U S WEST / Report of Independent Public Accountants

To the Board of Directors and Stockholders of U S WEST, Inc.:

We have audited, in accordance with generally accepted auditing standards, the consolidated balance sheets of U S WEST, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1998, appearing in the proxy statement ("Proxy Statement") for the 1999 annual meeting of stockholders of U S WEST, Inc. (not presented herein). In our report dated January 22, 1999, also appearing in the Proxy Statement, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements on pages 29 to 30 is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived.

Arthur Andersen LLP
Denver, Colorado
January 22, 1999

Safe Harbor Statement: This document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For these statements, we claim the safe harbor for "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ from expectations include: (i) greater than anticipated competition from new entrants into the local exchange, intraLATA toll, wireless, data and directories markets, causing loss of customers and increased price competition; (ii) changes in demand for U S WEST's products and services, including optional custom calling features; (iii) higher than anticipated employee levels, capital expenditures and operating expenses (such as costs associated with interconnection and year 2000 remediation); (iv) the loss of significant customers; (v) pending and future state and federal regulatory changes affecting the telecommunications industry, including changes that could have an impact on the competitive environment in the local exchange market; (vi) a change in economic conditions in the various markets served by U S WEST's operations;
(vii) higher than anticipated start-up costs associated with new business opportunities; (viii) delays in U S WEST's ability to begin offering interLATA long-distance services; (ix) consumer acceptance of broadband services, including telephony, data and wireless services; and (x) delays in the development of anticipated technologies, or the failure of such technologies to perform according to expectations. These cautionary statements should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by U S WEST. U S WEST cannot always predict or determine after the fact what factors would cause actual results to differ materially from those indicated by the forward-looking statements or other statements. In addition, readers are urged to consider statements that include the terms "believes," "belief," "expects," "plans," "objectives," "anticipates," "intends," or the like to be uncertain and forward-looking. All cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. U S WEST does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

U S WEST Board of Directors

Linda G. Alvarado
President and CEO, Alvarado Construction

Craig R. Barrett
President and CEO, Intel Corporation

Hank Brown
President, University of Northern Colorado; Former U.S. Senator from Colorado

Jerry J. Colangelo
Owner, Chairman and CEO, Arizona Diamondbacks; President and CEO, Phoenix Suns, NBA

George J. Harad
Chairman of the Board and CEO, Boise Cascade Corporation

Peter S. Hellman
President and COO, TRW, Inc.

Allen F. Jacobson
Retired, Chairman and CEO, Minnesota Mining and Manufacturing

Richard D. McCormick
Chairman of the Board, Retired CEO, Old U S WEST, Inc.

Marilyn Carlson Nelson
Vice Chair, President and CEO, Carlson Companies, Inc.; Co-Chair, Carlson Wagonlit Travel

Frank Popoff
Chairman, Dow Chemical Company

Solomon D. Trujillo
President and CEO, U S WEST, Inc.

Mr. Trujillo assumed his present title in 1998 when U S WEST officially split into two independent, publicly traded companies. Previously, he was President and CEO of U S WEST Communications since 1995. Mr. Trujillo has been called "the first digital telecom CEO" by former Presidential Science Advisor Jay Keyworth. He joined U S WEST in 1974 and has successfully led Small Business Operations, state public policy efforts, and the company's directory publishing arm. Mr. Trujillo serves on the corporate boards of directors for the Dayton Hudson Corporation and Bank of America. He also advises the United States government on trade policies as an appointee to the Investment and Services Policy Advisory Committee of the Office of the President.

U S WEST Leadership Team

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Solomon D. Trujillo
President and CEO

Betsy Bernard
Executive VP, Retail Markets

Mark D. Roellig
Executive VP--Public Policy, Human Resources, Law, General Counsel and Secretary

Allan Spies
Executive VP and Chief Financial Officer

Greg M. Winn
Executive VP, Operations & Technologies

John A. Kelley
President, Wholesale Markets

Peter A. Mannetti
President, U S WEST Wireless

Jim Smith
President and CEO, U S WEST Dex

Joseph R. Zell
President, U S WEST !NTERPRISE Networking

Kathy Stephens
Chief Operating Officer, U S WEST Long Distance

Dana Philip Dunne
VP--Strategy Development

Mike Fernandez
VP--Public Relations

Dave R. Laube
VP and Chief Information Officer

U S WEST Overview

[Logo -- US WEST life's better here (Registered Trademark)]

Voice

With revenues in excess of $11 billion in 1998, our retail and wholesale businesses each generated significant growth in 1998. Combined voice revenues from both businesses were $9.7 billion in 1998.

Growth

Our overall business increased by 13 percent in 1998. Our wholesale business grew to $2.6 billion in 1998, a 10 percent increase over 1997, excluding mandated price decreases.

Caller ID penetration grew by 40 percent-plus in 1998.

Opportunity

By building integrated solutions for customer needs, we will further develop our relationship with our customers.

Data

Total data revenues for U S WEST in 1998 were nearly $1.3 billion. The bulk of the growth in that area is coming from !NTERPRISE, whose revenues increased 46 percent last year to $533 million.

Growth

Attained more than 20,000 subscribers to MegaBit Services DSL offering. Opportunity

We will generate $2-3 billion in revenue in 3-5 years.

Internet

We are taking advantage of the "renaissance of copper" by turbo-charging our customers' copper phone lines--providing Internet access and high-speed data options through our MegaBit Services digital subscriber line offering.

Growth

Internet access service uswest.net now has more than 150,000 subscribers--tops for any RBOC in its first year of rollout.

Opportunity

By some estimates, in less than five years, some 80 percent of the relative traffic on telephone networks will be for data and Internet usage. Winning even a small slice of that traffic will yield big results.

Wireless
Our first-in-the-nation PCS wireless service offers unique, integrated features to 13 million-plus potential customers in six major markets through-out the U S WEST 14-state region.

Growth

Attained 185,000 subscribers by the end of 1998.

More than 50 percent of subscribers opt for some level of integration. Churn among these subscribers is far lower than the industry average.

Opportunity

We will roll out additional markets in 1999.

We expect to generate some $200 million in revenues in 1999.

Directories

Acquired as a result of the June 1998 split of U S WEST from MediaOne, Dex had 1998 revenues of almost $1.3 billion.

Recognized as an industry leader in the area of directory publishing, Dex is aggressively pursuing Internet and e-commerce opportunities as well.

Growth

Published revenues grew an industry-leading 7 percent in 1998.

Internet Yellow Pages business more than doubled in 1998.

Opportunity

We plan to aggressively pursue electronic commerce opportunities with website design and development.

Video
Today we have 15,000-plus customers in service in Omaha, Neb. During 1999, we will begin rapid rollout of a cable-like video offering in Phoenix after having won several video franchises in that metro area in late 1998.

Opportunity

Bundling these services with core wireline and wireless services will help increase the average customer bill from about $40 today to as much as $200 within five years.

[Inside Back Cover]

[VSA Partners Inc., Chicago (Design). Paul Elledge (Photography), Art Wise (Photography). Graphic Arts Center (Printing).]

General Information

Annual Meeting

The Annual Meeting of Shareowners is scheduled at 10:30 am EDT on May 11, 1999, at the Millennium Broadway Hotel in New York City. A signer will be at the meeting to assist the hearing impaired.

Stock Exchanges

U S WEST common stock is listed on the New York and Pacific Stock Exchanges. U S WEST stock is traded under the ticker symbol "USW."

Shareowner Investment Plan

Shareowners may reinvest all or part of their USW dividend in additional shares of U S WEST stock. They may also make additional cash payments to purchase additional shares. For information, contact Shareowner Services, 1.800.537.0222.

Corporate Headquarters

U S WEST, Inc.
1801 California Street, Suite 5200
Denver, CO 80202

Toll-free phone number: 1.800.879.4357
http://www.uswest.com

Shareowner Information
If you have questions about U S WEST or need information about your U S WEST stock account, the following services are available to help you.

Shareowner Services

For inquiries about (or changes to) your stock account; general inquiries about stock certificates, stock transfers or U S WEST dividends; or to request a Form 10-K, please write:

U S WEST, Inc.
P.O. Box 8935
Boston, MA 02266-8935

For dividend reinvestment, please write or call:
U S WEST, Inc.
P.O. Box 8936
Boston, MA 02266-8936
Toll-free phone number: 1.800.537.0222

Shareowners calling from Alaska, Hawaii or outside the United States, please call collect: 0.505.989.2004.

Investor Relations

For information about the company's financial performance and prospects, please write or call:

U S WEST, Inc.
Investor Relations Department
1801 California Street, Suite 4320
Denver, CO 80202

Phone: 303.896.1277; Fax: 303.965.0550

Financial Statements Available

Consolidated financial statements for U S WEST and its subsidiaries are included in the Annual Report of U S WEST for 1998. Additional copies of these statements and the Annual Report on Form 10-K for the year ended December 31, 1998 (excluding exhibits, unless such exhibits have been specifically incorporated by reference thereon), may be obtained without charge from our Secretary, 1801 California Street Suite 5100, Denver, CO 80202. The Annual Report on Form 10-K is also on file with the SEC, Washington, D.C. 20549, and the New York Stock Exchange.

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[Logo: U S WEST (Registered Trademark) life's better here (Bell Trademark)]

Find out more at:
www.uswest.com/heartohere