Washington, D.C. 20549


                                    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): January 21, 1997

             (Exact Name of Registrant as Specified in its Charter)

          Delaware                      0-19437                  11-2962080
(State or Other Jurisdiction    (Commission File Number)      (I.R.S. Employer
    of Incorporation)                                        Identification No.)

           2401 Fourth Avenue
           Seattle, Washington                                     98121
(Address of Principal Executive Offices)                         (Zip Code)

                                 (206) 443-6400
              (Registrant's telephone number, including area code)


           This  Current  Report  on Form  8-K is filed  by  Cellular  Technical
Services Company,  Inc., a Delaware  corporation (the "Company"),  in connection
with the matters described herein.


           On  January  21,  1997,  the  Company  and Mr.  Robert  P.Dahut,  the
Company's President and Chief Operating Officer, entered into a letter agreement
modifying  the  employment  relationship  between  the  Company  and Mr.  Dahut.
Reference is made to the Letter Agreement attached as an Exhibit to this Report.


(c)        Exhibits.

99         Letter  Agreement  dated  January 21,  1997,  between the Company and
           Robert P. Dahut.



           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.

Date:   February 5, 1997
                                           CELLULAR TECHNICAL SERVICES,
                                              COMPANY, INC.

                                           By:  /s/ Michael E. McConnell
                                                Michael E. McConnell,
                                                Chief Financial Officer


                                January 21, 1997

Mr. Stephen Katz
Chief Executive Officer
Cellular Technical Services Company, Inc.
2401 Fourth Avenue, Suite 808
Seattle, Washington  98121

Dear Steve:

           As per our ongoing  discussions,  given the issues  currently  facing
CTS, I agree that our mutual best  interests  would be served if I were to agree
to a  substantial  reduction in my duties at CTS at your  discretion.  This will
give each of us an  opportunity  to  further  examine  our needs from each other
while  allowing me the  flexibility I desire.  With this in mind, I agree to the
terms described below.

           Beginning on January 22, 1997, I will cease  full-time  employment at
CTS's offices but will continue employment with CTS on an "at will" basis and as
described  below,  unless and until we otherwise agree in writing.  Beginning on
such date, I will:  (i) work on CTS matters at CTS's  offices for  approximately
one day per week and at home for  approximately  four days per week, (ii) act on
behalf of CTS at your direction and only after gaining your  concurrence to such
action;  (iii)  receive a base salary of $1,500 per week,  plus the same health,
medical,  dental,  and car allowance  benefits as in effect and applicable to me
prior to the date of this letter;  and (iv)  cooperate and negotiate with CTS in
good faith regarding any new written  employment  agreement offered to me by you
or the Board of Directors of CTS. If,  within five weeks after January 22, 1997,
we do not enter into a new written employment  agreement for any reason, I will,
upon your request at any time thereafter, resign from my positions as an officer
and member of the Board of  Directors  of CTS, but continue to cooperate in good
faith with CTS as to any matters which you feel may require my assistance.

           In exchange for the above terms,  which I acknowledge  to be good and
valuable  consideration,  I agree to the  following  effective as of the date of
this letter:

           (i) the Nonqualified  Stock Option Agreement  between CTS and I dated
December  21,  1993,  is amended to reflect  that,  regardless  of my  continued
employment  at CTS, I will vest in only  75,000 of the options  which  otherwise
would have vested on the third anniversary of my date of employment (taking into
consideration all stock splits), but I will not exercise any of my options until
June 1, 1997,  after which time I will  exercise no more than 27,000  options in
any given month;

           (ii) the Employment  Agreement  between CTS and I dated as of January
31, 1994 is terminated by the mutual agreement of the parties, such that neither
party will have any further  obligation to the other party under such agreement,
except for the obligations  under Sections 8, 9, and 10, which will survive such
termination and continue thereafter in full force and effect;

           (iii) CTS and all of its officers,  directors,  employees, and agents
are hereby  released  and forever  discharged  from any and all claims,  whether
known or unknown, which I may have against CTS

Stephen M. Katz
January 21, 1997
Page 2

arising out of or relating to my employment  with CTS or otherwise  (except only
for any claims based upon a breach by CTS of any of its obligations set forth in
this letter),  and I agree that I will not initiate or assist in any such action
after the date of this letter; the above release includes, without limitation, a
release of any and all claims I may have for  employment  discrimination  or any
wrongful  action in  connection  with my  employment,  whether such claims arise
under common law or under any federal, state, or local law or regulation;

           (iv) I will keep the terms, conditions,  and existence of this letter
confidential  and not disclose any such terms,  conditions,  or existence to any
other  person  or entity  without  the  express  written  approval  of CTS or as
required by a court order or applicable law; and

           (v) I will not make any  disparaging  remarks  about CTS,  any of its
officers, directors, employees, or agents, or any of its products or services to
any person or entity;  however, I will have the right to give truthful testimony
if I am required to testify as required by a court order or applicable law.

           I  understand  that this letter  releases  certain  claims I may have
against CTS and its officers,  directors,  employees, and agents, and understand
that I have the right to consult  counsel of choice and have  either  done so or
knowingly  waived the right to do so. I am entering  into this letter  agreement
voluntarily on my own accord.

           If you agree with the above terms,  please indicate your agreement by
signing a copy of this letter in the space provided below.

                                          Very truly yours,

                                          /s/ Robert P. Dahut
                                          Robert P. Dahut

ACCEPTED AND AGREE TO as of     January 21     , 199  7   .
                            -------------------     ------


By    /s/ Stephen Katz   
     Stephen Katz, Chief Executive Officer