent
to assist with the sale of the common stock, the party providing services may
receive compensation for their services. The compensation may be paid by the
buyer or the seller of the common stock and may be in the form of a commission,
concession or discount. The amount and form of compensation for such services
will be determined by the buyer and the seller. The persons providing such
services could be considered underwriters under the Securities Act, and any
profits received or compensation paid could be considered an underwriting
discount or commission under the Securities Act. At the time a particular offer
of shares of common stock is made, to the extent required, a supplement to this
prospectus will be distributed that will set forth the aggregate number of
shares of common stock being offered and the terms of the offering, including
the name or names of any underwriter, dealers or agents, any discounts,
commission and other items constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.

As used herein, "selling stockholders" includes pledgees, donees,
transferees or other successors-in-interest who receive shares of our common
stock covered by this prospectus as a pledge, gift, partnership distribution or
other non-sale related transfer from a selling stockholder. If a selling
stockholder notifies us that a pledgee, donee, transferee or other
successor-in-interest intends to sell more than 500 shares of our common stock
pursuant to this prospectus, a supplement to this prospectus will be provided to
name the pledgee, donee transferee or successor, as applicable.

Under the Exchange Act and applicable rules and regulations promulgated
thereunder, any person engaged in a distribution of any of the shares of common
stock may not simultaneously engage in market making activities involving the
common stock for a period of five days prior to the commencement of the
distribution, subject to certain exemptions. In addition, the selling
stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations promulgated thereunder, including without limitation
Regulation M. These regulations may limit the timing of purchases and sales of
the common stock by the selling stockholders.

Under certain state securities or blue sky laws, registered or licensed
brokers or dealers must be used to effect sales of capital stock. In addition,
certain states require that sales of capital stock must be registered or
qualified for sale in such state, or an exemption from registration or
qualification must be available and complied with in such state, prior to
effecting such sales.

Pursuant to the Registration Rights Agreement, we will pay substantially
all of the expenses incident to the registration, offering and sale of the
common stock to the public other than commissions, fees and discounts of
underwriters, dealers or agents. Under the Registration Rights Agreement, the
selling stockholders and any underwriter they may utilize will be indemnified by
us against certain civil liabilities, including liabilities under the Securities
Act. See "Certain Transactions."

77
<PAGE> 81

LEGAL MATTERS

Certain legal matters in connection with the offering of the common stock
hereby will be passed upon for Nucentrix by Vinson & Elkins L.L.P., 2001 Ross
Avenue, Suite 3700, Dallas, Texas.

EXPERTS

The consolidated financial statements and financial statement schedule of
Nucentrix as of December 31, 1998 and 1997 and for each of the years in the
three-year period ended December 31, 1998 have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (together
with all amendments and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933 with respect to the common stock covered by
this prospectus. This prospectus, which forms a part of the Registration
Statement, omits selected information contained in the Registration Statement,
and you should refer to the Registration Statement for further information with
respect to Nucentrix and the common stock covered by this prospectus. Statements
contained in this prospectus concerning the provisions or contents of any
documents are necessarily summaries of such documents and each such statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the SEC. We are subject to the information requirements of the
Securities Exchange Act of 1934, and in accordance therewith file periodic
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information, as well as the registration statement,
including the exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the SEC located at 7 World Trade Center, 13th Floor, New York, New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained from such offices, upon payment of the fees
prescribed by the SEC. The SEC maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, such as Nucentrix that submit electronic filings to the
SEC. Our common stock is listed on the Nasdaq National Market System under the
symbol "NCNX," and such reports, proxy and information statements and certain
other information also can be inspected at the office of Nasdaq Operations, 1735
K Street, NW, Washington, DC 20006.

78
<PAGE> 82

INDEX TO FINANCIAL STATEMENTS

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997, and September 30, 1999 (unaudited).................. F-3
Consolidated Statements of Operations for the three years
ended December 31, 1998, and for the period from Effective
Date to September 30, 1999 (unaudited), the period from
January 1, 1999, to Effective Date (unaudited) and the
nine months ended September 30, 1998 (unaudited).......... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 1998, for the
period from January 1, 1999, to Effective Date (unaudited)
and the period from Effective Date to September 30, 1999
(unaudited)............................................... F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998, and for the period from Effective
Date to September 30, 1999 (unaudited), the period from
January 1, 1999, to Effective Date (unaudited) and the
nine months ended September 30, 1998 (unaudited).......... F-6
Notes to Consolidated Financial Statements.................. F-7
Schedule II Valuation and Qualifying Accounts............... S-1
</TABLE>

F-1
<PAGE> 83

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Nucentrix Broadband Networks, Inc. (formerly Heartland Wireless Communications,
Inc.):

We have audited the accompanying consolidated balance sheets of Nucentrix
Broadband Networks, Inc. (formerly Heartland Wireless Communications, Inc.) and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1998. In connection with our
audits of the consolidated financial statements, we also have audited the
accompanying financial statement schedule. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nucentrix
Broadband Networks, Inc. (formerly Heartland Wireless Communications, Inc.) and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

KPMG LLP

Dallas, Texas

March 31, 1999, except as to Notes 1(a), 1(b),

1(q), 7, 8, 10(a), 13 and 17
which are as of April 1, 1999

F-2
<PAGE> 84

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR (NOTE 1) (NOTE 1)
--------------------- -------------
AS OF DECEMBER 31, AS OF
--------------------- SEPTEMBER 30,
1998 1997 1999
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 30,676 $ 42,821 $ 23,954
Restricted assets -- investment in debt and other
securities.............................................. 1,011 10,333 626
Subscriber receivables, net of allowance for doubtful
accounts of $348, $340 and $610, respectively........... 2,872 2,198 3,202
Prepaid expenses and other................................ 1,563 1,390 1,349
--------- --------- --------
Total current assets............................... 36,122 56,742 29,131
--------- --------- --------
Investments in affiliates, at equity (Notes 2 and 9)........ -- 34,167 --
Systems and equipment, net (Notes 3 and 4).................. 61,037 122,653 53,101
License and leased license investment, net (Notes 3 and
5)........................................................ 79,703 123,369 74,868
Excess of cost over fair value of net assets acquired, net
of accumulated amortization of $3,685 in 1997 (Notes 3 and
9)........................................................ -- 26,226 --
Note and lease receivables (Note 9)......................... 3,901 2,069 3,294
Other assets, net........................................... 5,269 6,908 3,523
--------- --------- --------
Total Assets....................................... $ 186,032 $ 372,134 $163,917
========= ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities Not Subject to Compromise:
Current Liabilities:
Accounts payable and accrued liabilities (Note 6)......... $ 11,915 $ 17,381 $ 13,488
Current portion of long-term debt (Note 7)................ 2,019 1,358 1,785
--------- --------- --------
Total current liabilities.......................... 13,934 18,739 15,273
--------- --------- --------
Long-term debt, less current portion (Note 7)............... 14,258 306,838 12,975
Minority interests in subsidiaries (Note 16)................ 149 149 149
Liabilities subject to compromise (Note 8).................. 322,781 -- --
Stockholders' equity (Note 10):
Common stock, $.001 par value; authorized 50,000,000
shares, issued 19,795,521 and 19,688,527 shares
respectively; all canceled as of April 1, 1999 (Note
1(b))................................................... 20 20 --
Common stock, $.001 par value; authorized 30,000,000
shares, 10,089,460 shares outstanding as of September
30, 1999................................................ -- -- 10
Preferred stock, $.01 par value; 15,000,000 shares
authorized, none issued................................. -- -- --
Additional paid-in capital................................ 261,943 261,880 147,043
Accumulated deficit....................................... (426,695) (215,134) (11,533)
Treasury stock at cost, 13,396 shares..................... (358) (358) --
--------- --------- --------
Total stockholders' equity (deficit)............... (165,090) 46,408 135,520
--------- --------- --------
Commitments and contingencies (Notes 5 and 13)
Total Liabilities and Stockholders' Equity......... $ 186,032 $ 372,134 $163,917
========= ========= ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-3
<PAGE> 85

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SUCCESSOR
(NOTE 1) PREDECESSOR (NOTE 1)
-------------- ---------------------------
PREDECESSOR (NOTE 1) PERIOD FROM PERIOD FROM
-------------------------------- EFFECTIVE DATE JANUARY 1, NINE MONTHS
YEAR ENDED DECEMBER 31, TO 1999 TO ENDED
-------------------------------- SEPTEMBER 30, EFFECTIVE SEPTEMBER 30,
1998 1997 1996 1999 DATE 1998
--------- --------- -------- -------------- ----------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ 73,989 $ 78,792 $ 56,017 $ 33,388 $ 18,086 $ 55,934
Operating expenses:
System operations............... 35,790 39,596 21,255 16,229 8,599 27,071
Selling, general and
administrative................ 36,367 42,255 42,435 17,246 9,156 27,774
Depreciation and amortization... 39,550 65,112 39,323 11,528 5,953 34,681
Impairment of long-lived assets
(Note 3)...................... 105,791 -- -- -- -- 105,791
--------- --------- -------- -------- -------- ---------
Total operating
expenses............... 217,498 146,963 103,013 45,003 23,708 195,317
--------- --------- -------- -------- -------- ---------
Operating loss........... (143,509) (68,171) (46,996) (11,615) (5,622) (139,383)
Other income (expense):
Interest income................. 2,659 5,546 3,811 744 423 2,137
Interest expense................ (37,095) (39,867) (21,977) (581) (321) (30,005)
Equity in losses of affiliates
(Notes 2 and 9)............... (30,340) (32,037) (18,612) -- -- (30,340)
Other income (expense), net
(Note 9)...................... (10) (54) 4,981 521 2 (10)
--------- --------- -------- -------- -------- ---------
Total other income
(expense).............. (64,786) (66,412) (31,797) 684 104 (58,218)
--------- --------- -------- -------- -------- ---------
Loss before reorganization
costs, income taxes and
extraordinary item............ (208,295) (134,583) (78,793) (10,931) (5,518) (197,601)
Reorganization costs (Note 1)..... (3,266) -- -- (602) (2,311) (1,242)
--------- --------- -------- -------- -------- ---------
Loss before income taxes
and extraordinary
item................... (211,561) (134,583) (78,793) (11,533) (7,829) (198,843)
Income tax benefit (Note 11)...... -- -- 28,156 -- -- --
--------- --------- -------- -------- -------- ---------
Loss before extraordinary
item................... (211,561) (134,583) (50,637) (11,533) (7,829) (198,843)
Extraordinary item -- gain (loss)
on extinguishment of debt, net
of tax (Note 7 and 8)........... -- -- (10,424) -- 173,783 --
--------- --------- -------- -------- -------- ---------
Net income (loss)........ $(211,561) $(134,583) $(61,061) $(11,533) $165,954 $(198,843)
========= ========= ======== ======== ======== =========
Net loss per new common share --
basic and diluted............... N/A N/A N/A $ (1.15) N/A N/A
========= ========= ======== ======== ======== =========
Average shares outstanding --
basic and diluted............... N/A N/A N/A 10,035 N/A N/A
========= ========= ======== ======== ======== =========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-4
<PAGE> 86

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
-------------------- PAID-IN ACCUMULATED ----------------
SHARES AMOUNT CAPITAL DEFICIT SHARES AMOUNT TOTAL
----------- ------ ---------- ----------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995.......... 12,611,131 $13 $ 71,165 $ (19,490) -- $ -- $ 51,688
Issuance of common stock for
acquisitions (Note 9)............. 6,934,040 7 184,840 -- (10,252) (274) 184,573
Exercise of stock options, warrants
and other, including tax
benefit........................... 49,310 -- 658 -- -- -- 658
Gain on equity investment, net of
taxes of $2,931 (Note 9).......... -- -- 4,989 -- -- -- 4,989
Net loss............................ -- -- -- (61,061) -- -- (61,061)
----------- --- --------- --------- ------- ----- ---------
BALANCE, DECEMBER 31, 1996.......... 19,594,481 20 261,652 (80,551) (10,252) (274) 180,847
Issuance of common stock to officer
(Note 10)......................... 75,000 -- 159 -- -- -- 159
Issuance of common stock for 401(k)
Plan.............................. 19,046 -- 69 -- -- -- 69
Acquired shares from escrow......... -- -- -- -- (3,144) (84) (84)
Net loss............................ -- -- -- (134,583) -- -- (134,583)
----------- --- --------- --------- ------- ----- ---------
BALANCE, DECEMBER 31, 1997.......... 19,688,527 20 261,880 (215,134) (13,396) (358) 46,408
Issuance of common stock to officer
(Note 10)......................... 10,000 -- 14 -- -- -- 14
Issuance of common stock for 401(k)
Plan.............................. 96,994 -- 49 -- -- -- 49
Net loss............................ -- -- -- (211,561) -- -- (211,561)
----------- --- --------- --------- ------- ----- ---------
BALANCE, DECEMBER 31, 1998.......... 19,795,521 20 261,943 (426,695) (13,396) (358) (165,090)
Net income (unaudited).............. -- -- -- 165,954 -- -- 165,954
Cancellation of old common stock
pursuant to the Plan
(unaudited)....................... (19,795,521) (20) (261,943) -- 13,396 358 (261,605)
Elimination of accumulated deficit
upon adoption of Fresh Start
Reporting (unaudited)............. -- -- -- 260,741 -- -- 260,741
Issuance of new common stock
pursuant to the Plan
(unaudited)....................... 10,000,000 10 145,987 -- -- -- 145,997
----------- --- --------- --------- ------- ----- ---------
BALANCE, EFFECTIVE DATE (NOTE 1)
(UNAUDITED)....................... 10,000,000 10 145,987 -- -- -- 145,997
Net loss (unaudited)................ -- -- -- (11,533) -- -- (11,533)
Additional shares issued pursuant to
the Plan (unaudited).............. 4,960 -- -- -- -- -- --
Exercise of employee stock options
(unaudited)....................... 84,500 -- 1,056 -- -- -- 1,056
----------- --- --------- --------- ------- ----- ---------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)....................... 10,089,460 $10 $ 147,043 $ (11,533) -- -- $ 135,520
=========== === ========= ========= ------- ----- =========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-5
<PAGE> 87

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR (NOTE 1) (NOTE 1) PREDECESSOR (NOTE 1)
-------------------------------- ----------------- ------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
YEAR ENDED DECEMBER 31, EFFECTIVE DATE TO JANUARY 1, ENDED
-------------------------------- SEPTEMBER 30, 1999 TO SEPTEMBER 30,
1998 1997 1996 1999 EFFECTIVE DATE 1998
--------- --------- -------- ----------------- -------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $(211,561) $(134,583) $(61,061) $(11,533) $ 165,954 $(198,843)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization.......... 39,550 65,112 39,323 11,528 5,953 34,681
Deferred income tax benefit............ -- -- (29,240) -- -- --
Debt accretion and debt issuance cost
amortization......................... 5,686 4,985 4,331 -- -- 4,813
Equity in losses of affiliates......... 30,340 32,037 18,612 -- -- 30,340
Compensation expense related to
issuance of common stock............. 63 228 -- -- -- --
Gain on sale of assets................. -- -- (5,279) -- -- --
Write-down of assets due to
impairment........................... 105,791 -- -- -- -- 105,791
Extraordinary item -- debt
extinguishment....................... -- -- 4,253 -- (173,783) --
Other.................................. -- -- -- -- -- 81
Changes in operating assets and
liabilities, net of acquisitions:
Restricted Assets -- investment in
debt securities.................... -- -- -- 385 -- --
Subscriber receivables............... (674) 3,194 (2,568) 624 (954) (147)
Prepaid expenses and other........... (132) 830 (414) 222 (158) (763)
Accounts payable, accrued expenses
and other liabilities.............. 22,560 (13,449) 9,289 (1,317) 2,890 18,392
--------- --------- -------- -------- --------- ---------
Net cash used in operating
activities....................... (8,377) (41,646) (22,754) (91) (98) (5,655)
--------- --------- -------- -------- --------- ---------
Cash flows from investing activities:
Investments and advances to affiliates... -- -- (3,050) -- -- --
Proceeds from note
receivable -- affiliate................ 366 18,749 58,340 -- -- --
Proceeds from sale of investment in
affiliate.............................. 1,534 -- -- -- -- --
Proceeds from sale of assets............. 236 126 24,139 -- -- 236
Purchases of systems and equipment....... (13,473) (29,402) (93,298) (3,772) (2,534) (10,438)
Expenditures for licenses and leased
licenses............................... -- (310) (2,382) (46) (16) --
Purchases of other investments........... -- (900) -- -- -- --
Purchase of debt securities.............. (69) -- (24,550) -- -- --
Proceeds from sale of debt securities.... 9,368 19,935 14,250 -- -- 8,731
Acquisitions, net of cash acquired....... -- (1,622) (7,618) -- -- --
Collections of note and lease
receivable............................. -- 250 -- 158 138 --
--------- --------- -------- -------- --------- ---------
Net cash provided by (used in)
investing activities............. (2,038) 6,826 (34,169) (3,660) (2,412) (1,471)
--------- --------- -------- -------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............. -- -- 141,350 -- -- --
Payment of debt issuance costs and
consent fees........................... -- (597) (12,973) -- -- --
Payments of long-term debt............... (327) -- (13,017) (717) (335) --
Proceeds from other notes payable........ -- -- 6,700 -- -- --
Payments on short-term borrowings and
other notes payable.................... (1,403) (1,358) (9,233) (224) (241) (1,100)
Proceeds from exercise of stock
options................................ -- -- 549 1,056 -- --
--------- --------- -------- -------- --------- ---------
Net cash provided by (used in)
financing activities............. (1,730) (1,955) 113,376 115 (576) (1,100)
--------- --------- -------- -------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.............................. (12,145) (36,775) 56,453 (3,636) (3,086) (8,226)
Cash and cash equivalents at beginning of
period................................... 42,821 79,596 23,143 27,590 30,676 42,821
--------- --------- -------- -------- --------- ---------
Cash and cash equivalents at end of
period................................... $ 30,676 $ 42,821 $ 79,596 $ 23,954 $ 27,590 $ 34,595
========= ========= ======== ======== ========= =========
Cash paid for interest.................... $ 10,416 $ 31,017 $ 14,434 $ 503 $ 391 $ 9,775
========= ========= ======== ======== ========= =========
Cash paid for reorganization costs........ $ 2,921 $ -- $ -- $ 820 $ 2,311 $ 1,242
========= ========= ======== ======== ========= =========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-6
<PAGE> 88

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTH

PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 IS UNAUDITED)

(1) GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

Nucentrix Broadband Networks, Inc. (formerly Heartland Wireless
Communications, Inc.) ("Nucentrix") provides wireless broadband network and
multichannel subscription television services in the 2.1 to 2.7 gigahertz
("GHz") range of the radio spectrum, primarily in medium and small markets in
the central United States. Nucentrix owns the basic trading area ("BTA")
authorizations, or otherwise licenses or leases MDS/MMDS/ITFS ("MMDS") spectrum,
in 87 markets.

At December 31, 1998, Nucentrix provided wireless subscription television
service in 57 markets, including an offering of up to 185 digital channels from
DIRECTV, Inc. ("DIRECTV") and its distributors in 51 of the 57 markets in
combination with Nucentrix's service or as a stand-alone offering. Nucentrix
also provides two-way high-speed Internet access services primarily to
businesses and small offices/home offices ("SOHOs") in Sherman/Denison, Texas
and is constructing a similar system in Austin, Texas. Nucentrix, through
national independent contractors, also offers technical support, e-mail, Web
design and hosting, and domain name registration and maintenance in connection
with its high-speed Internet access business.

(b) Financial Restructuring

In January 1998, Nucentrix retained Wasserstein Perella & Co. ("WP&Co.") to
assist in evaluating options to finance Nucentrix's business plan and service
its debt. In consultation with WP&Co., Nucentrix did not make the April 15, 1998
interest payment on its 13% Senior Notes ("Old 13% Notes" -- See Note 7).
Subsequently, Nucentrix began negotiating with holders of the Old 13% Notes and
holders of Nucentrix's 14% Senior Notes ("Old 14% Notes" -- See Note 7)
(collectively, "the Old Senior Notes") to restructure its debt. Nucentrix did
not make the October 15, 1998 interest payments on the Old Senior Notes. On
December 4, 1998, Nucentrix filed a voluntary, prenegotiated Plan of
Reorganization (the "Plan") under Chapter 11 of the U.S. Bankruptcy Code, with
the prepetition support from holders of more than 70% in principal amount of the
Old Senior Notes.

On April 1, 1999, Nucentrix canceled all issued and outstanding common
stock, stock options, and warrants (collectively, the "Old Common Stock") and
issued new common stock ("New Common Stock") and warrants. Holders of the Old
Senior Notes and holders of Nucentrix's 9% Convertible Notes ("Old Convertible
Notes" -- See Note 7) received 97% and 3% of the New Common Stock, respectively.
The holders of the Old Convertible Notes received warrants to purchase up to
7.5% of New Common Stock on a diluted basis. The holders of Nucentrix's Old
Common Stock will receive warrants to purchase up to 2.5% of New Common Stock on
a diluted basis. The warrants proposed to be issued to holders of Old Common
Stock are subject to certain securities litigation claims as set forth in the
Plan.

Nucentrix continued business operations as a debtor-in-possession until the
Plan was fully consummated. Prior to April 1, 1999, the obligations of Nucentrix
that were eligible for compromise under the Plan were classified as Liabilities
Subject to Compromise on Nucentrix's Consolidated Balance Sheet as of December
31, 1998, and March 31, 1999 (See Note 8). As of December 4, 1998, Nucentrix
discontinued the accrual of interest and amortization of deferred debt issuance
costs and discounts to notes payable related to Liabilities Subject to
Compromise.

On March 15, 1999, the U.S. Bankruptcy Court for the District of Delaware
confirmed the Plan, which was subject to certain conditions. All conditions to
effectiveness of the Plan have been satisfied or

F-7
<PAGE> 89

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

duly waived, and Nucentrix consummated the Plan on April 1, 1999, at which time
the reorganized company emerged from bankruptcy. Nucentrix changed its name to
Nucentrix Broadband Networks, Inc., and restructured its business into four
wholly-owned subsidiaries: Nucentrix Internet Services, Inc., Nucentrix Telecom
Services, Inc., Nucentrix Spectrum Resources, Inc., and Heartland Cable
Television, Inc.

On April 1, 1999, Nucentrix adopted Fresh Start Reporting in accordance
with American Institute of Certified Public Accountants Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7"). Fresh Start Reporting resulted in a new reporting entity
with assets and liabilities adjusted to fair value and beginning retained
earnings set to zero. Liabilities Subject to Compromise were adjusted to zero in
the debt discharge portion of the Fresh Start Reporting.

As a result of the cancellation of the senior notes and convertible notes
and common stock outstanding at the Effective Date, and the issuance of new
shares of common stock and warrants in accordance with the Plan, certain tax
attributes of the Company must be permanently reduced. These reductions may be
applied to one or more tax items, including but not limited to pre-bankruptcy
net operating loss carryforwards, the tax basis of certain assets and the tax
basis of subsidiary stock ("Tax Attribute Reduction"). Management is currently
considering the impact of alternatives available to the Company in performing
this Tax Attribute Reduction, but has not yet concluded which alternative it
will select. Accordingly, amounts allocated to the successor assets and
liabilities at the Effective Date may be revised and such revisions could be
material. Management will endeavor to select that Tax Attribute Reduction
alternative which will best meet its business objectives and maximize future tax
benefits. The cancellation of debt will not be treated as taxable income under
any of the alternatives.

In addition to the permanent Tax Attribute Reduction, the Company must also
limit the annual deduction of pre-bankruptcy net operating losses and
"built-in-deductions" to an amount no greater than the fair market value of the
Company immediately after the restructuring, multiplied by the long-term tax
exempt rate. This annual limitation is currently estimated to be approximately
$7.3 million.

At the present time management has not yet determined how much, if any,
pre-bankruptcy net operating losses will be available to offset post-bankruptcy
income. In the current quarter, the Company has continued to experience losses
and does not believe that the prospective Tax Attribute Reduction will have a
material impact on the Company's consolidated financial statements.

In connection with the Plan, the Company recorded an extraordinary gain of
approximately $174.0 million related to the discharge of liabilities subject to
compromise. This extraordinary gain is not taxable to the Company pursuant to
Federal income tax law because it arose in connection with the Company's
recapitalization under Chapter 11 of the U.S. Bankruptcy Code. It will, however,
result in a permanent Tax Attribute Reduction to be determined as discussed
above.

F-8
<PAGE> 90

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Nucentrix's Consolidated Financial Statements have been presented on a
going concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.

Nucentrix anticipates that additional sources of capital will be required
to fully implement its long-term business strategy, which encompasses expanding
the use of its spectrum through the delivery of broadband network services such
as high-speed Internet access and VoIP, telephony services as well as the
acquisition of additional spectrum in other medium-sized markets in the United
States for such use. Accordingly, Nucentrix is evaluating and will continue to
evaluate additional sources of capital, including the sale or exchange of debt
or equity securities, borrowings under secured or unsecured loan arrangements
and sales of assets.

There can be no assurance that Nucentrix will be able to obtain additional
capital in a timely manner and on terms satisfactory to Nucentrix that will be
necessary to implement its business strategy. If Nucentrix is unable to obtain
financing in a timely manner and on acceptable terms, management has developed
and intends to implement a plan that allows Nucentrix to continue to operate in
the normal course of business at least into 2000. More specifically, this plan
would include delaying, reducing or eliminating the launch of new broadband
network systems (including high-speed Internet systems), reducing or eliminating
new video subscriber installations and related marketing expenditures and
reducing or eliminating other discretionary expenditures.

(d) Principles of Consolidation

The consolidated financial statements include the accounts of Nucentrix and
its majority-owned subsidiaries. Investments in 20% to 50% owned affiliates are
accounted for on the equity method and investments in less than 20% owned
affiliates are accounted for on the cost method. All significant intercompany
balances and transactions have been eliminated in consolidation.

(e) Cash and Cash Equivalents

Nucentrix considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Cash and cash
equivalents consist of money market funds, certificates of deposit, overnight
repurchase agreements and other investment securities.

(f) Investments in Securities

Investments in debt and other securities are widely diversified and
principally consist of certificates of deposit, money market deposits, U.S.
government agency securities and rated commercial paper with an original
maturity of less than one year. These investments are considered held to
maturity and are stated at amortized cost which approximates fair value.

(g) Systems and Equipment

Systems and equipment are recorded at cost and include the cost of
transmission equipment as well as the excess of direct costs of subscriber
installations over installation fees (See Note 4). Upon installation,
depreciation and amortization of systems and equipment is recorded on a
straight-line basis over the estimated useful lives, from three to twenty years.
Equipment awaiting installation consists primarily of accessories, parts and
supplies for subscriber installations and is stated at the lower of average cost
or market.

F-9
<PAGE> 91

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The direct costs of subscriber installations include reception materials
and equipment on subscriber premises, installation labor and overhead charges
which are amortized over the useful life of the asset (presently seven years)
for the recoverable portion and the estimated average subscription term
(presently three years) for the nonrecoverable portion of such costs. The
nonrecoverable portion of the cost of a subscriber installation becomes fully
depreciated upon subscriber disconnect. The amortization period of the
nonrecoverable portion of subscriber installation costs was reduced from six
years to four years and from four to three years in the fourth quarter of 1996
and in the third quarter of 1997, respectively, to correspond to Nucentrix's
estimate of average subscription term. The effects of these changes in estimate
were to increase 1997 and 1996 depreciation expense by $1.2 million and $2.9
million, respectively, and increase 1997 and 1996 net loss by $1.2 million and
$1.9 million ($.04 and $.10 per basic common share), respectively. In the third
quarter of 1997, Nucentrix charged operations for $6.1 million for the write-off
of installed subscriber equipment which was deemed unrecoverable from lost
subscribers and $1.7 million for the write-off of obsolete subscriber equipment.

(h) License and Leased License Investment

License and leased license investment includes costs incurred to acquire
and/or develop wireless broadband channel rights and are amortized over 15 years
beginning with inception of service in each market.

In the fourth quarter of 1996, Nucentrix reduced its estimated useful life
of license and leased license investment from 20 years to 15 years. The effect
of this change increased 1996 amortization expense by $400,000 and increased
1996 net loss by $260,000 ($.01 per basic common share). During the third
quarter of 1998, Nucentrix wrote down the value of its operating licenses to
estimated fair market value in accordance with SFAS No. 121 (See Note 3). The
re-valued licenses are being amortized over the average remaining life of 12.5
years.

(i) Excess of Cost over Fair Value of Net Assets Acquired

The excess of cost over fair value of net assets acquired is amortized on a
straight-line basis, generally over 15 years. Nucentrix assesses the
recoverability of this asset by determining whether the amortization of the
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of impairment, if
any, is measured based on projected discounted future operating cash flows. The
assessment for the recoverability of excess of cost over fair value of net
assets acquired will be impacted if estimated future operating cash flows are
not achieved. (See Note 3). In the fourth quarter of 1996, Nucentrix reduced its
estimate of the useful life of its excess of cost over fair value of net assets
acquired from 20 years to 15 years. The effect of this change in estimate was to
increase 1996 amortization expense by $100,000 and increase 1996 net loss by
$65,000 (no material effect on a per basic common share basis).

(j) Impairment of Long Lived Assets

In January, 1996, Nucentrix adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets and certain intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by

F-10
<PAGE> 92

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

which the carrying amount of the net asset exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. (See Note 3).

(k) Investments in Affiliated Companies

Investments in affiliated companies are accounted for by the equity method.
The excess cost of the affiliates' stock over Nucentrix's share of their net
assets at the acquisition date is amortized on a straight-line basis over 15
years.

(l) Revenue Recognition

Revenues from subscribers are recognized as service is provided. Amounts
paid in advance are recorded as deferred revenue.

(m) Income Taxes

Nucentrix utilizes the asset and liability method for accounting for
deferred income taxes. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Based on the foregoing policy, deferred tax assets net of
deferred tax liabilities have been fully reserved.

(n) Net Loss Per Common Share -- Basic and Diluted

The Company has presented (1) basic loss per share, computed on the basis
of the weighted average number of common shares outstanding during the period,
and (2) diluted loss per share, computed on the basis of the weighted average
number of common shares and all dilutive potential common shares outstanding
during the period. Common stock options (and other potentially dilutive equity
securities) have not been included in the calculation of diluted loss per share
because their effects are antidilutive. Earnings per share information has not
been presented for the Predecessor Period as the Company was recapitalized on
the Effective Date, in connection with the Plan, and accordingly, per share
amounts are not comparable between the Predecessor and Successor Periods.

(o) Use of Estimates

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

(p) Concentrations of Credit Risk and Accounts Receivable

Nucentrix's subscribers and the related accounts receivable are primarily
residential subscribers that are concentrated in eight states in the central
United States. Nucentrix establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific subscribers, historical
trends

F-11
<PAGE> 93

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and other information. In the opinion of management, the allowance for doubtful
accounts is adequate and subscriber receivables are presented at net realizable
value.

(q) Other Assets

Other assets consists principally of debt issuance costs related to the
issuance of Nucentrix's long-term debt. These costs are amortized,
straight-line, over the term of the related indebtedness. Nucentrix discontinued
the amortization of deferred debt issuance costs upon filing the Plan on
December 4, 1998. The carrying value of these costs was adjusted to zero when
Nucentrix adopted Fresh Start Reporting on April 1, 1999.

(r) Reclassifications

Certain prior year balances have been reclassified to conform to the
current year presentation.

(s) Comprehensive Income

Effective January 1, 1998, Nucentrix adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income in a full set of
general-purpose financial statements. Comprehensive income includes net income
and other comprehensive income which is generally comprised of changes in the
fair value of available-for-sale marketable securities, foreign currency
translation adjustments and adjustments to recognize additional minimum pension
liabilities. For each of the years in the three years ended December 31, 1998,
for the periods from January 1, 1999 to the Effective Date, from the Effective
Date to September 30, 1999, and for the nine months ended September 30, 1998
presented in the accompanying consolidated statements of operations,
comprehensive income and net income are the same amount.

(t) Segment Reporting

In January 1998, Nucentrix adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS 131 requires that public companies report
operating segments based upon how management allocates resources and assesses
performance. Based on the criteria outlined in SFAS No. 131, Nucentrix is
comprised of a single reportable segment -- distribution of wireless
multichannel video programming. No additional disclosure is required by
Nucentrix to conform to the requirements of SFAS No. 131.

(u) Interim Financial Data

The interim financial data as of September 30, 1999, and for the period
from the Effective Date to September 30, 1999, the period from January 1, 1999,
to the Effective Date and the nine months ended September 30, 1998, has been
prepared by Nucentrix and is unaudited; however, in the opinion of Nucentrix,
the interim data includes all adjustments, consisting only of normal recurring
adjustments necessary for a fair statement of the results of operations and cash
flows for the interim periods. Results for interim periods are not necessarily
indicative of the results to be expected for the full fiscal year.

(2) INVESTMENTS IN AFFILIATES

Investments in affiliates was $0 and $34.2 million at December 31, 1998 and
1997, respectively. At December 31, 1997, Investments in affiliates consisted of
approximately 20% of the outstanding common stock of Wireless One, Inc.
("Wireless One") and 36% of the outstanding common stock of CS Wireless Systems,
Inc. ("CS Wireless"). During 1997, Nucentrix recorded its equity interest in
losses from

F-12
<PAGE> 94

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Wireless One to the extent that its investment balance was reduced to zero.
During 1998, Nucentrix recorded its equity interest in losses from CS Wireless,
wrote off $6.8 million of its excess basis in CS Wireless in the second quarter,
and wrote off its remaining investment balance of $11.7 million during the third
quarter based on impairment charges recorded by CS Wireless related to its
goodwill. In December 1998, Nucentrix sold its 36% equity interest in CS
Wireless to CAI Wireless Systems, Inc. ("CAI"). (See Note 9.)

(3) IMPAIRMENT OF LONG-LIVED ASSETS

During the second quarter of 1998, Nucentrix reviewed the assets associated
with certain undeveloped markets and determined that (i) cash flows from
operations would not be adequate to fund the capital outlay required to build
out such markets, and (ii) because of Nucentrix's default on its interest
payment on the Old 13% Notes in the second quarter of 1998, outside financing
for the build-out of these markets was not readily available prior to the
consummation of a financial restructuring. Therefore, in accordance with SFAS
No. 121, the channel licenses and leases in these undeveloped markets were
individually evaluated and written down to estimated fair value, resulting in a
non-cash impairment charge of $17.7 million in the second quarter of 1998.

Throughout the second and third quarters of 1998, Nucentrix analyzed
various recapitalization and restructuring alternatives with the assistance of
WP&Co., including consensual, out-of-court alternatives. In October 1998,
Nucentrix announced that it intended to file a voluntary prenegotiated plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code (See Note 1). This
event caused Nucentrix to evaluate all of its long-lived assets for impairment
(according to the requirements of SFAS No. 121). Nucentrix retained the services
of a third party to assist in performing a fair market valuation of
substantially all of Nucentrix's assets. This valuation, along with the $17.7
million impairment charge discussed above, resulted in a non-cash impairment
charge during 1998 of $105.8 million, as follows:

<TABLE>
<CAPTION>
DESCRIPTION OF WRITE-DOWNS
--------------------------
<S> <C>
Systems and equipment....................................... $ 44,510
License and leased license investment....................... 36,550
Excess of cost over fair value of net assets acquired....... 24,731
--------
Total............................................. $105,791
========
</TABLE>

Nucentrix's estimates of future gross revenues and operating cash flows,
the remaining estimated lives of long-lived assets, or both could be reduced in
the future due to changes in, among other things, technology, government
regulation, available financing, interference issues or competition. As a
result, the carrying amounts of long-lived assets could be reduced by additional
amounts which would be material to Nucentrix's financial position and results of
operations.

F-13
<PAGE> 95

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) SYSTEMS AND EQUIPMENT

Systems and equipment consists of the following at December 31, 1998 and
1997:

<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Equipment awaiting installation............................. $ 4,233 $ 5,812
Subscriber premises equipment and installation costs........ 26,309 102,892
Transmission equipment and system construction costs........ 31,170 45,961
Office furniture and equipment.............................. 1,813 8,811
Buildings and leasehold improvements........................ 461 1,786
------- --------
63,986 165,262
Accumulated depreciation and amortization................... 2,949 42,609
------- --------
$61,037 $122,653
======= ========
</TABLE>

(See Note 3 for discussion of systems and equipment written down in
September 1998. Also see Note 18.)

(5) OPERATING LEASES AND FCC LICENSES

Nucentrix depends on leases with third parties for some of its channel
rights. Under FCC rules, the base term of each lease cannot exceed the term of
the underlying FCC license. FCC licenses generally must be renewed every ten
years, and there is no automatic renewal of such licenses. The remaining initial
terms of most of Nucentrix's operating channel leases range from 2 to 6 years,
although substantially all of these leases renew automatically or upon notice
from Nucentrix. Channel lease agreements generally require payments based on the
greater of specified minimums or amounts based upon various subscriber levels or
revenues.

Channel lease payments generally begin upon the completion of construction
of transmission equipment and facilities and upon approval for operation under
FCC rules. For certain leases, payments begin upon grant of the channel rights.
Channel lease expense was $3.0 million, $3.6 million and $3.3 million for the
years ended December 31, 1998, 1997 and 1996, respectively.

Nucentrix also has other operating leases for office space, equipment and
transmission tower space. Rent expense incurred in connection with these leases
was $4.2 million, $3.4 million and $3.5 million for the years ended December 31,
1998, 1997 and 1996, respectively.

Future minimum lease payments due under noncancellable leases at December
31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING CHANNEL OPERATING
DECEMBER 31 LEASES LEASES
- ----------- ------- ---------
<S> <C> <C>
1999........................................................ $2,855 $3,206
2000........................................................ 2,990 1,478
2001........................................................ 2,950 1,136
2002........................................................ 2,387 945
2003........................................................ 1,854 692
</TABLE>

F-14
<PAGE> 96

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consists of the following at
December 31, 1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accounts payable............................................ $ 319 $ 261
Accrued interest.......................................... 112 6,873
Accrued programming....................................... 2,798 2,937
Subscriber deposits....................................... 730 386
Deferred income........................................... 1,041 943
Accrued sales, property and franchise taxes............... 2,260 2,166
Accrued compensation...................................... 681 1,011
Other accrued expenses and other liabilities.............. 3,974 2,804
------- -------
$11,915 $17,381
======= =======
</TABLE>

As of December 31, 1998, accrued interest on the Old Senior Notes and Old
Convertible Notes has been reclassified to Liabilities Subject to Compromise.
(See Notes 1 and 8).

(7) LONG-TERM DEBT

Long-term debt at December 31, 1998 and 1997 consists of the following:

<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Subordinated Convertible Notes due 2004..................... $ -- $ 52,678
13% Senior Notes due 2003................................. -- 112,111
14% Senior Notes due 2004................................. -- 125,000
Other notes payable....................................... 16,277 18,407
------- --------
16,277 308,196
Less current portion...................................... 2,019 1,358
------- --------
$14,258 $306,838
======= ========
</TABLE>

Debt Cancellation Under the Plan

On April 1, 1999 under the terms of the Plan, the Old Senior Notes and Old
Convertible Notes were canceled. The holders of the Old Senior Notes and Old
Convertible Notes received 97% and 3%, respectively, of the New Common Stock in
exchange for cancellation of their debt. The holders of the Old Convertible
Notes also received warrants to purchase up to 7.5% of New Common Stock on a
diluted basis. Accordingly, the Old Senior Notes and Old Convertible Notes are
considered eligible for compromise and have been reclassified from Long Term
Debt to Liabilities Subject to Compromise on the Consolidated Balance Sheet at
December 31, 1998. (See Note 8). As of December 4, 1998, Nucentrix discontinued
the accrual of interest and amortization of deferred debt issue costs and
discounts on notes payable related to Liabilities Subject to Compromise. If
interest had continued to be accrued, total interest expense would have been
$39.9 million for the year ended December 31, 1998 and $12.6 million for the
three months ended March 31, 1999.

The following discussion of the Old Senior Notes and Old Convertible Notes
relates to the balances at December 31, 1997 and to amounts outstanding during
1998 prior to filing the Plan.

F-15
<PAGE> 97

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Old Convertible Notes

On November 30, 1994, Nucentrix consummated the $40.1 million private
placement of Old Convertible Notes. The Old Convertible Notes accreted at a rate
of 9%, compounded semiannually, to an aggregate principal amount of $62.4
million at November 30, 1999, with interest accruing and payable thereafter.

Old 13% Notes

In April 1995, Nucentrix consummated a private placement of $100.0 million
of Old 13% Notes and 600,000 warrants to purchase an equal number of shares of
Old Common Stock at an exercise price of $19.525 per share. For financial
reporting purposes, the warrants were valued at $4.2 million. In March 1996,
Nucentrix consummated a private placement of an additional $15.0 million of Old
13% Notes. Interest on the notes was payable semiannually on April 15 and
October 15.

In October 1996, by consent of a portion of the holders of the Old 13%
Notes, certain covenants and definitions were amended to provide for the
issuance of the Old 14% Notes. As a result of a substantive modification of the
terms of the debt, the Old 13% Notes were treated as extinguished and reissued
(at their estimated fair value) upon the consummation of the offering of the Old
14% Notes. The write-off of debt issuance costs of $5.3 million, consent
payments and certain other costs of $7.3 million, and a fair value adjustment of
$1.1 million related to the Old 13% Notes have been recorded as an extraordinary
loss in 1996 of $11.5 million, net of tax of $1.1 million.

Old 14% Notes

In December 1996, Nucentrix consummated a private placement of $125.0
million of Old 14% Notes. Nucentrix placed $22.0 million of the net proceeds
from the sale into an escrow account to fund the first three interest payments.
As of December 31, 1997, the escrow account amounted to $8.0 million, and was
used to make the April 15, 1998 interest payment.

In April 1997, Nucentrix consummated an exchange of $125.0 million of Old
14% Notes for a new series containing identical terms, except that the Old 14%
Notes were registered under the Securities Act of 1933, as amended.

Other Notes Payable

Other notes payable at December 31, 1998 and 1997 includes $15.1 million
and $15.8 million, respectively, relating to the acquisition of certain basic
trading areas ("BTAs") from the FCC. The note payable to the FCC bears interest
at 9.5%, payable quarterly over ten years beginning November 1996. Quarterly
principal payments are payable over the remaining eight years beginning November
1998.

Nucentrix and CS Wireless entered into a lease and purchase option
agreement for certain of the BTAs (collectively, the "Leased BTAs") awarded to
Nucentrix at a total cost of approximately $5.2 million. Under this agreement,
CS Wireless reimburses Nucentrix for principal and interest paid to the FCC for
the Leased BTAs. As of December 31, 1998, the amount of FCC debt related to the
CS Wireless Leased BTAs totaled $3.5 million and has been recorded as a
receivable.

In September 1997, Nucentrix entered into lease and purchase option
agreements with People's Choice TV Corp. ("PCTV") for two BTAs. Under these
agreements, PCTV has reimbursed Nucentrix for all amounts paid to the FCC for
the two BTAs. In September 1998, PCTV assumed the FCC debt related to the two
BTAs, the lease agreement was terminated, and the receivable and related debt
were removed from Nucentrix's financial records.

F-16
<PAGE> 98

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate maturities of long-term debt as of December 31, 1998, that are
not subject to compromise for the five years ending December 31, 2003 are as
follows: 1999 -- $2.0 million; 2000 -- $1.8 million; 2001 -- $1.9 million;
2002 -- $2.0 million; and 2003 -- $2.0 million.

(8) LIABILITIES SUBJECT TO COMPROMISE

As more fully discussed in Note 7, on April 1, 1999, holders of the Old
Senior Notes received New Common Stock and the holders of the Old Convertible
Notes received New Common Stock and Warrants in exchange for cancellation of
their debt. These amounts are considered eligible for compromise under the Plan
and have been reclassified as Liabilities Subject to Compromise on Nucentrix's
Consolidated Balance Sheet at December 31, 1998. Liabilities Subject to
Compromise are comprised of the following:

<TABLE>
<S> <C> <C>
Old 13% Notes: Principal Balance.................................. $115,000
Accrued Interest................................... 16,943
Unamortized Discount............................... (2,384)
Old 14% Notes: Principal Balance.................................. 125,000
Accrued Interest................................... 11,083
Old Convertible Notes: Principal Balance and Accreted Interest............ 57,139
--------
$322,781
========
</TABLE>

(9) ACQUISITIONS/DISPOSITIONS

(a) CableMaxx, AWS and Technivision Acquisitions

Effective February 23, 1996, Nucentrix acquired all the assets and
liabilities of American Wireless Systems, Inc. and CableMaxx, Inc. and acquired
substantially all of the assets and certain of the liabilities of Fort Worth
Wireless Cable T.V. Associates, Wireless Cable TV Associates #38 and Three Sixty
Corp. for an aggregate of 6,757,000 shares of Nucentrix's Old Common Stock (the
above five transactions are collectively referred to as the "CableMaxx
Acquisitions").

(b) CS Wireless Transaction

Immediately following the closing of the CableMaxx Acquisitions, Nucentrix,
CAI and CS Wireless consummated an agreement in which Nucentrix contributed a
substantial portion of the assets received in the CableMaxx Acquisitions and
certain other assets to CS Wireless and CAI contributed certain wireless cable
television assets to CS Wireless.

In exchange for the contributed assets, Nucentrix received (i) 36% of the
outstanding shares of CS Wireless common stock, (ii) approximately $28.3 million
in cash, (iii) a $25 million promissory note (which has been repaid) and (iv) a
$15 million promissory note payable ten years from closing and prepayable from
asset sales (the "Long Note").

Effective December 2, 1998, Nucentrix, CAI and CS Wireless signed a Master
Agreement, pursuant to which CAI purchased Nucentrix's 36% equity interest in CS
Wireless for $1.5 million. In addition, CS Wireless agreed to assign certain
MDS-1 channel rights, 20 MHz of Wireless Communications Service ("WCS")
frequencies and an MMDS subscription television operating system in Radcliffe,
Iowa to Nucentrix. Nucentrix agreed to assign channel rights and related
equipment in Portsmouth, New Hampshire to CS Wireless. The transfers and
assignments will occur following FCC approval, at which time Nucentrix will
cancel the Long Note issued by CS Wireless to Nucentrix. The carrying value of
this Long Note on Nucentrix's Consolidated Balance Sheet at December 31, 1998,
was $435,000. No gain or loss was recorded on this transaction.

F-17
<PAGE> 99

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1996, Nucentrix acquired four MMDS subscription television operating
systems in three separate purchase transactions for $2.1 million; $350,000 plus
126,601 shares of Old Common Stock; and $1.0 million plus $1.4 million in notes,
respectively. Also in 1996, Nucentrix sold two operating and two non-operating
systems for $5.4 million and $2.2 million, respectively. Nucentrix also sold
channel rights in two transactions for $9.0 million plus $750,000 in notes and
deferred payments in one transaction and $7.2 million in the other. The deferred
payments were made after December 31, 1996. The total gain recognized on these
sales transactions was $5.2 million.

In September 1997, Nucentrix sold a 39% equity interest in Television
Interactiva del Norte, S.A. de C.V. ("Telinor") for approximately $915,000 to CS
Wireless. In addition, Nucentrix sold to CS Wireless two promissory notes
payable by Telinor for approximately $2.6 million representing principal and
accrued interest payable under such notes. Following this transaction, Nucentrix
retained a 10% equity interest in Telinor.

All acquisitions have been accounted for as purchases, and operations of
the companies and businesses acquired have been included in the accompanying
Consolidated Financial Statements from their respective dates of acquisition.
There were no material acquisitions by Nucentrix in 1998.

Nucentrix allocated the purchase prices of the acquisitions consummated in
1997 and 1996 discussed above to the assets acquired and liabilities assumed
based on estimated fair values of such assets and liabilities as follows:

<TABLE>
<CAPTION>
1997 1996
------ --------
<S> <C> <C>
Working capital (deficit)................................... $ 10 $(19,790)
Assets held for sale........................................ -- 11,819
Systems and equipment....................................... 1,241 19,489
License and leased license investment and goodwill.......... 371 88,292
Deferred income taxes....................................... -- (24,851)
------ --------
Total purchase price.............................. $1,622 $ 74,959
====== ========
</TABLE>

(d) Pro Forma Information

Pro forma disclosure relating to the 1997 acquisitions/transactions
discussed in (c) above is not presented, as the impact on Nucentrix's financial
position or results of operations is immaterial.

Summarized below is the unaudited pro forma information for the year ended
December 31, 1996 as if the acquisitions/transactions discussed above had been
consummated as of the beginning of 1996, after giving effect to certain
adjustments, including amortization of intangibles and selected income tax
effects. The pro forma information does not purport to represent what
Nucentrix's results of operations actually would have been had such transactions
or events occurred on the dates specified, or to project Nucentrix's results of
operations for any future period.

<TABLE>
<CAPTION>
(UNAUDITED)
-----------
<S> <C>
Revenues.................................................... $ 58,353
Net loss.................................................... $(82,594)
Net loss per basic and diluted common share................. $ (4.17)
</TABLE>

F-18
<PAGE> 100

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) STOCKHOLDERS' EQUITY

(a) Stock Options

The 1994 Employee Stock Option and Non-Employee Director Plans
(collectively, the "Old Stock Option Plans") provide for the granting of options
to purchase a maximum of 1,950,000 and 50,000 shares of Old Common Stock,
respectively. Options are granted at exercise prices of not less than 100% of
the fair market value of the Old Common Stock on the date of grant. Options
typically vest over a five-year period.

At December 31, 1998, there were 469,217 additional shares available for
grant under the Old Stock Option Plans. The per share weighted average fair
value of stock options granted during fiscal years 1998, 1997 and 1996 was
$1.16, $1.70 and $10.82, respectively, on the dates of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield................................... 0% 0% 0%
Stock price volatility.................................... 131% 80% 36%
Risk-free interest rate................................... 5.5% 6.0% 6.5%
Expected option term...................................... 5 years 5 years 5 years
</TABLE>

Nucentrix applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recorded for its stock
options in the Consolidated Financial Statements. Had Nucentrix determined
compensation based on the fair value at the grant date for its stock options
under SFAS No. 123, net loss and loss per share would have been increased as
indicated below:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Net loss attributable to Common Stockholders:
As reported...................................... $(211,561) $(134,583) $(61,061)
Pro forma SFAS No. 123........................... $(213,077) $(137,126) $(64,349)
Net loss per share -- Basic and Diluted:
As reported...................................... $ (10.72) $ (6.85) $ (3.31)
Pro forma for SFAS No. 123....................... $ (10.80) $ (6.98) $ (3.48)
</TABLE>

Pro forma net loss reflects only options granted in 1998, 1997, 1996 and
1995. Compensation cost is reflected over the options' vesting period of three
to five years.

F-19
<PAGE> 101

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of option activity during 1996, 1997 and 1998 follows:

<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF OPTIONS EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995........................... 743,000 $13.64
Granted.................................................... 514,000 $25.09
Exercised.................................................. (40,000) $10.50
Canceled................................................... (16,000) $24.41
---------
Outstanding at December 31, 1996........................... 1,201,000 $18.50
Granted.................................................... 867,000 $ 2.49
Canceled................................................... (711,000) $22.03
---------
Outstanding at December 31, 1997........................... 1,357,000 $ 6.42
Granted.................................................... 165,000 $ 3.33
Canceled................................................... (72,000) $ 7.19
---------
Outstanding at December 31, 1998........................... 1,450,000 $ 6.03
=========
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- NUMBER WEIGHTED-
NUMBER REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/98 LIFE PRICE 12/31/98 PRICE
--------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.125 to $3.1875.............. 892,000 5.3 years $ 2.05 184,000 $ 2.15
$9.375 to $14.25............... 541,000 2.4 years 12.07 519,000 12.02
$22.125 to $29.25.............. 17,000 2.2 years 22.96 16,000 22.57
--------- -------
$1.125 to $29.25............... 1,450,000 4.2 years $ 6.03 719,000 $ 9.73
========= =======
</TABLE>

At December 31, 1997 and 1996, the number of options exercisable and the
weighted average exercise prices of those options were 552,000 and 396,200 and
$11.27 and $12.51, respectively.

On April 1, 1999, the effective date of the Plan, the Old Stock Option
Plans were canceled and a new share incentive plan was adopted.

(b) Old Common Stock to Officers

In April 1998 and April 1997, Nucentrix issued 10,000 shares and 75,000
shares, respectively, to officers of Nucentrix. The quoted market price of the
shares on the grant date has been expensed in the accompanying Consolidated
Financial Statements.

(11) INCOME TAXES

In addition to the income tax benefit related to continuing operations of
$28.2 million for the year ended December 31, 1996, a deferred income tax
benefit of $1.1 million was allocated to the extraordinary item for the year
ended December 31, 1996.

F-20
<PAGE> 102

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax benefit for the years ended December 31, 1998, 1997 and 1996,
differed from the amount computed by applying the U.S. federal income tax rate
of 35% to loss before income taxes as a result of the following:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax benefit...................... $(73,890) $(47,104) $(27,578)
Amortization and write-down of goodwill.............. 9,300 738 521
Loss for which no tax benefit was recognized......... 68,812 49,058 28,156
State income tax..................................... (4,222) (2,692) (1,099)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997, are presented below:

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 119,709 $ 61,555
Investments in affiliates................................. -- 9,303
Subscriber receivables.................................... 129 96
Debt restructuring........................................ 906 1,172
Asset impairment.......................................... 29,992 3,543
Systems and equipment..................................... 4,779 --
Other..................................................... 1,247 1,091
--------- --------
Total gross deferred tax assets............................. 156,762 76,760
Less valuation allowance.................................... (151,253) (68,697)
--------- --------
Net deferred tax assets................................... 5,509 8,063
Deferred tax liabilities:
License and leased license investment..................... (5,509) (8,063)
--------- --------
Net deferred tax liability.................................. $ -- $ --
========= ========
</TABLE>

The net changes in the total valuation allowance for the years ended
December 31, 1998, 1997 and 1996, were increases of $82.6 million, $48.6 million
and $16.0 million, respectively. In assessing the realizability of deferred tax
assets, Nucentrix considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets depends on the generation of future taxable income during
the periods in which those temporary differences become deductible. Nucentrix
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon these considerations, Nucentrix has fully reserved all deferred tax assets
to the extent such assets exceed deferred tax liabilities.

As of December 31, 1998, Nucentrix has approximately $324.0 million of
federal income tax loss carryforwards which expire in years 2013 through 2018.
Nucentrix estimates that approximately $38.0 million of the above carryforwards
relate to various acquisitions and are subject to certain limitations. (see Note
1).

F-21
<PAGE> 103

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) RELATED PARTY TRANSACTIONS

At December 31, 1998, Nucentrix leased office space from entities owned by
certain current and former officers and directors of Nucentrix for which the
expense amounted to approximately $205,000 in 1998, $171,000 in 1997 and
$187,000 in 1996. In connection with its restructuring, Nucentrix terminated
approximately 56,000 square feet of such leases. Nucentrix continues to lease
approximately 6,300 square feet of space for telemarketing and customer care
operations, for which Nucentrix pays approximately $48,000 per year.

Nucentrix paid and/or accrued $181,000 in 1997 and $97,000 in 1996 to an
affiliate of a former officer and director of Nucentrix for certain
administrative services.

In 1997, Nucentrix, CS Wireless, Wireless One and CAI formed Wireless
Enterprises, LLC ("Wireless Enterprises"). Wireless Enterprises is a programming
cooperative that negotiates programming and marketing services with suppliers of
programming. In 1998 and 1997, Nucentrix paid approximately $24.5 million and
$15.5 million, respectively, to Wireless Enterprises as reimbursement of
programming expenses and for other administrative services.

In 1996, in exchange for the delivery of certain equipment and receipt of a
promissory note in the principal amount of $400,000, Nucentrix acquired a 10%
interest in a limited liability company formed to acquire and operate channel
rights and operating systems in Chile. An affiliate of a former employee of
Nucentrix holds a 22% interest in such limited liability company.

(13) COMMITMENTS AND CONTINGENCIES

Nucentrix is a co-defendant in one securities lawsuit. In addition, certain
current and former directors, officers and/or employees of Nucentrix, to whom we
may have indemnity obligations, are defendants in two purported securities class
action lawsuits. These actions allege, among other things, various violations of
federal and state securities laws.

Nucentrix also is a party to three purported class action lawsuits alleging
that Nucentrix overcharged its customers for administrative late fees.

These matters were stayed during Nucentrix's reorganization proceedings
and, as of the April 1, 1999, Effective Date of the Plan, this stay was lifted.
Nucentrix intends to vigorously defend the above matters. While it is not
feasible to predict or determine the final outcome of these proceedings or to
estimate the amounts or potential range of loss with respect to these matters,
management believes that an adverse outcome in one or more of such proceedings
which exceeds or otherwise is excluded from applicable insurance coverage could
have a material adverse effect on the financial condition or results of
operations of Nucentrix. (See Note 18.)

Nucentrix also is a party to other legal proceedings, a majority of which
are incidental to its business. In the opinion of management, and after
consideration for amounts recorded in the accompanying Consolidated Financial
Statements, the ultimate effects of such other matters are not expected to have
a material adverse effect on the consolidated financial condition or results of
operations of Nucentrix.

Nucentrix has entered into a series of noncancellable agreements to
purchase entertainment programming for retransmission which expire through 2000.
The agreements generally require monthly payments based upon the number of
subscribers to Nucentrix's systems, subject to certain minimums.

F-22
<PAGE> 104

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and estimated fair values
of Nucentrix's financial instruments at December 31, 1998 and 1997. The fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties:

<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Restricted assets -- investments
in U.S. Treasury securities....... $ 1,011 $ 1,011 $ 10,333 $ 10,194
Note receivable from affiliate.... 3,901 3,901 2,069 2,069
Old Senior Notes.................. (237,616) (57,616) (237,111) (83,250)
Old Convertible Notes and other
Notes payable................... (73,416) (18,354) (71,085) (23,500)
</TABLE>

The fair value of cash and cash equivalents, accounts receivable and
accounts payable approximate the carrying amounts of these assets and
liabilities because of the short maturity of these instruments.

The fair value of U.S. Treasury securities are based on quoted market
prices at the reporting date for those investments. The carrying amount of note
receivable from affiliate approximates fair value since the interest rate
equates to the market rate of interest. The fair values of the Old Senior Notes
are based on market quotes obtained from WP&Co. The fair values of the Old
Convertible Notes and other notes payable are based on management's estimate
derived from market quotes obtained from WP&Co.

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables present unaudited financial data of Nucentrix for each
quarter of fiscal years 1998 and 1997.

<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Revenues............................. $ 19,099 $ 18,622 $ 18,213 $ 18,055
Operating loss....................... (10,642) (27,412) (101,329) (4,126)
Net loss............................. (25,202) (50,641) (123,000) (12,718)
Net loss per common share -- basic
and diluted....................... (1.28) (2.57) (6.23) (.64)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Revenues............................. $ 19,185 $ 19,741 $ 19,890 $ 19,976
Operating loss....................... (11,067) (19,098) (25,053) (12,953)
Net loss............................. (27,573) (35,791) (41,847) (29,372)
Net loss per common share -- basic
and diluted....................... (1.41) (1.82) (2.13) (1.49)
</TABLE>

During the second quarter of 1998, Nucentrix recorded an impairment charge
of $17.7 million to write down the value of its non-operating licenses to fair
market value and wrote off $6.8 million of its excess basis in its investment in
CS Wireless. During the third quarter of 1998, Nucentrix recorded an impairment
of charge of $88 million related to the write down of its operating assets to
estimated fair market value and wrote off $11.7 million of its remaining
investment in CS Wireless. During the fourth

F-23
<PAGE> 105

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

quarter of 1998, Nucentrix recorded $2.1 million in reorganization costs related
to its restructuring and Chapter 11 filing.

(16) MINORITY INTERESTS

In connection with the development of certain wireless cable television
markets, Nucentrix sold stock in certain of its subsidiary companies principally
for cash. In addition to providing a portion of the cash necessary for market
development, the sales of subsidiary stock were intended to provide local
community involvement and ownership.

(17) SUBSEQUENT EVENTS

On February 11, 1999, Wireless One, a 20% owned affiliate of Nucentrix (see
Note 2), filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. On February 25, 1999, Nucentrix requested that Wireless
One consider an alternative plan of reorganization to be co-proposed by
Nucentrix. The principal terms of the proposal included, among other things, a
merger of Wireless One with and into Nucentrix and a material change in the
composition of the Board of Directors of Wireless One. On March 8, 1999,
Nucentrix filed the proposal on Schedule 13D pursuant to rule 13d-101 of the
Securities Exchange Act of 1934. As of March 31, 1999, Nucentrix was continuing
discussions regarding such proposal with Wireless One and/or its
representatives. (See Note 18.)

On March 15, 1999, the Plan was approved by all classes of creditors voting
on the Plan and was confirmed by the United States Bankruptcy court for the
District of Delaware. Nucentrix emerged from bankruptcy on April 1, 1999 (the
"Effective Date").

Under the Plan, as of the Effective Date, all the Old Common Stock was
canceled and Nucentrix issued 10 million shares of New Common Stock. Holders of
the Old Senior Notes and holders of the Old Convertible Notes received 9,700,000
and 300,000 shares of the New Common Stock, respectively. The holders of the Old
Convertible Notes also received warrants to purchase 825,000 shares of New
Common Stock at a per share exercise price of $27.63, subject to adjustment in
the event of certain sales of stock or assets of Nucentrix.

Holders of Old Common Stock were granted the right to receive warrants to
purchase 275,000 shares of New Common Stock at a per share exercise price of
$27.63, subject to adjustment in the event of certain sales of stock or assets
of Nucentrix, subject to certain pending securities litigation claims as set
forth in the Plan.

(18) SUBSEQUENT EVENTS (UNAUDITED)

In May 1999, Nucentrix launched two-way high-speed Internet access services
in Austin, Texas. In May 1999 Nucentrix also began providing wireless
subscription television service in one additional market -- Radcliffe/Story
City, Iowa -- through a management arrangement with CS Wireless Systems, Inc. CS
Wireless has agreed to assign its rights to the assets and channel leases for
this market to Nucentrix upon FCC approval of the assignment of certain other
MMDS and WCS spectrum rights and the closing of a master agreement with CS
Wireless.

On August 4, 1999, Nucentrix filed a registration statement with the
Securities and Exchange Commission relating to the proposed public offering by
Nucentrix of 2 million shares of its common stock. Nucentrix has not yet
requested acceleration of the registration statement, and has not determined
when, or if, it will request acceleration of or effect an offering pursuant to
the registration statement. Nucentrix may determine to delay the offering or
withdraw the registration statement depending upon, among other things, market
conditions and equipment financing opportunities.

F-24
<PAGE> 106

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES

(FORMERLY HEARTLAND WIRELESS COMMUNICATIONS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On October 21, 1999, Nucentrix signed a definitive agreement for the sale
and leaseback of 34 of its communications towers for a purchase price of
approximately $7.0 million. Nucentrix will lease back space on the towers for
its wireless broadband Internet and video operations. This transaction is
expected to close in the fourth quarter of 1999, subject to customary closing
conditions. The $7.0 million purchase price is subject to reduction if closing
conditions with respect to some of the sites are not satisfied and, therefore,
those sites are excluded from the sale.

On July 8, 1999, the securities lawsuit in which Nucentrix is a
co-defendant was dismissed without prejudice for the second time for plaintiffs'
failure to state a claim. The court granted plaintiffs permission to file an
amended complaint for the second time, which the plaintiffs have filed and to
which the defendants have responded.

On July 12, 1999, the plaintiffs in one of the purported securities class
action lawsuits in which certain current and former directors, officers and/or
employees were defendants voluntarily dismissed this lawsuit without prejudice.

On July 15, 1999, the court in one of three purported late fee class action
lawsuits granted plaintiff's motion for non-suit and dismissed all claims
against Nucentrix.

On August 16, 1999, Nucentrix filed a motion in U.S. Bankruptcy Court to
enjoin and dismiss one of the two remaining purported late fee class action
lawsuits because of the plaintiff's failure to file a proof of claim in
Nucentrix's Chapter 11 proceedings. The Court has heard oral arguments on the
motion, but has not rendered a decision.

In September 1999, Nucentrix received notice that a Motion to Revoke Order
of Confirmation had been filed pro se in the U.S. Bankruptcy Court for the
District of Delaware (No. 98-2692-JJF) by two former stockholders of Heartland
Wireless Communications, Inc., seeking to revoke the order of the Bankruptcy
Court confirming Nucentrix's plan of reorganization under Chapter 11 of the U.S.
Bankruptcy Code. The motion asserts that Nucentrix procured the order confirming
its plan of reorganization by fraudulently undervaluing its enterprise value,
and seeks to set aside the order. Nucentrix has responded to this motion,
believes the motion is without merit and intends to vigorously defend the
matter. While it is not feasible to predict or determine the final outcome of
this proceeding, and while management does not expect such an outcome, an
adverse outcome in this proceeding could result in the discharge of Nucentrix's
debt effected by confirmation of Nucentrix's plan of reorganization being
revoked and Nucentrix could be placed back in reorganization under Chapter 11 of
the U.S. Bankruptcy Code.

In December 1999, Wireless One consummated its plan of reorganization under
Chapter 11, and became a wholly-owned subsidiary of MCI WorldCom.

F-25
<PAGE> 107

SCHEDULE II

NUCENTRIX BROADBAND NETWORKS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS PERIOD
- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful accounts.... $ 340 1,649 -- (1,641)(a) $ 348
======= ===== ====== ======= ========
Valuation allowance for deferred
tax
assets.......................... $68,697 -- 73,828(b) $ -- 142,525
======= ===== ====== ======= ========
Year ended December 31, 1997:
Allowance for doubtful accounts.... $ 5,468 3,465 -- (8,593)(a) $ 340
======= ===== ====== ======= ========
Valuation allowance for deferred
tax assets...................... $20,011 -- 48,686(b) -- $ 68,697
======= ===== ====== ======= ========
Year ended December 31, 1996:
Allowance for doubtful accounts.... $ 961 7,295 169(c) (2,957)(a) $ 5,468
======= ===== ====== ======= ========
Valuation allowance for deferred
tax assets...................... $ 3,981 -- 16,030(b) -- $ 20,011
======= ===== ====== ======= ========
</TABLE>

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

(a) Accounts written off.

(b) Recognized as a component of deferred tax assets.

S-1
<PAGE> 108

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses payable by Nucentrix Broadband Networks, Inc. (the
"registrant") in connection with the registration of the common stock offered
hereby are as follows:

<TABLE>
<S> <C>
SEC registration fee..................................... $ 31,119
"Blue Sky" fees and expenses............................. 5,000
Printing and engraving expenses.......................... 50,000
Legal fees and expenses.................................. 100,000
Accounting fees and expenses............................. 50,000
Transfer agent and registrar fees........................ N/A
Miscellaneous expenses................................... 10,000
--------
Total.......................................... 246,119
========
</TABLE>

The selling stockholders will not bear any of these expenses.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") permits a corporation to indemnify certain persons made a
party to an action, by reason of the fact that such person 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 or enterprise. In the case of an action by or in the right of the
corporation, no indemnification may be made in respect of any matter as to which
such person was adjudged liable for negligence or misconduct in the performance
of such person's duty to the corporation unless the Delaware Court of Chancery
or the court in which such action was brought determines that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for proper expenses. To the extent such person has been successful in
the defense of any matter, such person shall be indemnified against expenses
actually and reasonably incurred by him.

Section 102(b)(7) of the DGCL enables a Delaware corporation to include a
provision in its certificate of incorporation limiting a director's liability to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty as a director. The registrant's Amended and Restated Certificate
of Incorporation and By-laws provide for indemnification of its officers and
directors to the full extent permitted under Delaware law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Effective April 1, 1999, the registrant issued 10,000,000 shares of common
stock and warrants to purchase 825,000 shares of common stock of the registrant
(the "Issued Securities") pursuant to the registrant's plan of reorganization
under Chapter 11 of the U.S. Bankruptcy Code (the "Plan"). The registrant also
is obligated pursuant to the Plan to issue (1) warrants to acquire an additional
275,000 shares of common stock to certain classes of or claims against and/or
interests in the registrant, which will become issuable upon the resolution of
certain pending litigation claims, and (2) a yet to be determined number of
additional shares of common stock to satisfy certain miscellaneous unsecured
claims that may be allowed by the bankruptcy court (the "Future Securities" and,
together with the Issued Securities, the "Securities"). The Issued Securities
were, and the Future Securities will be, issued pursuant to the Plan under
Section 1145(a) of the Bankruptcy Code. Therefore, the issuance of the
Securities is exempt from the registration requirements of Section 5 of the
Securities Act. However, pursuant to Section 1145(c) of the Bankruptcy Code, the
issuance of the Securities pursuant to the Plan is deemed a public offering of
the Securities and, therefore, the Securities are not "restricted securities"
for purposes of Rule 144 promulgated under the Securities Act. In accordance
with the Plan, the

II-1
<PAGE> 109

Securities were, or will be, distributed to certain creditors of and/or interest
holders in the registrant in exchange for claims against and/or interests in the
registrant. See "Reorganization."

As of December 1, 1999, the registrant had issued 9,757 shares of common
stock pursuant to the Plan as described in clause (2) of the preceding
paragraph.

The issuance of shares of common stock upon the exercise of the warrants
issued, or to be issued, pursuant to the Plan also will be exempt from the
registration requirements of the Securities Act pursuant to Section 1145(a)(2)
of the Bankruptcy Code and, pursuant to Section 1145(c) of the Bankruptcy Code,
such shares will not be "restricted securities" for purposes of Rule 144.

On April 25, 1997, the registrant issued 75,000 shares of its common stock
to Carroll D. McHenry in connection with his appointment by the registrant to
serve as President, Chief Executive Officer and Acting Chief Financial Officer
of the registrant. On January 22, 1998, the registrant issued 10,000 shares of
its common stock to Marjean Henderson. Each of these issuances was made pursuant
to Section 4(2) of the Securities Act and, therefore was exempt from the
registration requirements of Section 5 of the Securities Act. The shares of
common stock were canceled pursuant to the Plan as of April 1, 1999.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

II-2
<PAGE> 110

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.7 -- Cooperative Marketing Agreement between the Registrant
and DIRECTV, dated November 12, 1997, and the following
related agreements between the Registrant and DIRECTV:
Transport Agreement, DSS Receiver Support Agreement and
Subscriber Payment Agreement (incorporated by reference
to Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the Fiscal Year ended December 31, 1997
(the "1997 Form 10-K")).
10.8 -- Agreement between DIRECTV and the Registrant, dated April
5, 1998 (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (the "June 1998 Form 10-Q")).
10.9 -- Registrant's Performance Incentive Compensation Plan
(incorporated by reference to Exhibit 10.17 to the 1997
Form 10-K).
10.10 -- Employment Agreement between the Registrant and Carroll
D. McHenry dated as of March 6, 1998 (incorporated by
reference to Exhibit 10.18 to the 1997 Form 10-K).
10.11 -- Employment Agreement between the Registrant and J. Curtis
Henderson dated as of April 8, 1998 (incorporated by
reference to Exhibit 10.4 to the June 1998 Form 10-Q).
10.12 -- Employment Agreement between the Registrant and Marjean
Henderson dated as of April 8, 1998 (incorporated by
reference to Exhibit 10.5 to the June 1998 Form 10-Q).
10.13 -- Employment Agreement between the Registrant and Alexander
R. Padilla dated as of July 13, 1998 (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998).
10.14 -- Employment Agreement between the Registrant and Frank H.
Hosea dated as of November 3, 1998 (incorporated by
reference to Exhibit 10.18 to the Registrant's Annual
Report on Form 10-K for the Fiscal Year ended December
31, 1998).
+10.15 -- Nonqualified Stock Option Agreement between Registrant
and Carroll D. McHenry dated as of April 1, 1999.
+10.16 -- Nonqualified Stock Option Agreement between Registrant
and Marjean Henderson dated as of April 1, 1999.
+10.17 -- Nonqualified Stock Option Agreement between Registrant
and J. Curtis Henderson dated as of April 1, 1999.
+10.18 -- Nonqualified Stock Option Agreement between Registrant
and Alexander R. Padilla dated as of April 1, 1999.
+10.19 -- Nonqualified Stock Option Agreement between Registrant
and Frank H. Hosea dated as of April 1, 1999.
10.20 -- Registrant's Warrant Agreement, dated as of April 1, 1999
(incorporated by reference to Exhibit 10.2 to the March
1999 Form 10-Q).
10.21 -- Master Agreement, dated as of December 2, 1998, among the
Registrant, CS Wireless Systems, Inc. and CAI Wireless
Systems, Inc. (incorporated by reference to Exhibit 10.18
to the Registrant's Registration Statement on Form S-1
filed with the SEC on August 4, 1999, Registration No.
333-84465 (the "August 1999 Registration Statement"))
21.1 -- List of Subsidiaries (incorporated by reference to
Exhibit 21.1 to the August 1999 Registration Statement).
</TABLE>

II-3
<PAGE> 111

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*23.1 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
*23.2 -- Consent of KPMG LLP.
+24.1 -- Powers of Attorney (included in the signature pages
hereto).
</TABLE>

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

+ Previously filed.

* Filed herewith.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of Nucentrix pursuant to the provisions in Item 14 above, or otherwise,
Nucentrix has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Nucentrix of
expenses incurred or paid by a director or officer or controlling person of
Nucentrix 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, Nucentrix 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 of whether such indemnification by it
is against public policy as expressed in such act and will be governed by the
final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and

(iii) To include any material information with respect to the Plan
of Distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;

(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
<PAGE> 112

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on the 15th day of December, 1999.

NUCENTRIX BROADBAND NETWORKS, INC.

By: /s/ CARROLL D. MCHENRY

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

Carroll D. McHenry

Chairman of the Board,

President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the date set
forth below, in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ CARROLL D. MCHENRY Chairman of the Board, December 15, 1999
- ----------------------------------------------------- President and Chief
Carroll D. McHenry Executive Officer
(Principal Executive
Officer)

/s/ MARJEAN HENDERSON Senior Vice President and December 15, 1999
- ----------------------------------------------------- Chief Financial Officer
Marjean Henderson (Principal Financial
Officer)

/s/ AMY E. MANNING Controller (Principal December 15, 1999
- ----------------------------------------------------- Accounting Officer)
Amy E. Manning

* Director December 15, 1999
- -----------------------------------------------------
Richard B. Gold

* Director December 15, 1999
- -----------------------------------------------------
Terry S. Parker

* Director December 15, 1999
- -----------------------------------------------------
Mark G. Schoeppner

* Director December 15, 1999
- -----------------------------------------------------
Neil S. Subin

* Director December 15, 1999
- -----------------------------------------------------
R. Ted Weschler

*By: /s/ CARROLL D. MCHENRY
------------------------------------------------
Carroll D. McHenry
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 113

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Registrant's Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code (incorporated by
reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated January 19, 1999).
+2.2 -- Order Confirming Registrant's Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, dated as of
March 16, 1999.
3.1 -- Amended and Restated Certificate of Incorporation of
Registrant, (incorporated by reference to Exhibit 3.1 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 (the "March 1999 Form
10-Q")).
3.2 -- Restated Bylaws of Registrant (incorporated by reference
to Exhibit 3.2 to the March 1999 Form 10-Q).
+4.1 -- Specimen Nucentrix Broadband Networks, Inc. Stock
Certificate.
*4.2 -- Registration Rights Agreement dated as of April 1, 1999,
between the Registrant and the selling stockholders named
herein.
*5.1 -- Legal Opinion of Vinson & Elkins L.L.P., dated as of
December 15, 1999.
10.1 -- Registrant's First Amended and Restated 1999 Share
Incentive Plan (the "New Share Incentive
Plan")(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission (the "SEC")
on June 3, 1999, Registration No. 333-79913).
10.5 -- Office Lease, dated April 10, 1996, between Merit Office
Portfolio Limited Partnership and the Registrant for the
Registrant's Plano, Texas office (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 ("June 1996 Form
10-Q")).
10.6 -- Sublease Agreement, dated June 14, 1996, between the
Registrant and CS Wireless Systems, Inc. (incorporated by
reference to Exhibit 10.2 to the June 1996 Form 10-Q).
10.7 -- Cooperative Marketing Agreement between the Registrant
and DIRECTV, dated November 12, 1997, and the following
related agreements between the Registrant and DIRECTV:
Transport Agreement, DSS Receiver Support Agreement and
Subscriber Payment Agreement (incorporated by reference
to Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the Fiscal Year ended December 31, 1997
(the "1997 Form 10-K")).
10.8 -- Agreement between DIRECTV and the Registrant, dated April
5, 1998 (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (the "June 1998 Form 10-Q")).
10.9 -- Registrant's Performance Incentive Compensation Plan
(incorporated by reference to Exhibit 10.17 to the 1997
Form 10-K).
10.10 -- Employment Agreement between the Registrant and Carroll
D. McHenry dated as of March 6, 1998 (incorporated by
reference to Exhibit 10.18 to the 1997 Form 10-K).
10.11 -- Employment Agreement between the Registrant and J. Curtis
Henderson dated as of April 8, 1998 (incorporated by
reference to Exhibit 10.4 to the June 1998 Form 10-Q).
10.12 -- Employment Agreement between the Registrant and Marjean
Henderson dated as of April 8, 1998 (incorporated by
reference to Exhibit 10.5 to the June 1998 Form 10-Q).
</TABLE>
<PAGE> 114

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.13 -- Employment Agreement between the Registrant and Alexander
R. Padilla dated as of July 13, 1998 (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998).
10.14 -- Employment Agreement between the Registrant and Frank H.
Hosea dated as of November 3, 1998 (incorporated by
reference to Exhibit 10.18 to the Registrant's Annual
Report on Form 10-K for the Fiscal Year ended December
31, 1998).
+10.15 -- Nonqualified Stock Option Agreement between Registrant
and Carroll D. McHenry dated as of April 1, 1999.
+10.16 -- Nonqualified Stock Option Agreement between Registrant
and Marjean Henderson dated as of April 1, 1999.
+10.17 -- Nonqualified Stock Option Agreement between Registrant
and J. Curtis Henderson dated as of April 1, 1999.
+10.18 -- Nonqualified Stock Option Agreement between Registrant
and Alexander R. Padilla dated as of April 1, 1999.
+10.19 -- Nonqualified Stock Option Agreement between Registrant
and Frank H. Hosea dated as of April 1, 1999.
10.20 -- Registrant's Warrant Agreement, dated as of April 1, 1999
(incorporated by reference to Exhibit 10.2 to the March
1999 Form 10-Q).
10.21 -- Master Agreement, dated as of December 2, 1998, among the
Registrant, CS Wireless Systems, Inc. and CAI Wireless
Systems, Inc. (incorporated by reference to Exhibit 10.18
to the Registrant's Registration Statement on Form S-1
filed with the SEC on August 4, 1999, Registration No.
333-84465 (the "August 1999 Registration Statement"))
21.1 -- List of Subsidiaries (incorporated by reference to
Exhibit 21.1 to the August 1999 Registration Statement).
*23.1 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
*23.2 -- Consent of KPMG LLP.
+24.1 -- Powers of Attorney (included in the signature pages
hereto).
</TABLE>

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

+ Previously filed.

* Filed herewith.

<PAGE> 1

EXHIBIT 4.2

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of April 1, 1999, by Nucentrix
Broadband Networks, Inc., a Delaware corporation (the "Company"), for the
benefit of the persons listed on Annex A hereto (the "Initial Holders") who have
executed and delivered to the Company a counterpart signature page hereto or a
Stockholder Representation and Request requesting inclusion in the Registration
Statement of shares of Common Stock, and their Permitted Transferees .

W I T N E S S E T H:

WHEREAS, the Company filed a Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code on January 19, 1999 (the "Plan");

WHEREAS, the Company has issued to the Initial Holders shares (the
"Common Shares") of its common stock, par value $.001 per share ("Common
Stock"), in accordance with the terms and subject to the conditions set forth in
the Plan, and

WHEREAS, in order to induce the Initial Holders to accept the
unregistered Common Shares, the Company has agreed to provide registration
rights with respect to the Common Shares.

NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:

1. Definitions. Unless otherwise defined herein, the following terms shall
have the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):

"Agreement" shall mean this Registration Rights Agreement, including all
amendments, modifications and supplements, and any annexes, exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative.

"Business Day" shall mean any day other than a Saturday, a Sunday, or
other day on which banking institutions in the City of Dallas, Texas or New
York, New York shall be permitted or required by law or executive order to be
closed.

"Closing Date" shall mean the date on which the Common Shares shall be
issued by the Company to the Initial Holders in accordance with the Plan.

"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.

<PAGE> 2

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

"Holders" shall mean the Initial Holders who have executed and delivered
to the Company a counterpart signature page hereto or a Stockholder
Representation and Request requesting inclusion in the Registration Statement of
shares of Common Stock, and each Permitted Transferee.

"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.

"Permitted Transferee" shall mean a transferee or assignee of
Registrable Securities, which were transferred or assigned pursuant to Section 7
hereof.

"Registrable Securities" shall mean the Common Shares, and any other
securities issued or issuable with respect to such Common Shares by way of
dividend or stock split or in connection with any combination of shares of
Common Stock, recapitalization, exchange, merger, consolidation or
reorganization; provided, that any Registrable Security shall cease to be a
Registrable Security when (i) a registration statement covering such Registrable
Security has been declared effective by the Commission and it has been disposed
of pursuant to such effective registration statement, (ii) it is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are met or (iii)(x)
it has been otherwise transferred, (y) the Company has delivered a new
certificate or other evidence of ownership for it not bearing a legend
restricting further transfer and (z) it may be resold without subsequent
registration under the Securities Act.

"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.

2. Registration.

(a) The Company shall, at its cost, as promptly as commercially
practicable (but in no event later than 22 days after the effective date of the
Plan) file with the Commission and thereafter shall use its commercially
reasonable best efforts to cause to be declared effective a registration
statement (the "Shelf Registration Statement" or the "Registration Statement")
on an appropriate form under the Securities Act relating to the offer and sale
of the Registrable Securities by the Holders therefor from time to time in
accordance with the methods of distribution set forth in the Shelf Registration
Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf
Registration"); provided, however, that no Holder (other than an Initial Holder)
shall be entitled to have the Registrable Securities held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder as provided in a
written notice and questionnaire delivered to all Holders (including the Initial
Holders) notifying such Holders that a Shelf Registration

<PAGE> 3

Statement will be filed by the Company, requesting such information with respect
to the Holders as required to be disclosed by the Shelf Registration Statement
and setting forth a deadline for response therein (which in no event shall be
less than 30 calendar days).

(b) The Company shall use its commercially reasonable best efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the prospectus included therein to be lawfully delivered by the Holders of the
relevant Registrable Securities, for a period of three years (or for such longer
period if extended pursuant to Section 3(h) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Registrable Securities covered by the Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor rule thereof) (the "Shelf
Registration Period"). During the Shelf Registration Period, the Company will
have the ability to suspend the availability of the Shelf Registration Statement
for up to two periods of up to 45 consecutive days, but no more than an
aggregate of 60 days during any 365-day period. The Company shall be deemed not
to have used its commercially reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Registrable Securities covered
thereby not being able to offer and sell such Registrable Securities during that
period, unless (i) such action is required by applicable law or (ii) upon the
occurrence of any event contemplated by section 3(b)(ii) through (iv) below,
such action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), so long as the
Company reasonably promptly thereafter complies with the requirements of Section
3(h) hereof, if applicable, if the Company has determined in good faith that
there are no material legal or commercial impediments to so doing.

(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading (other than with
respect to information supplied in writing by the selling Holders expressly for
use in the Shelf Registration Statement pursuant to this Agreement).

3. Registration Procedures. In connection with the Shelf Registration
contemplated by Section 2 hereof, the following provisions shall apply:

(a) The Company shall (i) furnish to each Initial Holder, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its commercially reasonable best efforts to reflect in
each such document, when so filed with the Commission, such comments concerning
such Initial Holder as such

<PAGE> 4

Initial Holder reasonably may propose; and (ii) include the names of the
Holders, who propose to sell Registrable Securities pursuant to the Shelf
Registration Statement, as selling securityholders.

(b) The Company shall give written notice to the Holders of the
Registrable Securities:

(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;

(ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the Company's receipt
of notice of the initiation of any proceedings for that purpose;

(iii) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and

(iv) of the happening of any event that requires the Company to make
changes in the Registration Statement or the prospectus in order that
the Registration Statement or the prospectus not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein (in the
case of the prospectus, in light of the circumstances under which they
were made) not misleading (which written notice shall be accompanied by
an instruction to suspend the use of the prospectus until the requisite
changes have been made and which need not provide any detail as to the
nature of such event).

(c) The Company shall make every commercially reasonable effort to
obtain the withdrawal, at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.

(d) The Company shall furnish to each Holder of Registrable Securities
included within the coverage of the Shelf Registration, without charge, one copy
of the Shelf Registration Statement, any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (excluding those, if any, incorporated by
reference and available on-line via EDGAR).

(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Registrable Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company hereby consents subject to the provisions of this Agreement to the use
of the prospectus or any amendment or supplement thereto by each of the Holders
of the Registrable Securities in

<PAGE> 5

connection with the offering and sale of the Registrable Securities covered by
the prospectus or any amendment or supplement thereto.

(f) Prior to any public offering of the Registrable Securities pursuant
to the Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Registrable Securities included therein and
their respective counsel in connection with the registration or qualification of
the Registrable Securities for offer and sale under the securities or "blue sky"
laws of such states of the United States as any Holder of the Registrable
Securities reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Registrable Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it is not then so qualified or (ii) take any
action which would subject it to general service of process or to taxation in
any jurisdiction where it is not then so subject.

(g) The Company shall reasonably cooperate with the Holders of the
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be sold pursuant to
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as the Holders may request a reasonable period of
time prior to sales of the Registrable Securities pursuant to such Registration
Statement.

(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (iv) of Section 3(b) above during the Shelf Registration Period, the
Company shall reasonably promptly prepare and file a post-effective amendment to
the Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Registrable Securities or purchasers of Registrable Securities, the prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Holders of the Registrable Securities
and any known participating underwriter or broker-dealer in accordance with
paragraphs (ii) through (iv) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made, then
the Holders of the Registrable Securities and any such participating
underwriters or broker-dealers shall suspend use of such prospectus, and the
period of effectiveness of the Registration Statement provided for in Section 2
above shall be extended by the number of days from and including the date of the
giving of such notice to and including the date when the Holders of the
Registrable Securities and any known participating underwriter or broker-dealer
shall have received such amended or supplemented prospectus pursuant to this
Section 3(h).

<PAGE> 6

(i) Not later than the effective date of the Registration Statement, the
Company will provide a CUSIP number for the Common Stock, and provide printed
certificates therefor in a form eligible for deposit with The Depository Trust
Company.

(j) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Registration
Statement, which statement shall cover such 12-month period.

(k) The Company may require each Holder of Registrable Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Registrable
Securities as the Company may from time to time reasonably require for inclusion
in the Shelf Registration Statement, and the Company may exclude from the
Registration Statement the Registrable Securities of any Holder than fails to
furnish such information within a reasonable time after receiving such request.

(l) The Company shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form with managing
underwriters reasonably acceptable to the Company) and shall use commercially
reasonable best efforts to take all such other action, if any, as any Holder of
the Registrable Securities shall reasonably request in order to facilitate the
disposition of the Registrable Securities pursuant to any Shelf Registration.

(m) The Company shall (i) make reasonably available for inspection by
the Holders of the Registrable Securities, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any attorney,
accountant or other agent retained by the Holders of the Registrable Securities
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the Company's
officers, directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Registrable Securities or
any such underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons to conduct a reasonable investigation within the meaning of Section
11 of the Securities Act; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the time
of delivery of such information shall be kept confidential by the Holders or any
such underwriter, attorney, accountant or agent, unless such disclosure is made
in connection with a court proceeding or required by law, or such information
becomes available to the public generally (other than because of a disclosure by
any Holder) or through a third party without an accompanying

<PAGE> 7

obligation of confidentiality and that the foregoing inspection and information
gathering (x) shall be coordinated on behalf of the Holders, by one counsel (the
"Designated Counsel") designated by the Holders of a majority of the Registrable
Securities covered by the Shelf Registration Statement and (y) shall not be
available for any such Holder that is a competitor of the Company.

(n) The Company, if requested by the Designated Counsel, shall use its
best efforts to cause (i) its counsel to deliver an opinion relating to the
Registrable Securities in customary form addressed to such Holders and the
managing underwriters, if any, thereof and, in the case of the initial opinion,
dated on or prior to the effective date of the Shelf Registration Statement (it
being agreed that the matters to be covered by such opinion shall include,
without limitation, subject to usual and customary qualifications, the due
incorporation and good standing of the Company and its significant subsidiaries;
the qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(l) hereof; the due
authorization, valid issuance, full payment and non-assessability of the
applicable Registrable Securities; and absence of material legal or governmental
proceedings involving the Company and its significant subsidiaries; the absence
of governmental approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the applicable Registrable
Securities, or any agreement of the type referred to in Section 3(l) hereof; the
compliance in all material respects as to form of such Shelf Registration
Statement with the requirements of the Securities Act on the date it is declared
effective; and, as of the date of the opinion and as of the effective date of
the Shelf Registration Statement or the most recent post-effective amendment
thereto, as the case may be, of negative assurance with respect to the absence
from such Shelf Registration Statement and the prospectus included therein as
then amended or supplemented, of any untrue statement of a material fact or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of any such
documents, in the light of the circumstances existing at the time that such
documents were filed with the Commission); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof reasonably
requested by the Designated Counsel; and (iii) its independent public
accountants to provide to the Holders of Registrable Securities and the managing
underwriter, if any, a comfort letter in customary form and covering matters of
the type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

(o) The Company shall use its commercially reasonably best efforts to
take all other steps necessary to effect the registration of the Registrable
Securities covered by a Registration Statement contemplated hereby.

4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of their obligations under Section 2
and 3 hereof (including the reasonable fees and expenses, if any, of Andrews &
Kurth L.L.P.,

<PAGE> 8

counsel for the Initial Holders), whether or not the Shelf Registration
Statement is filed or becomes effective, and shall bear or reimburse the other
Holders of the Registable Securities covered thereby for the reasonable fees and
disbursements of Designated Counsel, if any.

5. Indemnification and Contribution.

(a) Indemnification by Company. The Company shall indemnify and hold
harmless the Holder of such Registrable Securities, its officers, directors,
partners, legal counsel, each other person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
person, if any, who controls such Holder or such participating person within the
meaning of the Securities Act, against any expenses, losses, claims, damages or
liabilities, joint or several, to which such Holder, officer, director, partner,
legal counsel, or any such participating person or controlling person may become
subject under the Securities Act or any other statute or at common law, insofar
as such expenses, losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any alleged untrue statement of any
material fact contained, on the effective date thereof, in the Shelf
Registration Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (iii) any violation by the Company of
the Securities Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, and shall reimburse such Holder, officer, director,
partner, legal counsel or such participating person or controlling person for
any legal or any other expenses reasonably incurred by such Holder, officer,
director, partner, legal counsel or such participating person or controlling
person in connection with investigating and defending or settling any such
expense, loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the Shelf
Registration Statement, preliminary prospectus, prospectus or amendment or
supplement in reliance upon and in conformity with information furnished to the
Company by such Holder; and, provided further that the Company shall not be
liable in any such case insofar as it relates to any untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus but eliminated or remedied in the final prospectus.

(b) Indemnification by Holders. Each Holder, by acceptance of the
Registrable Securities, agrees to indemnify and hold harmless the Company, its
directors and officers and each other person, if any, who controls the Company
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director or
officer or any such other person may become subject under the Securities Act or
any other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
information provided in writing to the Company by such Holder and contained in
(or omitted from, as the case may be), on the effective date of, the Shelf

<PAGE> 9

Registration Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto.

(c) Contribution. If the indemnification provided for in this Section 5
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

(d) Notice and Defense of Claims. Whenever a claim shall arise for
indemnification under this Section 5, the indemnified party shall promptly
notify the indemnifying party of such claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification resulting from or in connection with a claim or legal proceeding
by a third party, the indemnifying party may, at its sole expense, assume the
defense thereof. If an indemnifying party assumes the defense of any such claim
or legal proceeding, the indemnifying party shall be entitled to select counsel
reasonably acceptable to the indemnified party and take all steps necessary in
the defense thereof; provided, however, that no settlement shall be made without
the prior written consent of the indemnified party, which shall not be
unreasonably withheld (it being understood that the indemnified party may not
withhold consent to any settlement involving only a monetary payment where the
indemnifying party is ready, willing and able to pay such amount); and, provided
further, that the indemnified party may, at its own expense, participate in any
such proceeding with the counsel of its choice. If the indemnifying party does
not assume the defense of any such claim or litigation in accordance with the
terms hereof, the indemnified party may defend against such claim or litigation
in such manner as it may deem appropriate, including, but not limited to,
settling such claim or litigation (after giving notice of the same to the
indemnifying party) on such terms as the indemnified party may reasonably deem
appropriate, and the

<PAGE> 10

indemnifying party will promptly indemnify the indemnified party in accordance
with the provisions of this Section 5.

6. Public Information. The Company covenants and agrees that for so long as
the Common Stock shall be registered under Section 12(b) or 12(g) of the
Exchange Act or the Company shall be subject to the reporting requirements of
Section 15(d) of the Exchange Act, unless the Shelf Registration Statement shall
be effective, in order to facilitate sales of any Registrable Securities in
reliance on Rule 144 under the Securities Act either (a) there will be available
adequate current public information with respect to the Company as required by
Rule 144, or (b) if such information is not available the Company will use its
commercially reasonable efforts to make such information available without
delay. Without limiting the foregoing, the Company covenants and agrees that for
so long as the Common Stock shall be registered under Section 12(b) or 12(g) of
the Exchange Act or the Company shall be subject to the reporting requirements
of Section 15(d) of the Exchange Act, it will timely file with the Commission
all reports required to be filed under Sections 13 and 15(d) of the Exchange Act
and will promptly furnish to any Holder so requesting a written statement that
the Company has complied with all such reporting requirements.

7. Transfer or Assignment of Registration Rights. If any person shall
acquire Registrable Securities from any Holder, in any manner, whether by
operation of law or otherwise, such person shall be entitled to receive the
rights granted to a Holder under this Agreement, including the rights to require
the Company to register the Registrable Securities; provided that, (a) the
Company is given written notice at the time of or within ten Business Days after
said transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such rights are
being transferred or assigned and (b) the transferee or assignee of such rights
assumes the obligations of a Holder under this Agreement.

8. Miscellaneous.

(a) Termination. Notwithstanding any other provision of this Agreement,
this Agreement shall terminate and be of no further force or effect on and after
the earlier to occur of the third anniversary of the effective date of the Shelf
Registration Statement and the fourth anniversary of the Closing Date; provided,
however, the indemnification and contribution obligations set forth in Section 5
shall survive until all applicable statutes of limitations related to the Shelf
Registration Statement shall have expired.

(b) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given
unless the Company has obtained the written consent of Holders of at least a
majority of the Registrable Securities.

(c) Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the

<PAGE> 11

provisions of this Agreement will be in writing and (i) delivered personally,
(ii) sent by telefacsimile, (iii) delivered by a nationally recognized overnight
courier service, or (iv) sent by registered or certified mail, postage prepaid,
as follows:

(1) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.

(2) If to the Company, at

Nucentrix Broadband Networks, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075
Attention: J. Curtis Henderson
Telecopy Number: (972) 633-0074

With a copy to

Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Rodney L. Moore
Telecopy Number: (214) 999-7781

Every notice, demand, request, consent, approval, declaration, delivery or other
communication required or permitted under this Agreement that is addressed as
provided in this Section 8(c) will (x) if delivered personally or by overnight
courier service, be deemed given upon delivery; (y) if delivered by
telefacsimile or similar facsimile transmission, be deemed given when
electronically confirmed; and (z) if sent by registered or certified mail, be
deemed given when received. Any party from time to time may change its address
for the purpose of notices to that party by giving a similar notice specifying a
new address, but no such notice will be deemed to have been given until it is
actually received by the party sought to be charged with the contents thereof.

(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their respective successors and
assigns including any person to whom any Registrable Securities are transferred
in accordance with their terms and the terms of any agreement relating thereto.

(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

(f) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to the provisions thereof relating to conflict
of laws.

(g) Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but

<PAGE> 12

if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

(h) Entire Agreement. This Agreement represents the complete agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.

(i) No Inconsistent Agreement. The Company shall not on or after the
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of Registrable
Securities pursuant to this Agreement.

[Remainder of page left blank intentionally]

<PAGE> 13

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

THE COMPANY: NUCENTRIX BROADBAND
NETWORKS, INC.

BY: /s/ CARROLL D. MCHENRY
-------------------------------------
NAME: CARROLL D. MCHENRY
TITLE: CHIEF EXECUTIVE OFFICER
ACCEPTED AND AGREED:

INITIAL HOLDERS: ASPEN PARTNERS, L.P.

BY: /s/ NIKOS HECHT
-------------------------------------
NAME: NIKOS HECHT
TITLE: MANAGING DIRECTOR

CONDOR PARTNERS IV, L.L.C.

BY: /s/ NEIL SUBIN
-------------------------------------
NAME: NEIL SUBIN
TITLE: PRESIDENT

QUAD-C, PARTNERS II, L.P.

BY: QUAD-C, INC., ITS SOLE GENERAL
PARTNER

BY: /s/ R. TED WESCHLER
---------------------------------
NAME: R. TED WESCHLER
TITLE: VICE PRESIDENT

<PAGE> 14

QUAD-C PARTNERS III, L.P.

BY: QUAD-C, INC., ITS SOLE GENERAL
PARTNER

BY: /s/ R. TED WESCHLER
---------------------------------
NAME: R. TED WESCHLER
TITLE: VICE PRESIDENT

QUAD-C PARTNERS IV, L.P.

BY: QUAD-C, INC., ITS SOLE GENERAL
PARTNER

BY: /s/ R. TED WESCHLER
---------------------------------
NAME: R. TED WESCHLER
TITLE: VICE PRESIDENT

QUAKER CAPITAL PARTNERS L.P.

BY: QUAKER PREMIERE, L.P.,
ITS SOLE GENERAL PARTNER

BY: QUAKER CAPITAL
MANAGEMENT
CORPORATION, ITS
SOLE GENERAL PARTNER

BY: /s/ MARK SCHOEPPNER
-----------------------------
NAME: MARK SCHOEPPNER
TITLE: PRESIDENT

/s/ R. TED WESCHLER
-----------------------------------------
R. TED WESCHLER

<PAGE> 15

TRUST OF CAROL S. SCHOEPPNER
FBO MARK G. SCHOEPPNER

BY: /s/ MARK G. SCHOEPPNER
-------------------------------------
MARK G. SCHOEPPNER, TRUSTEE

RIDGEVIEW PARTNERS

BY: /s/ MARK G. SCHOEPPNER
-------------------------------------

<PAGE> 16

ANNEX A

LIST OF INITIAL HOLDERS

<TABLE>
<CAPTION>
Name of Initial Holder Securities Received under Plan
- ---------------------- ------------------------------

<S> <C>
Quad-C Partners IV, L.P. 817,450
Quad-C Partners III, L.P. 410,078
Quad-C Partners II, L.P. 287,057
Quaker Capital Partners I, L.P. 897,637
Georgica Advisors LLC 651,832
R. Ted Weschler 161,878
Condor Partners IV, L.L.C. 78,799
Trust of Carol S. Schoeppner FBO Mark G. Schoeppner 41,523
Ridgeview Partners 41,523
Michael Andretti Trust UAD 12/22/90 Michael Andretti Trustee 2,906
Dr. Edwin E. Assid SEP-IRA 3,151
Cathleen Nimick Austin & Peter S. Austin 590
Dr. and Mrs. Murat Bankaci 1,575
Murat Bankaci IRA 7/29/93 984
Dr. Murat Bankaci Children's Trust 984
Stonecipher, Cunningham, Beard & Schmitt Pension Plan 7,058
Stonecipher, Cunningham, Beard & Schmitt PSP 7,058
Mrs. Wendy Becker Payton 9,850
Jerry L. Bedford 1,181
Behrenberg Glass Company Profit Sharing Plan 788
Michael W. and Beth A. Bowman 196
Mrs. Shirley Brankley 393
Mrs. Gretchen Brown 393
Kelly Brown 590
E. Fulton Brylawski 2,166
Charles F. Capper IRA 3,114
Cardio Thoracic Surgical Assoc. Profit Sharing Trust 14,117
Ray T. Charley 2,363
Ray T. & Catherine M. Charley 1993 Desc. Trustee S. Lynch 4,334
Jeffrey L. Clements 1,772
Clinic of Orthopedic Surgery Pension Plan 2,757
Gertrude S. Cohn 1,181
Glenn I. Crain 5,190
Diagnostic Imaging Amended & Restated Pension dtd 10/1/99 4,030
P.J. Dick Inc. Conservative Cash 1,379
</TABLE>

<PAGE> 17

<TABLE>
<S> <C>
Dick Foundation 196
Dr. and Mrs. Nick DiGlovine 196
Dodson Engineering Inc. Profit Sharing Plan 1,181
Joe Dumars Special Loan Acct. 1,245
Richard E. and Mary Lou Durr 3,114
Durr Marketing Pension Plan DTD 12/22/72 Trustee Mary Lou Durr 2,906
Durr Marketing Associates PSP Trustees Richard & Mary Lou Durr 3,529
Robert and Ann Egan 1,772
Ms. Victoria Nimick Enright 4,531
Victoria N. Enright Charitable Remainder Unit Trust 985
Evans Ivory Pooled Pension Plan 4,982
Evans Ivory Pooled Profit Sharing Plan 4,359
Farrell Brokerage Inc. Profit Sharing Plan 6,500
Drs. Peter J. and Linda W. Fedyshin 1,868
First Evangelical Lutheran Church of Greensburg 7,880
Christopher M. Fleming IRA 393
Helen Marie Flinner 985
Dr. Michelle Foltz, MD 6,851
Mr. John Frasco 2,491
Dr. Peter Gabriel IRA 787
Mr. Bart Gates 787
Mr. Charley Gates 787
Dr. R. Edward Gates Cust for Lauren Gates 590
Dr. R. Edward Gates Cust for Rebecca Gates 590
Gettig Technologies Inc. Profit Sharing Retirement Plan 4,530
William A. & Loene M. Gettig 1,378
T&V Partners, L.P., a Pennsylvania Limited Partnership 3,545
Kurt W. Gottschalk 1,660
The Kurt W. Gottschalk Irrev. Trust 622
Dr. Robert E. Grady D.D.S., IRA 4,359
Thomas M. and Lori Z. Hardiman 1,245
John J. Haverlack IRA 393
Heifer International Foundation Endowment 11,211
Robert E. Higgin REV TR 8/21/96 Robert & Colin Higgin, Trustees 1,453
Randy and Heather Hillier 394
Mr. John K. Hinds IRA 196
Mr. Thomas Hollander 3,944
Barbara S. Hollander Trust 1,868
Dr. Barry Hootman 5,397
Mr. Arthur B. Hopperstead IRA 787
Hollis T. Hurd 2,757
Hollis Hurd IRA 787
Iron City Sash & Door Profit Sharing Plan 3,743
</TABLE>

<PAGE> 18

<TABLE>
<S> <C>
Dr. John A. Johnston Jr. IRA 196
Mrs. Mina G. Johnston 393
James E. Johns 1,575
Margaret L. Johnston 1,868
Nancy B. Johns 1,969
Carolyn S. Johnson IRA 5,910
Keystone Honing Profit Sharing 11,819
Douglas E. and Martha A. Knable 590
Susan E. Kraybill 1,575
Susan Kraybill IRA Rollover 393
Mr. Harold S. Larrick 1,181
Daniel R. and Linda K. Lattanzi 1,773
Laurel Medical Imaging Associates Profit Sharing Plan 4,136
Laurel Medical Imaging Money Purchase Plan dtd 5/1/94 984
Dr. M. Russell Leslie Jr. IRA 787
Oakland Ortho. Assoc. Pension Plan FBO M. Russell Leslie 2,757
Oakland Ortho. Assoc. PSP FBO M. Russell Leslie 393
John R. Lucas IRA 196
Dr. George & Mrs. Margaret Magovern 11,626
Mrs. Elizabeth Anne Margiapana 196
Dr. Bruce A. Margulis IRA Rollover 2,076
Bruce A. Margulis Trust 6,228
R. Ralph Margulis Trust 2,491
Dr. Pedro A. Marquez IRA 787
Carmen C. Marquez, Cust. Diego S. Marquez 393
Carmen C. Marquez, Cust. Melissa T. Marquez 393
Mr. John C. Mascaro IRA 1,378
Mascaro Company, L.P. 5,319
Mr. John C. Mascaro 196
Associates in Orthodontics Profit Sharing Plan 6,303
Mr. Rich Mayberry 393
Dr. Robert H. McDonald 787
Mr. Sean McDonald and Ms. Elizabeth Boyle 2,363
Edward McFarland III DMD Ltd. PSP u/a dtd 10/8/81 1,772
Edward McFarland III DMD Pension Plan dtd 10/08/81 787
Helen Messerotes 196
Richard Jurik & Helen Messerotes Trustee U/W George Messerotes 787
Midland Mortgage Investment Corp. Emp. Savings Plan & Trust 4,136
Dr. Michael Miller and Dr. Barbara Carpenter 1,181
Paul E. Moses IRA 4,152
Paul E. Moses & Krina S. Moses 3,529
Dr. Arthur I. Murphy IRA 3,737
</TABLE>

<PAGE> 19

<TABLE>
<S> <C>
Vernon C. & Alvina B. Neal Fund 4,775
Greater Pittsburgh Orthopaedic Associates Pension Trust 9,849
Greater Pittsburgh Orthopaedic Assoc. Profit Sharing Plan 3,151
Oakland Neurosurgical Assoc. 401(K) PSP and Trust 12/4/72 10,795
Susan Oberg Investments Ltd. 13,789
Orthopaedic Surgical Associates Pension Plan 6,698
Orthopaedic Surgical Associates Profit Sharing Plan 4,728
Mr. Dominic Palombo, Jr. 393
Palombo Assoc. Inc. Pft. Shr. Plan Trustee Dominic Palombo 196
RELC Associates L.P. 3,743
Mr. & Mrs. Peter Shaw 393
Charles J. and JoAnn H. Queenan 2,076
JoAnn H. Queenan 3,944
M. Reza Raji Irrevocable Trust dtd 9/26/91 1,181
Dr. M. Reza Raji IRA Rollover 1,091
Sandra M. Roberts 3,529
Mr. Thomas A. Rohrich 787
Ms. Janice Rosenberg 3,546
Harry W. Rosenberg Trust 2,560
Florence Kris Rosenberg Trust 2,560
St. Andrew's Church 6,643
Jean-Pierre Sakey 393
Mr. Richard J. Scarton IRA Rollover 1,575
Joel R. Segel & Barbara L. Segel 590
Dr. Theodore A. Severyn 5,813
The Shingler Family Trust Trustees Mr. & Mrs. Shingler 984
Mr. Myron Swetlitz IRA Rollover 1,181
Harold Swensen IRA 7,092
Nancy M. Swensen MD IRA 10,047
Kenton C. and Linda T. Tekulve 2,561
Dr. John E. and Susan M. Tiano 985
Ms. Miriam Mendelson 393
Trumbull Corp. Conservative Cash 394
Trumbull Profit Sharing Savings Plan 19,699
Mrs. Mary K. Ware 196
Dr. Linda Wellner 1,869
Charles J. and Louise B. Weschler 1,575
Mr. Richard V. Westerhoff Esq. IRA 705
Barbara A. Westerhoff Family Trust dtd 10/31/91 2,076
Richard V. Westerhoff Revocable Trust dtd 3/7/88 1,370
Pearl E. Williams Living Trust Trustee Donald M. Williams 1,575
Mr. Michael Wolff 393
West. PA Anesthesia Employee Pension 5,515
Richard A. Zappala 8,927
Zappala Family Foundation 2,906
-----------
3,842,593
</TABLE>

<PAGE> 1
EXHIBIT 5.1

[VINSON & ELKINS L. L. P. LETTERHEAD]

December 15, 1999

Nucentrix Broadband Networks, Inc.
200 Chisholm Place, Suite 200
Plano, Texas 75075

Re: Nucentrix Broadband Networks, Inc.
Common Stock, $.001 par value
Registration Statement on Form S-1

Ladies and Gentlemen:

We have acted as counsel for Nucentrix Broadband Networks, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of the offer and
sale by certain stockholders of the Company of 3,842,593 shares of its common
stock, par value $.001 per share (the "Common Stock"), on the Company's
Registration Statement on Form S-1, as amended, registration no. 333-80929 (the
"Registration Statement").

In reaching the opinions set forth herein, we have reviewed those
agreements, certificates of public officials, officers of the Company and other
persons, records, documents and matters of law that we deemed relevant,
including but not limited to (a) the Certificate of Incorporation, as amended,
and the By-Laws of the Company, (b) resolutions previously adopted by the Board
of Directors of the Company, (c) the Company's Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code dated January 19, 1999, and (d)
the Order Confirming Debtor's Plan of Reorganization under Chapter 11 of the
Bankruptcy Code dated as of March 15, 1999.

Based on and subject to the foregoing and subject further to the
assumptions, exceptions and qualifications hereinafter stated, we are of the
opinion that the 3,842,593 shares of Common Stock to which the Registration
Statement relates are legally issued, fully paid and nonassessable.

The opinions expressed above are subject in all respects to the
following assumptions, exceptions and qualifications:

<PAGE> 2

Nucentrix Broadband Networks, Inc.
December 15, 1999
Page 2

a. We have assumed that (i) all signatures on all documents
reviewed by us are genuine, (ii) all documents submitted to us as
originals are true and complete, (iii) all documents submitted to us as
copies are true and complete copies of the originals thereof, (iv) all
information submitted to us in the preparation of the Registration
Statement is true and complete as of the date hereof, (v) each natural
person signing any document reviewed by us had the legal capacity to do
so, and (vi) each person signing in a representative capacity any
document reviewed by us had authority to sign in that capacity.

b. The opinions expressed above are limited to the General
Corporation Law of the State of Delaware and the federal laws of the
United States of America. The opinions expressed herein as to the laws
of the State of Delaware are based solely upon the latest official
compilation of the General Corporation Law of the State of Delaware
publicly available.

c. The opinions expressed above speak as of the date hereof
and are limited to the matters expressly set forth herein, and no
opinion is to be implied or inferred beyond such matters.

d. We express no opinion as to the requirements of or
compliance with federal or state securities laws or regulations.

We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement and filed with the
Commission pursuant to the Securities Act, and we hereby consent to that use of
our name in the Registration Statement and the Prospectus forming a part
thereof, including any amendments thereof or supplements thereto, and to the
filing of this opinion as an exhibit to the Registration Statement. In giving
this consent, we do not admit that we come into the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission promulgated thereunder.

This firm disclaims any duty to advise you regarding any changes in, or
otherwise communicate with you with respect to, the matters addressed herein.

Respectfully submitted,

VINSON & ELKINS L. L. P.

By: /s/ RODNEY L. MOORE
------------------------
Rodney L. Moore

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Nucentrix Broadband Networks, Inc.:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP

Dallas, Texas
December 14, 1999