FORM 8-K

                                 CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   June 12, 1998


                            ICG COMMUNICATIONS, INC.
                                ICG FUNDING, LLC
                           ICG HOLDINGS (CANADA), INC.
                               ICG HOLDINGS, INC.
           (Exact name of registrants as specified in their charters)

------------------ ------------------------ ----------------------------------
Delaware            1-11965                   84-1342022
Delaware            333-40495                 84-1434980
Canada              1-11052                   Not applicable
Colorado            33-96540                  84-1158866
(State or other     (Commission File Number)  (IRS Employer Identification No.)
jurisdiction of
incorporation)
---------------------------------- -------------------------------------------
161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

1710-1177 West Hastings Street        c/o ICG Communications, Inc.
Vancouver, BC V6E 2L3                 161 Inverness Drive West
                                      P.O. Box 6742
                                      Englewood, Colorado 80155-6742

161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

(Address of principal                 (Address of U.S. agent for service)
executive offices) (Zip Code)
---------------------------------- -------------------------------------------
Registrants' telephone numbers, including area codes:
(888) 424-1144 or (303) 414-5000



<PAGE>



ITEM 5. OTHER EVENTS.


         On January 21, 1998, ICG Communications, Inc. ("ICG" or the "Company"),
a Delaware  corporation,  completed a merger with NETCOM  On-Line  Communication
Services, Inc. ("NETCOM"), a Delaware corporation.  At the effective time of the
merger,  each outstanding  share of NETCOM common stock, $.01 par value ("NETCOM
Common  Stock"),  became  automatically  convertible  into  shares of ICG common
stock,  $.01 par value ("ICG  Common  Stock"),  at an  exchange  ratio of 0.8628
shares of ICG Common Stock per share of NETCOM Common Stock.

         The business  combination of ICG and NETCOM has been accounted for as a
pooling of interests,  and  accordingly,  the Company's  Consolidated  Financial
Statements,  included  in  Exhibit  99.1,  have been  restated  to  include  the
operations of NETCOM for all historical periods.

ITEM 7.  EXHIBITS.

     (23) Consents.

          23.1: Consent of KPMG Peat Marwick LLP, Independent Auditors.

          23.2: Consent of Ernst & Young LLP, Independent Auditors.

     (99) Additional Exhibits.

          99.1:Consolidated Financial Statements of ICG Communications, Inc. and
               Subsidiaries  for the Fiscal Years Ended  September  30, 1995 and
               1996,  the Three  Months  Ended  December 31, 1996 and the Fiscal
               Year Ended December 31, 1997.

          99.2:Financial   Statement   Schedule  II:  Valuation  and  Qualifying
               Accounts for the Fiscal Years Ended  September 30, 1995 and 1996,
               the Three  Months  Ended  December  31,  1996 and the Fiscal Year
               Ended December 31, 1997,  and the  Independent  Auditors'  Report
               Thereon.

          99.3:Report of Ernst & Young LLP, Independent Auditors,  Regarding the
               Consolidated Financial Statements of NETCOM On-Line Communication
               Services,  Inc. as of December  31, 1996 and 1997 and for each of
               the Three Years in the Period Ended December 31, 1997.

          99.4:Report of Ernst & Young LLP, Independent Auditors,  Regarding the
               Consolidated Financial Statements of NETCOM On-Line Communication
               Services,  Inc. as of December  31, 1996 and for the Three Months
               Then Ended.



<PAGE>


                                  EXHIBIT 23.1

             Consent of KPMG Peat Marwick LLP, Independent Auditors.

<PAGE>




             Consent of KPMG Peat Marwick LLP, Independent Auditors





The Board of Directors
ICG Communications, Inc.:


We consent to  incorporation  by reference in the  registration  statements Nos.
33-96660  and  33-08729 on Form S-3 of  IntelCom  Group  Inc.,  Nos.  333-18839,
333-38823,  333-40495 and 333-40495-01 on Form S-3 of ICG  Communications,  Inc.
and  Nos.  33-14127,  333-25957,  333-39737  and  333-45213  on Form  S-8 of ICG
Communications,  Inc.  of our  reports  dated  April 16,  1998,  relating to the
consolidated  balance sheets of ICG Communications,  Inc. and subsidiaries as of
December  31,  1996  and  1997,  and  the  related  consolidated  statements  of
operations,  stockholders' equity (deficit), and cash flows for the fiscal years
ended  September 30, 1995 and 1996,  the  three-month  period ended December 31,
1996,  and the fiscal year ended  December 31, 1997,  and the related  financial
statement  schedule,  which reports  appear in the Current Report on Form 8-K of
ICG Communications,  Inc., ICG Funding, LLC, ICG Holdings (Canada), Inc. and ICG
Holdings, Inc., dated June 12, 1998.

As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.




                                                KPMG Peat Marwick LLP


Denver, Colorado
June 11, 1998



<PAGE>


                                  EXHIBIT 23.2

               Consent of Ernst & Young LLP, Independent Auditors.


<PAGE>



               Consent of Ernst & Young LLP, Independent Auditors



We consent to the  incorporation  by  reference in the  Registration  Statements
(Forms  S-3 of  IntelCom  Group Nos.  33-96660  and  33-08729;  Forms S-3 of ICG
Communications,  Inc. Nos. 333-18839, 333-38823, 333-40495 and 333-40495-01; and
Forms S-8 of ICG Communications,  Inc. Nos. 33-14127, 333-25957,  333-39737, and
333-45213)  of our  reports  (a) dated  February  13,  1998 with  respect to the
consolidated balance sheets of NETCOM On-Line Communication Services, Inc. as of
December  31,  1996  and  1997  and  the  related   statements  of   operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1997 (not presented  separately herein),  and (b) dated April
16,  1998 with  respect  to the  consolidated  balance  sheet of NETCOM  On-Line
Communication  Services, Inc. as of December 31, 1996 and the related statements
of  operations,  stockholders'  equity and cash flows for the three  months then
ended (not presented separately herein), included in this Current Report on Form
8-K of ICG Communications, Inc., ICG Funding, LLC, ICG Holdings (Canada), Inc.
and ICG Holdings, Inc. dated June 12, 1998.



                                                  Ernst & Young LLP


San Jose, California
June 12, 1998


<PAGE>


                                  EXHIBIT 99.1

                    Consolidated Financial Statements of ICG
              Communications, Inc. and Subsidiaries for the Fiscal
         Years  Ended  September  30,  1995 and  1996,  the Three  Months  Ended
         December 31, 1996 and the Fiscal Year Ended December 31, 1997.


<PAGE>




                                       F-1

                              FINANCIAL STATEMENTS

 

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .    F-2

Consolidated Balance Sheets, December 31, 1996 and 1997  . . . . . .    F-4

Consolidated Statements of Operations, Fiscal Years Ended
 September 30, 1995 and 1996, the Three Months Ended
 December 31, 1995  (unaudited) and 1996, and Fiscal Year Ended
 Fiscal Year Ended December  31, 1997 . . . . . . . . . . . . . . . .   F-6

Consolidated Statements of Stockholders' Equity (Deficit), Fiscal
 Years Ended September 30, 1995 and 1996, the Three Months Ended
 December 31, 1996, and Fiscal Year Ended December 31, 1997 . . . . .   F-8

Consolidated Statements of Cash Flows, Fiscal Years Ended
 September 30, 1995 and 1996, the Three Months Ended
 December 31, 1995 (unaudited) and 1996, and Fiscal Year Ended
 December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . .   F-10
  . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements, December 31, 1996
 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-13



<PAGE>
                                      F-2

                          Independent Auditors' Report




The Board of Directors and Stockholders
ICG Communications, Inc.:

We  have  audited  the   accompanying   consolidated   balance   sheets  of  ICG
Communications, Inc. ("ICG") and subsidiaries (the "Company") as of December 31,
1996  and  1997  and  the  related   consolidated   statements  of   operations,
stockholders'  equity  (deficit),  and cash  flows for the  fiscal  years  ended
September 30, 1995 and 1996, the three-month period ended December 31, 1996, and
the fiscal year ended December 31, 1997. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits. We did not audit the consolidated financial statements of NETCOM On-Line
Communication  Services,  Inc.  ("NETCOM"),  a wholly  owned  subsidiary  of the
Company,  which consolidated  statements reflect total assets  constituting 15.2
percent  in fiscal  1996 and 11.7  percent  in fiscal  1997,  and total  revenue
constituting  32.0  percent in fiscal 1995,  41.6  percent in fiscal 1996,  39.0
percent in the three months ended  December 31, 1996, and 37.0 percent in fiscal
1997 of the related consolidated totals. Those consolidated financial statements
were audited by other  auditors  whose report has been  furnished to us, and our
opinion,  insofar as it relates to the amounts  included  for  NETCOM,  is based
solely on the reports of the other auditors.

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,  based on the audits and the reports of the other auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the  financial  position of ICG  Communications,  Inc.  and
subsidiaries  as of  December  31,  1996  and  1997,  and the  results  of their
operations  and their cash flows for the fiscal years ended  September  30, 1995
and 1996,  the  three-month  period ended December 31, 1996, and the fiscal year
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.


<PAGE>

                                      F-3


As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.


                                                          KPMG Peat Marwick LLP

Denver, Colorado
April 16, 1998


<PAGE>




                                      F-4

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated  Balance Sheets December 31, 1996 and 1997  (Restated,  see notes 1
and 2)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                  ------------------------------------------------
Assets                                                                     1996                    1997
------
                                                                  ------------------------ ----------------------
                                                                                     (in thousands)
<S>                                                                    <C>                        <C>                            
Current assets:
    Cash and cash equivalents                                          $   433,342                  182,202
    Short-term investments available for sale (note 4)                      33,450                  112,281
    Receivables:
         Trade, net of allowance of $3,411 and $7,004 at
          December 31, 1996 and 1997, respectively                          42,415                   61,439
       Revenue earned, but unbilled                                          6,053                    8,599
       Due from affiliate (note 6)                                               -                    9,384
       Other (note 9)                                                        1,440                    1,696
                                                                  ------------------------ ----------------------
                                                                            49,908                   81,118
                                                                  ------------------------ ----------------------
    Inventory                                                                3,309                    4,242
    Prepaid expenses and deposits                                            7,503                   14,097
    Notes receivable, net                                                      200                        -
                                                                  ------------------------ ----------------------
       Total current assets                                                527,712                  393,940
                                                                  ------------------------ ----------------------

Property and equipment (notes 7, 10 and 11)                                567,697                  860,495
    Less accumulated depreciation                                          (79,648)                (155,383)
                                                                  ------------------------ ----------------------
       Net property and equipment                                          488,049                  705,112
                                                                  ------------------------ ----------------------
Investments (note 3)                                                         5,170                        -
Long-term notes receivable from affiliate and others,
    net (note 6)                                                               623                   10,375
Restricted cash (notes 12 and 16)                                           13,333                   24,649
Other assets, net of accumulated amortization:
    Goodwill (note 3)                                                       31,881                   77,562
    Deferred financing costs (note 11)                                      21,963                   23,196
    Deferred subscriber acquisition costs                                    5,595                    3,115
    Transmission and other licenses                                          8,526                    6,031
    Other (note 8)                                                          10,915                   10,531
                                                                  ------------------------ ----------------------
                                                                            78,880                  120,435
                                                                  ------------------------ ----------------------
                                                                       $ 1,113,767                1,254,511
                                                                  ======================== ======================
</TABLE>
                                   (Continued)
<PAGE>
                                      F-5

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets, Continued

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                     December 31,                  
                                                                  ----------------------------------------------
Liabilities and Stockholders' Equity (Deficit)                              1996                    1997
----------------------------------------------                    ------------------------ ---------------------
                                                                                   (in thousands)
<S>                                                                    <C>                          <C>
Current liabilities:
    Accounts payable                                                   $      32,330                   38,457
    Accrued liabilities                                                       46,286                   71,678
    Deferred revenue                                                           8,349                   10,219
    Current portion of capital lease obligations (notes 10 and 16)            24,683                    8,128
    Current portion of long-term debt (note 11)                                  817                    1,784
                                                                  ------------------------ ---------------------
          Total current liabilities                                          112,465                  130,266
                                                                  ------------------------ ---------------------
Capital lease obligations, less current portion (note 10)                     71,146                   70,489
Long-term debt, net of discount, less current portion (note 11)              690,358                  890,568
                                                                  ------------------------ ---------------------
    Total liabilities                                                        873,969                1,091,323
                                                                  ------------------------ ---------------------
Minority interests                                                             1,967                        -

Redeemable  preferred  stock of subsidiary  ($164.8  million and $301.2  million
    liquidation value at December 31, 1996
    and 1997, respectively) (notes 11 and 12)                                159,120                  292,442
Company-obligated mandatorily redeemable preferred securities
    of subsidiary limited liability company which holds solely Company preferred
    stock ($133.4 million liquidation value at
    December 31, 1997) (note 12)                                                   -                  127,729

Stockholders' equity (deficit):
     Common stock (notes 1 and 13)                                             8,189                      749
     Additional paid-in capital                                              499,993                  533,541
     Accumulated deficit                                                    (430,682)                (791,417)
     Cumulative foreign currency translation adjustment and other              1,211                      144
                                                                  ------------------------ ---------------------
          Total stockholders' equity (deficit)                                78,711                 (256,983)
                                                                  ------------------------ ---------------------

Commitments and contingencies (notes 9, 10, 11, 12 and 16)
                                                                        $  1,113,767                1,254,511
                                                                  ======================== =====================
</TABLE>

             See accompanying notes to consolidated financial statements.
<PAGE>
                                   F-6

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations
Fiscal Years Ended September 30, 1995 and 1996,
the Three Months Ended December 31, 1995  (unaudited)  and 1996, and Fiscal Year
Ended December 31, 1997 (Restated, see notes 1 and 2)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          Fiscal years ended           Three months ended      Fiscal year ended
                                                            September 30,                 December 31,            December 31,

                                                    ------------------------------  --------------------------
                                                         1995            1996          1995          1996             1997
                                                    --------------  --------------  ------------  ------------  ----------------
                                                                                     (unaudited)
                                                                       (in thousands, except per share data)
<S>                                                 <C>                  <C>            <C>           <C>          <C>
Revenue:
    Telecom services (note 2)                      $     32,330         87,681         13,513        34,787        177,690
    Internet services                                    52,422        120,540         19,672        36,379        160,660
    Network services                                     58,778         60,116         15,718        15,981         65,678
    Satellite services (note 14)                         20,502         21,297          6,168         6,188         29,986
                                                    --------------  --------------  ------------  ------------  ----------------
        Total revenue                                   164,032        289,634         55,071        93,335        434,014
                                                    --------------  --------------  ------------  ------------  ----------------
Operating costs and expenses:
    Operating costs                                     108,396        208,798         38,006        72,428       341,916
    Selling, general and administrative expenses         90,816        142,531         29,195        41,171       216,405
    Depreciation and amortization (note 2)               26,569         59,994          9,008        19,179        91,881
    Net loss (gain) on disposal of long-lived
      assets (note 3)                                     1,552          6,614          1,644          (610)           50
    Provision for impairment of long-lived assets
      (note 3)                                            7,000          9,994              -             -        11,950
    Restructuring and related charges (note 15)               -              -              -             -         1,879
                                                    --------------  --------------  ------------  ------------  ----------------
        Total operating costs and expenses               234,333        427,931         77,853       132,168       664,081
                                                    --------------  --------------  ------------  ------------  ----------------

        Operating loss                                   (70,301)      (138,297)       (22,782)      (38,833)     (230,067)

Other income (expense):
    Interest expense (note 11)                           (24,368)       (85,714)       (15,215)      (24,454)     (118,279)
    Interest income                                        6,344         25,015          4,787         7,033        26,152
    Other, net (note 11)                                    (508)        (3,911)            22           (59)         (691)
                                                    --------------  --------------  ------------  ------------  ----------------
                                                         (18,532)       (64,610)       (10,406)      (17,480)      (92,818)
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before income taxes, minority interest, share
    of losses and cumulative effect of change
    in accounting                                        (88,833)      (202,907)       (33,188)      (56,313)     (322,885)
Income tax (expense) benefit (note 17)                       (15)         5,108             (4)          (12)          (38)
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before minority interest, share of losses and
    cumulative effect of change in accounting            (88,848)      (197,799)       (33,192)      (56,325)     (322,923)
Minority interest in share of losses, net of
    accretion and preferred dividends on preferred
    securities of subsidiaries (note 12)                  (1,123)       (25,306)        (3,215)       (4,988)      (37,812)
Share of losses of joint venture and investment
    (note 3)                                                (741)        (1,814)          (228)            -             -
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before cumulative effect of change in
    accounting                                           (90,712)      (224,919)       (36,635)      (61,313)     (360,735)
Cumulative effect of change in accounting                      -         (3,453)        (3,453)            -             -
                                                    --------------  --------------  ------------  ------------  ----------------
    Net loss                                        $    (90,712)      (228,372)       (40,088)      (61,313)     (360,735)
                                                    ==============  ==============  ============  ============  ================
                                                                                                                  (Continued)
</TABLE>


<PAGE>
                                      F-7

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations, Continued

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                  Fiscal year
                                                       Fiscal years ended              Three months ended            ended
                                                          September 30,                   December 31,            December 31,
                                               ---------------------------------- ----------------------------
                                                      1995              1996            1995          1996             1997
                                               ------------------  -------------- --------------- ------------  ----------------
                                                                                 (unaudited)
                                                                     (in thousands, except per share data)
<S>                                            <C>                      <C>               <C>          <C>             <C>
Net loss per share - basic and diluted:
    Net loss before cumulative effect of
      change in accounting                     $      (2.94)            (6.10)            (1.13)       (1.47)          (8.49)
    Cumulative effect of change in accounting             -             (0.09)            (0.11)           -               -
                                               ------------------  --------------  -------------- ------------  ----------------
      Net loss per share                              (2.94)            (6.19)            (1.24)       (1.47)          (8.49)
                                               ==================  ==============  ============== ============  =================

Weighted average number of shares
    outstanding - basic and diluted                  30,808             36,875           32,343        41,760         42,508
                                               ==================  ==============  ============== ============  =================
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>
                                      F-8

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)
Fiscal Years Ended  September 30, 1995 and 1996, the Three Months Ended
December 31, 1996, and Fiscal Year Ended December 31, 1997 (Restated,  see notes
1 and 2)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                   Additional
                                                                            Common stock           paid-in      Accumulated
                                                                      Shares         Amount        capital        deficit
                                                                  -------------- -------------- -------------  -------------
                                                                                         (in thousands)

<S>                                                                  <C>         <C>               <C>            <C>
Balances at October 1, 1994                                           22,849      $  95,664         33,819         (61,737)
 Shares issued for cash (note 13):
  Public offering and private placements, net of offering costs        9,547         78,369        169,182               -
  Exercise of options and warrants                                       836          1,476          1,074               -
 Shares issued as repayment of debt and related accrued interest         683          9,482              -               -
  (note 11)
 Shares issued in connection with business combinations (note 3)         169          1,737          1,300               -
 Conversion of ICG Holdings (Canada), Inc. preferred shares              302          2,000              -               -
 Shares issued as contribution to 401(k) plan (note 19)                   38            490              -               -
 Warrants issued in connection with offerings (notes 11, 12 and 13)        -              -         24,134               -
 Change in foreign currency translation adjustment                         -              -              -             (38)
 Compensation expense related to issuance of common stock options          -              -            158               -
 Shares issued in exchange for investments and other assets              123          1,398              -               -
 Shares issued as payment of trade payables                               18            233              -               -
 Cumulative foreign currency translation adjustment                        -              -              -               -
 Net loss                                                                  -              -              -         (90,712)
                                                                  -------------- -------------- -------------  -------------
Balances at September 30, 1995                                        34,565        190,849        229,667        (152,487)
 Shares issued for cash in connection with the exercise of options
  and warrants                                                         1,983          1,747          2,498               -
 Shares issued as repayment of debt and related accrued interest         130            687              -               -
 Shares issued in connection with business combinations (note 3)          64            749              -               -
 Conversion of ICG Holdings (Canada), Inc. preferred shares              496          3,780              -               -
 Shares issued as contribution to 401(k) plan (note 19)                   87            856            300               -
 Shares issued upon conversion of subordinated notes (note 11)         4,413         76,336              -               -
 Repurchase of warrants                                                    -              -         (2,671)              -
 Compensation expense related to issuance of common stock options          -              -             53               -
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG             -       (248,682)       248,682               -
  common stock
 Unrealized gains on available for sale investments                        -              -              -               -
 Cumulative foreign currency translation adjustment                        -              -              -               -
 Net loss                                                                  -              -              -        (228,372)
                                                                  -------------- -------------- -------------  -------------
Balances at September 30, 1996                                        41,738      $  26,322        478,529        (380,859)
                                                                                                                 (Continued)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                     Cumulative foreign           Total
                                                                    currency translation       stockholders'
                                                                    adjustment and other      equity (deficit)
                                                                   -----------------------   -------------------
                                                                                     (in thousands)

<S>                                                                             <C>               <C>   
Balances at October 1, 1994                                                         -               67,746
 Shares issued for cash (note 13):
  Public offering and private placements, net of offering costs                     -              247,551
  Exercise of options and warrants                                                  -                2,550
 Shares issued as repayment of debt and related accrued interest                    -                9,482
  (note 11)
 Shares issued in connection with business combinations (note 3)                    -                3,037
 Conversion of ICG Holdings (Canada), Inc. preferred shares                         -                2,000
 Shares issued as contribution to 401(k) plan (note 19)                             -                  490
 Warrants issued in connection with offerings (notes 11, 12 and 13)                 -               24,134
 Change in foreign currency translation adjustment                                  -                  (38)
 Compensation expense related to issuance of common stock options                   -                  158
 Shares issued in exchange for investments and other assets                         -                1,398
 Shares issued as payment of trade payables                                         -                  233
 Cumulative foreign currency translation adjustment                               (28)                 (28)
 Net loss                                                                           -              (90,712)
                                                                   -----------------------   -------------------    
Balances at September 30, 1995                                                    (28)             268,001
 Shares issued for cash in connection with the exercise of options                 
  and warrants                                                                      -                4,245
 Shares issued as repayment of debt and related accrued interest                    
  (note 11)                                                                         -                  687
 Shares issued in connection with business combinations (note 3)                    -                  749
 Conversion of ICG Holdings (Canada), Inc. preferred shares                         -                3,780
 Shares issued as contribution to 401(k) plan (note 19)                             -                1,156
 Shares issued upon conversion of subordinated notes (note 11)                      -               76,336
 Repurchase of warrants                                                             -               (2,671)
 Compensation expense related to issuance of common stock options                   -                   53
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                      
  common stock                                                                      -                    -
 Unrealized gains on available for sale investments                               540                  540
 Cumulative foreign currency translation adjustment                               699                  699
 Net loss                                                                           -             (228,372)
                                                                   -----------------------   -------------------
Balances at September 30, 1996                                                  1,211              125,203
                                                                                                (Continued)
</TABLE>

<PAGE>
                                      F-9

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit), Continued

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                      Additional  
                                                                              Common stock             paid-in      Accumulated    
                                                                           Shares        Amount        capital        deficit      
                                                                      -------------  -------------  -------------  ------------- 
                                                                                             (in thousands)

<S>                                                                       <C>           <C>             <C>         <C>    
 Shares issued for cash in connection with the exercise of options                            
  and warrants                                                               132        $  1,800            284            -    
 Shares issued in connection with business combination (note 3)               18               -            350            -        
 Shares issued as contribution to 401(k) plan (note 19)                       19               -            480            -    
 Shares issued upon conversion of subordinated notes (note 11)                23             417              -            -     
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                                        
  common stock                                                                 -         (20,350)        20,350            - 
 Net loss                                                                      -               -              -      (61,313)    
 Net loss of NETCOM for the three months ended December 31, 1996                              
  (note 2)                                                                     -               -              -       11,490
                                                                      -------------  -------------  ------------- -------------- 
Balances at December 31, 1996                                             41,930           8,189        499,993     (430,682)   
 Shares issued for cash in connection with the exercise of options                      
  and warrants                                                             1,069               6          5,813            - 
 Shares issued in connection with business combination (note 3)              687               7         15,953            -    
 Shares issued for cash in connection with employee stock purchase                        
  plan                                                                       109               1          1,318            -  
 Shares issued as contribution to 401(k) plan (note 19)                      179               2          3,008            -   
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                                
  common stock                                                                 -          (7,456)         7,456            -
 Reversal of unrealized gains on short-term investments available                        
  for sale                                                                     -               -              -            - 
 Cumulative foreign currency translation adjustment                            -               -              -            -    
 Net loss                                                                      -               -              -     (360,735)  
                                                                      -------------  -------------  ------------- -------------- 
Balances at December 31, 1997                                             43,974        $    749        533,541     (791,417)  
                                                                      =============  =============  ============= ============== 
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                                                                     Cumulative foreign            Total
                                                                                    currency translation        stockholders'
                                                                                    adjustment and other       equity (deficit)
                                                                                 --------------------------  -------------------
                                                                                                   (in thousands)

<S>                                                                                         <C>                     <C>    
 Shares issued for cash in connection with the exercise of options                        
  and warrants                                                                                  -                      2,084
 Shares issued in connection with business combination (note 3)                                 -                        350
 Shares issued as contribution to 401(k) plan (note 19)                                         -                        480
 Shares issued upon conversion of subordinated notes (note 11)                                  -                        417
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                               
  common stock                                                                                  -                          -
 Net loss                                                                                       -                    (61,313)
 Net loss of NETCOM for the three months ended December 31, 1996                             
  (note 2)                                                                                      -                     11,490
                                                                                 --------------------------  -------------------
Balances at December 31, 1996                                                               1,211                     78,711
 Shares issued for cash in connection with the exercise of options                      
  and warrants                                                                                  -                      5,819
 Shares issued in connection with business combination (note 3)                                 -                     15,960
 Shares issued for cash in connection with employee stock purchase                          
  plan                                                                                          -                      1,319
 Shares issued as contribution to 401(k) plan (note 19)                                         -                      3,010
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                              
  common stock                                                                                  -                          -
 Reversal of unrealized gains on short-term investments available                         
  for sale                                                                                   (540)                      (540)
 Cumulative foreign currency translation adjustment                                          (527)                      (527)
 Net loss                                                                                       -                   (360,735)
                                                                                ---------------------------  -------------------
Balances at December 31, 1997                                                                 144                   (256,983)
                                                                                                     
                                                                                ===========================  ===================
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>
                                      F-10

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Fiscal Years Ended September 30, 1995 and 1996,
the Three Months Ended December 31, 1995 (unaudited) and 1996, and Fiscal Year
Ended December 31, 1997 (Restated, see notes 1 and 2)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                        Fiscal years ended          Three months ended      
                                                           September 30,                December 31,          Fiscal year ended
                                                    --------------------------- --------------------------       December 31,   
                                                        1995          1996          1995          1996               1997
                                                    ------------- ------------- ------------- ------------  -------------------
                                                                                 (unaudited)
                                                                                (in thousands)
<S>                                                 <C>              <C>           <C>           <C>             <C>      
Cash flows from operating activities:
   Net loss                                          $ (90,712)      (228,372)     (40,088)      (61,313)        (360,735)
   Adjustments to reconcile net loss to net cash
    used by operating activities:
     Cumulative effect of change in accounting               -          3,453        3,453             -                -
     Share of losses of joint venture and investment       741          1,814          228             -                -
     Minority interest in share of losses, net of
        accretion and non-cash preferred dividends
        on preferred securities of subsidiaries            656         24,279        2,188         4,988           35,457
     Depreciation and amortization                      26,569         59,994        9,008        19,179           91,881
     Compensation expense related to issuance of
        common stock options                               158             53           14             -                -
     Interest expense deferred and included in          
        long-term debt                                  14,068         63,951       12,004        22,087          102,947
     Amortization of deferred financing costs
        included in interest expense                       989          2,573          527           612            2,514
     Write-off of non operating assets                       -          2,650            -             -            1,192
     Contribution to 401(k) plan through issuance
        of common shares                                   490          1,156          405           480            3,010
     Deferred income tax benefit                             -         (5,329)           -             -                -
     Provision for impairment of long-lived assets       7,000          9,994            -             -           11,950
     Net loss (gain) on disposal of long-lived           
        assets                                           1,552          6,614        1,644          (610)              50
     Change in operating assets and liabilities,  
        excluding the effects of business  
        acquisitions, dispositions and non-cash 
        transactions:
         Receivables                                    (6,095)       (13,124)      (3,436)       (6,265)         (25,565)
         Inventory                                        (562)        (1,458)        (302)          408           (2,699)
         Prepaid expenses and deposits                  (3,629)        (4,645)        (491)       (1,366)          (6,425)
         Deferred subscriber acquisition costs          (5,505)       (14,368)      (3,093)       (2,379)          (6,542)
         Accounts payable and accrued liabilities        9,836         22,623       16,822         8,404           22,011
         Deferred revenue                                1,185          3,134         (503)        2,454            1,870
                                                    ------------- ------------- ------------- -------------- -------------------
           Net cash used by operating activities    $   (43,259)      (65,008)      (1,620)      (13,321)        (129,084)
                                                    ------------- ------------- ------------- -------------- -------------------
                                                                                                                 (Continued)
</TABLE>

                                                                 

<PAGE>
                                      F-11

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

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

<TABLE>
<CAPTION>

                                                         Fiscal years ended           Three months ended        
                                                            September 30,                December 31,         Fiscal year ended
                                                       -------------------------  -------------------------      December 31,
                                                        1995          1996           1995          1996             1997
                                                     ------------  ------------  -------------  -----------  ------------------
                                                                               (unaudited)
                                                                              (in thousands)
<S>                                                  <C>           <C>             <C>            <C>            <C>    
Cash flows from investing activities:
   (Increase) decrease in notes receivable from
      affiliate and others                           $     348            4         (1,263)            133         (9,552)
   Advances to affiliates                                (2,184)       (109)           (15)              -              -
   Investment in and advances to joint venture           (6,652)     (4,308)             -               -              -
   Payments for business acquisitions, net of cash       
      acquired                                           (8,109)     (8,441)             -               -        (45,861)
   Acquisition of property, equipment and other         
      assets                                            (93,667)   (176,269)       (39,946)        (59,372)      (280,458)       
   Payments for construction of new headquarters              -      (1,501)             -          (7,945)       (29,432)
   Proceeds from disposition of property, equipment
      and other assets                                        -      21,593         21,146           2,057         17,403
   Purchase of short-term investments                         -      (6,832)        (4,979)        (25,769)       (65,580)
   Increase in restricted cash                                -     (13,333)       (13,333)              -        (25,416)
   Other investments                                     (6,061)          -              -               -              -
                                                     ------------  ------------  -------------  -----------  ------------------
      Net cash used by investing activities            (116,325)   (189,196)       (38,390)        (90,896)      (438,896)
                                                     ------------  ------------  -------------  -----------  ------------------
Cash flows from financing activities: 
   Proceeds from issuance of common stock:
     Common stock offering                              254,792       2,351        120,442              13              -
     Business combination (note 3)                            -           -              -               -         15,960
     Exercise of stock options and warrants               1,471       1,894            101           2,084          4,116
     Employee stock purchase plan                             -           -              -               -          3,022
   Proceeds from issuance of redeemable preferred
      securities of subsidiaries, net of issuance        
      costs                                              28,800     144,000              -               -        223,628
   Proceeds from issuance of convertible stock of        
      subsidiary                                         16,000           -              -               -              -     
   Offering costs related to common and preferred
      stock offerings                                    (5,565)          -              -               -              -
   Redemption of preferred shares                        (3,800)     (5,570)        (5,570)              -              -
   Repurchase of redeemable preferred stock of
      subsidiary and payment of accrued dividend              -     (32,629)             -               -              -
   Repurchase of redeemable warrants                          -      (2,671)             -               -              -
   Proceeds from issuance of short-term debt                  -      17,500         17,500               -              -
   Principal payments on short-term debt                      -     (21,192)        (3,692)              -              -
   Proceeds from issuance of long-term debt             305,613     300,034              -               -        101,486
   Deferred debt issuance costs                         (13,641)    (11,915)             -               -         (3,554)
   Principal payments on long-term debt                 (29,333)    (16,920)       (13,761)           (279)        (2,161)
   Principal payments on capital lease obligations       (6,271)     (12,304)       (2,991)         (1,975)       (25,425)
                                                     ------------   -----------  -------------  -----------  ------------------
     Net cash provided (used) by financing              
     activities                                         548,066      362,578       112,029            (157)       317,072
                                                     ------------   -----------  -------------  -----------  ------------------
     Net (decrease) increase in cash and cash           
     equivalents                                        388,482      108,374        72,019        (104,374)      (250,908)
     Effect of exchange rates on cash                       (28)         699           (28)            544           (232)
Cash and cash equivalents, beginning of period           26,963      415,417       305,173         537,172        433,342
                                                     ------------   -----------  -------------  -----------  ------------------
Cash and cash equivalents, end of period              $ 415,417      524,490        377,164        433,342        182,202
                                                     ============   ===========  =============  ===========  ==================
                                                                                                                  (Continued)

</TABLE>



                                                                     

<PAGE>

                                      F-12

ICG COMMUNICATIONS, INC.           
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

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

                                                        Fiscal years ended          Three months ended      
                                                          September 30,                December 31,           Fiscal year ended
                                                     -------------------------  -------------------------        December 31,
                                                          1995        1996          1995          1996              1997
                                                     ------------  -----------  -----------  ------------   -------------------
                                                                             (unaudited)
                                                                           (in thousands)
<S>                                                  <C>           <C>          <C>          <C>            <C>    
Restated disclosure of cash flows information:
   Cash paid for interest                            $    9,318        19,190       2,684        1,755              12,577
                                                     ============  ===========  ===========  ============   ===================
   Cash paid for income taxes                        $        8            23           -           12                  26
                                                     ============  ===========  ===========  ============   ===================

Restated schedule of non-cash investing and 
  financing activities:
     Common shares issued in connection with
        business combinations, repayment of debt or
        conversion of liabilities to equity           $  11,452        77,772           -          350                   -
                                                     ============  ===========  ===========  ============   ===================
     Common shares issued in exchange for notes
        receivable, investments and other assets      $    2,698            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Assets acquired under capital leases and
        through the issuance of debt or warrants      $  38,670        55,030          84       19,479               6,393
        (note 16)
                                                     ============  ===========  ===========  ============   ===================
     Reclassification of investment in joint
        venture to long-term notes receivable         $    6,882            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Conversion of notes receivable related to
        business combinations                         $    6,330            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Capitalized interest on assets under            
        construction                                  $        -         4,916           -        1,966               3,179
                                                     ============  ===========  ===========  ============   ===================
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>
                                      F-13

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996 and 1997
----------------------------------------------------------------------------

(1)      Organization and Nature of Business

         ICG  Communications,   Inc.,  a  Delaware   corporation   ("ICG"),  was
         incorporated  on April 11,  1996,  for the purpose of becoming  the new
         publicly-traded  U.S. parent company of ICG Holdings (Canada),  Inc., a
         Canadian federal corporation ("Holdings-Canada"), ICG Holdings, Inc., a
         Colorado corporation ("Holdings"), and its subsidiaries.  Pursuant to a
         Plan  of  Arrangement  (the  "Arrangement"),   which  was  approved  by
         Holdings-Canada shareholders on July 30, 1996, and by the Ontario Court
         of Justice  on August 2,  1996,  each  shareholder  of  Holdings-Canada
         exchanged  their common  shares on a  one-for-one  basis for either (i)
         shares of $.01 par value common stock of ICG (the "ICG Common  Stock"),
         or  (ii)  Class  A  common   shares  of   Holdings-Canada   (which  are
         exchangeable  at any time on a  one-for-one  basis  into  shares of ICG
         Common Stock). On August 2, 1996, 28,795,132,  or approximately 98%, of
         the total issued and outstanding common shares of Holdings-Canada  were
         exchanged  for an equal  number of shares  of Common  Stock of ICG.  In
         accordance  with  generally   accepted   accounting   principles,   the
         Arrangement  was  accounted  for in a manner  similar  to a pooling  of
         interests since ICG and  Holdings-Canada had common  shareholders,  and
         the number of shares  outstanding  and the weighted  average  number of
         shares  outstanding  reflect the equivalent shares  outstanding for the
         combined  companies.  On September  17, 1997,  ICG formed a new special
         purpose entity, ICG Funding,  LLC, a Delaware limited liability company
         and wholly owned subsidiary of ICG ("ICG Funding").

         On January 21, 1998, the Company completed a merger with NETCOM On-Line
         Communication Services,  Inc. ("NETCOM").  At the effective time of the
         merger,  each outstanding share of NETCOM common stock, $.01 par value,
         became automatically  convertible into shares of ICG Common Stock at an
         exchange  ratio of 0.8628  shares of ICG Common Stock per NETCOM common
         share. The business  combination has been accounted for as a pooling of
         interests,  and accordingly,  the Company's  accompanying  consolidated
         financial  statements  have been restated to include the  operations of
         NETCOM for all historical periods presented. NETCOM was incorporated in
         the state of California in August 1992 and  reincorporated in the state
         of  Delaware  in  October  1994.  ICG and its  subsidiaries,  including
         NETCOM,  are collectively  referred to as the "Company." All references
         to common shares of the Company  represent  either shares of ICG Common
         Stock or common shares of NETCOM, adjusted for the exchange ratio noted
         above.

<PAGE>
                                      F-14

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996 and 1997
----------------------------------------------------------------------------

(1)  Organization and Nature of Business (continued)

     The Company's principal business activity is  telecommunications  services,
     including  Telecom  Services,   Internet  Services,  Network  Services  and
     Satellite Services.  Telecom Services consists of the Company's competitive
     local exchange  carrier  operations  which provide services to business end
     users, long distance carriers and resellers.  Internet Services consists of
     the operations of NETCOM which  includes  Internet  access,  World Wide Web
     (the  "Web")  site  hosting  services  and other  value-added  connectivity
     services,  which are primarily targeted to small and medium-sized  business
     customers  in the United  States,  Canada and the United  Kingdom.  Network
     Services supplies  information  technology services and selected networking
     products, focusing on network design, installation, maintenance and support
     for a variety of end users,  including  Fortune  1000 firms and other large
     businesses and  telecommunications  companies.  Satellite Services provides
     satellite  voice  and  data  services  to  major  cruise  ship  lines,  the
     commercial  shipping  industry,  yachts,  the U.S.  Navy and  offshore  oil
     platforms.  To better focus on its core Telecom  Services unit, the Company
     entered  into  definitive  agreements  on April 1, 1998 to sell the capital
     stock  of  the  two  main  subsidiaries   within  its  Satellite   Services
     operations.

(2)  Summary of Significant Accounting Policies

     (a)  Basis of Presentation

          The accompanying  consolidated financial statements have been restated
          to give retroactive  effect to the merger of ICG and NETCOM on January
          21, 1998,  which has been  accounted for as a pooling of interests for
          all periods  presented,  and  includes the accounts of the Company and
          its  majority  and wholly owned  subsidiaries.  Financial  information
          prior  to  the  completion  of  the  Arrangement  on  August  2,  1996
          represents the combined  financial  position and results of operations
          of  NETCOM  as  well  as  Holdings-Canada  and  Holdings,   which  are
          considered to be predecessor entities to ICG.

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.

<PAGE>
                                      F-15

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

     (b)  Fiscal Year Ends of ICG and NETCOM

          The Company  changed its fiscal year end to December 31 from September
          30,  effective  January 1, 1997.  References to fiscal 1995,  1996 and
          1997  relate  to the  years  ended  September  30,  1995  and 1996 and
          December 31, 1997, respectively.

          Unaudited consolidated statements of operations and cash flows for the
          three  months  ended  December  31,  1995  have been  included  in the
          accompanying   consolidated   financial   statements  for  comparative
          purposes.

          Prior to the merger,  NETCOM's consolidated  financial statements were
          prepared   using  a  year  end  of  December  31.   Accordingly,   the
          consolidated statements of operations for fiscal 1995 and 1996 reflect
          the combination of NETCOM's  results of operations for the years ended
          December  31 with ICG's  results  of  operations  for the years  ended
          September   30.   The   accompanying    consolidated   statements   of
          stockholders' equity (deficit) excludes the activity of NETCOM for the
          three months ended December 31, 1994.  Additionally,  NETCOM's results
          of operations  for the three months ended  December 31, 1996 have been
          combined with ICG's  results of operations  for the same period in the
          accompanying consolidated statement of operations.  Revenue, operating
          costs and  expenses  and net loss of NETCOM for the three months ended
          December  31,  1996 was  $36.4  million,  $48.9  million  and  $(11.5)
          million,  respectively.  The net loss of NETCOM  for the three  months
          ended  December  31,  1996 has  been  eliminated  in the  consolidated
          statement of stockholders' equity (deficit).

     (c)  Cash Equivalents and Short-term Investments Available for Sale

          The Company  considers  all highly  liquid  investments  with original
          maturities of three months or less to be cash equivalents. The Company
          invests  primarily in high grade short-term  investments which consist
          of  money  market  instruments,   commercial  paper,  certificates  of
          deposit,  government obligations and corporate bonds, all of which are
          considered to be available for sale and generally  have  maturities of
          one year or less. The Company's short-term  investment  objectives are
          safety,  liquidity and yield,  in that order.  The Company carries all
          cash equivalents at cost, which  approximates  fair value.  Short-term
          investments  available for sale are carried at fair market value based
          on quoted market prices with unrealized gains and

<PAGE>

                                      F-16

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          losses,  net of tax, reported as a separate component of stockholders'
          equity  (deficit).  Realized  gains and losses and  declines  in value
          judged to be other than  temporary  are  included in the  statement of
          operations.

     (d)  Inventory

          Inventory,  consisting of satellite systems equipment and equipment to
          be utilized in the installation of  communications  systems,  services
          and  networks  for  customers,  is  recorded  at the  lower of cost or
          market, using the first-in, first-out method of accounting for cost.

     (e)  Investments

          Investments  in joint  ventures  are  accounted  for using the  equity
          method,  under which the Company's  share of earnings or losses of the
          joint  ventures are reflected in operations and dividends are credited
          against the investment when received.  Losses  recognized in excess of
          the Company's  investment  due to  additional  investment or financing
          requirements,  or  guarantees,  are  recorded  as a  liability  in the
          consolidated financial statements.  Other investments  representing an
          interest of 20% or more,  but less than 50%, are  accounted  for using
          the equity method of accounting. Investments of less than a 20% equity
          interest are accounted  for using the cost method,  unless the Company
          exercises  significant influence and/or control over the operations of
          the investee company, in which case the equity method is used.

     (f)  Property and Equipment

          Property and equipment are stated at cost.  Costs of construction  are
          capitalized,   including   interest  costs  related  to  construction.
          Equipment held under capital leases is stated at the lower of the fair
          value of the  asset or the net  present  value  of the  minimum  lease
          payments  at the  inception  of the lease.  For  equipment  held under
          capital  leases,  depreciation  is  provided  using the  straight-line
          method over the  estimated  useful lives of the assets  owned,  or the
          related lease term, whichever is shorter.

<PAGE>
                                      F-17

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Estimated  useful lives of major  categories of property and equipment
          are as follows:

               Office furniture and equipment          3 to 7 years 
               Buildings and improvements              31.5 years 
               Machinery and equipment                 3 to 8 years 
               Switch equipment                        10 years 
               Fiber optic transmission system         20 years

          The  Company   capitalizes  the  direct  costs   associated  with  the
          installation of dial tone customers'  service,  including labor and an
          allocation  of  overhead  costs,  and  amortizes  these costs over two
          years, the estimated average customer contract term.

     (g)  Deferred Subscriber Acquisition Costs

          The Company  expenses the costs of  advertising  as  incurred,  except
          direct response  advertising  expenses  relating to Internet  services
          which  are  included  in  deferred   subscriber   acquisition   costs.
          Subscriber  acquisition costs are deferred and amortized over a period
          determined by calculating  the ratio of current revenue related to the
          direct response  advertising versus the total expected revenue,  or 12
          months,   whichever  is  shorter.   These  costs  relate  directly  to
          subscriber   solicitations  and  principally   include  the  printing,
          production and shipping of starter packages and the costs of obtaining
          qualified prospects by various targeted direct marketing programs.  No
          indirect costs are included in subscriber  acquisition costs. To date,
          all   subscriber   acquisition   costs  have  been  incurred  for  the
          solicitation of specifically identified prospects. It is possible that
          these  estimates of anticipated  gross revenue could be reduced in the
          future based on management's current evaluation of the estimates used.
          As a result, the carrying value and/or the amortization  period of the
          subscriber acquisition costs could be reduced in the future.

     (h)  Other Assets

          Amounts related to the acquisition of transmission  and other licenses
          are  recorded  at  cost  and   amortized   over  20  years  using  the
          straight-line  method.  Goodwill  results from the  application of the
          purchase  method  of  accounting  for  business  combinations  and  is
          amortized over a maximum of 20 years using the straight-line method.

<PAGE>
                                      F-18

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Rights of way, minutes of use, and non-compete agreements are recorded
          at cost, and amortized using the  straight-line  method over the terms
          of the agreements, ranging from 2 to 12 years.

          Amortization of deferred  financing costs is provided over the life of
          the  related  financing  agreement,  the  maximum  term of which is 10
          years.

     (i)  Foreign Currency Translation Adjustments

          The  functional  currency  for all  foreign  operations  is the  local
          currency.  As such, all assets and liabilities  denominated in foreign
          currencies  are  translated  at the exchange rate on the balance sheet
          date.  Revenue  and costs and  expenses  are  translated  at  weighted
          average rates of exchange  prevailing  during the period.  Translation
          adjustments  are  recorded as a separate  component  of  stockholders'
          equity  (deficit).  Gains and losses  resulting from foreign  currency
          transactions  are included in operations and are not  significant  for
          the periods presented.

     (j)  Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities  and  disclosures of contingent  assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenue and expenses  during the  reporting  periods.  Actual  results
          could differ from those estimates.

     (k)  Revenue Recognition

          The  Company  recognizes  Telecom  Services,   Internet  Services  and
          Satellite Services revenue as services are provided and charges direct
          selling  expenses to  operations  as  incurred.  Revenue  from Network
          Services  contracts for the design and  installation of  communication
          systems and networks,  which are generally short-term in duration,  is
          recognized  using the  percentage of completion  method of accounting.
          Maintenance   revenue  is   recognized   as  services  are   provided.
          Uncollectible  trade receivables are accounted for using the allowance
          method. 

<PAGE>
                                      F-19

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Revenue  which has been  earned  under the  percentage  of  completion
          method,  but has not  been  billed  to the  customer  is  included  in
          receivables-revenue earned, but unbilled in the consolidated financial
          statements.  Deferred  revenue  includes  monthly advance  billings to
          customers  for  certain  services  provided by the  Company's  Telecom
          Services, Internet Services and Satellite Services, as well as Network
          Services  revenue  which has been billed to the customer in compliance
          with  contract  terms,  but not yet  earned  under the  percentage  of
          completion method.

          Prior to January 1, 1996,  the  Company  recognized  Telecom  Services
          revenue  in an  amount  equal  to the  non-cancelable  portion  of the
          contract,  which is a minimum  of one year on a  three-year  or longer
          contract,  at the  inception of the contract  and upon  activation  of
          service  to the  customer  to the  extent of direct  installation  and
          selling expenses incurred in obtaining  customers during the period in
          which such revenue was  recognized.  Revenue  recognized  in excess of
          normal monthly billings during the year was limited to an amount which
          did not exceed such  installation and selling  expense.  The remaining
          revenue from the contract was  recognized  ratably over the  remaining
          non-cancelable  portion of the contract.  The Company believes the new
          method is preferable  because it provides a better matching of revenue
          and related operating  expenses and is more consistent with accounting
          practices  within the  telecommunications  industry.  As  required  by
          generally accepted  accounting  principles,  the Company has reflected
          the  effects of the change in  accounting  as if such  change had been
          adopted  as of October 1, 1995,  and has  included  in the  results of
          operations  for fiscal  1996 a charge of  approximately  $3.5  million
          relating to the cumulative effect of this change in accounting.  Other
          than the cumulative  effect of adopting this new method of accounting,
          the effect of this change in accounting for the periods  presented was
          not significant.

     (l)  Income Taxes

          The  Company  accounts  for  income  taxes  under  the  provisions  of
          Statement of Financial  Accounting  Standards No. 109,  Accounting for
          Income Taxes ("SFAS  109").  Under the asset and  liability  method of
          SFAS 109,  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.  Deferred tax assets and
          liabilities  are measured using enacted tax rates expected to apply to
          taxable income in the years in which those

<PAGE>

                                      F-20

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          temporary  differences are expected to be recovered or settled.  Under
          SFAS 109,  the effect on  deferred  tax assets  and  liabilities  of a
          change  in tax  rates is  recognized  in  income  in the  period  that
          includes the enactment date.

     (m)  Net Loss Per Share

          Net  loss per  share is  calculated  by  dividing  the net loss by the
          weighted average number of shares outstanding. Weighted average number
          of shares  outstanding for fiscal year 1995 and the three months ended
          December 31, 1995 represents outstanding Holdings-Canada common shares
          and ICG Common  Stock  resulting  from the  exchange of NETCOM  common
          shares. Weighted average number of shares outstanding for fiscal 1996,
          the three  months ended  December 31, 1996 and fiscal 1997  represents
          Holdings-Canada  common shares  outstanding  for the period October 1,
          1995  through  August 2,  1996,  and  combined  ICG  Common  Stock and
          Holdings-Canada  Class A common  shares  outstanding  for the  periods
          subsequent to August 5, 1996.

          In February  1997,  the Financial  Accounting  Standards  Board issued
          Statement  No. 128,  Earnings Per Share ("SFAS 128") which revises the
          calculation and presentation provisions of Accounting Principles Board
          Opinion No. 15 and related interpretations. Under SFAS 128, basic loss
          per share is computed on the basis of weighted  average  common shares
          outstanding.  Diluted loss per share considers  potential common stock
          instruments in the  calculation.  The Company adopted SFAS 128 for its
          fiscal year ending  December 31, 1997,  including the  requirement for
          retroactive application. The adoption of SFAS 128 had no effect on the
          Company's  previously reported loss per share.  Potential common stock
          instruments,   which  include   options,   warrants  and   convertible
          subordinated notes and preferred  securities,  are not included in the
          loss per share calculation as their effect is anti-dilutive.

     (n)  Stock-Based Compensation

          The Company  accounts for its  stock-based  employee and  non-employee
          director  compensation  plans using the  intrinsic  value based method
          prescribed by Accounting  Principles Board Opinion No. 25,  Accounting
          for Stock Issued to Employees, and related Interpretations ("APB 25").
          The Company has provided pro forma

<PAGE>
                                      F-21


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          disclosures  of net loss and loss per share as if the fair value based
          method of  accounting  for these plans,  as prescribed by Statement of
          Financial  Accounting  Standards No. 123,  Accounting for  Stock-Based
          Compensation  ("SFAS 123"),  had been applied.  Pro forma  disclosures
          include  the  effects of  employee  and  non-employee  director  stock
          options  granted  during fiscal 1996,  the three months ended December
          31, 1996 and fiscal 1997.

     (o)  Impairment of Long-Lived Assets

          The Company provides for the impairment of long-lived  assets pursuant
          to 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 121") which  requires  that  long-lived  assets and
          certain  identifiable  intangibles  held  and  used  by an  entity  be
          reviewed for impairment  whenever  events or changes in  circumstances
          indicate that the carrying  value of an asset may not be  recoverable.
          An impairment  loss is recognized when estimated  undiscounted  future
          cash  flows  expected  to be  generated  by the asset is less than its
          carrying  value.  Measurement of the  impairment  loss is based on the
          fair value of the asset, which is generally determined using valuation
          techniques  such as the  discounted  present value of expected  future
          cash flows.

     (p)  Reclassifications

          Certain prior period  amounts have been  reclassified  to conform with
          the current period's presentation.

<PAGE>
                                      F-22


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments

     (a)  Merger with NETCOM Subsequent to December 31, 1997

          As discussed in note 1, on January 21,  1998,  ICG  completed a merger
          with    NETCOM    which   has   been    accounted    for   under   the
          pooling-of-interests  method of accounting.  The following information
          presents the combined  results of  operations  of ICG and NETCOM as if
          the business combination had been consummated on October 1, 1994:
<TABLE>
<CAPTION>


                                  Fiscal years ended                  Three months ended           Fiscal year ended
                                     September 30,                       December 31,                December 31,
                          ------------------------------------
                               1995                1996                      1996                        1997
                          ----------------    ----------------     -------------------------     ----------------------
                                                       (in thousands)
<S>                          <C>                   <C>                        <C>                        <C>               
Revenue:
   ICG                       $  111,610             169,094                    56,956                     273,354
   NETCOM                        52,422             120,540                    36,379                     160,660
                          ----------------    ----------------     -------------------------     ----------------------
     Combined                $  164,032             289,634                    93,335                     434,014
                          ================    ================     =========================     ======================

Net loss:
   ICG                          (76,648)           (184,107)                  (49,823)                   (327,643)
   NETCOM                       (14,064)            (44,265)                  (11,490)                    (33,092)
                          ----------------    ----------------     -------------------------     ----------------------
     Combined               $   (90,712)           (228,372)                  (61,313)                   (360,735)
                          ================    ================     =========================     ======================

Loss per share - 
basic and diluted:
   ICG                      $    (3.25)             (6.83)                      (1.56)                     (10.11)
                          ================    ================     =========================     ======================
   NETCOM                   $    (1.95)             (4.46)                      (1.15)                      (3.27)
                          ================    ================     =========================     ======================
     Combined               $    (2.94)             (6.19)                      (1.46)                      (8.49)
                          ================    ================     =========================     ======================
</TABLE>

     (b)  Acquisition During Fiscal 1997

          On October 17, 1997, the Company  purchased  approximately  91% of the
          outstanding  capital  stock  of  Communications   Buying  Group,  Inc.
          ("CBG"),  an Ohio based  local  exchange  and  centrex  reseller.  The
          Company paid total consideration of approximately $46.5 million,  plus
          the  assumption  of certain  liabilities.  Separately,  on October 17,
          1997, the Company sold 687,221 shares of ICG Common Stock for

<PAGE>

                                      F-23

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          approximately $16.0 million to certain shareholders of CBG. Subsequent
          to  December   31,  1997,   the  Company   purchased   the   remaining
          approximately  9% interest in CBG for  approximately  $2.9  million in
          cash.

          The Company  has  accounted  for the  acquisition  under the  purchase
          method of accounting, and accordingly, the operations of CBG have been
          included in the Company's  operations since the acquisition  date. The
          excess  of  the  purchase  price  over  the  fair  value  of  the  net
          identifiable  assets  acquired of $48.8  million has been  recorded as
          goodwill  and is being  amortized  on a  straight-line  basis over six
          years.  Revenue,  net loss and loss per share on a pro forma  combined
          basis are not  significantly  different from the Company's  historical
          results for the periods presented herein.

     (c)  Acquisitions and Investments During Fiscal 1996

          In January  1996,  the Company  purchased  the  remaining 49% minority
          interest of Fiber Optic  Technologies,  Inc.  ("FOTI"),  making FOTI a
          wholly   owned   subsidiary.   Consideration   for  the  purchase  was
          approximately  $2.0  million  in cash  and  66,236  common  shares  of
          Holdings-Canada  valued  at  approximately  $0.8  million,  for  total
          consideration of approximately $2.8 million.

          In February 1996, the Company  entered into an agreement with Linkatel
          California,   L.P.  ("Linkatel")  and  its  other  partners,  Linkatel
          Communications,  Inc.  and The Copley  Press,  Inc.,  under  which the
          Company acquired a 60% interest in Linkatel for an aggregate  purchase
          price of $10.0  million  in cash and  became  the  general  partner of
          Linkatel.  In April 1996, the  partnership  was renamed ICG Telecom of
          San Diego, L.P.

          In March 1996, the Company acquired a 90% equity interest in MarineSat
          Communications  Network,  Inc.  ("MCN"),  (formally  Maritime Cellular
          Tele-network,   Inc.),  a  Florida-based   provider  of  cellular  and
          satellite   communications  for  commercial  ships,  private  vessels,
          offshore oil platforms and land-based  mobile units, for approximately
          $0.7 million in cash and  approximately  $0.1 million of assumed debt,
          for total  consideration of approximately $0.8 million. In April 1997,
          the Company  received  the  remaining  10%  interest in MCN as partial
          consideration

<PAGE>

                                      F-24

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          for the sale of its  investment  in Mexico.  In the fourth  quarter of
          fiscal 1997,  the Company  recorded a provision for impairment of $2.9
          million to reflect  management's  estimate of the net realizable value
          of the Company's investment in MCN.

          In August  1996,  the  Company  acquired  certain  Signaling  System 7
          ("SS7") assets of Pace Network Services,  Inc. ("Pace"), a division of
          Pace  Alternative  Communications,  Inc. SS7 is used by local exchange
          companies,  long-distance  carriers,  wireless  carriers and others to
          signal between network elements, creating faster call set-up resulting
          in a more  efficient use of network  resources.  The Company paid cash
          consideration  of  $1.6  million  as of  September  30,  1996  and  an
          additional  $1.0  million  in  January  1997,  based on the  operating
          results of the underlying business since the date of acquisition.

          The  acquisitions  described  above have been  accounted for using the
          purchase  method of accounting,  and  accordingly,  the net assets and
          results of  operations  are  included  in the  consolidated  financial
          statements from the respective dates of acquisition. Revenue, net loss
          and  loss  per  share  on a pro  forma  basis  are  not  significantly
          different  from  the  Company's  historical  results  for the  periods
          presented herein.

     (d)  Acquisitions and Investments During Fiscal 1995

          In  January  1995,  the  Company  and an  unaffiliated  entity  formed
          Maritime  Telecommunications Network, Inc. ("MTN") to provide wireless
          communications  through  satellites to the maritime  cruise  industry,
          U.S. Navy vessels and offshore oil platforms. The Company acquired (i)
          approximately  64% of MTN,  (ii)  approximately  $4.4 million in notes
          receivable from MTN and (iii)  consulting and  non-compete  agreements
          valued at an aggregate of  approximately  $0.3 million in exchange for
          (i)  approximately  $9.0  million  in  cash,  (ii) the  surrender  and
          cancellation  of a note to the Company  from the other entity for $0.6
          million plus  interest,  (iii) 408,347  Holdings-Canada  common shares
          valued at  approximately  $5.1 million (of which 256,303 common shares
          were  issued  in the  fourth  quarter  of fiscal  1994),  and (iv) the
          Company's commitment to provide additional convertible

<PAGE>

                                      F-25

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          working  capital  advances  to MTN  as  required  by  MTN.  The  other
          shareholder of MTN contributed the assets of a predecessor business to
          MTN. MTN also assumed  approximately  $2.1 million of  obligations  of
          such  predecessor  business.  The Company paid a $0.5 million finder's
          fee obligation of the predecessor to a third party.

          During  fiscal  1995,  the Company  purchased a 58%  interest in Zycom
          Corporation ("Zycom"), an Alberta, Canada corporation whose shares are
          traded on the Alberta Stock Exchange.  Consideration  for the purchase
          was approximately $0.8 million in cash, the conversion of $2.0 million
          in notes receivable,  and the assumption of approximately $0.7 million
          in debt for total  consideration  of  approximately  $3.5 million.  In
          March 1996, the Company acquired an additional  approximate 12% equity
          interest in Zycom by  converting  a $3.2 million  receivable  due from
          Zycom into common  stock.  In the fourth  quarter of fiscal 1997,  the
          Company recorded a provision for impairment of $2.7 million to reflect
          management's  estimate of the net  realizable  value of the  Company's
          investment in Zycom.

          In August 1995,  NETCOM  completed  the  acquisition  of  Professional
          Internet Consulting, Inc. ("PICnet") pursuant to an Agreement and Plan
          of  Reorganization  in a transaction  accounted for using the purchase
          method of  accounting.  As  consideration  for all of the  outstanding
          shares of PICnet,  the Company issued 27,788 shares of Common Stock at
          an  approximate  fair  market  value of $35.99  per share with a total
          value  of  approximately  $1.0  million.   Additionally,  the  Company
          acquired  net  liabilities  with a fair  value of  approximately  $0.4
          million.  The resulting  consideration in excess of the fair values of
          the  underlying  assets  acquired  totaling  $1.4  million  represents
          goodwill, which was amortized over a period of 18 months.

          The acquisitions described above were accounted for using the purchase
          method of accounting, and accordingly,  the net assets and the results
          of operations are included in the  consolidated  financial  statements
          from the respective dates of acquisition.  Revenue,  net loss and loss
          per share on a pro forma basis are not  significantly  different  from
          the Company's historical results for the periods presented herein.


<PAGE>
                                      F-26

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          In June 1995,  NETCOM  acquired  Series A Common Stock in the McKinley
          Group,  Inc.  ("McKinley")  in exchange  for $1.2  million in cash and
          approximately  $0.3  million  in Common  Stock.  During  fiscal  1996,
          Excite,  Inc.  ("Excite")  acquired all of the  outstanding  shares of
          McKinley and the Company  received common shares of Excite in exchange
          for its  investment in McKinley.  The Company  recorded a loss of $1.2
          million in fiscal 1996 to reflect  management's  estimate of the value
          of the shares  received.  During  fiscal  1997,  the Company  sold its
          shares  of  Excite  and  recorded  a net  gain of  approximately  $1.3
          million,  which  is  included  in  net  loss  (gain)  on  disposal  of
          long-lived  assets  in  the  Company's   consolidated   statements  of
          operations.

          During fiscal 1995, the Company  invested  approximately  $5.2 million
          ($3.9   million   in  cash,   $1.1   million   in  common   shares  of
          Holdings-Canada,  and the conversion of approximately  $0.2 million in
          notes  receivable)  in  StarCom   International   Optics   Corporation
          ("StarCom"),  for which the Company  received a 25% equity interest in
          each of Starcom's  wholly owned  operating  subsidiaries.  In December
          1997, a senior secured  creditor of StarCom  notified the Company that
          it intended to foreclose on its collateral in StarCom,  and in January
          1998, StarCom commenced bankruptcy proceedings.  Based on management's
          estimate of the net realizable  value of its  investment,  the Company
          recorded a provision for  impairment of its investment of $5.2 million
          in fiscal 1997.

     (e)  Investments in Joint Venture and Affiliate and Other Investments

          In September 1992, the Company entered into a joint venture  agreement
          with Greenstar  Technologies  Inc. (now GST  Telecommunications,  Inc.
          ("GST")) to design, construct and operate a competitive access network
          in Phoenix.  The Company and GST each had a 50% equity interest in the
          joint  venture.  All  financing  provided to the joint  venture by the
          Company,  as well as the  recognition  of the  Company's  share of the
          joint venture's losses,  were recorded  according to the equity method
          of accounting.  During fiscal 1996,  the Company  recorded a valuation
          allowance of  approximately  $5.8  million for the amounts  receivable
          arising from advances made to the Phoenix network joint venture, based
          on  management's   estimate  of  the  net  realizable   value  of  the
          receivable.


<PAGE>
                                      F-27

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          In October 1996, the Company sold its interest in the joint venture to
          GST.  The  Company  received   approximately  $2.1  million  in  cash,
          representing  $1.3 million of  consideration  for its 50% interest and
          $0.8 million for equipment and amounts  advanced to the joint venture.
          In addition,  the Company received  equipment with a net book value of
          $2.4 million and assumed  liabilities of $0.3 million.  A gain on sale
          of the joint venture of approximately $0.8 million was recorded in the
          consolidated  financial  statements  during  the  three  months  ended
          December 31, 1996.

(4)  Short-term Investments Available for Sale

     Short-term investments available for sale are comprised of the following:

                                                  December 31,
                                    ----------------------------------------
                                           1996                  1997
                                    -------------------     ----------------
                                                  (in thousands)

     Money market instruments            $   10,000                  -
     Commercial paper                         5,500              4,000
     U.S. Treasury securities                17,101             94,181
     Equity securities                          849                  -
                                    ===================     ================
                                         $   33,450             98,181
                                    ===================     ================


     At December 31, 1996 and 1997,  the  estimated  fair value of the Company's
     money market  instruments,  commercial paper and U.S.  Treasury  securities
     approximated  cost,  and the  amount  of  gross  unrealized  gains  was not
     significant.  At December 31, 1996, the cost of equity  securities was $0.3
     million and unrealized  gains for fiscal 1996 were $0.5 million.  All money
     market  instruments,  commercial paper and U.S. Treasury  securities mature
     within one year.


<PAGE>
                                      F-28



ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(5)  Subscriber Acquisition and Advertising Costs

     Subscriber  acquisition  costs deferred  during fiscal years 1995 and 1996,
     the three months ended December 31, 1996 and fiscal 1997 were $5.5 million,
     $14.4 million,  $2.4 million and $6.5 million,  respectively.  Amortization
     and write-offs for the same periods were $2.8 million,  $12.2 million, $4.3
     million  and  $8.9  million,   respectively,  and  have  been  included  in
     depreciation  and  amortization  expense  in  the  Company's   consolidated
     statements of operations.

     The amount charged to advertising  expense was $4.5 million in fiscal 1995,
     $7.5  million  in fiscal  1996,  $1.6  million  in the three  months  ended
     December 31, 1996 and $4.7 million in fiscal 1997.

(6)  Notes Receivable and Due from Affiliate

     In January 1997,  the Company  announced a strategic  alliance with Central
     and South  West  Corporation  ("CSW")  which is  developing  and  marketing
     telecommunications services in certain cities in Texas. The venture entity,
     a limited partnership named CSW/ICG ChoiceCom, L.P. ("ChoiceCom"), is based
     in Austin, Texas. CSW holds 100% of the interest in ChoiceCom,  and CSW and
     the Company each have two  representatives  on the Management  Committee of
     the  general  partner of  ChoiceCom.  The  Company  has  committed  to loan
     ChoiceCom  $15.0 million under two promissory  notes,  which are payable on
     demand and earn  interest at LIBOR plus 2% per annum (7.97% at December 31,
     1997). Advances under these promissory notes were $10.0 million at December
     31, 1997.

     Additionally,  the  Company  has agreed to perform  certain  administrative
     services for  ChoiceCom  and make certain  payments to vendors on behalf of
     ChoiceCom,  for which such  services and payments are to be conducted on an
     arm's  length  basis and  reimbursed  by  ChoiceCom.  At December 31, 1997,
     amounts outstanding under this arrangement and justify included in due from
     affiliate  were  approximately  $9.4  million,  and were  collected in full
     during the subsequent fiscal quarter.


<PAGE>
                                      F-29

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(7)  Property and Equipment

     Property and  equipment,  including  assets held under capital  leases,  is
     comprised of the following:
<TABLE>
<CAPTION>

                                                                        December 31,
                                                         ----------------------------------------
                                                               1996                   1997
                                                         ------------------     -----------------
                                                                     (in thousands)

     <S>                                                     <C>                   <C>
     Land                                                    $     306                  709
     Buildings and improvements                                 10,193               10,855
     Furniture, fixtures and office equipment                   46,190               58,606
     Machinery and equipment                                    10,764               31,630
     Fiber optic and point of presence equipment               230,904              257,062
     Satellite equipment                                        19,408               29,760
     Switch equipment                                           58,199               85,546
     Fiber optic transmission system                           117,281              192,756
     Build out/site preparation                                 13,284               13,898
     Construction in progress (see note 16)                     61,168              179,673
                                                         ------------------     -----------------
                                                               567,697              860,495
     Less accumulated depreciation                             (79,648)            (155,383)
                                                         ==================     =================
                                                            $  488,049              705,112
                                                         ==================     =================
</TABLE>

     Property and equipment includes  approximately  $179.7 million of equipment
     which has not been placed in service at December 31, 1997, and accordingly,
     is not being  depreciated.  The  majority  of this amount is related to new
     network construction (see note 16).

     Certain of the assets  described  above have been  pledged as security  for
     long-term  debt and are held under capital leases at December 31, 1997. The
     following is a summary of property and equipment held under capital leases:

<PAGE>
                                      F-30


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(7)  Property and Equipment (continued)

                                                       December 31,
                                        ---------------------------------------
                                               1996                  1997
                                        ------------------    ------------------
                                                      (in thousands)

     Machinery and equipment                $    1,842               3,926
     Fiber optic and point of presence
      equipment                                  7,514              12,707
     Switch equipment                           22,280              21,380
     Fiber optic transmission system            55,746              58,806
     Construction in progress                   20,187              17,895
                                        ------------------    ------------------
                                               107,569             114,714
     Less accumulated depreciation              (4,424)            (10,385)
                                        ==================    ==================
                                           $   103,145             104,329
                                        ==================    ==================

(8)  Other Assets

     Other assets are comprised of the following:

                                                    December 31,
                                     ----------------------------------------
                                           1996                   1997
                                     ------------------    ------------------
                                                   (in thousands)

     Deposits                           $    4,416              3,296
     Pace customer base                      2,581              2,805
     Rights of way                           1,739                425
     Minutes of use agreement                1,421                  -
     Non-compete agreements                    902              1,386
     Right of entry                              -              5,019
     Other                                   1,403              1,099
                                     ------------------    ------------------
                                            12,462             14,030
     Less accumulated amortization          (1,547)            (3,499)
                                     ==================    ==================
     Other                              $   10,915             10,531
                                     ==================    ==================

<PAGE>
                                      F-31

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(9)  Related Party Transactions

     During  fiscal  1996,  Holdings-Canada  and  International   Communications
     Consulting,  Inc. ("ICC") entered into a consulting  agreement  whereby ICC
     will provide various  consulting  services to the Company through  December
     1999 for  approximately  $4.2  million  to be paid  during  the term of the
     agreement. During fiscal 1996, the three months ended December 31, 1996 and
     fiscal 1997, the Company paid approximately $1.3 million,  $0.3 million and
     $1.1 million,  respectively,  related to this consulting agreement. William
     W. Becker,  a stockholder and former director of the Company,  is President
     and Chief Executive Officer of ICC.

     At December 31, 1996 and 1997,  receivables  from officers and employees of
     approximately  $1.0 million and $0.9 million,  respectively,  are primarily
     comprised of promissory notes from officers for relocation expenses,  which
     are generally  payable on demand and bear interest at 7% per annum, and are
     included in  receivables-other in the accompanying  consolidated  financial
     statements.

(10) Capital Lease Obligations

     The Company has payment  obligations under various capital lease agreements
     for equipment.  The future  required  payments under the Company's  capital
     lease  obligations  subsequent  to  December  31,  1997 are as follows  (in
     thousands):

           Due December 31:
             1998                                             $  18,874
             1999                                                16,976
             2000                                                15,247
             2001                                                16,350
             2002                                                11,009
             Thereafter                                          93,584
                                                           ---------------------
               Total minimum lease payments                     172,040
               Less amounts representing interest               (93,423)
                                                           ---------------------
               Present value of net minimum lease payments       78,617
               Less current portion                              (8,128)
                                                           ---------------------
                                                              $  70,489
                                                           =====================

<PAGE>
                                      F-32

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt

     Long-term debt is summarized as follows:
<TABLE>
<CAPTION>

                                                                                            December 31,
                                                                           -----------------------------------------------
                                                                                    1996                     1997
                                                                           ----------------------   ----------------------
                                                                                           (in thousands)

     <S>                                                                <C>                              <C>    
     11 5/8% Senior discount notes, net of discount (a)                 $             -                  109,436
     12 1/2% Senior discount notes, net of discount (b)                         325,530                  367,494
     13 1/2% Senior discount notes, net of discount (c)                         355,955                  407,409
     Note payable with interest at the 90-day  
       commercial paper rate plus 4 3/4% (10.3% at 
       December 31, 1997),  due 2001,  secured  by 
       certain telecommunications equipment                                       5,815                    4,932
                                                                                       
     Note payable with interest at 11%, due monthly
       through fiscal 1999, secured by equipment                                  2,625                    1,860
     Mortgage payable with interest at 8 1/2%, due
        monthly through 2009, secured by building                                 1,177                    1,131
          Other                                                                      73                       90
                                                                           ----------------------    ---------------------
                                                                                691,175                  892,352
          Less current portion                                                     (817)                  (1,784)
                                                                           ----------------------    ---------------------
                                                                             $  690,358                  890,568
                                                                           ======================    =====================
</TABLE>

     (a)  11 5/8% Notes

          On March 11, 1997,  Holdings  completed a private placement (the "1997
          Private  Offering") of 11 5/8% Senior Discount Notes due 2007 (the "11
          5/8%  Notes")  and  14%  Exchangeable   Preferred  Stock   Mandatorily
          Redeemable  2008 (the "14%  Preferred  Stock")  for gross  proceeds of
          $99.9 million and $100.0 million,  respectively. Net proceeds from the
          1997 Private Offering, after costs of approximately $7.5 million, were
          approximately $192.4 million.

          The 11  5/8%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed by ICG) that mature on March 15, 2007, at a maturity value
          of  $176.0  million.  Interest  will  accrue  at 11  5/8%  per  annum,
          beginning  March 15, 2002,  and is payable each March 15 and September
          15, commencing September 15, 2002. The indenture for the

<PAGE>
                                      F-33


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt (continued)

          11 5/8% Notes contains certain covenants which provide for limitations
          on indebtedness, dividends, asset sales and certain other transactions
          and effectively prohibits the payment of cash dividends.

          The 11 5/8% Notes were  originally  recorded  at  approximately  $99.9
          million.  The discount on the 11 5/8% Notes is being accreted  through
          March  15,  2002,  the date on which  the 11 5/8%  Notes  may first be
          redeemed.  The  accretion of the discount and debt  issuance  costs is
          included  in  interest  expense  in  the   accompanying   consolidated
          financial statements.

     (b)  12 1/2% Notes

          On April 30, 1996,  Holdings  completed a private placement (the "1996
          Private  Offering") of 12 1/2% Senior Discount Notes due 2006 (the "12
          1/2% Notes") and of 14 1/4%  Exchangeable  Preferred Stock Manditorily
          Redeemable 2007 (the "14 1/4% Preferred  Stock") for gross proceeds of
          $300.0 million and $150.0 million, respectively. Net proceeds from the
          1996 Private  Offering,  after issuance costs of  approximately  $17.0
          million, were approximately $433.0 million.

          The 12  1/2%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed  by ICG and  Holdings-Canada)  that mature on May 1, 2006,
          with a maturity  value of $550.3  million.  Interest will accrue at 12
          1/2% per annum,  beginning May 1, 2001,  and is payable each May 1 and
          November 1, commencing November 1, 2001. The indenture for the 12 1/2%
          Notes  contains  certain  covenants  which provide for  limitations on
          indebtedness,  dividends,  asset sales and certain other  transactions
          and effectively prohibits the payment of cash dividends.

          The 12 1/2% Notes were  originally  recorded at  approximately  $300.0
          million.  The discount on the 12 1/2% Notes is being accreted  through
          May 1,  2001,  the  date on  which  the 12 1/2 % Notes  may  first  be
          redeemed.  The  accretion of the discount and debt  issuance  costs is
          included  in  interest  expense  in  the   accompanying   consolidated
          financial statements.

<PAGE>
                                      F-34


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt (continued)

          Approximately  $35.3  million of the  proceeds  from the 1996  Private
          Offering  were used to redeem the 12%  redeemable  preferred  stock of
          Holdings  (the  "Redeemable  Preferred  Stock")  issued in August 1995
          ($30.0 million), pay accrued preferred dividends ($2.6 million) and to
          repurchase  916,666  warrants of the Company ($2.7 million)  issued in
          connection with the Redeemable Preferred Stock. The Company recognized
          a charge to minority interest in share of losses, net of accretion and
          preferred  dividends  on  preferred   securities  of  subsidiaries  of
          approximately  $12.3 million for the excess of the redemption price of
          the Redeemable  Preferred  Stock over the carrying amount at April 30,
          1996,  and  recognized a charge to interest  expense of  approximately
          $11.5  million for the payments  made to  noteholders  with respect to
          consents to amendments to the indenture governing the 13 1/2% Notes to
          permit the 1996 Private Offering.

     (c)  13 1/2% Notes

          On August 8, 1995,  Holdings  completed a private placement (the "1995
          Private Offering") through the issuance of 58,430 units (the "Units"),
          each Unit consisting of ten $1,000,  13 1/2% Senior Discount Notes due
          2005 (the "13 1/2% Notes") and  warrants to purchase 33 common  shares
          of Holdings-Canada  (the "Unit Warrants").  Net proceeds from the 1995
          Private Offering, after issuance costs of approximately $14.0 million,
          were approximately $286.0 million.

          The 13  1/2%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed by ICG and  Holdings-Canada)  that mature on September 15,
          2005, with a maturity value of $584.3 million. Interest will accrue at
          the rate of 13 1/2% per annum,  beginning  September 15, 2000,  and is
          payable in cash each March 15 and September 15,  commencing  March 15,
          2001. The indenture for the 13 1/2% Notes contains  certain  covenants
          which provide for limitations on the  indebtedness,  dividends,  asset
          sales and certain other  transactions  and  effectively  prohibits the
          payment of cash dividends.

          The 13 1/2% Notes were  originally  recorded at  approximately  $294.0
          million,  which  represents  the $300.0  million in proceeds  less the
          approximate $6.0 million value assigned to the Unit Warrants, which is
          included in additional  paid-in  capital.  The discount on the 13 1/2%
          Notes and the debt issuance  costs are being  accreted over five years
          until  September  15,  2000,  the date at which the 13 1/2%  Notes can
          first be

<PAGE>
                                      F-35


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          redeemed.  The  value  assigned  to the  Unit  Warrants,  representing
          additional  debt  discount,  is also being accreted over the five-year
          period.  The  accretion of the total  discount is included in interest
          expense  in  the  accompanying   consolidated   financial  statements.
          Holdings may redeem the 13 1/2% Notes on or after  September 15, 2000,
          in  whole  or in  part,  at the  redemption  prices  set  forth in the
          agreement, plus unpaid interest, if any, at the date of redemption.

          The Unit  Warrants  entitle the holder to purchase one common share of
          Holdings-Canada,  which is  exchangeable  into one share of ICG Common
          Stock,  at the exercise price of $12.51 per share and are  exercisable
          at any time between August 8, 1996 and August 8, 2005.

          In  connection  with the  issuance of the 13 1/2%  Notes,  the Company
          obtained $6.0 million of interim  financing  from the placement  agent
          and  certain  private  investors  in exchange  for the  issuance of an
          aggregate  of 520,000  Series A Warrants  (see note 13 (c)).  The $6.0
          million  was  repaid  with a  portion  of the  proceeds  from the 1995
          Private  Offering.  As a  result  of  the  repayment  of  the  interim
          financing,  the  value  assigned  to the  Series A  Warrants  totaling
          approximately $3.0 million, representing debt discount, was charged to
          interest expense during the year ended September 30, 1995.




<PAGE>
                                      F-36

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          Scheduled  principal  maturities of long-term  debt as of December 31,
          1997 are as follows (in thousands):

          Due December 31:
           1998                                              $       1,784
           1999                                                      1,686
           2000                                                      1,290
           2001                                                        938
           2002                                                        938
           Thereafter (a)                                        1,311,976
                                                           --------------------
                                                                 1,318,612
             Less unaccreted discount on the 11 5/8% Notes,  
               the 12 1/2% Notes and the 13 1/2% Notes            (426,260)
                                                           --------------------
                                                             $     892,352
                                                           ====================

          (a)  Includes $176.0 million,  $550.3 million and $584.3 million of 11
               5/8% Notes, 12 1/2% Notes, and 13 1/2% Notes,  respectively,  due
               at maturity.

     (e)  Private  Placement of Senior  Discount Notes  Completed  Subsequent to
          December 31, 1997

          On February 12, 1998, ICG Services,  Inc., a Delaware  corporation and
          new wholly  owned  subsidiary  of ICG ("ICG  Services"),  completed  a
          private  placement  of 10%  Senior  Discount  Notes due 2008 (the "10%
          Notes")  for gross  proceeds  of  approximately  $300.6  million.  Net
          proceeds from the offering,  after underwriting costs of approximately
          $9.0 million, were approximately $291.6 million.

          The 10% Notes are unsecured  senior  obligations  of ICG Services that
          mature on February 15, 2008,  at a maturity  value of $490.0  million.
          Interest  will accrue at 10% per annum,  beginning  February 15, 2003,
          and is payable each February 15 and August 15,  commencing  August 15,
          2003. The indenture for the 10% Notes contains certain covenants which
          provide  limitations  on  indebtedness,  dividends,  asset  sales  and
          certain other transactions.

<PAGE>
                                      F-37


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          The  10%  Notes  were  originally  recorded  at  approximately  $300.6
          million.  The  discount  on the 10%  Notes  will be  accreted  through
          February  15,  2003,  the date on which  the 10%  Notes  may  first be
          redeemed.

(12) Redeemable Preferred Securities of Subsidiaries

     Redeemable preferred stock of subsidiary is summarized as follows:
<TABLE>
<CAPTION>

                                                                     December 31,
                                                         -------------------------------------
                                                               1996                1997
                                                         -----------------    ----------------
                                                                    (in thousands)
     <S>                                                    <C>                    <C>                   
     14% Exchangeable preferred stock, mandatorily
       redeemable in 2008 (a)                               $         -            108,022
     14 1/4% Exchangeable preferred stock,
       mandatorily redeemable in 2007 (b)                       159,120            184,420
                                                         -----------------    ----------------
                                                             $  159,120            292,442
                                                         =================    ================
</TABLE>

     (a)  14% Preferred Stock

          In connection  with the 1997 Private  Offering,  Holdings sold 100,000
          shares of exchangeable preferred stock that bear a cumulative dividend
          at the rate of 14% per annum.  The  dividend is payable  quarterly  in
          arrears  each March 15, June 15,  September  15, and  December 15, and
          commenced  June 15,  1997.  Through  March 15,  2002,  the dividend is
          payable at the option of Holdings in cash or additional  shares of 14%
          Preferred  Stock.  Holdings may exchange the 14% Preferred  Stock into
          14%  Senior  Subordinated  Exchange  Debentures  at any time after the
          exchange  is  permitted  by certain  indenture  restrictions.  The 14%
          Preferred Stock is subject to mandatory redemption on March 15, 2008.

     (b)  14 1/4% Preferred Stock

          In connection  with the 1996 Private  Offering,  Holdings sold 150,000
          shares of exchangeable preferred stock that bear a cumulative dividend
          at the rate of 14 1/4% per annum. The dividend is payable quarterly in
          arrears each February 1, May 1, August 1 and November 1, and commenced
          August 1, 1996. Through

<PAGE>

                                      F-38

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(12) Redeemable Preferred Securities of Subsidiaries (continued)

          May 1, 2001,  the dividend is payable,  at the option of Holdings,  in
          cash or additional  shares of 14 1/4%  Preferred  Stock.  Holdings may
          exchange the 14 1/4% Preferred Stock into 14 1/4% Senior  Subordinated
          Exchange  Debentures  at any time after the  exchange is  permitted by
          certain indenture restrictions. The 14 1/4% Preferred Stock is subject
          to mandatory redemption on May 1, 2007.

     (c)  6 3/4% Preferred Securities

          During  fiscal 1997,  a new  subsidiary  of the Company,  ICG Funding,
          completed a private placement of 6 3/4% Exchangeable Limited Liability
          Company Preferred Securities  Mandatorily Redeemable 2009 (the "6 3/4%
          Preferred  Securities")  for gross  proceeds of $132.25  million.  Net
          proceeds  from the  private  placement,  after  offering  costs,  were
          approximately $127.6 million.  Restricted cash at December 31, 1997 of
          $24.6  million  includes  the  proceeds  from the  offering  which are
          designated  for the payment of cash  dividends on the 6 3/4% Preferred
          Securities through November 15, 2000.

          The 6 3/4%  Preferred  Securities  consist of  2,645,000  exchangeable
          preferred securities of ICG Funding that bear a cumulative dividend at
          the  rate of 6 3/4% per  annum.  The  dividend  is paid  quarterly  in
          arrears  each  February  15, May 15,  August 15 and  November  15, and
          commenced  November 15, 1997.  The dividend is payable in cash through
          November  15,  2000 and,  thereafter,  in cash or shares of ICG Common
          Stock, at the option of ICG Funding.  The 6 3/4% Preferred  Securities
          are  exchangeable,  at the option of the holder,  at any time prior to
          November 15, 2009 into shares of ICG Common Stock at an exchange  rate
          of 2.0812  shares  of  Common  Stock  per  preferred  security,  or an
          exchange  price of $24.025  per  share,  subject  to  adjustment.  ICG
          Funding may, at its option,  redeem the 6 3/4% Preferred Securities at
          any time on or after  November  18,  2000.  Prior  to that  time,  ICG
          Funding  may redeem the 6 3/4%  Preferred  Securities  if the  current
          market value of ICG Common Stock equals or exceeds the exchange price,
          for at least 20 days of any 30-day  trading  period,  by 170% prior to
          November 16, 1998;  160% from  November 16, 1998 through  November 15,
          1999; and 150% from November 16, 1999 through November 15, 2000. The 6
          3/4%  Preferred  Securities  are subject to  mandatory  redemption  on
          November 15, 2009. 

<PAGE>
                                      F-39

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(12) Redeemable Preferred Securities of Subsidiaries (continued)

          On February 15, 1998, ICG Funding used the remaining proceeds from the
          private  placement  of the 6 3/4%  Preferred  Securities  to  purchase
          $112.4  million of ICG  Communications,  Inc.  Preferred  Stock  ("ICG
          Preferred  Stock")  which pays  dividends  each  February  15, May 15,
          August 15 and November 15 in additional  shares of ICG Preferred Stock
          through November 15, 2000.  Subsequent to November 15, 2000, dividends
          are  payable in cash or shares of ICG Common  Stock,  at the option of
          ICG. The ICG  Preferred  Stock is  exchangeable,  at the option of ICG
          Funding,  at any time prior to  November  15,  2009 into shares of ICG
          Common Stock at an exchange  rate based on the exchange  rate of the 6
          3/4%  Preferred  Securities.  The ICG  Preferred  Stock is  subject to
          mandatory redemption on November 15, 2009.

          The accreted value of the 6 3/4%  Preferred  Securities is included in
          Company-obligated   mandatorily  redeemable  preferred  securities  of
          subsidiary  limited  liability  company  which  holds  solely  Company
          preferred  stock in the  accompanying  consolidated  balance  sheet at
          December 31, 1997.

     Included in  minority  interest in share of losses,  net of  accretion  and
     preferred   dividends   on  preferred   securities   of   subsidiaries   is
     approximately $1.3 million,  $27.0 million,  $5.8 million and $39.8 million
     for fiscal 1995 and 1996,  the three  months  ended  December  31, 1996 and
     fiscal 1997, respectively, associated with the accretion of issuance costs,
     discount and preferred  security dividend accruals for the 6 3/4% Preferred
     Securities,  the 14% Preferred  Stock,  the 14 1/4% Preferred Stock and the
     Redeemable  Preferred  Stock  (issued in  connection  with the 1995 Private
     Offering and redeemed in April 1996).  These costs are partially  offset by
     the minority interest share in losses of subsidiaries of approximately $0.6
     million,  $2.7  million,  $0.8 million and $2.0 million for fiscal 1995 and
     1996,   the  three  months  ended   December  31,  1996  and  fiscal  1997,
     respectively.

(13) Stockholders' Deficit

     (a)  Common Stock

          Common stock  outstanding  at December 31, 1997  represents the issued
          and  outstanding  Common  Stock of ICG and  Class A common  shares  of
          Holdings-Canada (not owned by ICG) which are exchangeable at any time,
          on a one-for-one basis, for ICG Common Stock. The following table sets
          forth the number of shares

<PAGE>
                                      F-39


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          outstanding for ICG and Holdings-Canada on a separate company basis as
          of December 31, 1997:
<TABLE>
<CAPTION>

                                                                                 Shares                Shares not owned
                                                                              owned by ICG                  by ICG
                                                                           --------------------       -------------------
           <S>                                                              <C>                            <C>        
           ICG Common Stock, $.01 par value, 100,000,000
             shares authorized; 41,122,966 and 43,950,959
             shares issued and outstanding at December 31,
             1996 and 1997, respectively                                             -                     43,950,959
           Holdings-Canada Class A common shares, no par
             value, 100,000,000 shares authorized;
             31,795,270 and 31,822,756 shares issued and
             outstanding at December 31, 1996 and 1997,
             respectively:
             Class A common shares, exchangeable on a
               one-for-one basis for ICG Common Stock
               at any time                                                           -                         23,700
             Class A common shares owned by ICG                             31,799,056                              -
                                                                                                      -------------------
           Total shares outstanding                                                                        43,974,659
                                                                                                      ===================
</TABLE>

     (b)  Stock Options and Employee Stock Purchase Plan

          In fiscal years 1991,  1992 and 1993, the Company's Board of Directors
          approved  incentive  stock  option plans and  replenishments  to those
          plans  which  provide  for  the  granting  of  options  to  directors,
          officers,  employees  and  consultants  of  the  Company  to  purchase
          285,000,  724,400 and 1,692,700  shares,  respectively,  of ICG Common
          Stock,  with exercise prices between 80% and 100% of the fair value of
          the shares at the date of grant.  A total of  1,849,600  options  have
          been  granted  under these plans with  exercise  prices  ranging  from
          approximately $2.92 to $14.03.  Compensation expense has been recorded
          for options  granted at an exercise  price below the fair market value
          of ICG Common Stock at the date of grant,  pursuant to the  provisions
          of APB 25.  The  options  granted  under  these  plans are  subject to
          various vesting requirements and expire in five and ten years from the
          date of grant.

<PAGE>
                                      F-41

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The NETCOM  1993 Stock  Option Plan has been  assumed and  approved by
          ICG's Board of  Directors  as an  incentive  and  non-qualified  stock
          option  plan which  provides  for the  granting  of options to certain
          directors,  officers and employees to purchase 2,720,901 shares of ICG
          Common  Stock.  A total of 4,380,099  options have been granted  under
          this plan at exercise  prices  ranging  from $0.65 to $92.14,  none of
          which  were  less  than 100% of the fair  market  value of the  shares
          underlying  options  on  the  date  of  grant,  and  accordingly,   no
          compensation  expense was recorded for these options under APB 25. The
          options  granted  under  this  plan are  subject  to  various  vesting
          requirements,  generally  three and five years,  and expire within ten
          years from the date of grant.

          In fiscal years 1994,  1995 and 1996,  the three months ended December
          31, 1996 and fiscal 1997,  the Company's  Board of Directors  approved
          incentive and non-qualified  stock option plans and  replenishments to
          plans which provide for the granting of options to certain  directors,
          officers  and  employees  to purchase  2,536,000  shares of ICG Common
          Stock under the 1994 plan and an aggregate of 2,700,000  shares of the
          Company's  Common  Stock  under  the 1995 and 1996  plans.  A total of
          5,709,426  options  have been  granted  under  these plans at original
          exercise prices ranging from $7.94 to $27.06,  none of which were less
          than 100% of the fair market value of the shares underlying options on
          the date of  grant,  and  accordingly,  no  compensation  expense  was
          recorded for these  options  under APB 25. The options  granted  under
          these plans are subject to various vesting  requirements and expire in
          five and ten years from the date of grant.

          In order to continue  to provide  non-cash  incentives  and retain key
          employees,  all employee  stock options  outstanding on April 16, 1997
          with  exercise  prices at or in excess of $15.875 were canceled by the
          Stock  Option  Committee  of the  Company's  Board  of  Directors  and
          regranted with an exercise price of $10.375,  the closing price of ICG
          Common Stock on the Nasdaq  National Market on April 16, 1997. A total
          of 597,600 options, with original exercise prices ranging from $15.875
          to $26.25,  were  canceled and  regranted.  There was no effect on the
          Company's  consolidated  financial  statements  as  a  result  of  the
          cancellation and regranting of options.

          In October 1996,  the Company  established  an Employee Stock Purchase
          Plan  whereby  employees  can  elect to  designate  1% to 30% of their
          annual salary,  to be used to purchase  shares of ICG Common Stock, up
          to a limit of $25,000 in ICG

<PAGE>
                                      F-42


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          Common Stock each year, at a 15% discount to fair market value.  Stock
          purchases  will occur four times a year on February 1, May 1, August 1
          and November 1, with the price per share  equaling the lower of 85% of
          the market price at the beginning or end of the offering  period.  The
          Company  is  authorized  to issue a total of  1,000,000  shares of ICG
          Common Stock to  participants  in the plan.  During  fiscal 1997,  the
          Company  sold 109,213  shares of ICG Common  Stock to employees  under
          this plan.

          During fiscal 1994,  NETCOM's Board of Directors  approved and adopted
          an Employee  Stock  Purchase  Plan which was  dissolved  upon NETCOM's
          merger with ICG. Shares  purchased under this plan have been converted
          into an estimated 119,000 shares of ICG Common Stock.

          The  Company  recorded  compensation  expense in  connection  with its
          stock-based employee and non-employee  director  compensation plans of
          $0.2 million and $0.1 million for fiscal 1995 and 1996,  respectively,
          pursuant  to  the  intrinsic   value  based  method  of  APB  25.  Had
          compensation  expense for the Company's plans been determined based on
          the fair  market  value of the  options at the grant  dates for awards
          under those plans  consistent  with the  provisions  of SFAS 123,  the
          Company's pro forma net loss and net loss per share would have been as
          presented below. Pro forma disclosures include the effects of employee
          and  non-employee  director stock options  granted during fiscal 1996,
          the three months ended December 31, 1996 and fiscal 1997.

<TABLE>
<CAPTION>

                                   Fiscal years ended                
                                     September 30,                   Three months ended             Fiscal year ended
                           -----------------------------------           December 31,                  December 31,
                                1995               1996                     1996                          1997
                           ---------------    ----------------    --------------------------    --------------------------
                                                      (in thousands, except per share amounts)
<S>                          <C>                   <C>                       <C>                         <C>    
Net loss:
As reported                  $   (90,712)          (228,372)                 (61,313)                    (360,735)
Pro forma                       (101,423)          (242,974)                 (64,985)                    (369,677)

Net loss per share -
basic and diluted:
As reported                  $     (2.94)             (6.19)                   (1.47)                       (8.49)
Pro forma                          (3.29)             (6.59)                   (1.56)                       (8.70)
                           
</TABLE>

<PAGE>
                                      F-43

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The fair value of each  option  grant to  employees  and  non-employee
          directors other than NETCOM employees and  non-employee  directors was
          estimated on the date of grant using the Black-Scholes  option-pricing
          model with the following  weighted  average  assumptions:  an expected
          option  life  of  three  years  for  directors,   officers  and  other
          executives,  and two  years  for  other  employees,  for all  periods;
          expected  volatility of 50% for all periods;  and  risk-free  interest
          rates  ranging  from 5.03% to 7.42% for  fiscal  1995 and 1996 and the
          three months ended  December 31, 1996,  and risk-free  interest  rates
          ranging from 5.61% to 6.74% for fiscal 1997. Risk-free interest rates,
          as were currently  available on the grant date,  were assigned to each
          granted option based on the zero-coupon rate of U.S. Treasury bills to
          be held for the same period as the assumed option life. The fair value
          of each option grant to NETCOM  employees and  non-employee  directors
          was  estimated  on the date of grant  using the  Black-Scholes  option
          pricing  model with the following  weighted  average  assumptions:  an
          expected  option life of 1.6 years;  expected  volatility  of 80%; and
          risk free interest  rates of 6%. Since the Company does not anticipate
          issuing any dividends on its Common Stock,  the dividend yield for all
          options  granted was assumed to be zero.  The  weighted  average  fair
          market value of combined ICG and NETCOM options  granted during fiscal
          1995 and 1996,  the three  months  ended  December 31, 1996 and fiscal
          1997 was  approximately  $7.83,  $11.10,  $9.48 and $10.31 per option,
          respectively.

          As options  outstanding  at December 31, 1997 will continue to vest in
          subsequent  periods and additional  options are expected to be awarded
          under  existing  and new plans,  the above pro forma  results  are not
          necessarily  indicative  of the  impact  on net  loss and net loss per
          share in future periods.


<PAGE>
                                      F-44


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The following table summarizes the status of the Company's stock-based
          compensation plans:
<TABLE>
<CAPTION>

                                                       Shares              Weighted
                                                     underlying            average                   Options
                                                       options           exercise price            exercisable
                                                 -------------------  --------------------  ------------------------
                                                   (in thousands)                               (in thousands)

     <S>                                              <C>          <C>                          <C>  
     Outstanding at October 1, 1994                    1,921        $       6.79                 1,059
       Granted                                         3,612               17.42
       Exercised                                        (487)               3.16
       Canceled                                         (218)              14.02
                                                 -------------------

     Outstanding at September 30, 1995                 4,828               14.92                 1,230
       Granted                                         2,054               18.30
       Exercised                                        (415)               7.35
       Canceled                                         (631)              24.73
                                                 -------------------

     Outstanding at September 30, 1996                 5,836               15.49                 2,771
       Granted                                           335               18.59
       Exercised                                         (31)               8.95
       Canceled                                          (56)              12.65
                                                 -------------------

     Outstanding at December 31, 1996                  6,084               15.68                 3,476
       Granted                                         3,377               14.94
       Exercised                                        (709)               8.13
       Canceled                                        (2,604)             25.32
                                                 -------------------

     Outstanding at December 31, 1997                   6,148              11.97                 3,532
                                                ===================
</TABLE>

<PAGE>
                                      F-45

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The following table summarizes  information about options  outstanding
          at December 31, 1997:
<TABLE>
<CAPTION>

                                            Options outstanding                            Options exercisable
                          ---------------------------------------------------------  ---------------------------------
                                                  Weighted
                                                  average            Weighted                              Weighted
          Range of                               remaining            average                              average
          exercise             Number           contractual          exercise             Number           exercise
           prices            outstanding            life               price           exercisable          price
      ------------------  ------------------  -----------------  ------------------  -----------------   -------------
                           (in thousands)        (in years)                           (in thousands)

       <S>                       <C>                <C>              <C>                   <C>              <C>        
       $2.60  -    6.25            111               5.10            $    4.08                111           $   4.08
            7.94                 1,550               7.41                 7.94              1,550               7.94
        8.50  -  10.38           1,737               8.31                 9.99                651               9.67
       10.50  -  26.88           2,703               8.69                15.61              1,210              14.34
       27.06   - 46.65              47               9.17                27.94                  9              29.48
                          ------------------                                         ------------------
                                 6,148                                                      3,531
                          ==================                                         ==================
</TABLE>

     (c)  Warrants

          During fiscal 1995 and 1996,  the three months ended December 31, 1996
          and fiscal 1997, the Company's warrant activity was as follows:

          (i)  During fiscal 1993, the Company issued to a debt holder  warrants
               to purchase  17,067,  3,255 and 11,039  common shares at exercise
               prices of $6.56,  $7.38 and $7.88,  respectively.  During  fiscal
               1994,   17,067   warrants   were   exercised   for   proceeds  of
               approximately $0.1 million. In addition,  during fiscal 1994, the
               Company  issued to the same debt  holder  additional  warrants to
               purchase 1,989, 15,260 and 3,665 common shares of Holdings-Canada
               at $21.51, $20.01 and $11.80 per share,  exercisable on or before
               November   10,  1998,   March  24,   1999,   and  July  8,  1999,
               respectively.  An additional  7,725  warrants were issued on July
               10, 1995 at an exercise price of $14.50,  which expire on July 9,
               2000.  Also  issued  on July  10,  1995  were  60,000  additional
               warrants to an affiliate of the debt holder at an exercise  price
               of $14.50,  which expire on July 9, 2000. During the three months
               ended December 31, 1996, 1,231 of

<PAGE>
                                      F-46


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

               the $7.38 warrants,  4,456 of the $7.88 warrants and 2,215 of the
               $11.80 warrants were canceled.  During fiscal 1997,  2,024 of the
               $7.38 warrants,  6,583 of the $7.88 warrants, 1,450 of the $11.80
               warrants  and 17,429 of the $14.50  warrants  were  exercised  in
               exchange for Holdings-Canada  Class A common shares. In addition,
               50,296 of the $14.50  warrants  were  canceled.  At December  31,
               1997, a total of 17,249 of these warrants remained outstanding.

          (ii) During fiscal 1994, the Company issued to two financial  advisors
               warrants  to  purchase   75,000  and  200,000  common  shares  of
               Holdings-Canada.  These  warrants have an exercise price of $7.94
               and $18.00 and are  exercisable  for two- and five-year  periods,
               respectively.  During fiscal 1995 and 1996, 74,335 and 665 of the
               75,000   warrants   were   exercised   for  total   proceeds   of
               approximately  $0.6  million.   During  the  three  months  ended
               December 31, 1996, 100,000 of the 200,000 warrants were exercised
               for proceeds of approximately $1.8 million. At December 31, 1997,
               100,000 warrants remained outstanding.

          (iii)Pursuant  to a  private  placement  of the  Redeemable  Preferred
               Stock and the interim financing  arrangement  during fiscal 1995,
               the Company  issued  1,895,000  Series A Warrants  and  1,375,000
               Series B Warrants to purchase an equal number of common shares of
               Holdings-Canada   with  exercise   prices  of  $7.94  and  $8.73,
               respectively,  which expire on July 14, 2000. During fiscal 1996,
               the Company repurchased 458,333 each of the Series A and Series B
               Warrants for $3.21 and $2.52,  respectively (see note 11 (c)). In
               addition,  1,853,334 warrants were exercised in June 1996 through
               a cashless  exercise in which  1,271,651  Holdings-Canada  common
               shares were issued.  During fiscal 1997,  the  remaining  500,000
               warrants of the Series A and Series B warrants were  exercised in
               exchange for 346,014 common shares of Holdings-Canada, which were
               in turn  converted  into an equal  number of shares of ICG Common
               Stock.


<PAGE>
                                      F-47

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          (iv) In connection with the 1995 Private Offering,  the Company issued
               1,928,190  warrants to purchase an equal number of common  shares
               of  Holdings-Canada.  The  warrants  were  exercisable  beginning
               August 8, 1996 at $12.51  per share and expire on August 6, 2005.
               During  fiscal 1997,  71,775  warrants  were  exercised for total
               proceeds of approximately $0.9 million and were in turn converted
               into an equal number of shares of ICG Common  Stock.  At December
               31, 1997, 1,856,415 of these warrants remained outstanding.

     The following table  summarizes  warrant activity for fiscal 1995 and 1996,
     the three months ended December 31, 1996 and fiscal 1997:
<TABLE>
<CAPTION>

                                                                   Outstanding                Price
                                                                    warrants                  range
                                                               --------------------  -------------------------
                                                                  (in thousands)

                <S>                                                     <C>            <C>            
                Outstanding, October 1, 1994                              310          $   7.38   -   21.51
                Granted                                                 5,266              7.94   -   14.50
                Exercised                                                 (74)                   7.94
                                                               --------------------
                Outstanding, September 30, 1995                         5,502              7.38   -   21.51
                Exercised                                              (1,854)             7.94   -    8.73
                Repurchased                                              (917)             2.52   -    3.21
                                                               --------------------

                Outstanding, September 30, 1996                         2,731              7.38   -   21.51
                Exercised                                                (100)                  18.00
                Canceled                                                   (8)             7.38   -   11.80
                                                               --------------------

                Outstanding, December 31, 1996                          2,623              7.38   -   21.51
                Exercised                                                (599)             7.38   -   14.50
                Canceled                                                  (50)                  14.50
                                                               --------------------

                Outstanding, December 31, 1997                          1,974             12.51  -    21.51
                                                               ====================
</TABLE>

<PAGE>
                                      F-48


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

     The  warrants  outstanding  on December  31,  1997 expire on the  following
     dates:
<TABLE>
<CAPTION>

                                                      Outstanding                 Exercise
                       Expiration date                 warrants                     price
                  --------------------------      --------------------       --------------------
                                                     (in thousands)

                  <S>                                      <C>                  <C>        
                  November 10, 1998                            2                $     21.51
                  December 17, 1998                          100                      18.00
                  March 24, 1999                              15                      20.01
                  August 6, 2005                           1,857                      12.51
                                                  ====================
                                                           1,974
                                                  ====================
</TABLE>

(14) Sale of Teleports

     In December  1995,  the Company  received  approximately  $21.1  million as
     partial  payment for the sale of four of its teleports and certain  related
     assets, and entered into a management  agreement with the purchaser whereby
     the purchaser assumed control of the teleport operations.  Upon approval of
     the  transaction  by the Federal  Communications  Commission  ("FCC"),  the
     Company  completed the sale in March 1996 and received an  additional  $0.4
     million due to certain  closing  adjustments,  for total  proceeds of $21.5
     million. The Company recognized a loss of approximately $1.1 million on the
     sale.  Revenue  associated  with these  operations was  approximately  $9.1
     million  and $2.5  million  for  fiscal  1995 and 1996,  respectively.  The
     Company  has  reported  results of  operations  from these  assets  through
     December 31, 1995.

(15) Restructuring and Related Charges

     Restructuring  and related  charges of $1.9 million  recorded during fiscal
     1997 are the result of a decision by management to  restructure  operations
     of NETCOM's  subsidiary in the United  Kingdom.  The  restructuring  charge
     includes  $1.4 million in accrued  expenses  for costs to terminate  excess
     leased office facilities and a write-off of office equipment, furniture and
     building  improvements  as a result of  consolidating  office space, a $0.3
     million   write-down  of   previously   capitalized   deferred   subscriber
     acquisition costs and $0.2 million for severance costs.


<PAGE>
                                      F-49


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies

     (a)  Network Construction

          In March 1996,  the Company and  Southern  California  Edison  Company
          ("SCE")  jointly  entered  into a 25-year  agreement  under  which the
          Company  will  lease  1,258  miles of fiber  optic  cable in  Southern
          California,  and can install up to 500 additional miles of fiber optic
          cable. This network,  which will be maintained and operated  primarily
          by the Company,  stretches from Los Angeles to southern Orange County.
          Under the terms of this agreement,  SCE will be entitled to receive an
          annual  fee  for  ten  years,  certain  fixed  quarterly  payments,  a
          quarterly  payment equal to a percentage of certain  network  revenue,
          and  certain  other   installation  and  fiber  connection  fees.  The
          aggregate  fixed  payments   remaining  under  the  agreement  totaled
          approximately  $144.7  million at December 31, 1997. The agreement has
          been accounted for as a capital lease in the accompanying consolidated
          balance sheets.

          In May 1997, the Company  entered into a long-term  agreement with The
          Southern  Company   ("Southern")  that  will  permit  the  Company  to
          construct a 100-mile  fiber optic network in the Atlanta  metropolitan
          area.  The Company paid $5.5 million upon  execution of the  agreement
          and is responsible for  reimbursement to Southern for costs of network
          design,   construction,    installation,   maintenance   and   repair.
          Additionally, the Company is also required to pay Southern a quarterly
          fee based on specified  percentages of the Company's  revenue  derived
          from services provided over this network.  Network construction on the
          initial  43-mile build is expected to be completed by May of 1998. The
          Company   estimates   costs  to  complete  the  initial  build  to  be
          approximately  $5.2  million.  Other  than the  initial  $5.5  million
          payment, no costs have been incurred as of December 31, 1997.

          In January 1997, the Company  announced the formation of ChoiceCom,  a
          strategic  alliance  between the Company and CSW, which is expected to
          develop and market  telecommunications  services in certain  cities in
          Texas. CSW holds 100% of the partnership interest in ChoiceCom and the
          Company has an option to purchase a 50%  interest at any time prior to
          July 1, 2003.  Subsequent  to July 1,  1999,  if the  Company  has not
          exercised  its  option,  CSW will have the  right to sell,  at a price
          pursuant to the terms of the limited partnership agreement, either 51%
          or 100% of the  partnership  interest  in  ChoiceCom  to the  Company.
          Additionally,  the  Company  has  committed  to loan $15.0  million to
          ChoiceCom under two promissory

<PAGE>
                                      F-50


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          notes, of which $10.0 million was advanced as of December 31, 1997 and
          the  remaining  $5.0 million was advanced  during the first quarter of
          fiscal 1998.

          In June 1997, the Company  entered into an  indefeasible  right of use
          ("IRU") agreement with Qwest Communications  Corporation ("Qwest") for
          approximately  1,800  miles  of fiber  optic  network  and  additional
          broadband  capacity in California,  Colorado,  Ohio and the Southeast.
          Network  construction  is ongoing  and is  expected  to be complete by
          December  1998.  The  Company  is  responsible   for  payment  on  the
          construction as segments of the network are completed and has incurred
          approximately  $8.0 million as of December 31, 1997,  with total costs
          anticipated  to be  approximately  $35.0  million.  Additionally,  the
          Company has  committed to purchase  $6.0  million in network  capacity
          from Qwest prior to the end of 1998.

     (b)  Company Headquarters

          During the three months ended December 31, 1996, the Company  acquired
          property for its new  headquarters  and commenced  construction  of an
          office building that will accommodate  most of the Company's  Colorado
          operations.   The  total  cost  of  the  project  is  expected  to  be
          approximately  $44.2 million, of which $29.4 million had been incurred
          as of December 31, 1997 and is included in  construction  in progress.
          In January 1998, the Company sold the substantially completed building
          to a third party and entered  into an  agreement  to lease back all of
          the office space under a 15-year  operating  lease which  includes two
          ten-year renewal terms.

     (c)  Other Commitments

          As part of the terms of the original purchase  agreement,  the Company
          was obligated to purchase,  at fair market value, all of the shares of
          Maritime   Telecommunications  Network,  Inc.  ("MTN"),  a  64%  owned
          subsidiary   of  the   Company,   that  were  owned  by  the  minority
          shareholders,   upon  demand  of  the  minority  shareholders,   if  a
          transaction  was not effected which converted the minority shares into
          publicly  traded  securities  or cash by January  3,  1998.  As of the
          current   date,   no  such  demand  has  been  made  by  the  minority
          shareholders.

<PAGE>
                                      F-51


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          NETCOM  has   guaranteed   monthly   usage  levels  with  its  primary
          communications  vendor,  which if not met, will obligate  NETCOM for a
          total of $9.3 million in each of fiscal 1998 and 1999, $7.6 million in
          fiscal  2000 and $4.2  million  in  fiscal  2001.  These  amounts  are
          exclusive of usage discounts.

          The Company has entered into  various  equipment  purchase  agreements
          with certain of its vendors.  Under these  agreements,  if the Company
          does not meet a minimum  purchase  level in any given year, the vendor
          may  discontinue  for that  year  certain  discounts,  allowances  and
          incentives  otherwise  provided  to  the  Company.  In  addition,  the
          agreements  may be terminated by either the Company or the vendor upon
          prior written notice.

          Additionally,  the Company has entered  into  certain  commitments  to
          purchase   capital   assets  with  an  aggregate   purchase  price  of
          approximately $19.5 million at December 31, 1997.

     (d)  Operating Leases

          The Company  leases  office space and equipment  under  non-cancelable
          operating leases. Lease expense was approximately $4.4 million,  $10.3
          million,  $2.4 million and $18.0 million for fiscal 1995 and 1996, the
          three  months ended  December 31, 1996 and fiscal 1997,  respectively.
          Estimated  future minimum lease  payments for the years  subsequent to
          December 31, 1997 are (in thousands):

                   Due December 31:
                     1998                      $        18,933
                     1999                               15,116
                     2000                               10,860
                     2001                                9,478
                     2002                                7,140
                     Thereafter                         53,909
                                           =========================
                                               $       115,436
                                           =========================


<PAGE>
                                      F-52


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

     (e)  Reciprocal Compensation

          The Company has  recorded  revenue of  approximately  $4.9 million for
          fiscal 1997 for reciprocal  compensation relating to the transport and
          termination  of local  traffic  to  Internet  service  providers  from
          customers of incumbent  local  exchange  carriers  pursuant to various
          interconnection  agreements.  These local  exchange  carriers have not
          paid most of the bills they have  received  from the  Company and have
          disputed  substantially  all of these charges based on the belief that
          such calls are not local traffic as defined by the various  agreements
          and under state and federal laws and public  policies.  The resolution
          of these  disputes  will be based on rulings by state  public  utility
          commissions and/or by the Federal  Communications  Commission ("FCC").
          To date, there have been favorable  rulings from 16 states,  favorable
          preliminary  decisions from three additional states and no unfavorable
          final rulings by any state public  utility  commission or the FCC that
          would  indicate  that calls  placed by end users to  Internet  service
          providers would not qualify as local traffic subject to the payment of
          reciprocal  compensation.  In addition,  cases are pending  before six
          other states.  While the Company  believes  that all revenue  recorded
          through  December 31, 1997 is collectible  and that future  reciprocal
          compensation revenue will be realized,  there can be no assurance that
          such future regulatory rulings will be favorable to the Company.

     (f)  Litigation

          On April 4, 1997, certain shareholders of the Company's majority owned
          subsidiary,   Zycom   Corporation   ("Zycom"),   an  Alberta,   Canada
          corporation,  filed a  shareholder  derivative  suit and class  action
          complaint for unspecified damages, purportedly on behalf of all of the
          minority  shareholders  of  Zycom,  in the  District  Court of  Harris
          County,  Texas (Cause No.  97-17777)  against the  Company,  Zycom and
          certain of their subsidiaries. This complaint alleges that the Company
          and certain of its  subsidiaries  breached  certain duties owed to the
          plaintiffs.  The Company is vigorously  defending the claims. While it
          is not possible to predict the outcome of this litigation,  management
          believes these  proceedings will not have a material adverse effect on
          the  Company's  financial  condition,  results of  operations  or cash
          flows.

<PAGE>
                                      F-53


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          The Company is a party to certain other litigation which has arisen in
          the ordinary  course of business.  In the opinion of  management,  the
          ultimate  resolution of these matters will not have a material adverse
          effect on the Company's financial condition,  results of operations or
          cash flows.

(17) Income Taxes

     The components of income tax (expense) benefit are as follows:
<TABLE>
<CAPTION>


                                                                                                  
                                      Fiscal years ended             Three months ended            
                                        September 30,                   December 31,              Fiscal year ended
                                  ---------------------------   -----------------------------        December 31,
                                     1995           1996             1995           1996                1997
                                  ------------  -------------   ---------------  ------------   ----------------------
                                                                    (in thousands)

<S>                                <C>              <C>                  <C>          <C>                    <C> 
Current income tax expense         $   (15)          (221)               (4)          (12)                   (38)
Deferred income tax benefit              -          5,329                 -             -                      -
                                  ------------  -------------   ---------------  ------------   ----------------------
       Total                        $  (15)         5,108                (4)          (12)                   (38)
                                  ============  =============   ===============  ============   ======================
</TABLE>


     Current  income tax  expense  represents  foreign  and state  income  taxes
     relating to operations of subsidiary  companies in foreign countries and in
     states requiring separate entity tax returns. Accordingly,  these entities'
     taxable  income  cannot be  offset  by the  Company's  net  operating  loss
     carryforwards.

     During fiscal 1996, the deferred tax liability was adjusted for the effects
     of  certain  changes  in  estimated  lives of  property  and  equipment  as
     discussed in note 2 (l). As a result,  the Company recognized an income tax
     benefit of $5.3 million.

     Income tax benefit  differs from the amounts  computed by applying the U.S.
     federal income tax rate to loss before income taxes  primarily  because the
     Company  has not  recognized  the income tax  benefit of certain of its net
     operating  loss  carryforwards  and other  deferred  tax  assets due to the
     uncertainty of realization.

     The tax  effect of  temporary  differences  that  give rise to  significant
     portions  of the  deferred  tax  assets and  deferred  tax  liabilities  at
     December  31, 1996 and 1997 are as follows:  

<PAGE>
                                      F-54

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(17) Income Taxes (continued)
<TABLE>
<CAPTION>


                                                                                      December 31,
                                                                      ------------------------------------------
                                                                             1996                  1997
                                                                      -------------------   --------------------
                                                                                   (in thousands)
     <S>                                                              <C>                     <C>    
     Deferred income tax liabilities:
       Property and equipment, due to excess
         purchase price of tangible assets and
         differences in depreciation for book and
         tax purposes                                                 $      14,268              8,542
       Deferred subscriber acquisition costs                                  1,153                939
                                                                      -------------------   --------------------
                                                                             15,421              9,481
                                                                      -------------------   --------------------

       Deferred income tax assets:
         Net operating loss carryforwards                                   (96,569)          (184,201)
         Accrued interest on high yield debt obligations
           deductible when paid                                             (32,873)           (72,330)
         Accrued expenses not currently deductible for
           tax purposes, including deferred revenue                          (6,621)           (12,777)
         Less valuation allowance                                           120,642            259,827
                                                                      -------------------   --------------------
                                                                            (15,421)            (9,481)
                                                                      -------------------   --------------------

         Net deferred income tax liability                             $          -                  -
                                                                      ===================   ====================
</TABLE>

     As of December 31, 1997, the Company has net federal and foreign  operating
     losses  ("NOLs")  of   approximately   $442.0  million  and  $27.0  million
     respectively, which expire in varying amounts through 2012. However, due to
     the provisions of Section 382, Section 1502 and certain other provisions of
     the Internal Revenue Code (the "Code"),  the utilization of these NOLs will
     be limited.  The Company is also subject to certain  state income tax laws,
     which will also limit the  utilization of NOLs. As a result of ICG's merger
     with NETCOM,  which created a change in ownership of NETCOM of greater than
     50%,  the NOLs  generated  by NETCOM  prior to January 21, 1998 that can be
     used to reduce future  taxable  income are limited to  approximately  $15.0
     million per year.

     A valuation allowance has been provided for the deferred tax asset relating
     to the Company's NOLs, as management cannot determine when the Company will
     generate future taxable income.

<PAGE>
                                      F-55


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(18) Employee Benefit Plans

     The Company has established  salary  reduction  savings plans under Section
     401(k)  of  the  Code  which  the  Company  administers  for  participating
     employees.  All  full-time  employees  are  covered  under the plans  after
     meeting minimum service and age  requirements.  Under the plan available to
     NETCOM employees, the Company makes a matching contribution of 100% of each
     NETCOM  employee's  contribution  up to a maximum  of 3% of the  employee's
     eligible earnings.  Prior to 1997, the Company's matching  contribution was
     limited to 50% of each NETCOM employee's contribution up to a maximum of 6%
     of the employee's eligible earnings.  Under the plan available to all other
     Company employees,  the Company makes a matching contribution of ICG Common
     Stock up to a maximum of 6% of an employee's  eligible earnings.  Aggregate
     matching  contributions  under the  Company's  employee  benefit plans were
     approximately  $0.7 million,  $1.6  million,  $0.6 million and $3.6 million
     during fiscal 1995 and 1996,  the three months ended  December 31, 1996 and
     fiscal 1997, respectively.

(19) Summarized Financial Information of ICG Holdings, Inc.

     As discussed  in note 11, the 11 5/8% Notes issued by Holdings  during 1997
     are  guaranteed  by ICG.  The 12 1/2%  Notes  and 13 1/2%  Notes  issued by
     Holdings during fiscal 1996 and 1995, respectively,  are also guaranteed by
     ICG and  Holdings-Canada.  The separate  complete  financial  statements of
     Holdings  have not been  included  herein  because such  disclosure  is not
     considered to be material to the holders of the 11 5/8% Notes,  the 12 1/2%
     Notes  and  the 13  1/2%  Notes.  However,  summarized  combined  financial
     information for Holdings and subsidiaries and affiliates is as follows:



<PAGE>
                                      F-56

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(19) Summarized Financial Information of ICG Holdings, Inc. (continued)

<TABLE>
<CAPTION>

                            Summarized Consolidated Balance Sheet Information

                                                                      December 31,
                                                         ---------------------------------------
                                                               1996                 1997
                                                         ------------------   ------------------
                                                                     (in thousands)

          <S>                                              <C>                      <C>    
          Current assets                                   $     449,059             215,817
          Property and equipment, net                            403,676             632,167
          Other non-current assets, net                           88,439             122,768
          Current liabilities                                     87,423              98,351
          Long-term debt, less current portion                   690,293             890,503
          Due to parent                                           11,485              30,970
          Other long-term liabilities                             73,113              66,939
          Preferred stock                                        159,120             292,442
          Stockholders' deficit                                  (80,260)           (408,453)
</TABLE>
<TABLE>
<CAPTION>

                    Summarized Consolidated and Combined Statement of Operations Information (a)

                                  Fiscal years ended                Three months ended           Fiscal year ended
                                     September 30,                     December 31,                 December 31,
                           ---------------------------------  --------------------------------
                                 1995             1996            1995              1996                1997
                           ---------------  ---------------- ----------------  ---------------  ----------------------
                                                               (unaudited)
                                                                 (in thousands)

<S>                           <C>                 <C>            <C>              <C>                   <C>    
Total revenue                 $ 111,610           169,094        35,399           56,956                273,354
Total operating costs
     and expenses               157,384           238,908        50,296           83,934                465,517
Operating loss                  (45,774)          (69,814)      (14,897)         (26,978)              (192,163)
Net loss                        (68,760)         (172,687)      (34,281)         (49,750)              (328,193)
</TABLE>
         
     (a)  Holdings-Canada's  51%  interest in FOTI was  contributed  to Holdings
          effective in February 1995 (the remaining 49% was purchased in January
          1996) and,  accordingly,  FOTI's  operations have been included in the
          consolidated amounts subsequent to that date.

<PAGE>
                                      F-57

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(20) Financial Information of ICG Holdings (Canada), Inc.

     Condensed financial information for Holdings-Canada only is as follows:

                                       Condensed Balance Sheet Information
<TABLE>
<CAPTION>

                                                                          December 31,
                                                         -----------------------------------------------
                                                                 1996                     1997
                                                         ----------------------   ----------------------
                                                                         (in thousands)

          <S>                                              <C>                          <C>
          Current assets                                   $          165                    162
          Advances to subsidiaries                                 11,485                 30,790
          Non-current assets, net                                   2,793                  3,800
          Current liabilities                                         199                    107
          Long-term debt, less current portion                         65                     65
          Due to parent                                             1,566                 22,162
          Preferred stock                                         127,729                      -
          Share of losses of subsidiary                            80,260                408,453
          Shareholders' deficit                                   (67,647)              (396,035)
</TABLE>
<TABLE>
<CAPTION>


                                      Condensed Statement of Operations Information

                                       Fiscal years ended           Three months ended                
                                         September 30,                   December 31,                  Fiscal year ended     
                                ---------------------------------  -------------------------------        December 31,
                                       1995            1996             1995            1996                  1997
                                -----------------  --------------  ---------------  --------------   ----------------------
                                                                    (unaudited)
                                                                   (in thousands)

<S>                             <C>                    <C>              <C>              <C>                <C>                 
  Total revenue                 $            -                -               -                -                   -
  Total operating costs
    and expenses                         1,309            3,438             361               73                 195
  Operating loss                        (1,309)          (3,438)           (361)             (73)               (195)
  Losses from subsidiaries             (68,760)        (172,687)        (34,281)         (49,750)           (328,193)
  Net loss attributable to
    common shareholders                (76,648)        (184,107)        (34,642)         (49,823)           (328,388)

</TABLE>

<PAGE>
                                      F-58


ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(21) Summarized Financial Information of ICG Funding, LLC

     As  discussed  in note 12, the 6 3/4%  Preferred  Securities  issued by ICG
     Funding  during fiscal 1997 are  guaranteed  by ICG. The separate  complete
     financial  statements of ICG Funding have not been included  herein because
     such  disclosure  is not  considered to be material to the holders of the 6
     3/4% Preferred Securities.  For fiscal 1997, the statement of operations of
     ICG Funding included only the preferred dividends paid and accrued on the 6
     3/4% Preferred  Securities and interest  income earned on the proceeds from
     the offering of such securities.  The summarized  balance sheet information
     for ICG Funding is as follows:

                      Summarized Balance Sheet Information

                                                         December 31,
                                                            1997
                                                  -------------------------
                                                        (in thousands)

     Cash, cash equivalents and short-term
       investments available for sale                   $      108,282
     Restricted cash                                            24,649
     Dividends payable                                           1,218
     Due to parent                                               4,642
     Preferred securities                                      132,250
     Member deficit                                               (537)

(22) Condensed  Financial  Information  of  ICG  Communications,   Inc.  (Parent
     company)

     At December  31,  1997,  the  primary  asset of ICG was its  investment  in
     Holdings-Canada.  Certain  corporate  expenses  of the parent  company  are
     included in ICG's  statement  of  operations  and were  approximately  $1.2
     million for fiscal 1997. At December 31, 1997, ICG had no operations  other
     than those of ICG Funding, Holdings-Canada and its subsidiaries.

<PAGE>
                                      F-59



ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(23) Events Subsequent to Date of Independent Auditors' Report (Unaudited)

     (a)  Sale of Satellite Services Operating Subsidiaries

          On April 1, 1998, the Company  entered into  definitive  agreements to
          sell  the  capital  stock of MTN and  MCN,  the two main  subsidiaries
          within the  Company's  Satellite  Services  operations,  for aggregate
          consideration of approximately  $34.8 million.  The sales are expected
          to close  later  this  year and are  subject  to  certain  conditions,
          including regulatory approvals.

          At December 31, 1997,  the Company  owned a 64.5%  interest in MTN. In
          April  1998,  the  Company  paid  the  minority  shareholders  of  MTN
          approximately $3.1 million for the minority interest of MTN as well as
          other settlement costs.

     (b)  9 7/8% Notes

          On April 27,  1998,  ICG Services  completed a private  placement of 9
          7/8%  Senior  Discount  Notes due 2008 (the "9 7/8%  Notes") for gross
          proceeds  of  approximately  $250.0  million.  Net  proceeds  from the
          offering, after underwriting costs of approximately $7.5 million, were
          approximately $242.5 million.

          The 9 7/8% Notes are unsecured senior obligations of ICG Services that
          mature on May 1, 2008, at a maturity value of $405.3 million. Interest
          will accrue at 9 7/8% per annum, beginning May 1, 2003, and is payable
          each May 1 and November 1, commencing  November 1, 2003. The indenture
          for  the  9  7/8%  Notes  contains  certain  covenants  which  provide
          limitations on indebtedness,  dividends, asset sales and certain other
          transactions.

          The 9 7/8% Notes were  originally  recorded  at  approximately  $250.0
          million. The discount on the 9 7/8% Notes will be accreted through May
          1, 2003, the date on which the 9 7/8% Notes may first be redeemed.





<PAGE>


                                  EXHIBIT 99.2

   Financial Statement Schedule II : Valuation and Qualifying Accounts for the
     Fiscal Years Ended September 30, 1995 and 1996, the Three Months Ended
            December 31, 1996 and the Fiscal Year Ended December 31,
               1997, and the Independent Auditors' Report Thereon.

<PAGE>



                          Independent Auditors' Report



The Board of Directors and Stockholders
ICG Communications, Inc.:


Under the date of April 16, 1998, we reported on the consolidated balance sheets
of ICG  Communications,  Inc. and  subsidiaries as of December 31, 1996 and 1997
and the related  consolidated  statements  of  operations,  stockholders  equity
(deficit) and cash flows for the fiscal years ended September 30, 1995 and 1996,
the three months ended December 31, 1996, and the fiscal year ended December 31,
1997. In connection with our audits of the aforementioned consolidated financial
statements,  we have also audited the related financial  statement  Schedule II:
Valuation and  Qualifying  Accounts.  This financial  statement  schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this financial  statement  schedule  based on our audits.  We did not
audit the  consolidated  financial  statements of NETCOM  On-Line  Communication
Services,  Inc.  ("NETCOM"),  a wholly owned  subsidiary  of the Company,  which
consolidated statements reflect total assets constituting 15.2 percent in fiscal
1996 and 11.7  percent  in fiscal  1997,  and total  revenue  constituting  32.0
percent in fiscal 1995,  41.6 percent in fiscal 1996,  39.0 percent in the three
months ended  December 31, 1996,  and 37.0 percent in fiscal 1997 of the related
consolidated  totals.  Those consolidated  financial  statements were audited by
other auditors  whose report has been furnished to us, and our opinion,  insofar
as it relates to the amounts  included in the financial  statement  schedule for
NETCOM, is based solely on the reports of the other auditors.

In our opinion,  based on the audits and the reports of the other auditors,  the
related financial statement  schedule,  when considered in relation to the basic
consolidated  financial  statements  taken as  whole,  presents  fairly,  in all
material respects, the information set forth therein.

As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.


                                              KPMG Peat Marwick LLP



Denver, Colorado
April 16, 1998


<PAGE>



ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Schedule II:  Valuation and Qualifying Accounts
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                     Additions
                                                            -----------------------------
                                               Balance at    Charged to     Charged to                      Balance at
                                               beginning      costs and        other                          end of
Description                                     of period     expenses        accounts     Deductions         period
---------------------------------------------  ------------ --------------  -------------  --------------  -------------
                                                                          (in thousands)
Allowance for uncollectible trade receivables:

    <S>                                        <C>              <C>                  <C>       <C>              <C>
    Fiscal year ended September 30, 1995       $   1,106        2,560                -         (1,224)          2,442
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $   2,442        3,436                -         (2,473)          3,405
                                              ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   3,405        1,190                -         (1,184)          3,411
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   3,411        5,520                -         (1,927)          7,004
                                              ------------- --------------  -------------  --------------  -------------

Allowance for uncollectible note receivable:

    Fiscal year ended September 30, 1995       $       -          175                -              -             175
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $      175       7,100                -              -           7,275
                                              ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   7,275            -                -              -           7,275
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   7,275            -                -           3,975          3,300
                                              ------------- --------------  -------------  --------------  -------------

Allowance for investment impairment:

    Fiscal year ended September 30, 1995       $       -        2,000                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $   2,000            -                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   2,000            -                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   2,000        5,170                -           2,000          5,170
                                              ------------- --------------  -------------  --------------  -------------
</TABLE>


                 See accompanying independent auditors' report.



<PAGE>


                                  EXHIBIT 99.3

               Report of Ernst & Young LLP, Independent Auditors,
                 Regarding the Consolidated Financial Statements
                of NETCOM On-Line Communication Services, Inc. as
                of December 31, 1996 and 1997 and for each of the
                            Three Years in the Period
                            Ended December 31, 1997.

<PAGE>



                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Stockholders
NETCOM On-Line Communication Services, Inc.

     We  have  audited  the   consolidated   balance  sheet  of  NETCOM  On-Line
Communication  Services,  Inc. as of December 31, 1996 and 1997, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the three years in the period  ended  December  31, 1997 (not  presented
separately  herein).  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NETCOM On-Line  Communication  Services,  Inc. at December 31, 1996 and 1997 and
the  consolidated  results of its  operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity  with generally
accepted accounting principles.


                                             ERNST & YOUNG LLP

San Jose, California
February 13, 1998


<PAGE>


                                  EXHIBIT 99.4

               Report of Ernst & Young LLP, Independent Auditors,
               Regarding the Consolidated Financial Statements of
                NETCOM On-Line Communication Services, Inc. as of
             December 31, 1996 and for the Three Months Then Ended.


<PAGE>



                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Stockholders
NETCOM On-Line Communication Services, Inc.

     We  have  audited  the   consolidated   balance  sheet  of  NETCOM  On-Line
Communication   Services,  Inc.  as  of  December  31,  1996,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the three months then ended (not presented  separately herein).  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NETCOM  On-Line  Communication  Services,  Inc.  at  December  31,  1996 and the
consolidated  results of its  operations and its cash flows for the three months
then ended, in conformity with generally accepted accounting principles.



                                               ERNST & YOUNG LLP

San Jose, California
April 16, 1998

<PAGE>



                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                         ICG Communications, Inc.

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer



<PAGE>


                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                         ICG Funding, LLC

                                         By:      ICG Communications, Inc.
                                                  Common Member and Manager

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer



<PAGE>


                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.



                                         ICG Holdings (Canada), Inc.


Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer


<PAGE>



                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.



                                         ICG Holdings, Inc.


Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President,
                                                  Chief Financial Officer and 
                                                  Director
[{"type": "8-K", "sequence": "1", "secsgml_size_bytes": 215710}]
{"company-data": {"conformed-name": "ICG HOLDINGS INC", "cik": "0001001131", "assigned-sic": "4813", "irs-number": "841128866", "state-of-incorporation": "CO", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "033-96540", "film-number": "98648324"}, "business-address": {"street1": "161 INVERNESS DRIVE WEST", "street2": "P O BOX 6742", "city": "ENGLEWOOD", "state": "CO", "zip": "80112", "phone": "303-414-50"}, "mail-address": {"street1": "P O BOX 6742", "street2": "SUITE 1610", "city": "ENGLEWOOD", "state": "CO", "zip": "80112"}}
FORM 8-K

                                 CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   June 12, 1998

                            ICG COMMUNICATIONS, INC.
                                ICG FUNDING, LLC
                           ICG HOLDINGS (CANADA), INC.
                               ICG HOLDINGS, INC.
           (Exact name of registrants as specified in their charters)

------------------ ------------------------ ----------------------------------
Delaware            1-11965                   84-1342022
Delaware            333-40495                 84-1434980
Canada              1-11052                   Not applicable
Colorado            33-96540                  84-1158866
(State or other     (Commission File Number)  (IRS Employer Identification No.)
jurisdiction of
incorporation)
---------------------------------- -------------------------------------------
161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

1710-1177 West Hastings Street        c/o ICG Communications, Inc.
Vancouver, BC V6E 2L3                 161 Inverness Drive West
                                      P.O. Box 6742
                                      Englewood, Colorado 80155-6742

161 Inverness Drive West              Not applicable
Englewood, Colorado 80112

(Address of principal                 (Address of U.S. agent for service)
executive offices) (Zip Code)
---------------------------------- -------------------------------------------
Registrants' telephone numbers, including area codes:
(888) 424-1144 or (303) 414-5000
ITEM 5. OTHER EVENTS.

         On January 21, 1998, ICG Communications, Inc. ("ICG" or the "Company"),
a Delaware  corporation,  completed a merger with NETCOM  On-Line  Communication
Services, Inc. ("NETCOM"), a Delaware corporation.  At the effective time of the
merger,  each outstanding  share of NETCOM common stock, $.01 par value ("NETCOM
Common  Stock"),  became  automatically  convertible  into  shares of ICG common
stock,  $.01 par value ("ICG  Common  Stock"),  at an  exchange  ratio of 0.8628
shares of ICG Common Stock per share of NETCOM Common Stock.

         The business  combination of ICG and NETCOM has been accounted for as a
pooling of interests,  and  accordingly,  the Company's  Consolidated  Financial
Statements,  included  in  Exhibit  99.1,  have been  restated  to  include  the
operations of NETCOM for all historical periods.

ITEM 7.  EXHIBITS.

     (23) Consents.

          23.1: Consent of KPMG Peat Marwick LLP, Independent Auditors.

          23.2: Consent of Ernst & Young LLP, Independent Auditors.

     (99) Additional Exhibits.

          99.1:Consolidated Financial Statements of ICG Communications, Inc. and
               Subsidiaries  for the Fiscal Years Ended  September  30, 1995 and
               1996,  the Three  Months  Ended  December 31, 1996 and the Fiscal
               Year Ended December 31, 1997.

          99.2:Financial   Statement   Schedule  II:  Valuation  and  Qualifying
               Accounts for the Fiscal Years Ended  September 30, 1995 and 1996,
               the Three  Months  Ended  December  31,  1996 and the Fiscal Year
               Ended December 31, 1997,  and the  Independent  Auditors'  Report
               Thereon.

          99.3:Report of Ernst & Young LLP, Independent Auditors,  Regarding the
               Consolidated Financial Statements of NETCOM On-Line Communication
               Services,  Inc. as of December  31, 1996 and 1997 and for each of
               the Three Years in the Period Ended December 31, 1997.

          99.4:Report of Ernst & Young LLP, Independent Auditors,  Regarding the
               Consolidated Financial Statements of NETCOM On-Line Communication
               Services,  Inc. as of December  31, 1996 and for the Three Months
               Then Ended.
EXHIBIT 23.1

             Consent of KPMG Peat Marwick LLP, Independent Auditors.
Consent of KPMG Peat Marwick LLP, Independent Auditors

The Board of Directors
ICG Communications, Inc.:

We consent to  incorporation  by reference in the  registration  statements Nos.
33-96660  and  33-08729 on Form S-3 of  IntelCom  Group  Inc.,  Nos.  333-18839,
333-38823,  333-40495 and 333-40495-01 on Form S-3 of ICG  Communications,  Inc.
and  Nos.  33-14127,  333-25957,  333-39737  and  333-45213  on Form  S-8 of ICG
Communications,  Inc.  of our  reports  dated  April 16,  1998,  relating to the
consolidated  balance sheets of ICG Communications,  Inc. and subsidiaries as of
December  31,  1996  and  1997,  and  the  related  consolidated  statements  of
operations,  stockholders' equity (deficit), and cash flows for the fiscal years
ended  September 30, 1995 and 1996,  the  three-month  period ended December 31,
1996,  and the fiscal year ended  December 31, 1997,  and the related  financial
statement  schedule,  which reports  appear in the Current Report on Form 8-K of
ICG Communications,  Inc., ICG Funding, LLC, ICG Holdings (Canada), Inc. and ICG
Holdings, Inc., dated June 12, 1998.

As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.

                                                KPMG Peat Marwick LLP

Denver, Colorado
June 11, 1998
EXHIBIT 23.2

               Consent of Ernst & Young LLP, Independent Auditors.
Consent of Ernst & Young LLP, Independent Auditors

We consent to the  incorporation  by  reference in the  Registration  Statements
(Forms  S-3 of  IntelCom  Group Nos.  33-96660  and  33-08729;  Forms S-3 of ICG
Communications,  Inc. Nos. 333-18839, 333-38823, 333-40495 and 333-40495-01; and
Forms S-8 of ICG Communications,  Inc. Nos. 33-14127, 333-25957,  333-39737, and
333-45213)  of our  reports  (a) dated  February  13,  1998 with  respect to the
consolidated balance sheets of NETCOM On-Line Communication Services, Inc. as of
December  31,  1996  and  1997  and  the  related   statements  of   operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1997 (not presented  separately herein),  and (b) dated April
16,  1998 with  respect  to the  consolidated  balance  sheet of NETCOM  On-Line
Communication  Services, Inc. as of December 31, 1996 and the related statements
of  operations,  stockholders'  equity and cash flows for the three  months then
ended (not presented separately herein), included in this Current Report on Form
8-K of ICG Communications, Inc., ICG Funding, LLC, ICG Holdings (Canada), Inc.
and ICG Holdings, Inc. dated June 12, 1998.

                                                  Ernst & Young LLP

San Jose, California
June 12, 1998
EXHIBIT 99.1

                    Consolidated Financial Statements of ICG
              Communications, Inc. and Subsidiaries for the Fiscal
         Years  Ended  September  30,  1995 and  1996,  the Three  Months  Ended
         December 31, 1996 and the Fiscal Year Ended December 31, 1997.
F-1

                              FINANCIAL STATEMENTS

 

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .    F-2

Consolidated Balance Sheets, December 31, 1996 and 1997  . . . . . .    F-4

Consolidated Statements of Operations, Fiscal Years Ended
 September 30, 1995 and 1996, the Three Months Ended
 December 31, 1995  (unaudited) and 1996, and Fiscal Year Ended
 Fiscal Year Ended December  31, 1997 . . . . . . . . . . . . . . . .   F-6

Consolidated Statements of Stockholders' Equity (Deficit), Fiscal
 Years Ended September 30, 1995 and 1996, the Three Months Ended
 December 31, 1996, and Fiscal Year Ended December 31, 1997 . . . . .   F-8

Consolidated Statements of Cash Flows, Fiscal Years Ended
 September 30, 1995 and 1996, the Three Months Ended
 December 31, 1995 (unaudited) and 1996, and Fiscal Year Ended
 December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . .   F-10
  . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements, December 31, 1996
 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-13
F-2

                          Independent Auditors' Report

The Board of Directors and Stockholders
ICG Communications, Inc.:

We  have  audited  the   accompanying   consolidated   balance   sheets  of  ICG
Communications, Inc. ("ICG") and subsidiaries (the "Company") as of December 31,
1996  and  1997  and  the  related   consolidated   statements  of   operations,
stockholders'  equity  (deficit),  and cash  flows for the  fiscal  years  ended
September 30, 1995 and 1996, the three-month period ended December 31, 1996, and
the fiscal year ended December 31, 1997. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits. We did not audit the consolidated financial statements of NETCOM On-Line
Communication  Services,  Inc.  ("NETCOM"),  a wholly  owned  subsidiary  of the
Company,  which consolidated  statements reflect total assets  constituting 15.2
percent  in fiscal  1996 and 11.7  percent  in fiscal  1997,  and total  revenue
constituting  32.0  percent in fiscal 1995,  41.6  percent in fiscal 1996,  39.0
percent in the three months ended  December 31, 1996, and 37.0 percent in fiscal
1997 of the related consolidated totals. Those consolidated financial statements
were audited by other  auditors  whose report has been  furnished to us, and our
opinion,  insofar as it relates to the amounts  included  for  NETCOM,  is based
solely on the reports of the other auditors.

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,  based on the audits and the reports of the other auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the  financial  position of ICG  Communications,  Inc.  and
subsidiaries  as of  December  31,  1996  and  1997,  and the  results  of their
operations  and their cash flows for the fiscal years ended  September  30, 1995
and 1996,  the  three-month  period ended December 31, 1996, and the fiscal year
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.
F-3

As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.

                                                          KPMG Peat Marwick LLP

Denver, Colorado
April 16, 1998
F-4

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated  Balance Sheets December 31, 1996 and 1997  (Restated,  see notes 1
and 2)
------------------------------------------------------------------------------
December 31,
                                                                  ------------------------------------------------
Assets                                                                     1996                    1997
------
                                                                  ------------------------ ----------------------
                                                                                     (in thousands)
Current assets:
    Cash and cash equivalents                                          $   433,342                  182,202
    Short-term investments available for sale (note 4)                      33,450                  112,281
    Receivables:
         Trade, net of allowance of $3,411 and $7,004 at
          December 31, 1996 and 1997, respectively                          42,415                   61,439
       Revenue earned, but unbilled                                          6,053                    8,599
       Due from affiliate (note 6)                                               -                    9,384
       Other (note 9)                                                        1,440                    1,696
                                                                  ------------------------ ----------------------
                                                                            49,908                   81,118
                                                                  ------------------------ ----------------------
    Inventory                                                                3,309                    4,242
    Prepaid expenses and deposits                                            7,503                   14,097
    Notes receivable, net                                                      200                        -
                                                                  ------------------------ ----------------------
       Total current assets                                                527,712                  393,940
                                                                  ------------------------ ----------------------

Property and equipment (notes 7, 10 and 11)                                567,697                  860,495
    Less accumulated depreciation                                          (79,648)                (155,383)
                                                                  ------------------------ ----------------------
       Net property and equipment                                          488,049                  705,112
                                                                  ------------------------ ----------------------
Investments (note 3)                                                         5,170                        -
Long-term notes receivable from affiliate and others,
    net (note 6)                                                               623                   10,375
Restricted cash (notes 12 and 16)                                           13,333                   24,649
Other assets, net of accumulated amortization:
    Goodwill (note 3)                                                       31,881                   77,562
    Deferred financing costs (note 11)                                      21,963                   23,196
    Deferred subscriber acquisition costs                                    5,595                    3,115
    Transmission and other licenses                                          8,526                    6,031
    Other (note 8)                                                          10,915                   10,531
                                                                  ------------------------ ----------------------
                                                                            78,880                  120,435
                                                                  ------------------------ ----------------------
                                                                       $ 1,113,767                1,254,511
                                                                  ======================== ======================
(Continued)
F-5

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets, Continued

-------------------------------------------------------------------------------
December 31,                  
                                                                  ----------------------------------------------
Liabilities and Stockholders' Equity (Deficit)                              1996                    1997
----------------------------------------------                    ------------------------ ---------------------
                                                                                   (in thousands)
Current liabilities:
    Accounts payable                                                   $      32,330                   38,457
    Accrued liabilities                                                       46,286                   71,678
    Deferred revenue                                                           8,349                   10,219
    Current portion of capital lease obligations (notes 10 and 16)            24,683                    8,128
    Current portion of long-term debt (note 11)                                  817                    1,784
                                                                  ------------------------ ---------------------
          Total current liabilities                                          112,465                  130,266
                                                                  ------------------------ ---------------------
Capital lease obligations, less current portion (note 10)                     71,146                   70,489
Long-term debt, net of discount, less current portion (note 11)              690,358                  890,568
                                                                  ------------------------ ---------------------
    Total liabilities                                                        873,969                1,091,323
                                                                  ------------------------ ---------------------
Minority interests                                                             1,967                        -

Redeemable  preferred  stock of subsidiary  ($164.8  million and $301.2  million
    liquidation value at December 31, 1996
    and 1997, respectively) (notes 11 and 12)                                159,120                  292,442
Company-obligated mandatorily redeemable preferred securities
    of subsidiary limited liability company which holds solely Company preferred
    stock ($133.4 million liquidation value at
    December 31, 1997) (note 12)                                                   -                  127,729

Stockholders' equity (deficit):
     Common stock (notes 1 and 13)                                             8,189                      749
     Additional paid-in capital                                              499,993                  533,541
     Accumulated deficit                                                    (430,682)                (791,417)
     Cumulative foreign currency translation adjustment and other              1,211                      144
                                                                  ------------------------ ---------------------
          Total stockholders' equity (deficit)                                78,711                 (256,983)
                                                                  ------------------------ ---------------------

Commitments and contingencies (notes 9, 10, 11, 12 and 16)
                                                                        $  1,113,767                1,254,511
                                                                  ======================== =====================
See accompanying notes to consolidated financial statements.
F-6

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations
Fiscal Years Ended September 30, 1995 and 1996,
the Three Months Ended December 31, 1995  (unaudited)  and 1996, and Fiscal Year
Ended December 31, 1997 (Restated, see notes 1 and 2)
-------------------------------------------------------------------------------
Fiscal years ended           Three months ended      Fiscal year ended
                                                            September 30,                 December 31,            December 31,

                                                    ------------------------------  --------------------------
                                                         1995            1996          1995          1996             1997
                                                    --------------  --------------  ------------  ------------  ----------------
                                                                                     (unaudited)
                                                                       (in thousands, except per share data)
Revenue:
    Telecom services (note 2)                      $     32,330         87,681         13,513        34,787        177,690
    Internet services                                    52,422        120,540         19,672        36,379        160,660
    Network services                                     58,778         60,116         15,718        15,981         65,678
    Satellite services (note 14)                         20,502         21,297          6,168         6,188         29,986
                                                    --------------  --------------  ------------  ------------  ----------------
        Total revenue                                   164,032        289,634         55,071        93,335        434,014
                                                    --------------  --------------  ------------  ------------  ----------------
Operating costs and expenses:
    Operating costs                                     108,396        208,798         38,006        72,428       341,916
    Selling, general and administrative expenses         90,816        142,531         29,195        41,171       216,405
    Depreciation and amortization (note 2)               26,569         59,994          9,008        19,179        91,881
    Net loss (gain) on disposal of long-lived
      assets (note 3)                                     1,552          6,614          1,644          (610)           50
    Provision for impairment of long-lived assets
      (note 3)                                            7,000          9,994              -             -        11,950
    Restructuring and related charges (note 15)               -              -              -             -         1,879
                                                    --------------  --------------  ------------  ------------  ----------------
        Total operating costs and expenses               234,333        427,931         77,853       132,168       664,081
                                                    --------------  --------------  ------------  ------------  ----------------

        Operating loss                                   (70,301)      (138,297)       (22,782)      (38,833)     (230,067)

Other income (expense):
    Interest expense (note 11)                           (24,368)       (85,714)       (15,215)      (24,454)     (118,279)
    Interest income                                        6,344         25,015          4,787         7,033        26,152
    Other, net (note 11)                                    (508)        (3,911)            22           (59)         (691)
                                                    --------------  --------------  ------------  ------------  ----------------
                                                         (18,532)       (64,610)       (10,406)      (17,480)      (92,818)
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before income taxes, minority interest, share
    of losses and cumulative effect of change
    in accounting                                        (88,833)      (202,907)       (33,188)      (56,313)     (322,885)
Income tax (expense) benefit (note 17)                       (15)         5,108             (4)          (12)          (38)
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before minority interest, share of losses and
    cumulative effect of change in accounting            (88,848)      (197,799)       (33,192)      (56,325)     (322,923)
Minority interest in share of losses, net of
    accretion and preferred dividends on preferred
    securities of subsidiaries (note 12)                  (1,123)       (25,306)        (3,215)       (4,988)      (37,812)
Share of losses of joint venture and investment
    (note 3)                                                (741)        (1,814)          (228)            -             -
                                                    --------------  --------------  ------------  ------------  ----------------
Loss before cumulative effect of change in
    accounting                                           (90,712)      (224,919)       (36,635)      (61,313)     (360,735)
Cumulative effect of change in accounting                      -         (3,453)        (3,453)            -             -
                                                    --------------  --------------  ------------  ------------  ----------------
    Net loss                                        $    (90,712)      (228,372)       (40,088)      (61,313)     (360,735)
                                                    ==============  ==============  ============  ============  ================
                                                                                                                  (Continued)
F-7

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations, Continued

-------------------------------------------------------------------------------
Fiscal year
                                                       Fiscal years ended              Three months ended            ended
                                                          September 30,                   December 31,            December 31,
                                               ---------------------------------- ----------------------------
                                                      1995              1996            1995          1996             1997
                                               ------------------  -------------- --------------- ------------  ----------------
                                                                                 (unaudited)
                                                                     (in thousands, except per share data)
Net loss per share - basic and diluted:
    Net loss before cumulative effect of
      change in accounting                     $      (2.94)            (6.10)            (1.13)       (1.47)          (8.49)
    Cumulative effect of change in accounting             -             (0.09)            (0.11)           -               -
                                               ------------------  --------------  -------------- ------------  ----------------
      Net loss per share                              (2.94)            (6.19)            (1.24)       (1.47)          (8.49)
                                               ==================  ==============  ============== ============  =================

Weighted average number of shares
    outstanding - basic and diluted                  30,808             36,875           32,343        41,760         42,508
                                               ==================  ==============  ============== ============  =================
See accompanying notes to consolidated financial statements.
F-8

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)
Fiscal Years Ended  September 30, 1995 and 1996, the Three Months Ended
December 31, 1996, and Fiscal Year Ended December 31, 1997 (Restated,  see notes
1 and 2)
-------------------------------------------------------------------------------
Additional
                                                                            Common stock           paid-in      Accumulated
                                                                      Shares         Amount        capital        deficit
                                                                  -------------- -------------- -------------  -------------
                                                                                         (in thousands)
Balances at October 1, 1994                                           22,849      $  95,664         33,819         (61,737)
 Shares issued for cash (note 13):
  Public offering and private placements, net of offering costs        9,547         78,369        169,182               -
  Exercise of options and warrants                                       836          1,476          1,074               -
 Shares issued as repayment of debt and related accrued interest         683          9,482              -               -
  (note 11)
 Shares issued in connection with business combinations (note 3)         169          1,737          1,300               -
 Conversion of ICG Holdings (Canada), Inc. preferred shares              302          2,000              -               -
 Shares issued as contribution to 401(k) plan (note 19)                   38            490              -               -
 Warrants issued in connection with offerings (notes 11, 12 and 13)        -              -         24,134               -
 Change in foreign currency translation adjustment                         -              -              -             (38)
 Compensation expense related to issuance of common stock options          -              -            158               -
 Shares issued in exchange for investments and other assets              123          1,398              -               -
 Shares issued as payment of trade payables                               18            233              -               -
 Cumulative foreign currency translation adjustment                        -              -              -               -
 Net loss                                                                  -              -              -         (90,712)
                                                                  -------------- -------------- -------------  -------------
Balances at September 30, 1995                                        34,565        190,849        229,667        (152,487)
 Shares issued for cash in connection with the exercise of options
  and warrants                                                         1,983          1,747          2,498               -
 Shares issued as repayment of debt and related accrued interest         130            687              -               -
 Shares issued in connection with business combinations (note 3)          64            749              -               -
 Conversion of ICG Holdings (Canada), Inc. preferred shares              496          3,780              -               -
 Shares issued as contribution to 401(k) plan (note 19)                   87            856            300               -
 Shares issued upon conversion of subordinated notes (note 11)         4,413         76,336              -               -
 Repurchase of warrants                                                    -              -         (2,671)              -
 Compensation expense related to issuance of common stock options          -              -             53               -
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG             -       (248,682)       248,682               -
  common stock
 Unrealized gains on available for sale investments                        -              -              -               -
 Cumulative foreign currency translation adjustment                        -              -              -               -
 Net loss                                                                  -              -              -        (228,372)
                                                                  -------------- -------------- -------------  -------------
Balances at September 30, 1996                                        41,738      $  26,322        478,529        (380,859)
                                                                                                                 (Continued)
Cumulative foreign           Total
                                                                    currency translation       stockholders'
                                                                    adjustment and other      equity (deficit)
                                                                   -----------------------   -------------------
                                                                                     (in thousands)
Balances at October 1, 1994                                                         -               67,746
 Shares issued for cash (note 13):
  Public offering and private placements, net of offering costs                     -              247,551
  Exercise of options and warrants                                                  -                2,550
 Shares issued as repayment of debt and related accrued interest                    -                9,482
  (note 11)
 Shares issued in connection with business combinations (note 3)                    -                3,037
 Conversion of ICG Holdings (Canada), Inc. preferred shares                         -                2,000
 Shares issued as contribution to 401(k) plan (note 19)                             -                  490
 Warrants issued in connection with offerings (notes 11, 12 and 13)                 -               24,134
 Change in foreign currency translation adjustment                                  -                  (38)
 Compensation expense related to issuance of common stock options                   -                  158
 Shares issued in exchange for investments and other assets                         -                1,398
 Shares issued as payment of trade payables                                         -                  233
 Cumulative foreign currency translation adjustment                               (28)                 (28)
 Net loss                                                                           -              (90,712)
                                                                   -----------------------   -------------------    
Balances at September 30, 1995                                                    (28)             268,001
 Shares issued for cash in connection with the exercise of options                 
  and warrants                                                                      -                4,245
 Shares issued as repayment of debt and related accrued interest                    
  (note 11)                                                                         -                  687
 Shares issued in connection with business combinations (note 3)                    -                  749
 Conversion of ICG Holdings (Canada), Inc. preferred shares                         -                3,780
 Shares issued as contribution to 401(k) plan (note 19)                             -                1,156
 Shares issued upon conversion of subordinated notes (note 11)                      -               76,336
 Repurchase of warrants                                                             -               (2,671)
 Compensation expense related to issuance of common stock options                   -                   53
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                      
  common stock                                                                      -                    -
 Unrealized gains on available for sale investments                               540                  540
 Cumulative foreign currency translation adjustment                               699                  699
 Net loss                                                                           -             (228,372)
                                                                   -----------------------   -------------------
Balances at September 30, 1996                                                  1,211              125,203
                                                                                                (Continued)
F-9

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit), Continued

-------------------------------------------------------------------------------
Additional  
                                                                              Common stock             paid-in      Accumulated    
                                                                           Shares        Amount        capital        deficit      
                                                                      -------------  -------------  -------------  ------------- 
                                                                                             (in thousands)
Shares issued for cash in connection with the exercise of options                            
  and warrants                                                               132        $  1,800            284            -    
 Shares issued in connection with business combination (note 3)               18               -            350            -        
 Shares issued as contribution to 401(k) plan (note 19)                       19               -            480            -    
 Shares issued upon conversion of subordinated notes (note 11)                23             417              -            -     
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                                        
  common stock                                                                 -         (20,350)        20,350            - 
 Net loss                                                                      -               -              -      (61,313)    
 Net loss of NETCOM for the three months ended December 31, 1996                              
  (note 2)                                                                     -               -              -       11,490
                                                                      -------------  -------------  ------------- -------------- 
Balances at December 31, 1996                                             41,930           8,189        499,993     (430,682)   
 Shares issued for cash in connection with the exercise of options                      
  and warrants                                                             1,069               6          5,813            - 
 Shares issued in connection with business combination (note 3)              687               7         15,953            -    
 Shares issued for cash in connection with employee stock purchase                        
  plan                                                                       109               1          1,318            -  
 Shares issued as contribution to 401(k) plan (note 19)                      179               2          3,008            -   
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                                
  common stock                                                                 -          (7,456)         7,456            -
 Reversal of unrealized gains on short-term investments available                        
  for sale                                                                     -               -              -            - 
 Cumulative foreign currency translation adjustment                            -               -              -            -    
 Net loss                                                                      -               -              -     (360,735)  
                                                                      -------------  -------------  ------------- -------------- 
Balances at December 31, 1997                                             43,974        $    749        533,541     (791,417)  
                                                                      =============  =============  ============= ==============
See accompanying notes to consolidated financial statements.
Cumulative foreign            Total
                                                                                    currency translation        stockholders'
                                                                                    adjustment and other       equity (deficit)
                                                                                 --------------------------  -------------------
                                                                                                   (in thousands)
Shares issued for cash in connection with the exercise of options                        
  and warrants                                                                                  -                      2,084
 Shares issued in connection with business combination (note 3)                                 -                        350
 Shares issued as contribution to 401(k) plan (note 19)                                         -                        480
 Shares issued upon conversion of subordinated notes (note 11)                                  -                        417
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                               
  common stock                                                                                  -                          -
 Net loss                                                                                       -                    (61,313)
 Net loss of NETCOM for the three months ended December 31, 1996                             
  (note 2)                                                                                      -                     11,490
                                                                                 --------------------------  -------------------
Balances at December 31, 1996                                                               1,211                     78,711
 Shares issued for cash in connection with the exercise of options                      
  and warrants                                                                                  -                      5,819
 Shares issued in connection with business combination (note 3)                                 -                     15,960
 Shares issued for cash in connection with employee stock purchase                          
  plan                                                                                          -                      1,319
 Shares issued as contribution to 401(k) plan (note 19)                                         -                      3,010
 Exchange of ICG Holdings (Canada), Inc. common shares for ICG                              
  common stock                                                                                  -                          -
 Reversal of unrealized gains on short-term investments available                         
  for sale                                                                                   (540)                      (540)
 Cumulative foreign currency translation adjustment                                          (527)                      (527)
 Net loss                                                                                       -                   (360,735)
                                                                                ---------------------------  -------------------
Balances at December 31, 1997                                                                 144                   (256,983)
                                                                                                     
                                                                                ===========================  ===================
See accompanying notes to consolidated financial statements.
F-10

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Fiscal Years Ended September 30, 1995 and 1996,
the Three Months Ended December 31, 1995 (unaudited) and 1996, and Fiscal Year
Ended December 31, 1997 (Restated, see notes 1 and 2)
-------------------------------------------------------------------------------
Fiscal years ended          Three months ended      
                                                           September 30,                December 31,          Fiscal year ended
                                                    --------------------------- --------------------------       December 31,   
                                                        1995          1996          1995          1996               1997
                                                    ------------- ------------- ------------- ------------  -------------------
                                                                                 (unaudited)
                                                                                (in thousands)
Cash flows from operating activities:
   Net loss                                          $ (90,712)      (228,372)     (40,088)      (61,313)        (360,735)
   Adjustments to reconcile net loss to net cash
    used by operating activities:
     Cumulative effect of change in accounting               -          3,453        3,453             -                -
     Share of losses of joint venture and investment       741          1,814          228             -                -
     Minority interest in share of losses, net of
        accretion and non-cash preferred dividends
        on preferred securities of subsidiaries            656         24,279        2,188         4,988           35,457
     Depreciation and amortization                      26,569         59,994        9,008        19,179           91,881
     Compensation expense related to issuance of
        common stock options                               158             53           14             -                -
     Interest expense deferred and included in          
        long-term debt                                  14,068         63,951       12,004        22,087          102,947
     Amortization of deferred financing costs
        included in interest expense                       989          2,573          527           612            2,514
     Write-off of non operating assets                       -          2,650            -             -            1,192
     Contribution to 401(k) plan through issuance
        of common shares                                   490          1,156          405           480            3,010
     Deferred income tax benefit                             -         (5,329)           -             -                -
     Provision for impairment of long-lived assets       7,000          9,994            -             -           11,950
     Net loss (gain) on disposal of long-lived           
        assets                                           1,552          6,614        1,644          (610)              50
     Change in operating assets and liabilities,  
        excluding the effects of business  
        acquisitions, dispositions and non-cash 
        transactions:
         Receivables                                    (6,095)       (13,124)      (3,436)       (6,265)         (25,565)
         Inventory                                        (562)        (1,458)        (302)          408           (2,699)
         Prepaid expenses and deposits                  (3,629)        (4,645)        (491)       (1,366)          (6,425)
         Deferred subscriber acquisition costs          (5,505)       (14,368)      (3,093)       (2,379)          (6,542)
         Accounts payable and accrued liabilities        9,836         22,623       16,822         8,404           22,011
         Deferred revenue                                1,185          3,134         (503)        2,454            1,870
                                                    ------------- ------------- ------------- -------------- -------------------
           Net cash used by operating activities    $   (43,259)      (65,008)      (1,620)      (13,321)        (129,084)
                                                    ------------- ------------- ------------- -------------- -------------------
                                                                                                                 (Continued)
F-11

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

------------------------------------------------------------------------------
Fiscal years ended           Three months ended        
                                                            September 30,                December 31,         Fiscal year ended
                                                       -------------------------  -------------------------      December 31,
                                                        1995          1996           1995          1996             1997
                                                     ------------  ------------  -------------  -----------  ------------------
                                                                               (unaudited)
                                                                              (in thousands)
Cash flows from investing activities:
   (Increase) decrease in notes receivable from
      affiliate and others                           $     348            4         (1,263)            133         (9,552)
   Advances to affiliates                                (2,184)       (109)           (15)              -              -
   Investment in and advances to joint venture           (6,652)     (4,308)             -               -              -
   Payments for business acquisitions, net of cash       
      acquired                                           (8,109)     (8,441)             -               -        (45,861)
   Acquisition of property, equipment and other         
      assets                                            (93,667)   (176,269)       (39,946)        (59,372)      (280,458)       
   Payments for construction of new headquarters              -      (1,501)             -          (7,945)       (29,432)
   Proceeds from disposition of property, equipment
      and other assets                                        -      21,593         21,146           2,057         17,403
   Purchase of short-term investments                         -      (6,832)        (4,979)        (25,769)       (65,580)
   Increase in restricted cash                                -     (13,333)       (13,333)              -        (25,416)
   Other investments                                     (6,061)          -              -               -              -
                                                     ------------  ------------  -------------  -----------  ------------------
      Net cash used by investing activities            (116,325)   (189,196)       (38,390)        (90,896)      (438,896)
                                                     ------------  ------------  -------------  -----------  ------------------
Cash flows from financing activities: 
   Proceeds from issuance of common stock:
     Common stock offering                              254,792       2,351        120,442              13              -
     Business combination (note 3)                            -           -              -               -         15,960
     Exercise of stock options and warrants               1,471       1,894            101           2,084          4,116
     Employee stock purchase plan                             -           -              -               -          3,022
   Proceeds from issuance of redeemable preferred
      securities of subsidiaries, net of issuance        
      costs                                              28,800     144,000              -               -        223,628
   Proceeds from issuance of convertible stock of        
      subsidiary                                         16,000           -              -               -              -     
   Offering costs related to common and preferred
      stock offerings                                    (5,565)          -              -               -              -
   Redemption of preferred shares                        (3,800)     (5,570)        (5,570)              -              -
   Repurchase of redeemable preferred stock of
      subsidiary and payment of accrued dividend              -     (32,629)             -               -              -
   Repurchase of redeemable warrants                          -      (2,671)             -               -              -
   Proceeds from issuance of short-term debt                  -      17,500         17,500               -              -
   Principal payments on short-term debt                      -     (21,192)        (3,692)              -              -
   Proceeds from issuance of long-term debt             305,613     300,034              -               -        101,486
   Deferred debt issuance costs                         (13,641)    (11,915)             -               -         (3,554)
   Principal payments on long-term debt                 (29,333)    (16,920)       (13,761)           (279)        (2,161)
   Principal payments on capital lease obligations       (6,271)     (12,304)       (2,991)         (1,975)       (25,425)
                                                     ------------   -----------  -------------  -----------  ------------------
     Net cash provided (used) by financing              
     activities                                         548,066      362,578       112,029            (157)       317,072
                                                     ------------   -----------  -------------  -----------  ------------------
     Net (decrease) increase in cash and cash           
     equivalents                                        388,482      108,374        72,019        (104,374)      (250,908)
     Effect of exchange rates on cash                       (28)         699           (28)            544           (232)
Cash and cash equivalents, beginning of period           26,963      415,417       305,173         537,172        433,342
                                                     ------------   -----------  -------------  -----------  ------------------
Cash and cash equivalents, end of period              $ 415,417      524,490        377,164        433,342        182,202
                                                     ============   ===========  =============  ===========  ==================
                                                                                                                  (Continued)
F-12

ICG COMMUNICATIONS, INC.           
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

-------------------------------------------------------------------------------
Fiscal years ended          Three months ended      
                                                          September 30,                December 31,           Fiscal year ended
                                                     -------------------------  -------------------------        December 31,
                                                          1995        1996          1995          1996              1997
                                                     ------------  -----------  -----------  ------------   -------------------
                                                                             (unaudited)
                                                                           (in thousands)
Restated disclosure of cash flows information:
   Cash paid for interest                            $    9,318        19,190       2,684        1,755              12,577
                                                     ============  ===========  ===========  ============   ===================
   Cash paid for income taxes                        $        8            23           -           12                  26
                                                     ============  ===========  ===========  ============   ===================

Restated schedule of non-cash investing and 
  financing activities:
     Common shares issued in connection with
        business combinations, repayment of debt or
        conversion of liabilities to equity           $  11,452        77,772           -          350                   -
                                                     ============  ===========  ===========  ============   ===================
     Common shares issued in exchange for notes
        receivable, investments and other assets      $    2,698            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Assets acquired under capital leases and
        through the issuance of debt or warrants      $  38,670        55,030          84       19,479               6,393
        (note 16)
                                                     ============  ===========  ===========  ============   ===================
     Reclassification of investment in joint
        venture to long-term notes receivable         $    6,882            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Conversion of notes receivable related to
        business combinations                         $    6,330            -           -            -                   -
                                                     ============  ===========  ===========  ============   ===================
     Capitalized interest on assets under            
        construction                                  $        -         4,916           -        1,966               3,179
                                                     ============  ===========  ===========  ============   ===================
See accompanying notes to consolidated financial statements.
F-13

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996 and 1997
----------------------------------------------------------------------------

(1)      Organization and Nature of Business

         ICG  Communications,   Inc.,  a  Delaware   corporation   ("ICG"),  was
         incorporated  on April 11,  1996,  for the purpose of becoming  the new
         publicly-traded  U.S. parent company of ICG Holdings (Canada),  Inc., a
         Canadian federal corporation ("Holdings-Canada"), ICG Holdings, Inc., a
         Colorado corporation ("Holdings"), and its subsidiaries.  Pursuant to a
         Plan  of  Arrangement  (the  "Arrangement"),   which  was  approved  by
         Holdings-Canada shareholders on July 30, 1996, and by the Ontario Court
         of Justice  on August 2,  1996,  each  shareholder  of  Holdings-Canada
         exchanged  their common  shares on a  one-for-one  basis for either (i)
         shares of $.01 par value common stock of ICG (the "ICG Common  Stock"),
         or  (ii)  Class  A  common   shares  of   Holdings-Canada   (which  are
         exchangeable  at any time on a  one-for-one  basis  into  shares of ICG
         Common Stock). On August 2, 1996, 28,795,132,  or approximately 98%, of
         the total issued and outstanding common shares of Holdings-Canada  were
         exchanged  for an equal  number of shares  of Common  Stock of ICG.  In
         accordance  with  generally   accepted   accounting   principles,   the
         Arrangement  was  accounted  for in a manner  similar  to a pooling  of
         interests since ICG and  Holdings-Canada had common  shareholders,  and
         the number of shares  outstanding  and the weighted  average  number of
         shares  outstanding  reflect the equivalent shares  outstanding for the
         combined  companies.  On September  17, 1997,  ICG formed a new special
         purpose entity, ICG Funding,  LLC, a Delaware limited liability company
         and wholly owned subsidiary of ICG ("ICG Funding").

         On January 21, 1998, the Company completed a merger with NETCOM On-Line
         Communication Services,  Inc. ("NETCOM").  At the effective time of the
         merger,  each outstanding share of NETCOM common stock, $.01 par value,
         became automatically  convertible into shares of ICG Common Stock at an
         exchange  ratio of 0.8628  shares of ICG Common Stock per NETCOM common
         share. The business  combination has been accounted for as a pooling of
         interests,  and accordingly,  the Company's  accompanying  consolidated
         financial  statements  have been restated to include the  operations of
         NETCOM for all historical periods presented. NETCOM was incorporated in
         the state of California in August 1992 and  reincorporated in the state
         of  Delaware  in  October  1994.  ICG and its  subsidiaries,  including
         NETCOM,  are collectively  referred to as the "Company." All references
         to common shares of the Company  represent  either shares of ICG Common
         Stock or common shares of NETCOM, adjusted for the exchange ratio noted
         above.
F-14

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996 and 1997
----------------------------------------------------------------------------

(1)  Organization and Nature of Business (continued)

     The Company's principal business activity is  telecommunications  services,
     including  Telecom  Services,   Internet  Services,  Network  Services  and
     Satellite Services.  Telecom Services consists of the Company's competitive
     local exchange  carrier  operations  which provide services to business end
     users, long distance carriers and resellers.  Internet Services consists of
     the operations of NETCOM which  includes  Internet  access,  World Wide Web
     (the  "Web")  site  hosting  services  and other  value-added  connectivity
     services,  which are primarily targeted to small and medium-sized  business
     customers  in the United  States,  Canada and the United  Kingdom.  Network
     Services supplies  information  technology services and selected networking
     products, focusing on network design, installation, maintenance and support
     for a variety of end users,  including  Fortune  1000 firms and other large
     businesses and  telecommunications  companies.  Satellite Services provides
     satellite  voice  and  data  services  to  major  cruise  ship  lines,  the
     commercial  shipping  industry,  yachts,  the U.S.  Navy and  offshore  oil
     platforms.  To better focus on its core Telecom  Services unit, the Company
     entered  into  definitive  agreements  on April 1, 1998 to sell the capital
     stock  of  the  two  main  subsidiaries   within  its  Satellite   Services
     operations.

(2)  Summary of Significant Accounting Policies

     (a)  Basis of Presentation

          The accompanying  consolidated financial statements have been restated
          to give retroactive  effect to the merger of ICG and NETCOM on January
          21, 1998,  which has been  accounted for as a pooling of interests for
          all periods  presented,  and  includes the accounts of the Company and
          its  majority  and wholly owned  subsidiaries.  Financial  information
          prior  to  the  completion  of  the  Arrangement  on  August  2,  1996
          represents the combined  financial  position and results of operations
          of  NETCOM  as  well  as  Holdings-Canada  and  Holdings,   which  are
          considered to be predecessor entities to ICG.

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.
F-15

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

     (b)  Fiscal Year Ends of ICG and NETCOM

          The Company  changed its fiscal year end to December 31 from September
          30,  effective  January 1, 1997.  References to fiscal 1995,  1996 and
          1997  relate  to the  years  ended  September  30,  1995  and 1996 and
          December 31, 1997, respectively.

          Unaudited consolidated statements of operations and cash flows for the
          three  months  ended  December  31,  1995  have been  included  in the
          accompanying   consolidated   financial   statements  for  comparative
          purposes.

          Prior to the merger,  NETCOM's consolidated  financial statements were
          prepared   using  a  year  end  of  December  31.   Accordingly,   the
          consolidated statements of operations for fiscal 1995 and 1996 reflect
          the combination of NETCOM's  results of operations for the years ended
          December  31 with ICG's  results  of  operations  for the years  ended
          September   30.   The   accompanying    consolidated   statements   of
          stockholders' equity (deficit) excludes the activity of NETCOM for the
          three months ended December 31, 1994.  Additionally,  NETCOM's results
          of operations  for the three months ended  December 31, 1996 have been
          combined with ICG's  results of operations  for the same period in the
          accompanying consolidated statement of operations.  Revenue, operating
          costs and  expenses  and net loss of NETCOM for the three months ended
          December  31,  1996 was  $36.4  million,  $48.9  million  and  $(11.5)
          million,  respectively.  The net loss of NETCOM  for the three  months
          ended  December  31,  1996 has  been  eliminated  in the  consolidated
          statement of stockholders' equity (deficit).

     (c)  Cash Equivalents and Short-term Investments Available for Sale

          The Company  considers  all highly  liquid  investments  with original
          maturities of three months or less to be cash equivalents. The Company
          invests  primarily in high grade short-term  investments which consist
          of  money  market  instruments,   commercial  paper,  certificates  of
          deposit,  government obligations and corporate bonds, all of which are
          considered to be available for sale and generally  have  maturities of
          one year or less. The Company's short-term  investment  objectives are
          safety,  liquidity and yield,  in that order.  The Company carries all
          cash equivalents at cost, which  approximates  fair value.  Short-term
          investments  available for sale are carried at fair market value based
          on quoted market prices with unrealized gains and
F-16

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          losses,  net of tax, reported as a separate component of stockholders'
          equity  (deficit).  Realized  gains and losses and  declines  in value
          judged to be other than  temporary  are  included in the  statement of
          operations.

     (d)  Inventory

          Inventory,  consisting of satellite systems equipment and equipment to
          be utilized in the installation of  communications  systems,  services
          and  networks  for  customers,  is  recorded  at the  lower of cost or
          market, using the first-in, first-out method of accounting for cost.

     (e)  Investments

          Investments  in joint  ventures  are  accounted  for using the  equity
          method,  under which the Company's  share of earnings or losses of the
          joint  ventures are reflected in operations and dividends are credited
          against the investment when received.  Losses  recognized in excess of
          the Company's  investment  due to  additional  investment or financing
          requirements,  or  guarantees,  are  recorded  as a  liability  in the
          consolidated financial statements.  Other investments  representing an
          interest of 20% or more,  but less than 50%, are  accounted  for using
          the equity method of accounting. Investments of less than a 20% equity
          interest are accounted  for using the cost method,  unless the Company
          exercises  significant influence and/or control over the operations of
          the investee company, in which case the equity method is used.

     (f)  Property and Equipment

          Property and equipment are stated at cost.  Costs of construction  are
          capitalized,   including   interest  costs  related  to  construction.
          Equipment held under capital leases is stated at the lower of the fair
          value of the  asset or the net  present  value  of the  minimum  lease
          payments  at the  inception  of the lease.  For  equipment  held under
          capital  leases,  depreciation  is  provided  using the  straight-line
          method over the  estimated  useful lives of the assets  owned,  or the
          related lease term, whichever is shorter.
F-17

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Estimated  useful lives of major  categories of property and equipment
          are as follows:

               Office furniture and equipment          3 to 7 years 
               Buildings and improvements              31.5 years 
               Machinery and equipment                 3 to 8 years 
               Switch equipment                        10 years 
               Fiber optic transmission system         20 years

          The  Company   capitalizes  the  direct  costs   associated  with  the
          installation of dial tone customers'  service,  including labor and an
          allocation  of  overhead  costs,  and  amortizes  these costs over two
          years, the estimated average customer contract term.

     (g)  Deferred Subscriber Acquisition Costs

          The Company  expenses the costs of  advertising  as  incurred,  except
          direct response  advertising  expenses  relating to Internet  services
          which  are  included  in  deferred   subscriber   acquisition   costs.
          Subscriber  acquisition costs are deferred and amortized over a period
          determined by calculating  the ratio of current revenue related to the
          direct response  advertising versus the total expected revenue,  or 12
          months,   whichever  is  shorter.   These  costs  relate  directly  to
          subscriber   solicitations  and  principally   include  the  printing,
          production and shipping of starter packages and the costs of obtaining
          qualified prospects by various targeted direct marketing programs.  No
          indirect costs are included in subscriber  acquisition costs. To date,
          all   subscriber   acquisition   costs  have  been  incurred  for  the
          solicitation of specifically identified prospects. It is possible that
          these  estimates of anticipated  gross revenue could be reduced in the
          future based on management's current evaluation of the estimates used.
          As a result, the carrying value and/or the amortization  period of the
          subscriber acquisition costs could be reduced in the future.

     (h)  Other Assets

          Amounts related to the acquisition of transmission  and other licenses
          are  recorded  at  cost  and   amortized   over  20  years  using  the
          straight-line  method.  Goodwill  results from the  application of the
          purchase  method  of  accounting  for  business  combinations  and  is
          amortized over a maximum of 20 years using the straight-line method.
F-18

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Rights of way, minutes of use, and non-compete agreements are recorded
          at cost, and amortized using the  straight-line  method over the terms
          of the agreements, ranging from 2 to 12 years.

          Amortization of deferred  financing costs is provided over the life of
          the  related  financing  agreement,  the  maximum  term of which is 10
          years.

     (i)  Foreign Currency Translation Adjustments

          The  functional  currency  for all  foreign  operations  is the  local
          currency.  As such, all assets and liabilities  denominated in foreign
          currencies  are  translated  at the exchange rate on the balance sheet
          date.  Revenue  and costs and  expenses  are  translated  at  weighted
          average rates of exchange  prevailing  during the period.  Translation
          adjustments  are  recorded as a separate  component  of  stockholders'
          equity  (deficit).  Gains and losses  resulting from foreign  currency
          transactions  are included in operations and are not  significant  for
          the periods presented.

     (j)  Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities  and  disclosures of contingent  assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenue and expenses  during the  reporting  periods.  Actual  results
          could differ from those estimates.

     (k)  Revenue Recognition

          The  Company  recognizes  Telecom  Services,   Internet  Services  and
          Satellite Services revenue as services are provided and charges direct
          selling  expenses to  operations  as  incurred.  Revenue  from Network
          Services  contracts for the design and  installation of  communication
          systems and networks,  which are generally short-term in duration,  is
          recognized  using the  percentage of completion  method of accounting.
          Maintenance   revenue  is   recognized   as  services  are   provided.
          Uncollectible  trade receivables are accounted for using the allowance
          method.
F-19

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          Revenue  which has been  earned  under the  percentage  of  completion
          method,  but has not  been  billed  to the  customer  is  included  in
          receivables-revenue earned, but unbilled in the consolidated financial
          statements.  Deferred  revenue  includes  monthly advance  billings to
          customers  for  certain  services  provided by the  Company's  Telecom
          Services, Internet Services and Satellite Services, as well as Network
          Services  revenue  which has been billed to the customer in compliance
          with  contract  terms,  but not yet  earned  under the  percentage  of
          completion method.

          Prior to January 1, 1996,  the  Company  recognized  Telecom  Services
          revenue  in an  amount  equal  to the  non-cancelable  portion  of the
          contract,  which is a minimum  of one year on a  three-year  or longer
          contract,  at the  inception of the contract  and upon  activation  of
          service  to the  customer  to the  extent of direct  installation  and
          selling expenses incurred in obtaining  customers during the period in
          which such revenue was  recognized.  Revenue  recognized  in excess of
          normal monthly billings during the year was limited to an amount which
          did not exceed such  installation and selling  expense.  The remaining
          revenue from the contract was  recognized  ratably over the  remaining
          non-cancelable  portion of the contract.  The Company believes the new
          method is preferable  because it provides a better matching of revenue
          and related operating  expenses and is more consistent with accounting
          practices  within the  telecommunications  industry.  As  required  by
          generally accepted  accounting  principles,  the Company has reflected
          the  effects of the change in  accounting  as if such  change had been
          adopted  as of October 1, 1995,  and has  included  in the  results of
          operations  for fiscal  1996 a charge of  approximately  $3.5  million
          relating to the cumulative effect of this change in accounting.  Other
          than the cumulative  effect of adopting this new method of accounting,
          the effect of this change in accounting for the periods  presented was
          not significant.

     (l)  Income Taxes

          The  Company  accounts  for  income  taxes  under  the  provisions  of
          Statement of Financial  Accounting  Standards No. 109,  Accounting for
          Income Taxes ("SFAS  109").  Under the asset and  liability  method of
          SFAS 109,  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.  Deferred tax assets and
          liabilities  are measured using enacted tax rates expected to apply to
          taxable income in the years in which those
F-20

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          temporary  differences are expected to be recovered or settled.  Under
          SFAS 109,  the effect on  deferred  tax assets  and  liabilities  of a
          change  in tax  rates is  recognized  in  income  in the  period  that
          includes the enactment date.

     (m)  Net Loss Per Share

          Net  loss per  share is  calculated  by  dividing  the net loss by the
          weighted average number of shares outstanding. Weighted average number
          of shares  outstanding for fiscal year 1995 and the three months ended
          December 31, 1995 represents outstanding Holdings-Canada common shares
          and ICG Common  Stock  resulting  from the  exchange of NETCOM  common
          shares. Weighted average number of shares outstanding for fiscal 1996,
          the three  months ended  December 31, 1996 and fiscal 1997  represents
          Holdings-Canada  common shares  outstanding  for the period October 1,
          1995  through  August 2,  1996,  and  combined  ICG  Common  Stock and
          Holdings-Canada  Class A common  shares  outstanding  for the  periods
          subsequent to August 5, 1996.

          In February  1997,  the Financial  Accounting  Standards  Board issued
          Statement  No. 128,  Earnings Per Share ("SFAS 128") which revises the
          calculation and presentation provisions of Accounting Principles Board
          Opinion No. 15 and related interpretations. Under SFAS 128, basic loss
          per share is computed on the basis of weighted  average  common shares
          outstanding.  Diluted loss per share considers  potential common stock
          instruments in the  calculation.  The Company adopted SFAS 128 for its
          fiscal year ending  December 31, 1997,  including the  requirement for
          retroactive application. The adoption of SFAS 128 had no effect on the
          Company's  previously reported loss per share.  Potential common stock
          instruments,   which  include   options,   warrants  and   convertible
          subordinated notes and preferred  securities,  are not included in the
          loss per share calculation as their effect is anti-dilutive.

     (n)  Stock-Based Compensation

          The Company  accounts for its  stock-based  employee and  non-employee
          director  compensation  plans using the  intrinsic  value based method
          prescribed by Accounting  Principles Board Opinion No. 25,  Accounting
          for Stock Issued to Employees, and related Interpretations ("APB 25").
          The Company has provided pro forma
F-21

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(2)  Summary of Significant Accounting Policies (continued)

          disclosures  of net loss and loss per share as if the fair value based
          method of  accounting  for these plans,  as prescribed by Statement of
          Financial  Accounting  Standards No. 123,  Accounting for  Stock-Based
          Compensation  ("SFAS 123"),  had been applied.  Pro forma  disclosures
          include  the  effects of  employee  and  non-employee  director  stock
          options  granted  during fiscal 1996,  the three months ended December
          31, 1996 and fiscal 1997.

     (o)  Impairment of Long-Lived Assets

          The Company provides for the impairment of long-lived  assets pursuant
          to 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 121") which  requires  that  long-lived  assets and
          certain  identifiable  intangibles  held  and  used  by an  entity  be
          reviewed for impairment  whenever  events or changes in  circumstances
          indicate that the carrying  value of an asset may not be  recoverable.
          An impairment  loss is recognized when estimated  undiscounted  future
          cash  flows  expected  to be  generated  by the asset is less than its
          carrying  value.  Measurement of the  impairment  loss is based on the
          fair value of the asset, which is generally determined using valuation
          techniques  such as the  discounted  present value of expected  future
          cash flows.

     (p)  Reclassifications

          Certain prior period  amounts have been  reclassified  to conform with
          the current period's presentation.
F-22

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments

     (a)  Merger with NETCOM Subsequent to December 31, 1997

          As discussed in note 1, on January 21,  1998,  ICG  completed a merger
          with    NETCOM    which   has   been    accounted    for   under   the
          pooling-of-interests  method of accounting.  The following information
          presents the combined  results of  operations  of ICG and NETCOM as if
          the business combination had been consummated on October 1, 1994:
Fiscal years ended                  Three months ended           Fiscal year ended
                                     September 30,                       December 31,                December 31,
                          ------------------------------------
                               1995                1996                      1996                        1997
                          ----------------    ----------------     -------------------------     ----------------------
                                                       (in thousands)
Revenue:
   ICG                       $  111,610             169,094                    56,956                     273,354
   NETCOM                        52,422             120,540                    36,379                     160,660
                          ----------------    ----------------     -------------------------     ----------------------
     Combined                $  164,032             289,634                    93,335                     434,014
                          ================    ================     =========================     ======================

Net loss:
   ICG                          (76,648)           (184,107)                  (49,823)                   (327,643)
   NETCOM                       (14,064)            (44,265)                  (11,490)                    (33,092)
                          ----------------    ----------------     -------------------------     ----------------------
     Combined               $   (90,712)           (228,372)                  (61,313)                   (360,735)
                          ================    ================     =========================     ======================

Loss per share - 
basic and diluted:
   ICG                      $    (3.25)             (6.83)                      (1.56)                     (10.11)
                          ================    ================     =========================     ======================
   NETCOM                   $    (1.95)             (4.46)                      (1.15)                      (3.27)
                          ================    ================     =========================     ======================
     Combined               $    (2.94)             (6.19)                      (1.46)                      (8.49)
                          ================    ================     =========================     ======================
(b)  Acquisition During Fiscal 1997

          On October 17, 1997, the Company  purchased  approximately  91% of the
          outstanding  capital  stock  of  Communications   Buying  Group,  Inc.
          ("CBG"),  an Ohio based  local  exchange  and  centrex  reseller.  The
          Company paid total consideration of approximately $46.5 million,  plus
          the  assumption  of certain  liabilities.  Separately,  on October 17,
          1997, the Company sold 687,221 shares of ICG Common Stock for
F-23

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          approximately $16.0 million to certain shareholders of CBG. Subsequent
          to  December   31,  1997,   the  Company   purchased   the   remaining
          approximately  9% interest in CBG for  approximately  $2.9  million in
          cash.

          The Company  has  accounted  for the  acquisition  under the  purchase
          method of accounting, and accordingly, the operations of CBG have been
          included in the Company's  operations since the acquisition  date. The
          excess  of  the  purchase  price  over  the  fair  value  of  the  net
          identifiable  assets  acquired of $48.8  million has been  recorded as
          goodwill  and is being  amortized  on a  straight-line  basis over six
          years.  Revenue,  net loss and loss per share on a pro forma  combined
          basis are not  significantly  different from the Company's  historical
          results for the periods presented herein.

     (c)  Acquisitions and Investments During Fiscal 1996

          In January  1996,  the Company  purchased  the  remaining 49% minority
          interest of Fiber Optic  Technologies,  Inc.  ("FOTI"),  making FOTI a
          wholly   owned   subsidiary.   Consideration   for  the  purchase  was
          approximately  $2.0  million  in cash  and  66,236  common  shares  of
          Holdings-Canada  valued  at  approximately  $0.8  million,  for  total
          consideration of approximately $2.8 million.

          In February 1996, the Company  entered into an agreement with Linkatel
          California,   L.P.  ("Linkatel")  and  its  other  partners,  Linkatel
          Communications,  Inc.  and The Copley  Press,  Inc.,  under  which the
          Company acquired a 60% interest in Linkatel for an aggregate  purchase
          price of $10.0  million  in cash and  became  the  general  partner of
          Linkatel.  In April 1996, the  partnership  was renamed ICG Telecom of
          San Diego, L.P.

          In March 1996, the Company acquired a 90% equity interest in MarineSat
          Communications  Network,  Inc.  ("MCN"),  (formally  Maritime Cellular
          Tele-network,   Inc.),  a  Florida-based   provider  of  cellular  and
          satellite   communications  for  commercial  ships,  private  vessels,
          offshore oil platforms and land-based  mobile units, for approximately
          $0.7 million in cash and  approximately  $0.1 million of assumed debt,
          for total  consideration of approximately $0.8 million. In April 1997,
          the Company  received  the  remaining  10%  interest in MCN as partial
          consideration
F-24

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          for the sale of its  investment  in Mexico.  In the fourth  quarter of
          fiscal 1997,  the Company  recorded a provision for impairment of $2.9
          million to reflect  management's  estimate of the net realizable value
          of the Company's investment in MCN.

          In August  1996,  the  Company  acquired  certain  Signaling  System 7
          ("SS7") assets of Pace Network Services,  Inc. ("Pace"), a division of
          Pace  Alternative  Communications,  Inc. SS7 is used by local exchange
          companies,  long-distance  carriers,  wireless  carriers and others to
          signal between network elements, creating faster call set-up resulting
          in a more  efficient use of network  resources.  The Company paid cash
          consideration  of  $1.6  million  as of  September  30,  1996  and  an
          additional  $1.0  million  in  January  1997,  based on the  operating
          results of the underlying business since the date of acquisition.

          The  acquisitions  described  above have been  accounted for using the
          purchase  method of accounting,  and  accordingly,  the net assets and
          results of  operations  are  included  in the  consolidated  financial
          statements from the respective dates of acquisition. Revenue, net loss
          and  loss  per  share  on a pro  forma  basis  are  not  significantly
          different  from  the  Company's  historical  results  for the  periods
          presented herein.

     (d)  Acquisitions and Investments During Fiscal 1995

          In  January  1995,  the  Company  and an  unaffiliated  entity  formed
          Maritime  Telecommunications Network, Inc. ("MTN") to provide wireless
          communications  through  satellites to the maritime  cruise  industry,
          U.S. Navy vessels and offshore oil platforms. The Company acquired (i)
          approximately  64% of MTN,  (ii)  approximately  $4.4 million in notes
          receivable from MTN and (iii)  consulting and  non-compete  agreements
          valued at an aggregate of  approximately  $0.3 million in exchange for
          (i)  approximately  $9.0  million  in  cash,  (ii) the  surrender  and
          cancellation  of a note to the Company  from the other entity for $0.6
          million plus  interest,  (iii) 408,347  Holdings-Canada  common shares
          valued at  approximately  $5.1 million (of which 256,303 common shares
          were  issued  in the  fourth  quarter  of fiscal  1994),  and (iv) the
          Company's commitment to provide additional convertible
F-25

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          working  capital  advances  to MTN  as  required  by  MTN.  The  other
          shareholder of MTN contributed the assets of a predecessor business to
          MTN. MTN also assumed  approximately  $2.1 million of  obligations  of
          such  predecessor  business.  The Company paid a $0.5 million finder's
          fee obligation of the predecessor to a third party.

          During  fiscal  1995,  the Company  purchased a 58%  interest in Zycom
          Corporation ("Zycom"), an Alberta, Canada corporation whose shares are
          traded on the Alberta Stock Exchange.  Consideration  for the purchase
          was approximately $0.8 million in cash, the conversion of $2.0 million
          in notes receivable,  and the assumption of approximately $0.7 million
          in debt for total  consideration  of  approximately  $3.5 million.  In
          March 1996, the Company acquired an additional  approximate 12% equity
          interest in Zycom by  converting  a $3.2 million  receivable  due from
          Zycom into common  stock.  In the fourth  quarter of fiscal 1997,  the
          Company recorded a provision for impairment of $2.7 million to reflect
          management's  estimate of the net  realizable  value of the  Company's
          investment in Zycom.

          In August 1995,  NETCOM  completed  the  acquisition  of  Professional
          Internet Consulting, Inc. ("PICnet") pursuant to an Agreement and Plan
          of  Reorganization  in a transaction  accounted for using the purchase
          method of  accounting.  As  consideration  for all of the  outstanding
          shares of PICnet,  the Company issued 27,788 shares of Common Stock at
          an  approximate  fair  market  value of $35.99  per share with a total
          value  of  approximately  $1.0  million.   Additionally,  the  Company
          acquired  net  liabilities  with a fair  value of  approximately  $0.4
          million.  The resulting  consideration in excess of the fair values of
          the  underlying  assets  acquired  totaling  $1.4  million  represents
          goodwill, which was amortized over a period of 18 months.

          The acquisitions described above were accounted for using the purchase
          method of accounting, and accordingly,  the net assets and the results
          of operations are included in the  consolidated  financial  statements
          from the respective dates of acquisition.  Revenue,  net loss and loss
          per share on a pro forma basis are not  significantly  different  from
          the Company's historical results for the periods presented herein.
F-26

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          In June 1995,  NETCOM  acquired  Series A Common Stock in the McKinley
          Group,  Inc.  ("McKinley")  in exchange  for $1.2  million in cash and
          approximately  $0.3  million  in Common  Stock.  During  fiscal  1996,
          Excite,  Inc.  ("Excite")  acquired all of the  outstanding  shares of
          McKinley and the Company  received common shares of Excite in exchange
          for its  investment in McKinley.  The Company  recorded a loss of $1.2
          million in fiscal 1996 to reflect  management's  estimate of the value
          of the shares  received.  During  fiscal  1997,  the Company  sold its
          shares  of  Excite  and  recorded  a net  gain of  approximately  $1.3
          million,  which  is  included  in  net  loss  (gain)  on  disposal  of
          long-lived  assets  in  the  Company's   consolidated   statements  of
          operations.

          During fiscal 1995, the Company  invested  approximately  $5.2 million
          ($3.9   million   in  cash,   $1.1   million   in  common   shares  of
          Holdings-Canada,  and the conversion of approximately  $0.2 million in
          notes  receivable)  in  StarCom   International   Optics   Corporation
          ("StarCom"),  for which the Company  received a 25% equity interest in
          each of Starcom's  wholly owned  operating  subsidiaries.  In December
          1997, a senior secured  creditor of StarCom  notified the Company that
          it intended to foreclose on its collateral in StarCom,  and in January
          1998, StarCom commenced bankruptcy proceedings.  Based on management's
          estimate of the net realizable  value of its  investment,  the Company
          recorded a provision for  impairment of its investment of $5.2 million
          in fiscal 1997.

     (e)  Investments in Joint Venture and Affiliate and Other Investments

          In September 1992, the Company entered into a joint venture  agreement
          with Greenstar  Technologies  Inc. (now GST  Telecommunications,  Inc.
          ("GST")) to design, construct and operate a competitive access network
          in Phoenix.  The Company and GST each had a 50% equity interest in the
          joint  venture.  All  financing  provided to the joint  venture by the
          Company,  as well as the  recognition  of the  Company's  share of the
          joint venture's losses,  were recorded  according to the equity method
          of accounting.  During fiscal 1996,  the Company  recorded a valuation
          allowance of  approximately  $5.8  million for the amounts  receivable
          arising from advances made to the Phoenix network joint venture, based
          on  management's   estimate  of  the  net  realizable   value  of  the
          receivable.
F-27

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(3)  Business Combinations and Investments (continued)

          In October 1996, the Company sold its interest in the joint venture to
          GST.  The  Company  received   approximately  $2.1  million  in  cash,
          representing  $1.3 million of  consideration  for its 50% interest and
          $0.8 million for equipment and amounts  advanced to the joint venture.
          In addition,  the Company received  equipment with a net book value of
          $2.4 million and assumed  liabilities of $0.3 million.  A gain on sale
          of the joint venture of approximately $0.8 million was recorded in the
          consolidated  financial  statements  during  the  three  months  ended
          December 31, 1996.

(4)  Short-term Investments Available for Sale

     Short-term investments available for sale are comprised of the following:

                                                  December 31,
                                    ----------------------------------------
                                           1996                  1997
                                    -------------------     ----------------
                                                  (in thousands)

     Money market instruments            $   10,000                  -
     Commercial paper                         5,500              4,000
     U.S. Treasury securities                17,101             94,181
     Equity securities                          849                  -
                                    ===================     ================
                                         $   33,450             98,181
                                    ===================     ================

     At December 31, 1996 and 1997,  the  estimated  fair value of the Company's
     money market  instruments,  commercial paper and U.S.  Treasury  securities
     approximated  cost,  and the  amount  of  gross  unrealized  gains  was not
     significant.  At December 31, 1996, the cost of equity  securities was $0.3
     million and unrealized  gains for fiscal 1996 were $0.5 million.  All money
     market  instruments,  commercial paper and U.S. Treasury  securities mature
     within one year.
F-28

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(5)  Subscriber Acquisition and Advertising Costs

     Subscriber  acquisition  costs deferred  during fiscal years 1995 and 1996,
     the three months ended December 31, 1996 and fiscal 1997 were $5.5 million,
     $14.4 million,  $2.4 million and $6.5 million,  respectively.  Amortization
     and write-offs for the same periods were $2.8 million,  $12.2 million, $4.3
     million  and  $8.9  million,   respectively,  and  have  been  included  in
     depreciation  and  amortization  expense  in  the  Company's   consolidated
     statements of operations.

     The amount charged to advertising  expense was $4.5 million in fiscal 1995,
     $7.5  million  in fiscal  1996,  $1.6  million  in the three  months  ended
     December 31, 1996 and $4.7 million in fiscal 1997.

(6)  Notes Receivable and Due from Affiliate

     In January 1997,  the Company  announced a strategic  alliance with Central
     and South  West  Corporation  ("CSW")  which is  developing  and  marketing
     telecommunications services in certain cities in Texas. The venture entity,
     a limited partnership named CSW/ICG ChoiceCom, L.P. ("ChoiceCom"), is based
     in Austin, Texas. CSW holds 100% of the interest in ChoiceCom,  and CSW and
     the Company each have two  representatives  on the Management  Committee of
     the  general  partner of  ChoiceCom.  The  Company  has  committed  to loan
     ChoiceCom  $15.0 million under two promissory  notes,  which are payable on
     demand and earn  interest at LIBOR plus 2% per annum (7.97% at December 31,
     1997). Advances under these promissory notes were $10.0 million at December
     31, 1997.

     Additionally,  the  Company  has agreed to perform  certain  administrative
     services for  ChoiceCom  and make certain  payments to vendors on behalf of
     ChoiceCom,  for which such  services and payments are to be conducted on an
     arm's  length  basis and  reimbursed  by  ChoiceCom.  At December 31, 1997,
     amounts outstanding under this arrangement and justify included in due from
     affiliate  were  approximately  $9.4  million,  and were  collected in full
     during the subsequent fiscal quarter.
F-29

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(7)  Property and Equipment

     Property and  equipment,  including  assets held under capital  leases,  is
     comprised of the following:
December 31,
                                                         ----------------------------------------
                                                               1996                   1997
                                                         ------------------     -----------------
                                                                     (in thousands)
Land                                                    $     306                  709
     Buildings and improvements                                 10,193               10,855
     Furniture, fixtures and office equipment                   46,190               58,606
     Machinery and equipment                                    10,764               31,630
     Fiber optic and point of presence equipment               230,904              257,062
     Satellite equipment                                        19,408               29,760
     Switch equipment                                           58,199               85,546
     Fiber optic transmission system                           117,281              192,756
     Build out/site preparation                                 13,284               13,898
     Construction in progress (see note 16)                     61,168              179,673
                                                         ------------------     -----------------
                                                               567,697              860,495
     Less accumulated depreciation                             (79,648)            (155,383)
                                                         ==================     =================
                                                            $  488,049              705,112
                                                         ==================     =================
Property and equipment includes  approximately  $179.7 million of equipment
     which has not been placed in service at December 31, 1997, and accordingly,
     is not being  depreciated.  The  majority  of this amount is related to new
     network construction (see note 16).

     Certain of the assets  described  above have been  pledged as security  for
     long-term  debt and are held under capital leases at December 31, 1997. The
     following is a summary of property and equipment held under capital leases:
F-30

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(7)  Property and Equipment (continued)

                                                       December 31,
                                        ---------------------------------------
                                               1996                  1997
                                        ------------------    ------------------
                                                      (in thousands)

     Machinery and equipment                $    1,842               3,926
     Fiber optic and point of presence
      equipment                                  7,514              12,707
     Switch equipment                           22,280              21,380
     Fiber optic transmission system            55,746              58,806
     Construction in progress                   20,187              17,895
                                        ------------------    ------------------
                                               107,569             114,714
     Less accumulated depreciation              (4,424)            (10,385)
                                        ==================    ==================
                                           $   103,145             104,329
                                        ==================    ==================

(8)  Other Assets

     Other assets are comprised of the following:

                                                    December 31,
                                     ----------------------------------------
                                           1996                   1997
                                     ------------------    ------------------
                                                   (in thousands)

     Deposits                           $    4,416              3,296
     Pace customer base                      2,581              2,805
     Rights of way                           1,739                425
     Minutes of use agreement                1,421                  -
     Non-compete agreements                    902              1,386
     Right of entry                              -              5,019
     Other                                   1,403              1,099
                                     ------------------    ------------------
                                            12,462             14,030
     Less accumulated amortization          (1,547)            (3,499)
                                     ==================    ==================
     Other                              $   10,915             10,531
                                     ==================    ==================
F-31

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(9)  Related Party Transactions

     During  fiscal  1996,  Holdings-Canada  and  International   Communications
     Consulting,  Inc. ("ICC") entered into a consulting  agreement  whereby ICC
     will provide various  consulting  services to the Company through  December
     1999 for  approximately  $4.2  million  to be paid  during  the term of the
     agreement. During fiscal 1996, the three months ended December 31, 1996 and
     fiscal 1997, the Company paid approximately $1.3 million,  $0.3 million and
     $1.1 million,  respectively,  related to this consulting agreement. William
     W. Becker,  a stockholder and former director of the Company,  is President
     and Chief Executive Officer of ICC.

     At December 31, 1996 and 1997,  receivables  from officers and employees of
     approximately  $1.0 million and $0.9 million,  respectively,  are primarily
     comprised of promissory notes from officers for relocation expenses,  which
     are generally  payable on demand and bear interest at 7% per annum, and are
     included in  receivables-other in the accompanying  consolidated  financial
     statements.

(10) Capital Lease Obligations

     The Company has payment  obligations under various capital lease agreements
     for equipment.  The future  required  payments under the Company's  capital
     lease  obligations  subsequent  to  December  31,  1997 are as follows  (in
     thousands):

           Due December 31:
             1998                                             $  18,874
             1999                                                16,976
             2000                                                15,247
             2001                                                16,350
             2002                                                11,009
             Thereafter                                          93,584
                                                           ---------------------
               Total minimum lease payments                     172,040
               Less amounts representing interest               (93,423)
                                                           ---------------------
               Present value of net minimum lease payments       78,617
               Less current portion                              (8,128)
                                                           ---------------------
                                                              $  70,489
                                                           =====================
F-32

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt

     Long-term debt is summarized as follows:
December 31,
                                                                           -----------------------------------------------
                                                                                    1996                     1997
                                                                           ----------------------   ----------------------
                                                                                           (in thousands)
11 5/8% Senior discount notes, net of discount (a)                 $             -                  109,436
     12 1/2% Senior discount notes, net of discount (b)                         325,530                  367,494
     13 1/2% Senior discount notes, net of discount (c)                         355,955                  407,409
     Note payable with interest at the 90-day  
       commercial paper rate plus 4 3/4% (10.3% at 
       December 31, 1997),  due 2001,  secured  by 
       certain telecommunications equipment                                       5,815                    4,932
                                                                                       
     Note payable with interest at 11%, due monthly
       through fiscal 1999, secured by equipment                                  2,625                    1,860
     Mortgage payable with interest at 8 1/2%, due
        monthly through 2009, secured by building                                 1,177                    1,131
          Other                                                                      73                       90
                                                                           ----------------------    ---------------------
                                                                                691,175                  892,352
          Less current portion                                                     (817)                  (1,784)
                                                                           ----------------------    ---------------------
                                                                             $  690,358                  890,568
                                                                           ======================    =====================
(a)  11 5/8% Notes

          On March 11, 1997,  Holdings  completed a private placement (the "1997
          Private  Offering") of 11 5/8% Senior Discount Notes due 2007 (the "11
          5/8%  Notes")  and  14%  Exchangeable   Preferred  Stock   Mandatorily
          Redeemable  2008 (the "14%  Preferred  Stock")  for gross  proceeds of
          $99.9 million and $100.0 million,  respectively. Net proceeds from the
          1997 Private Offering, after costs of approximately $7.5 million, were
          approximately $192.4 million.

          The 11  5/8%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed by ICG) that mature on March 15, 2007, at a maturity value
          of  $176.0  million.  Interest  will  accrue  at 11  5/8%  per  annum,
          beginning  March 15, 2002,  and is payable each March 15 and September
          15, commencing September 15, 2002. The indenture for the
F-33

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt (continued)

          11 5/8% Notes contains certain covenants which provide for limitations
          on indebtedness, dividends, asset sales and certain other transactions
          and effectively prohibits the payment of cash dividends.

          The 11 5/8% Notes were  originally  recorded  at  approximately  $99.9
          million.  The discount on the 11 5/8% Notes is being accreted  through
          March  15,  2002,  the date on which  the 11 5/8%  Notes  may first be
          redeemed.  The  accretion of the discount and debt  issuance  costs is
          included  in  interest  expense  in  the   accompanying   consolidated
          financial statements.

     (b)  12 1/2% Notes

          On April 30, 1996,  Holdings  completed a private placement (the "1996
          Private  Offering") of 12 1/2% Senior Discount Notes due 2006 (the "12
          1/2% Notes") and of 14 1/4%  Exchangeable  Preferred Stock Manditorily
          Redeemable 2007 (the "14 1/4% Preferred  Stock") for gross proceeds of
          $300.0 million and $150.0 million, respectively. Net proceeds from the
          1996 Private  Offering,  after issuance costs of  approximately  $17.0
          million, were approximately $433.0 million.

          The 12  1/2%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed  by ICG and  Holdings-Canada)  that mature on May 1, 2006,
          with a maturity  value of $550.3  million.  Interest will accrue at 12
          1/2% per annum,  beginning May 1, 2001,  and is payable each May 1 and
          November 1, commencing November 1, 2001. The indenture for the 12 1/2%
          Notes  contains  certain  covenants  which provide for  limitations on
          indebtedness,  dividends,  asset sales and certain other  transactions
          and effectively prohibits the payment of cash dividends.

          The 12 1/2% Notes were  originally  recorded at  approximately  $300.0
          million.  The discount on the 12 1/2% Notes is being accreted  through
          May 1,  2001,  the  date on  which  the 12 1/2 % Notes  may  first  be
          redeemed.  The  accretion of the discount and debt  issuance  costs is
          included  in  interest  expense  in  the   accompanying   consolidated
          financial statements.
F-34

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(11) Long-term Debt (continued)

          Approximately  $35.3  million of the  proceeds  from the 1996  Private
          Offering  were used to redeem the 12%  redeemable  preferred  stock of
          Holdings  (the  "Redeemable  Preferred  Stock")  issued in August 1995
          ($30.0 million), pay accrued preferred dividends ($2.6 million) and to
          repurchase  916,666  warrants of the Company ($2.7 million)  issued in
          connection with the Redeemable Preferred Stock. The Company recognized
          a charge to minority interest in share of losses, net of accretion and
          preferred  dividends  on  preferred   securities  of  subsidiaries  of
          approximately  $12.3 million for the excess of the redemption price of
          the Redeemable  Preferred  Stock over the carrying amount at April 30,
          1996,  and  recognized a charge to interest  expense of  approximately
          $11.5  million for the payments  made to  noteholders  with respect to
          consents to amendments to the indenture governing the 13 1/2% Notes to
          permit the 1996 Private Offering.

     (c)  13 1/2% Notes

          On August 8, 1995,  Holdings  completed a private placement (the "1995
          Private Offering") through the issuance of 58,430 units (the "Units"),
          each Unit consisting of ten $1,000,  13 1/2% Senior Discount Notes due
          2005 (the "13 1/2% Notes") and  warrants to purchase 33 common  shares
          of Holdings-Canada  (the "Unit Warrants").  Net proceeds from the 1995
          Private Offering, after issuance costs of approximately $14.0 million,
          were approximately $286.0 million.

          The 13  1/2%  Notes  are  unsecured  senior  obligations  of  Holdings
          (guaranteed by ICG and  Holdings-Canada)  that mature on September 15,
          2005, with a maturity value of $584.3 million. Interest will accrue at
          the rate of 13 1/2% per annum,  beginning  September 15, 2000,  and is
          payable in cash each March 15 and September 15,  commencing  March 15,
          2001. The indenture for the 13 1/2% Notes contains  certain  covenants
          which provide for limitations on the  indebtedness,  dividends,  asset
          sales and certain other  transactions  and  effectively  prohibits the
          payment of cash dividends.

          The 13 1/2% Notes were  originally  recorded at  approximately  $294.0
          million,  which  represents  the $300.0  million in proceeds  less the
          approximate $6.0 million value assigned to the Unit Warrants, which is
          included in additional  paid-in  capital.  The discount on the 13 1/2%
          Notes and the debt issuance  costs are being  accreted over five years
          until  September  15,  2000,  the date at which the 13 1/2%  Notes can
          first be
F-35

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          redeemed.  The  value  assigned  to the  Unit  Warrants,  representing
          additional  debt  discount,  is also being accreted over the five-year
          period.  The  accretion of the total  discount is included in interest
          expense  in  the  accompanying   consolidated   financial  statements.
          Holdings may redeem the 13 1/2% Notes on or after  September 15, 2000,
          in  whole  or in  part,  at the  redemption  prices  set  forth in the
          agreement, plus unpaid interest, if any, at the date of redemption.

          The Unit  Warrants  entitle the holder to purchase one common share of
          Holdings-Canada,  which is  exchangeable  into one share of ICG Common
          Stock,  at the exercise price of $12.51 per share and are  exercisable
          at any time between August 8, 1996 and August 8, 2005.

          In  connection  with the  issuance of the 13 1/2%  Notes,  the Company
          obtained $6.0 million of interim  financing  from the placement  agent
          and  certain  private  investors  in exchange  for the  issuance of an
          aggregate  of 520,000  Series A Warrants  (see note 13 (c)).  The $6.0
          million  was  repaid  with a  portion  of the  proceeds  from the 1995
          Private  Offering.  As a  result  of  the  repayment  of  the  interim
          financing,  the  value  assigned  to the  Series A  Warrants  totaling
          approximately $3.0 million, representing debt discount, was charged to
          interest expense during the year ended September 30, 1995.
F-36

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          Scheduled  principal  maturities of long-term  debt as of December 31,
          1997 are as follows (in thousands):

          Due December 31:
           1998                                              $       1,784
           1999                                                      1,686
           2000                                                      1,290
           2001                                                        938
           2002                                                        938
           Thereafter (a)                                        1,311,976
                                                           --------------------
                                                                 1,318,612
             Less unaccreted discount on the 11 5/8% Notes,  
               the 12 1/2% Notes and the 13 1/2% Notes            (426,260)
                                                           --------------------
                                                             $     892,352
                                                           ====================

          (a)  Includes $176.0 million,  $550.3 million and $584.3 million of 11
               5/8% Notes, 12 1/2% Notes, and 13 1/2% Notes,  respectively,  due
               at maturity.

     (e)  Private  Placement of Senior  Discount Notes  Completed  Subsequent to
          December 31, 1997

          On February 12, 1998, ICG Services,  Inc., a Delaware  corporation and
          new wholly  owned  subsidiary  of ICG ("ICG  Services"),  completed  a
          private  placement  of 10%  Senior  Discount  Notes due 2008 (the "10%
          Notes")  for gross  proceeds  of  approximately  $300.6  million.  Net
          proceeds from the offering,  after underwriting costs of approximately
          $9.0 million, were approximately $291.6 million.

          The 10% Notes are unsecured  senior  obligations  of ICG Services that
          mature on February 15, 2008,  at a maturity  value of $490.0  million.
          Interest  will accrue at 10% per annum,  beginning  February 15, 2003,
          and is payable each February 15 and August 15,  commencing  August 15,
          2003. The indenture for the 10% Notes contains certain covenants which
          provide  limitations  on  indebtedness,  dividends,  asset  sales  and
          certain other transactions.
F-37

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(11) Long-term Debt (continued)

          The  10%  Notes  were  originally  recorded  at  approximately  $300.6
          million.  The  discount  on the 10%  Notes  will be  accreted  through
          February  15,  2003,  the date on which  the 10%  Notes  may  first be
          redeemed.

(12) Redeemable Preferred Securities of Subsidiaries

     Redeemable preferred stock of subsidiary is summarized as follows:
December 31,
                                                         -------------------------------------
                                                               1996                1997
                                                         -----------------    ----------------
                                                                    (in thousands)
14% Exchangeable preferred stock, mandatorily
       redeemable in 2008 (a)                               $         -            108,022
     14 1/4% Exchangeable preferred stock,
       mandatorily redeemable in 2007 (b)                       159,120            184,420
                                                         -----------------    ----------------
                                                             $  159,120            292,442
                                                         =================    ================
(a)  14% Preferred Stock

          In connection  with the 1997 Private  Offering,  Holdings sold 100,000
          shares of exchangeable preferred stock that bear a cumulative dividend
          at the rate of 14% per annum.  The  dividend is payable  quarterly  in
          arrears  each March 15, June 15,  September  15, and  December 15, and
          commenced  June 15,  1997.  Through  March 15,  2002,  the dividend is
          payable at the option of Holdings in cash or additional  shares of 14%
          Preferred  Stock.  Holdings may exchange the 14% Preferred  Stock into
          14%  Senior  Subordinated  Exchange  Debentures  at any time after the
          exchange  is  permitted  by certain  indenture  restrictions.  The 14%
          Preferred Stock is subject to mandatory redemption on March 15, 2008.

     (b)  14 1/4% Preferred Stock

          In connection  with the 1996 Private  Offering,  Holdings sold 150,000
          shares of exchangeable preferred stock that bear a cumulative dividend
          at the rate of 14 1/4% per annum. The dividend is payable quarterly in
          arrears each February 1, May 1, August 1 and November 1, and commenced
          August 1, 1996. Through
F-38

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(12) Redeemable Preferred Securities of Subsidiaries (continued)

          May 1, 2001,  the dividend is payable,  at the option of Holdings,  in
          cash or additional  shares of 14 1/4%  Preferred  Stock.  Holdings may
          exchange the 14 1/4% Preferred Stock into 14 1/4% Senior  Subordinated
          Exchange  Debentures  at any time after the  exchange is  permitted by
          certain indenture restrictions. The 14 1/4% Preferred Stock is subject
          to mandatory redemption on May 1, 2007.

     (c)  6 3/4% Preferred Securities

          During  fiscal 1997,  a new  subsidiary  of the Company,  ICG Funding,
          completed a private placement of 6 3/4% Exchangeable Limited Liability
          Company Preferred Securities  Mandatorily Redeemable 2009 (the "6 3/4%
          Preferred  Securities")  for gross  proceeds of $132.25  million.  Net
          proceeds  from the  private  placement,  after  offering  costs,  were
          approximately $127.6 million.  Restricted cash at December 31, 1997 of
          $24.6  million  includes  the  proceeds  from the  offering  which are
          designated  for the payment of cash  dividends on the 6 3/4% Preferred
          Securities through November 15, 2000.

          The 6 3/4%  Preferred  Securities  consist of  2,645,000  exchangeable
          preferred securities of ICG Funding that bear a cumulative dividend at
          the  rate of 6 3/4% per  annum.  The  dividend  is paid  quarterly  in
          arrears  each  February  15, May 15,  August 15 and  November  15, and
          commenced  November 15, 1997.  The dividend is payable in cash through
          November  15,  2000 and,  thereafter,  in cash or shares of ICG Common
          Stock, at the option of ICG Funding.  The 6 3/4% Preferred  Securities
          are  exchangeable,  at the option of the holder,  at any time prior to
          November 15, 2009 into shares of ICG Common Stock at an exchange  rate
          of 2.0812  shares  of  Common  Stock  per  preferred  security,  or an
          exchange  price of $24.025  per  share,  subject  to  adjustment.  ICG
          Funding may, at its option,  redeem the 6 3/4% Preferred Securities at
          any time on or after  November  18,  2000.  Prior  to that  time,  ICG
          Funding  may redeem the 6 3/4%  Preferred  Securities  if the  current
          market value of ICG Common Stock equals or exceeds the exchange price,
          for at least 20 days of any 30-day  trading  period,  by 170% prior to
          November 16, 1998;  160% from  November 16, 1998 through  November 15,
          1999; and 150% from November 16, 1999 through November 15, 2000. The 6
          3/4%  Preferred  Securities  are subject to  mandatory  redemption  on
          November 15, 2009.
F-39

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(12) Redeemable Preferred Securities of Subsidiaries (continued)

          On February 15, 1998, ICG Funding used the remaining proceeds from the
          private  placement  of the 6 3/4%  Preferred  Securities  to  purchase
          $112.4  million of ICG  Communications,  Inc.  Preferred  Stock  ("ICG
          Preferred  Stock")  which pays  dividends  each  February  15, May 15,
          August 15 and November 15 in additional  shares of ICG Preferred Stock
          through November 15, 2000.  Subsequent to November 15, 2000, dividends
          are  payable in cash or shares of ICG Common  Stock,  at the option of
          ICG. The ICG  Preferred  Stock is  exchangeable,  at the option of ICG
          Funding,  at any time prior to  November  15,  2009 into shares of ICG
          Common Stock at an exchange  rate based on the exchange  rate of the 6
          3/4%  Preferred  Securities.  The ICG  Preferred  Stock is  subject to
          mandatory redemption on November 15, 2009.

          The accreted value of the 6 3/4%  Preferred  Securities is included in
          Company-obligated   mandatorily  redeemable  preferred  securities  of
          subsidiary  limited  liability  company  which  holds  solely  Company
          preferred  stock in the  accompanying  consolidated  balance  sheet at
          December 31, 1997.

     Included in  minority  interest in share of losses,  net of  accretion  and
     preferred   dividends   on  preferred   securities   of   subsidiaries   is
     approximately $1.3 million,  $27.0 million,  $5.8 million and $39.8 million
     for fiscal 1995 and 1996,  the three  months  ended  December  31, 1996 and
     fiscal 1997, respectively, associated with the accretion of issuance costs,
     discount and preferred  security dividend accruals for the 6 3/4% Preferred
     Securities,  the 14% Preferred  Stock,  the 14 1/4% Preferred Stock and the
     Redeemable  Preferred  Stock  (issued in  connection  with the 1995 Private
     Offering and redeemed in April 1996).  These costs are partially  offset by
     the minority interest share in losses of subsidiaries of approximately $0.6
     million,  $2.7  million,  $0.8 million and $2.0 million for fiscal 1995 and
     1996,   the  three  months  ended   December  31,  1996  and  fiscal  1997,
     respectively.

(13) Stockholders' Deficit

     (a)  Common Stock

          Common stock  outstanding  at December 31, 1997  represents the issued
          and  outstanding  Common  Stock of ICG and  Class A common  shares  of
          Holdings-Canada (not owned by ICG) which are exchangeable at any time,
          on a one-for-one basis, for ICG Common Stock. The following table sets
          forth the number of shares
F-39

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          outstanding for ICG and Holdings-Canada on a separate company basis as
          of December 31, 1997:
Shares                Shares not owned
                                                                              owned by ICG                  by ICG
                                                                           --------------------       -------------------
ICG Common Stock, $.01 par value, 100,000,000
             shares authorized; 41,122,966 and 43,950,959
             shares issued and outstanding at December 31,
             1996 and 1997, respectively                                             -                     43,950,959
           Holdings-Canada Class A common shares, no par
             value, 100,000,000 shares authorized;
             31,795,270 and 31,822,756 shares issued and
             outstanding at December 31, 1996 and 1997,
             respectively:
             Class A common shares, exchangeable on a
               one-for-one basis for ICG Common Stock
               at any time                                                           -                         23,700
             Class A common shares owned by ICG                             31,799,056                              -
                                                                                                      -------------------
           Total shares outstanding                                                                        43,974,659
                                                                                                      ===================
(b)  Stock Options and Employee Stock Purchase Plan

          In fiscal years 1991,  1992 and 1993, the Company's Board of Directors
          approved  incentive  stock  option plans and  replenishments  to those
          plans  which  provide  for  the  granting  of  options  to  directors,
          officers,  employees  and  consultants  of  the  Company  to  purchase
          285,000,  724,400 and 1,692,700  shares,  respectively,  of ICG Common
          Stock,  with exercise prices between 80% and 100% of the fair value of
          the shares at the date of grant.  A total of  1,849,600  options  have
          been  granted  under these plans with  exercise  prices  ranging  from
          approximately $2.92 to $14.03.  Compensation expense has been recorded
          for options  granted at an exercise  price below the fair market value
          of ICG Common Stock at the date of grant,  pursuant to the  provisions
          of APB 25.  The  options  granted  under  these  plans are  subject to
          various vesting requirements and expire in five and ten years from the
          date of grant.
F-41

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
------------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The NETCOM  1993 Stock  Option Plan has been  assumed and  approved by
          ICG's Board of  Directors  as an  incentive  and  non-qualified  stock
          option  plan which  provides  for the  granting  of options to certain
          directors,  officers and employees to purchase 2,720,901 shares of ICG
          Common  Stock.  A total of 4,380,099  options have been granted  under
          this plan at exercise  prices  ranging  from $0.65 to $92.14,  none of
          which  were  less  than 100% of the fair  market  value of the  shares
          underlying  options  on  the  date  of  grant,  and  accordingly,   no
          compensation  expense was recorded for these options under APB 25. The
          options  granted  under  this  plan are  subject  to  various  vesting
          requirements,  generally  three and five years,  and expire within ten
          years from the date of grant.

          In fiscal years 1994,  1995 and 1996,  the three months ended December
          31, 1996 and fiscal 1997,  the Company's  Board of Directors  approved
          incentive and non-qualified  stock option plans and  replenishments to
          plans which provide for the granting of options to certain  directors,
          officers  and  employees  to purchase  2,536,000  shares of ICG Common
          Stock under the 1994 plan and an aggregate of 2,700,000  shares of the
          Company's  Common  Stock  under  the 1995 and 1996  plans.  A total of
          5,709,426  options  have been  granted  under  these plans at original
          exercise prices ranging from $7.94 to $27.06,  none of which were less
          than 100% of the fair market value of the shares underlying options on
          the date of  grant,  and  accordingly,  no  compensation  expense  was
          recorded for these  options  under APB 25. The options  granted  under
          these plans are subject to various vesting  requirements and expire in
          five and ten years from the date of grant.

          In order to continue  to provide  non-cash  incentives  and retain key
          employees,  all employee  stock options  outstanding on April 16, 1997
          with  exercise  prices at or in excess of $15.875 were canceled by the
          Stock  Option  Committee  of the  Company's  Board  of  Directors  and
          regranted with an exercise price of $10.375,  the closing price of ICG
          Common Stock on the Nasdaq  National Market on April 16, 1997. A total
          of 597,600 options, with original exercise prices ranging from $15.875
          to $26.25,  were  canceled and  regranted.  There was no effect on the
          Company's  consolidated  financial  statements  as  a  result  of  the
          cancellation and regranting of options.

          In October 1996,  the Company  established  an Employee Stock Purchase
          Plan  whereby  employees  can  elect to  designate  1% to 30% of their
          annual salary,  to be used to purchase  shares of ICG Common Stock, up
          to a limit of $25,000 in ICG
F-42

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          Common Stock each year, at a 15% discount to fair market value.  Stock
          purchases  will occur four times a year on February 1, May 1, August 1
          and November 1, with the price per share  equaling the lower of 85% of
          the market price at the beginning or end of the offering  period.  The
          Company  is  authorized  to issue a total of  1,000,000  shares of ICG
          Common Stock to  participants  in the plan.  During  fiscal 1997,  the
          Company  sold 109,213  shares of ICG Common  Stock to employees  under
          this plan.

          During fiscal 1994,  NETCOM's Board of Directors  approved and adopted
          an Employee  Stock  Purchase  Plan which was  dissolved  upon NETCOM's
          merger with ICG. Shares  purchased under this plan have been converted
          into an estimated 119,000 shares of ICG Common Stock.

          The  Company  recorded  compensation  expense in  connection  with its
          stock-based employee and non-employee  director  compensation plans of
          $0.2 million and $0.1 million for fiscal 1995 and 1996,  respectively,
          pursuant  to  the  intrinsic   value  based  method  of  APB  25.  Had
          compensation  expense for the Company's plans been determined based on
          the fair  market  value of the  options at the grant  dates for awards
          under those plans  consistent  with the  provisions  of SFAS 123,  the
          Company's pro forma net loss and net loss per share would have been as
          presented below. Pro forma disclosures include the effects of employee
          and  non-employee  director stock options  granted during fiscal 1996,
          the three months ended December 31, 1996 and fiscal 1997.
Fiscal years ended                
                                     September 30,                   Three months ended             Fiscal year ended
                           -----------------------------------           December 31,                  December 31,
                                1995               1996                     1996                          1997
                           ---------------    ----------------    --------------------------    --------------------------
                                                      (in thousands, except per share amounts)
Net loss:
As reported                  $   (90,712)          (228,372)                 (61,313)                    (360,735)
Pro forma                       (101,423)          (242,974)                 (64,985)                    (369,677)

Net loss per share -
basic and diluted:
As reported                  $     (2.94)             (6.19)                   (1.47)                       (8.49)
Pro forma                          (3.29)             (6.59)                   (1.56)                       (8.70)
F-43

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The fair value of each  option  grant to  employees  and  non-employee
          directors other than NETCOM employees and  non-employee  directors was
          estimated on the date of grant using the Black-Scholes  option-pricing
          model with the following  weighted  average  assumptions:  an expected
          option  life  of  three  years  for  directors,   officers  and  other
          executives,  and two  years  for  other  employees,  for all  periods;
          expected  volatility of 50% for all periods;  and  risk-free  interest
          rates  ranging  from 5.03% to 7.42% for  fiscal  1995 and 1996 and the
          three months ended  December 31, 1996,  and risk-free  interest  rates
          ranging from 5.61% to 6.74% for fiscal 1997. Risk-free interest rates,
          as were currently  available on the grant date,  were assigned to each
          granted option based on the zero-coupon rate of U.S. Treasury bills to
          be held for the same period as the assumed option life. The fair value
          of each option grant to NETCOM  employees and  non-employee  directors
          was  estimated  on the date of grant  using the  Black-Scholes  option
          pricing  model with the following  weighted  average  assumptions:  an
          expected  option life of 1.6 years;  expected  volatility  of 80%; and
          risk free interest  rates of 6%. Since the Company does not anticipate
          issuing any dividends on its Common Stock,  the dividend yield for all
          options  granted was assumed to be zero.  The  weighted  average  fair
          market value of combined ICG and NETCOM options  granted during fiscal
          1995 and 1996,  the three  months  ended  December 31, 1996 and fiscal
          1997 was  approximately  $7.83,  $11.10,  $9.48 and $10.31 per option,
          respectively.

          As options  outstanding  at December 31, 1997 will continue to vest in
          subsequent  periods and additional  options are expected to be awarded
          under  existing  and new plans,  the above pro forma  results  are not
          necessarily  indicative  of the  impact  on net  loss and net loss per
          share in future periods.
F-44

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The following table summarizes the status of the Company's stock-based
          compensation plans:
Shares              Weighted
                                                     underlying            average                   Options
                                                       options           exercise price            exercisable
                                                 -------------------  --------------------  ------------------------
                                                   (in thousands)                               (in thousands)
Outstanding at October 1, 1994                    1,921        $       6.79                 1,059
       Granted                                         3,612               17.42
       Exercised                                        (487)               3.16
       Canceled                                         (218)              14.02
                                                 -------------------

     Outstanding at September 30, 1995                 4,828               14.92                 1,230
       Granted                                         2,054               18.30
       Exercised                                        (415)               7.35
       Canceled                                         (631)              24.73
                                                 -------------------

     Outstanding at September 30, 1996                 5,836               15.49                 2,771
       Granted                                           335               18.59
       Exercised                                         (31)               8.95
       Canceled                                          (56)              12.65
                                                 -------------------

     Outstanding at December 31, 1996                  6,084               15.68                 3,476
       Granted                                         3,377               14.94
       Exercised                                        (709)               8.13
       Canceled                                        (2,604)             25.32
                                                 -------------------

     Outstanding at December 31, 1997                   6,148              11.97                 3,532
                                                ===================
F-45

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          The following table summarizes  information about options  outstanding
          at December 31, 1997:
Options outstanding                            Options exercisable
                          ---------------------------------------------------------  ---------------------------------
                                                  Weighted
                                                  average            Weighted                              Weighted
          Range of                               remaining            average                              average
          exercise             Number           contractual          exercise             Number           exercise
           prices            outstanding            life               price           exercisable          price
      ------------------  ------------------  -----------------  ------------------  -----------------   -------------
                           (in thousands)        (in years)                           (in thousands)
$2.60  -    6.25            111               5.10            $    4.08                111           $   4.08
            7.94                 1,550               7.41                 7.94              1,550               7.94
        8.50  -  10.38           1,737               8.31                 9.99                651               9.67
       10.50  -  26.88           2,703               8.69                15.61              1,210              14.34
       27.06   - 46.65              47               9.17                27.94                  9              29.48
                          ------------------                                         ------------------
                                 6,148                                                      3,531
                          ==================                                         ==================
(c)  Warrants

          During fiscal 1995 and 1996,  the three months ended December 31, 1996
          and fiscal 1997, the Company's warrant activity was as follows:

          (i)  During fiscal 1993, the Company issued to a debt holder  warrants
               to purchase  17,067,  3,255 and 11,039  common shares at exercise
               prices of $6.56,  $7.38 and $7.88,  respectively.  During  fiscal
               1994,   17,067   warrants   were   exercised   for   proceeds  of
               approximately $0.1 million. In addition,  during fiscal 1994, the
               Company  issued to the same debt  holder  additional  warrants to
               purchase 1,989, 15,260 and 3,665 common shares of Holdings-Canada
               at $21.51, $20.01 and $11.80 per share,  exercisable on or before
               November   10,  1998,   March  24,   1999,   and  July  8,  1999,
               respectively.  An additional  7,725  warrants were issued on July
               10, 1995 at an exercise price of $14.50,  which expire on July 9,
               2000.  Also  issued  on July  10,  1995  were  60,000  additional
               warrants to an affiliate of the debt holder at an exercise  price
               of $14.50,  which expire on July 9, 2000. During the three months
               ended December 31, 1996, 1,231 of
F-46

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

               the $7.38 warrants,  4,456 of the $7.88 warrants and 2,215 of the
               $11.80 warrants were canceled.  During fiscal 1997,  2,024 of the
               $7.38 warrants,  6,583 of the $7.88 warrants, 1,450 of the $11.80
               warrants  and 17,429 of the $14.50  warrants  were  exercised  in
               exchange for Holdings-Canada  Class A common shares. In addition,
               50,296 of the $14.50  warrants  were  canceled.  At December  31,
               1997, a total of 17,249 of these warrants remained outstanding.

          (ii) During fiscal 1994, the Company issued to two financial  advisors
               warrants  to  purchase   75,000  and  200,000  common  shares  of
               Holdings-Canada.  These  warrants have an exercise price of $7.94
               and $18.00 and are  exercisable  for two- and five-year  periods,
               respectively.  During fiscal 1995 and 1996, 74,335 and 665 of the
               75,000   warrants   were   exercised   for  total   proceeds   of
               approximately  $0.6  million.   During  the  three  months  ended
               December 31, 1996, 100,000 of the 200,000 warrants were exercised
               for proceeds of approximately $1.8 million. At December 31, 1997,
               100,000 warrants remained outstanding.

          (iii)Pursuant  to a  private  placement  of the  Redeemable  Preferred
               Stock and the interim financing  arrangement  during fiscal 1995,
               the Company  issued  1,895,000  Series A Warrants  and  1,375,000
               Series B Warrants to purchase an equal number of common shares of
               Holdings-Canada   with  exercise   prices  of  $7.94  and  $8.73,
               respectively,  which expire on July 14, 2000. During fiscal 1996,
               the Company repurchased 458,333 each of the Series A and Series B
               Warrants for $3.21 and $2.52,  respectively (see note 11 (c)). In
               addition,  1,853,334 warrants were exercised in June 1996 through
               a cashless  exercise in which  1,271,651  Holdings-Canada  common
               shares were issued.  During fiscal 1997,  the  remaining  500,000
               warrants of the Series A and Series B warrants were  exercised in
               exchange for 346,014 common shares of Holdings-Canada, which were
               in turn  converted  into an equal  number of shares of ICG Common
               Stock.
F-47

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

          (iv) In connection with the 1995 Private Offering,  the Company issued
               1,928,190  warrants to purchase an equal number of common  shares
               of  Holdings-Canada.  The  warrants  were  exercisable  beginning
               August 8, 1996 at $12.51  per share and expire on August 6, 2005.
               During  fiscal 1997,  71,775  warrants  were  exercised for total
               proceeds of approximately $0.9 million and were in turn converted
               into an equal number of shares of ICG Common  Stock.  At December
               31, 1997, 1,856,415 of these warrants remained outstanding.

     The following table  summarizes  warrant activity for fiscal 1995 and 1996,
     the three months ended December 31, 1996 and fiscal 1997:
Outstanding                Price
                                                                    warrants                  range
                                                               --------------------  -------------------------
                                                                  (in thousands)
Outstanding, October 1, 1994                              310          $   7.38   -   21.51
                Granted                                                 5,266              7.94   -   14.50
                Exercised                                                 (74)                   7.94
                                                               --------------------
                Outstanding, September 30, 1995                         5,502              7.38   -   21.51
                Exercised                                              (1,854)             7.94   -    8.73
                Repurchased                                              (917)             2.52   -    3.21
                                                               --------------------

                Outstanding, September 30, 1996                         2,731              7.38   -   21.51
                Exercised                                                (100)                  18.00
                Canceled                                                   (8)             7.38   -   11.80
                                                               --------------------

                Outstanding, December 31, 1996                          2,623              7.38   -   21.51
                Exercised                                                (599)             7.38   -   14.50
                Canceled                                                  (50)                  14.50
                                                               --------------------

                Outstanding, December 31, 1997                          1,974             12.51  -    21.51
                                                               ====================
F-48

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(13) Stockholders' Deficit (continued)

     The  warrants  outstanding  on December  31,  1997 expire on the  following
     dates:
Outstanding                 Exercise
                       Expiration date                 warrants                     price
                  --------------------------      --------------------       --------------------
                                                     (in thousands)
November 10, 1998                            2                $     21.51
                  December 17, 1998                          100                      18.00
                  March 24, 1999                              15                      20.01
                  August 6, 2005                           1,857                      12.51
                                                  ====================
                                                           1,974
                                                  ====================
(14) Sale of Teleports

     In December  1995,  the Company  received  approximately  $21.1  million as
     partial  payment for the sale of four of its teleports and certain  related
     assets, and entered into a management  agreement with the purchaser whereby
     the purchaser assumed control of the teleport operations.  Upon approval of
     the  transaction  by the Federal  Communications  Commission  ("FCC"),  the
     Company  completed the sale in March 1996 and received an  additional  $0.4
     million due to certain  closing  adjustments,  for total  proceeds of $21.5
     million. The Company recognized a loss of approximately $1.1 million on the
     sale.  Revenue  associated  with these  operations was  approximately  $9.1
     million  and $2.5  million  for  fiscal  1995 and 1996,  respectively.  The
     Company  has  reported  results of  operations  from these  assets  through
     December 31, 1995.

(15) Restructuring and Related Charges

     Restructuring  and related  charges of $1.9 million  recorded during fiscal
     1997 are the result of a decision by management to  restructure  operations
     of NETCOM's  subsidiary in the United  Kingdom.  The  restructuring  charge
     includes  $1.4 million in accrued  expenses  for costs to terminate  excess
     leased office facilities and a write-off of office equipment, furniture and
     building  improvements  as a result of  consolidating  office space, a $0.3
     million   write-down  of   previously   capitalized   deferred   subscriber
     acquisition costs and $0.2 million for severance costs.
F-49

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies

     (a)  Network Construction

          In March 1996,  the Company and  Southern  California  Edison  Company
          ("SCE")  jointly  entered  into a 25-year  agreement  under  which the
          Company  will  lease  1,258  miles of fiber  optic  cable in  Southern
          California,  and can install up to 500 additional miles of fiber optic
          cable. This network,  which will be maintained and operated  primarily
          by the Company,  stretches from Los Angeles to southern Orange County.
          Under the terms of this agreement,  SCE will be entitled to receive an
          annual  fee  for  ten  years,  certain  fixed  quarterly  payments,  a
          quarterly  payment equal to a percentage of certain  network  revenue,
          and  certain  other   installation  and  fiber  connection  fees.  The
          aggregate  fixed  payments   remaining  under  the  agreement  totaled
          approximately  $144.7  million at December 31, 1997. The agreement has
          been accounted for as a capital lease in the accompanying consolidated
          balance sheets.

          In May 1997, the Company  entered into a long-term  agreement with The
          Southern  Company   ("Southern")  that  will  permit  the  Company  to
          construct a 100-mile  fiber optic network in the Atlanta  metropolitan
          area.  The Company paid $5.5 million upon  execution of the  agreement
          and is responsible for  reimbursement to Southern for costs of network
          design,   construction,    installation,   maintenance   and   repair.
          Additionally, the Company is also required to pay Southern a quarterly
          fee based on specified  percentages of the Company's  revenue  derived
          from services provided over this network.  Network construction on the
          initial  43-mile build is expected to be completed by May of 1998. The
          Company   estimates   costs  to  complete  the  initial  build  to  be
          approximately  $5.2  million.  Other  than the  initial  $5.5  million
          payment, no costs have been incurred as of December 31, 1997.

          In January 1997, the Company  announced the formation of ChoiceCom,  a
          strategic  alliance  between the Company and CSW, which is expected to
          develop and market  telecommunications  services in certain  cities in
          Texas. CSW holds 100% of the partnership interest in ChoiceCom and the
          Company has an option to purchase a 50%  interest at any time prior to
          July 1, 2003.  Subsequent  to July 1,  1999,  if the  Company  has not
          exercised  its  option,  CSW will have the  right to sell,  at a price
          pursuant to the terms of the limited partnership agreement, either 51%
          or 100% of the  partnership  interest  in  ChoiceCom  to the  Company.
          Additionally,  the  Company  has  committed  to loan $15.0  million to
          ChoiceCom under two promissory
F-50

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          notes, of which $10.0 million was advanced as of December 31, 1997 and
          the  remaining  $5.0 million was advanced  during the first quarter of
          fiscal 1998.

          In June 1997, the Company  entered into an  indefeasible  right of use
          ("IRU") agreement with Qwest Communications  Corporation ("Qwest") for
          approximately  1,800  miles  of fiber  optic  network  and  additional
          broadband  capacity in California,  Colorado,  Ohio and the Southeast.
          Network  construction  is ongoing  and is  expected  to be complete by
          December  1998.  The  Company  is  responsible   for  payment  on  the
          construction as segments of the network are completed and has incurred
          approximately  $8.0 million as of December 31, 1997,  with total costs
          anticipated  to be  approximately  $35.0  million.  Additionally,  the
          Company has  committed to purchase  $6.0  million in network  capacity
          from Qwest prior to the end of 1998.

     (b)  Company Headquarters

          During the three months ended December 31, 1996, the Company  acquired
          property for its new  headquarters  and commenced  construction  of an
          office building that will accommodate  most of the Company's  Colorado
          operations.   The  total  cost  of  the  project  is  expected  to  be
          approximately  $44.2 million, of which $29.4 million had been incurred
          as of December 31, 1997 and is included in  construction  in progress.
          In January 1998, the Company sold the substantially completed building
          to a third party and entered  into an  agreement  to lease back all of
          the office space under a 15-year  operating  lease which  includes two
          ten-year renewal terms.

     (c)  Other Commitments

          As part of the terms of the original purchase  agreement,  the Company
          was obligated to purchase,  at fair market value, all of the shares of
          Maritime   Telecommunications  Network,  Inc.  ("MTN"),  a  64%  owned
          subsidiary   of  the   Company,   that  were  owned  by  the  minority
          shareholders,   upon  demand  of  the  minority  shareholders,   if  a
          transaction  was not effected which converted the minority shares into
          publicly  traded  securities  or cash by January  3,  1998.  As of the
          current   date,   no  such  demand  has  been  made  by  the  minority
          shareholders.
F-51

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          NETCOM  has   guaranteed   monthly   usage  levels  with  its  primary
          communications  vendor,  which if not met, will obligate  NETCOM for a
          total of $9.3 million in each of fiscal 1998 and 1999, $7.6 million in
          fiscal  2000 and $4.2  million  in  fiscal  2001.  These  amounts  are
          exclusive of usage discounts.

          The Company has entered into  various  equipment  purchase  agreements
          with certain of its vendors.  Under these  agreements,  if the Company
          does not meet a minimum  purchase  level in any given year, the vendor
          may  discontinue  for that  year  certain  discounts,  allowances  and
          incentives  otherwise  provided  to  the  Company.  In  addition,  the
          agreements  may be terminated by either the Company or the vendor upon
          prior written notice.

          Additionally,  the Company has entered  into  certain  commitments  to
          purchase   capital   assets  with  an  aggregate   purchase  price  of
          approximately $19.5 million at December 31, 1997.

     (d)  Operating Leases

          The Company  leases  office space and equipment  under  non-cancelable
          operating leases. Lease expense was approximately $4.4 million,  $10.3
          million,  $2.4 million and $18.0 million for fiscal 1995 and 1996, the
          three  months ended  December 31, 1996 and fiscal 1997,  respectively.
          Estimated  future minimum lease  payments for the years  subsequent to
          December 31, 1997 are (in thousands):

                   Due December 31:
                     1998                      $        18,933
                     1999                               15,116
                     2000                               10,860
                     2001                                9,478
                     2002                                7,140
                     Thereafter                         53,909
                                           =========================
                                               $       115,436
                                           =========================
F-52

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

     (e)  Reciprocal Compensation

          The Company has  recorded  revenue of  approximately  $4.9 million for
          fiscal 1997 for reciprocal  compensation relating to the transport and
          termination  of local  traffic  to  Internet  service  providers  from
          customers of incumbent  local  exchange  carriers  pursuant to various
          interconnection  agreements.  These local  exchange  carriers have not
          paid most of the bills they have  received  from the  Company and have
          disputed  substantially  all of these charges based on the belief that
          such calls are not local traffic as defined by the various  agreements
          and under state and federal laws and public  policies.  The resolution
          of these  disputes  will be based on rulings by state  public  utility
          commissions and/or by the Federal  Communications  Commission ("FCC").
          To date, there have been favorable  rulings from 16 states,  favorable
          preliminary  decisions from three additional states and no unfavorable
          final rulings by any state public  utility  commission or the FCC that
          would  indicate  that calls  placed by end users to  Internet  service
          providers would not qualify as local traffic subject to the payment of
          reciprocal  compensation.  In addition,  cases are pending  before six
          other states.  While the Company  believes  that all revenue  recorded
          through  December 31, 1997 is collectible  and that future  reciprocal
          compensation revenue will be realized,  there can be no assurance that
          such future regulatory rulings will be favorable to the Company.

     (f)  Litigation

          On April 4, 1997, certain shareholders of the Company's majority owned
          subsidiary,   Zycom   Corporation   ("Zycom"),   an  Alberta,   Canada
          corporation,  filed a  shareholder  derivative  suit and class  action
          complaint for unspecified damages, purportedly on behalf of all of the
          minority  shareholders  of  Zycom,  in the  District  Court of  Harris
          County,  Texas (Cause No.  97-17777)  against the  Company,  Zycom and
          certain of their subsidiaries. This complaint alleges that the Company
          and certain of its  subsidiaries  breached  certain duties owed to the
          plaintiffs.  The Company is vigorously  defending the claims. While it
          is not possible to predict the outcome of this litigation,  management
          believes these  proceedings will not have a material adverse effect on
          the  Company's  financial  condition,  results of  operations  or cash
          flows.
F-53

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(16) Commitments and Contingencies (continued)

          The Company is a party to certain other litigation which has arisen in
          the ordinary  course of business.  In the opinion of  management,  the
          ultimate  resolution of these matters will not have a material adverse
          effect on the Company's financial condition,  results of operations or
          cash flows.

(17) Income Taxes

     The components of income tax (expense) benefit are as follows:
Fiscal years ended             Three months ended            
                                        September 30,                   December 31,              Fiscal year ended
                                  ---------------------------   -----------------------------        December 31,
                                     1995           1996             1995           1996                1997
                                  ------------  -------------   ---------------  ------------   ----------------------
                                                                    (in thousands)
Current income tax expense         $   (15)          (221)               (4)          (12)                   (38)
Deferred income tax benefit              -          5,329                 -             -                      -
                                  ------------  -------------   ---------------  ------------   ----------------------
       Total                        $  (15)         5,108                (4)          (12)                   (38)
                                  ============  =============   ===============  ============   ======================
Current  income tax  expense  represents  foreign  and state  income  taxes
     relating to operations of subsidiary  companies in foreign countries and in
     states requiring separate entity tax returns. Accordingly,  these entities'
     taxable  income  cannot be  offset  by the  Company's  net  operating  loss
     carryforwards.

     During fiscal 1996, the deferred tax liability was adjusted for the effects
     of  certain  changes  in  estimated  lives of  property  and  equipment  as
     discussed in note 2 (l). As a result,  the Company recognized an income tax
     benefit of $5.3 million.

     Income tax benefit  differs from the amounts  computed by applying the U.S.
     federal income tax rate to loss before income taxes  primarily  because the
     Company  has not  recognized  the income tax  benefit of certain of its net
     operating  loss  carryforwards  and other  deferred  tax  assets due to the
     uncertainty of realization.

     The tax  effect of  temporary  differences  that  give rise to  significant
     portions  of the  deferred  tax  assets and  deferred  tax  liabilities  at
     December  31, 1996 and 1997 are as follows:
F-54

ICG COMMUNICATIONS, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(17) Income Taxes (continued)
December 31,
                                                                      ------------------------------------------
                                                                             1996                  1997
                                                                      -------------------   --------------------
                                                                                   (in thousands)
Deferred income tax liabilities:
       Property and equipment, due to excess
         purchase price of tangible assets and
         differences in depreciation for book and
         tax purposes                                                 $      14,268              8,542
       Deferred subscriber acquisition costs                                  1,153                939
                                                                      -------------------   --------------------
                                                                             15,421              9,481
                                                                      -------------------   --------------------

       Deferred income tax assets:
         Net operating loss carryforwards                                   (96,569)          (184,201)
         Accrued interest on high yield debt obligations
           deductible when paid                                             (32,873)           (72,330)
         Accrued expenses not currently deductible for
           tax purposes, including deferred revenue                          (6,621)           (12,777)
         Less valuation allowance                                           120,642            259,827
                                                                      -------------------   --------------------
                                                                            (15,421)            (9,481)
                                                                      -------------------   --------------------

         Net deferred income tax liability                             $          -                  -
                                                                      ===================   ====================
As of December 31, 1997, the Company has net federal and foreign  operating
     losses  ("NOLs")  of   approximately   $442.0  million  and  $27.0  million
     respectively, which expire in varying amounts through 2012. However, due to
     the provisions of Section 382, Section 1502 and certain other provisions of
     the Internal Revenue Code (the "Code"),  the utilization of these NOLs will
     be limited.  The Company is also subject to certain  state income tax laws,
     which will also limit the  utilization of NOLs. As a result of ICG's merger
     with NETCOM,  which created a change in ownership of NETCOM of greater than
     50%,  the NOLs  generated  by NETCOM  prior to January 21, 1998 that can be
     used to reduce future  taxable  income are limited to  approximately  $15.0
     million per year.

     A valuation allowance has been provided for the deferred tax asset relating
     to the Company's NOLs, as management cannot determine when the Company will
     generate future taxable income.
F-55

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(18) Employee Benefit Plans

     The Company has established  salary  reduction  savings plans under Section
     401(k)  of  the  Code  which  the  Company  administers  for  participating
     employees.  All  full-time  employees  are  covered  under the plans  after
     meeting minimum service and age  requirements.  Under the plan available to
     NETCOM employees, the Company makes a matching contribution of 100% of each
     NETCOM  employee's  contribution  up to a maximum  of 3% of the  employee's
     eligible earnings.  Prior to 1997, the Company's matching  contribution was
     limited to 50% of each NETCOM employee's contribution up to a maximum of 6%
     of the employee's eligible earnings.  Under the plan available to all other
     Company employees,  the Company makes a matching contribution of ICG Common
     Stock up to a maximum of 6% of an employee's  eligible earnings.  Aggregate
     matching  contributions  under the  Company's  employee  benefit plans were
     approximately  $0.7 million,  $1.6  million,  $0.6 million and $3.6 million
     during fiscal 1995 and 1996,  the three months ended  December 31, 1996 and
     fiscal 1997, respectively.

(19) Summarized Financial Information of ICG Holdings, Inc.

     As discussed  in note 11, the 11 5/8% Notes issued by Holdings  during 1997
     are  guaranteed  by ICG.  The 12 1/2%  Notes  and 13 1/2%  Notes  issued by
     Holdings during fiscal 1996 and 1995, respectively,  are also guaranteed by
     ICG and  Holdings-Canada.  The separate  complete  financial  statements of
     Holdings  have not been  included  herein  because such  disclosure  is not
     considered to be material to the holders of the 11 5/8% Notes,  the 12 1/2%
     Notes  and  the 13  1/2%  Notes.  However,  summarized  combined  financial
     information for Holdings and subsidiaries and affiliates is as follows:
F-56

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(19) Summarized Financial Information of ICG Holdings, Inc. (continued)
Summarized Consolidated Balance Sheet Information

                                                                      December 31,
                                                         ---------------------------------------
                                                               1996                 1997
                                                         ------------------   ------------------
                                                                     (in thousands)
Current assets                                   $     449,059             215,817
          Property and equipment, net                            403,676             632,167
          Other non-current assets, net                           88,439             122,768
          Current liabilities                                     87,423              98,351
          Long-term debt, less current portion                   690,293             890,503
          Due to parent                                           11,485              30,970
          Other long-term liabilities                             73,113              66,939
          Preferred stock                                        159,120             292,442
          Stockholders' deficit                                  (80,260)           (408,453)
Summarized Consolidated and Combined Statement of Operations Information (a)

                                  Fiscal years ended                Three months ended           Fiscal year ended
                                     September 30,                     December 31,                 December 31,
                           ---------------------------------  --------------------------------
                                 1995             1996            1995              1996                1997
                           ---------------  ---------------- ----------------  ---------------  ----------------------
                                                               (unaudited)
                                                                 (in thousands)
Total revenue                 $ 111,610           169,094        35,399           56,956                273,354
Total operating costs
     and expenses               157,384           238,908        50,296           83,934                465,517
Operating loss                  (45,774)          (69,814)      (14,897)         (26,978)              (192,163)
Net loss                        (68,760)         (172,687)      (34,281)         (49,750)              (328,193)
(a)  Holdings-Canada's  51%  interest in FOTI was  contributed  to Holdings
          effective in February 1995 (the remaining 49% was purchased in January
          1996) and,  accordingly,  FOTI's  operations have been included in the
          consolidated amounts subsequent to that date.
F-57

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(20) Financial Information of ICG Holdings (Canada), Inc.

     Condensed financial information for Holdings-Canada only is as follows:

                                       Condensed Balance Sheet Information
December 31,
                                                         -----------------------------------------------
                                                                 1996                     1997
                                                         ----------------------   ----------------------
                                                                         (in thousands)
Current assets                                   $          165                    162
          Advances to subsidiaries                                 11,485                 30,790
          Non-current assets, net                                   2,793                  3,800
          Current liabilities                                         199                    107
          Long-term debt, less current portion                         65                     65
          Due to parent                                             1,566                 22,162
          Preferred stock                                         127,729                      -
          Share of losses of subsidiary                            80,260                408,453
          Shareholders' deficit                                   (67,647)              (396,035)
Condensed Statement of Operations Information

                                       Fiscal years ended           Three months ended                
                                         September 30,                   December 31,                  Fiscal year ended     
                                ---------------------------------  -------------------------------        December 31,
                                       1995            1996             1995            1996                  1997
                                -----------------  --------------  ---------------  --------------   ----------------------
                                                                    (unaudited)
                                                                   (in thousands)
Total revenue                 $            -                -               -                -                   -
  Total operating costs
    and expenses                         1,309            3,438             361               73                 195
  Operating loss                        (1,309)          (3,438)           (361)             (73)               (195)
  Losses from subsidiaries             (68,760)        (172,687)        (34,281)         (49,750)           (328,193)
  Net loss attributable to
    common shareholders                (76,648)        (184,107)        (34,642)         (49,823)           (328,388)
F-58

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(21) Summarized Financial Information of ICG Funding, LLC

     As  discussed  in note 12, the 6 3/4%  Preferred  Securities  issued by ICG
     Funding  during fiscal 1997 are  guaranteed  by ICG. The separate  complete
     financial  statements of ICG Funding have not been included  herein because
     such  disclosure  is not  considered to be material to the holders of the 6
     3/4% Preferred Securities.  For fiscal 1997, the statement of operations of
     ICG Funding included only the preferred dividends paid and accrued on the 6
     3/4% Preferred  Securities and interest  income earned on the proceeds from
     the offering of such securities.  The summarized  balance sheet information
     for ICG Funding is as follows:

                      Summarized Balance Sheet Information

                                                         December 31,
                                                            1997
                                                  -------------------------
                                                        (in thousands)

     Cash, cash equivalents and short-term
       investments available for sale                   $      108,282
     Restricted cash                                            24,649
     Dividends payable                                           1,218
     Due to parent                                               4,642
     Preferred securities                                      132,250
     Member deficit                                               (537)

(22) Condensed  Financial  Information  of  ICG  Communications,   Inc.  (Parent
     company)

     At December  31,  1997,  the  primary  asset of ICG was its  investment  in
     Holdings-Canada.  Certain  corporate  expenses  of the parent  company  are
     included in ICG's  statement  of  operations  and were  approximately  $1.2
     million for fiscal 1997. At December 31, 1997, ICG had no operations  other
     than those of ICG Funding, Holdings-Canada and its subsidiaries.
F-59

ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued
----------------------------------------------------------------------------

(23) Events Subsequent to Date of Independent Auditors' Report (Unaudited)

     (a)  Sale of Satellite Services Operating Subsidiaries

          On April 1, 1998, the Company  entered into  definitive  agreements to
          sell  the  capital  stock of MTN and  MCN,  the two main  subsidiaries
          within the  Company's  Satellite  Services  operations,  for aggregate
          consideration of approximately  $34.8 million.  The sales are expected
          to close  later  this  year and are  subject  to  certain  conditions,
          including regulatory approvals.

          At December 31, 1997,  the Company  owned a 64.5%  interest in MTN. In
          April  1998,  the  Company  paid  the  minority  shareholders  of  MTN
          approximately $3.1 million for the minority interest of MTN as well as
          other settlement costs.

     (b)  9 7/8% Notes

          On April 27,  1998,  ICG Services  completed a private  placement of 9
          7/8%  Senior  Discount  Notes due 2008 (the "9 7/8%  Notes") for gross
          proceeds  of  approximately  $250.0  million.  Net  proceeds  from the
          offering, after underwriting costs of approximately $7.5 million, were
          approximately $242.5 million.

          The 9 7/8% Notes are unsecured senior obligations of ICG Services that
          mature on May 1, 2008, at a maturity value of $405.3 million. Interest
          will accrue at 9 7/8% per annum, beginning May 1, 2003, and is payable
          each May 1 and November 1, commencing  November 1, 2003. The indenture
          for  the  9  7/8%  Notes  contains  certain  covenants  which  provide
          limitations on indebtedness,  dividends, asset sales and certain other
          transactions.

          The 9 7/8% Notes were  originally  recorded  at  approximately  $250.0
          million. The discount on the 9 7/8% Notes will be accreted through May
          1, 2003, the date on which the 9 7/8% Notes may first be redeemed.
EXHIBIT 99.2

   Financial Statement Schedule II : Valuation and Qualifying Accounts for the
     Fiscal Years Ended September 30, 1995 and 1996, the Three Months Ended
            December 31, 1996 and the Fiscal Year Ended December 31,
               1997, and the Independent Auditors' Report Thereon.
Independent Auditors' Report

The Board of Directors and Stockholders
ICG Communications, Inc.:

Under the date of April 16, 1998, we reported on the consolidated balance sheets
of ICG  Communications,  Inc. and  subsidiaries as of December 31, 1996 and 1997
and the related  consolidated  statements  of  operations,  stockholders  equity
(deficit) and cash flows for the fiscal years ended September 30, 1995 and 1996,
the three months ended December 31, 1996, and the fiscal year ended December 31,
1997. In connection with our audits of the aforementioned consolidated financial
statements,  we have also audited the related financial  statement  Schedule II:
Valuation and  Qualifying  Accounts.  This financial  statement  schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this financial  statement  schedule  based on our audits.  We did not
audit the  consolidated  financial  statements of NETCOM  On-Line  Communication
Services,  Inc.  ("NETCOM"),  a wholly owned  subsidiary  of the Company,  which
consolidated statements reflect total assets constituting 15.2 percent in fiscal
1996 and 11.7  percent  in fiscal  1997,  and total  revenue  constituting  32.0
percent in fiscal 1995,  41.6 percent in fiscal 1996,  39.0 percent in the three
months ended  December 31, 1996,  and 37.0 percent in fiscal 1997 of the related
consolidated  totals.  Those consolidated  financial  statements were audited by
other auditors  whose report has been furnished to us, and our opinion,  insofar
as it relates to the amounts  included in the financial  statement  schedule for
NETCOM, is based solely on the reports of the other auditors.

In our opinion,  based on the audits and the reports of the other auditors,  the
related financial statement  schedule,  when considered in relation to the basic
consolidated  financial  statements  taken as  whole,  presents  fairly,  in all
material respects, the information set forth therein.

As  explained in note 2 to the  consolidated  financial  statements,  during the
fiscal  year  ended  September  30,  1996,  the  Company  changed  its method of
accounting for long-term telecom services contracts.

                                              KPMG Peat Marwick LLP

Denver, Colorado
April 16, 1998
ICG COMMUNICATIONS, INC.
AND SUBSIDIARIES

Schedule II:  Valuation and Qualifying Accounts
-------------------------------------------------------------------------------
Additions
                                                            -----------------------------
                                               Balance at    Charged to     Charged to                      Balance at
                                               beginning      costs and        other                          end of
Description                                     of period     expenses        accounts     Deductions         period
---------------------------------------------  ------------ --------------  -------------  --------------  -------------
                                                                          (in thousands)
Allowance for uncollectible trade receivables:
Fiscal year ended September 30, 1995       $   1,106        2,560                -         (1,224)          2,442
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $   2,442        3,436                -         (2,473)          3,405
                                              ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   3,405        1,190                -         (1,184)          3,411
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   3,411        5,520                -         (1,927)          7,004
                                              ------------- --------------  -------------  --------------  -------------

Allowance for uncollectible note receivable:

    Fiscal year ended September 30, 1995       $       -          175                -              -             175
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $      175       7,100                -              -           7,275
                                              ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   7,275            -                -              -           7,275
                                              ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   7,275            -                -           3,975          3,300
                                              ------------- --------------  -------------  --------------  -------------

Allowance for investment impairment:

    Fiscal year ended September 30, 1995       $       -        2,000                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Fiscal year ended September 30, 1996       $   2,000            -                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Three months ended December 31, 1996       $   2,000            -                -               -          2,000
                                               ------------- --------------  -------------  --------------  -------------

    Fiscal year ended December 31, 1997        $   2,000        5,170                -           2,000          5,170
                                              ------------- --------------  -------------  --------------  -------------
See accompanying independent auditors' report.
EXHIBIT 99.3

               Report of Ernst & Young LLP, Independent Auditors,
                 Regarding the Consolidated Financial Statements
                of NETCOM On-Line Communication Services, Inc. as
                of December 31, 1996 and 1997 and for each of the
                            Three Years in the Period
                            Ended December 31, 1997.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
NETCOM On-Line Communication Services, Inc.

     We  have  audited  the   consolidated   balance  sheet  of  NETCOM  On-Line
Communication  Services,  Inc. as of December 31, 1996 and 1997, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the three years in the period  ended  December  31, 1997 (not  presented
separately  herein).  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NETCOM On-Line  Communication  Services,  Inc. at December 31, 1996 and 1997 and
the  consolidated  results of its  operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity  with generally
accepted accounting principles.

                                             ERNST & YOUNG LLP

San Jose, California
February 13, 1998
EXHIBIT 99.4

               Report of Ernst & Young LLP, Independent Auditors,
               Regarding the Consolidated Financial Statements of
                NETCOM On-Line Communication Services, Inc. as of
             December 31, 1996 and for the Three Months Then Ended.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
NETCOM On-Line Communication Services, Inc.

     We  have  audited  the   consolidated   balance  sheet  of  NETCOM  On-Line
Communication   Services,  Inc.  as  of  December  31,  1996,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the three months then ended (not presented  separately herein).  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NETCOM  On-Line  Communication  Services,  Inc.  at  December  31,  1996 and the
consolidated  results of its  operations and its cash flows for the three months
then ended, in conformity with generally accepted accounting principles.

                                               ERNST & YOUNG LLP

San Jose, California
April 16, 1998
SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                         ICG Communications, Inc.

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer
SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                         ICG Funding, LLC

                                         By:      ICG Communications, Inc.
                                                  Common Member and Manager

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer
SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                         ICG Holdings (Canada), Inc.

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President and
                                                  Chief Financial Officer
SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                         ICG Holdings, Inc.

Date:  June 12, 1998                     By:      /s/James D. Grenfell
                                                  --------------------
                                                  James D. Grenfell
                                                  Executive Vice President,
                                                  Chief Financial Officer and 
                                                  Director