<PAGE>

                                                                     Exhibit 4.7

                    AMERICAN TELESOURCE INTERNATIONAL, INC.

                             1998 STOCK OPTION PLAN


1.   PURPOSE.  The purpose of the American TeleSource International, Inc. 1998
     -------
     Stock Option Plan (this "Plan") is to promote the interest of American
     TeleSource International, Inc., a Delaware corporation (the "Company"), and
     its stockholders by providing an effective means to attract, retain and
     increase the commitment of certain individuals and to provide such
     individuals with additional incentive to contribute to the success of the
     Company.

2.   ELIGIBILITY.  Options may be granted under the Plan to directors and
     -----------
     employees of, and advisors and consultants to, the Company, or of any
     parent or subsidiary of the Company (if any) provided, however, in the case
     of consultants or advisors, that such grant be in consideration of bona
     fide services rendered by such consultant or advisor and such services not
     be in connection with the offer or sale of securities in a capital-raising
     transaction. The Committee (defined below) shall select from such eligible
     class the individuals to whom Options shall be granted from time to time.

3.   ADMINISTRATION OF THE PLAN.  The Plan shall be administered by a committee
     --------------------------
     (the "Committee") consisting of at least two outside "non-employee
     directors, " as defined in Rule 16b-3 ("Rule 16b-3") under the Securities
     Exchange Act of 1934, as amended (the "Exchange Act"). A quorum of such
     Committee shall consist of a majority of the members of such Committee, or
     as may be otherwise provided in the Company's bylaws. The Committee shall
     hold meetings at such times and places and conduct its business at such
     meetings as it may determine, subject to any express provisions of the
     Company's bylaws. Acts of a majority of the Committee members attending a
     meeting at which a quorum is present, or such acts as are reduced to or
     approved in writing by the majority of the members of the Committee, shall
     be the valid acts of the Committee. The Committee shall from time to time
     in its discretion determine which individuals shall be granted Options, the
     amount of shares covered by such Options (as defined below), and certain
     other specific terms and conditions of such Options subject to the terms
     and conditions contained herein. Notwithstanding anything in this Plan to
     the contrary, the full Board of Directors of the Company shall determine
     whether any member of the Committee shall be granted Nonqualified Stock
     Options (as defined below) under the Plan, the terms and provisions of the
     respective agreements evidencing such options, the times at which such
     options shall be granted, and the number of shares of Common Stock subject
     to each such option and shall make all determinations under the Plan with
     respect to such options (which determinations of the Board of Directors
     shall be conclusive).The Committee shall have the sole authority and power,
     subject to the express provisions and conditions hereof, to construe this
     Plan and the Options granted hereunder, and to adopt, prescribe, amend, and
     rescind rules and regulations relating to this Plan, and to make all
     determinations necessary or advisable for administering this Plan. The
     Committee shall also have the authority and power to modify any provision
     of this Plan to render the Plan consistent with any amendments to Rule 16b-
     3 or Form S-8 of the Securities Act of 1933, as amended (the "Securities
     Act"), including amendments which permit the grant of Options on terms
     which are less restrictive than the terms set forth herein. The
     interpretation by the Committee of any provision of this Plan with respect
     to any incentive stock option granted hereunder shall be in accordance with
     section 422 of the Internal Revenue Code of 1986 and the regulations issued
     thereunder, as amended from time to time (the "Internal Revenue Code"), in
     order that the incentive stock options granted hereunder ("Incentive Stock
     Options") shall constitute "incentive stock options" within the meaning of
     section 422 of the Internal Revenue Code. Options granted under the Plan
     which are not intended to be Incentive Stock Options are referred to herein
     as "Nonqualified Stock Options." The term "Options" as used herein shall
     refer to Incentive Stock Options and Nonqualified Stock

                                       1
<PAGE>

     Options, either collectively or without distinction. The interpretation and
     construction by the Committee, if any, of any provisions of the Plan or of
     any Option granted hereunder shall be final and conclusive. No member of
     the Committee shall be liable for any action or determination made in good
     faith with respect to the Plan or any Option granted hereunder.


4.   SHARES SUBJECT TO THE PLAN.  Subject to the provisions of Section 6, the
     --------------------------
     number of shares subject to Options granted hereunder shall not exceed
     2,000,000 shares of the Company's authorized but unissued or reacquired
     Common Stock (the "Common Stock"). Such number of shares shall be subject
     to adjustment as provided in Section 6 below. Shares that by reason of the
     expiration, termination, cancellation or surrender of an Option are no
     longer subject to purchase pursuant to an Option granted under the Plan
     (other than by reason of exercise of such Option) may be reoptioned
     hereunder. The maximum number of shares of Common Stock for which Options
     granted hereunder to an eligible person shall not exceed 50% of the total
     number of shares authorized for issuance hereunder.


5.   TERMS AND CONDITIONS.
     --------------------

(A)  Option Price.  Each Option shall state the number of shares that may be
     purchased thereunder, shall expressly designate such Option as an Incentive
     Stock Option or a Nonqualified Stock Option, and shall state the option
     price per share (the "Option Price") which shall be paid in the manner
     specified in this Section 5(A) in order to exercise such Option.  The
     Option Price shall not be less than the lesser of (i) 100% of the fair
     market value of a share on the date the Option is granted or (ii) the
     average fair market value of a share during the 10-day trading period
     immediately preceding the day the Option is granted (but not less than 85%
     of the fair market value on the date of grant) with respect to any
     Nonqualified Stock Option granted under the Plan.  The Option Price shall
     not be less than 100% of the fair market value of the shares on the date
     the Option is granted with respect to any Incentive Stock Option.

          For purposes of the Plan, the fair market value per share of
     Common Stock on any date shall be deemed to be the closing price of a share
     of Common Stock on the principal national securities exchange on which the
     Common Stock is then listed or admitted to trading, if the Common Stock is
     then listed or admitted to trading on any national securities exchange. The
     closing price shall be the last reported sale price regular way, or, in
     case no such sale takes place on such day, the average of the closing bid
     and asked prices regular way, as reported by such exchange. If the Common
     Stock is not then so listed on a national securities exchange, the fair
     market value per share of Common Stock on any date shall be deemed to be
     the closing price (the last reported sale price regular way) in the over-
     the-counter market as reported by the Nasdaq National Market, if the Common
     Stock closing price is then reported on the Nasdaq National Market, or, if
     the Common Stock closing price of the Common Stock is not then reported by
     the Nasdaq National Market, shall be deemed to be the mean of the highest
     closing bid and lowest closing asked price of the Common Stock in the over-
     the-counter market as reported on the Nasdaq Stock Market or, if the Common
     Stock is not then quoted by Nasdaq Stock Market, as furnished by any member
     of the National Association of Securities Dealers, Inc. selected from time
     to time by the Company for that purpose. If no member of the National
     Association of Securities Dealers, Inc. furnishes quotes with respect to
     the Common Stock of the Company, such fair market value shall be determined
     by resolution of the Committee. Notwithstanding the foregoing provisions of
     this Section 5(A), if the Committee shall at any time determine that it is
     impracticable to apply the foregoing methods of determining fair market
     value, the Committee is empowered to adopt other reasonable methods for
     such purpose. The Committee may, if it deems it appropriate, engage the
     services of an independent qualified expert or experts to appraise the
     value of the Common Stock.
          Options under the Plan may be exercised by payment of the Option
     Price per share in cash or, if the Common Stock is then registered under
     the Exchange Act and an established

                                       2
<PAGE>

     market exists for the Common Stock, by delivery of the equivalent fair
     market value of Common Stock or by a "cashless exercise" procedure in which
     an Optionee is permitted to exercise an Option by arranging with the
     Company and his or her broker to deliver the appropriate Option Price from
     the concurrent market sale of the acquired shares, or a combination of the
     foregoing (subject to the discretion of the Committee). An employee's
     withholding tax due upon exercise of a Nonqualified Stock Option may be
     satisfied either by a cash payment or the retention from the exercise of a
     number of shares of Common Stock with a fair market value equal to the
     required withholding tax, as the Committee may permit.

               In addition, with respect to the exercise of any Nonqualified
          Stock Option, the Committee (or an authorized representative) shall
          advise the Optionee, upon receipt of notice of intent to exercise such
          Option, of the income tax withholding consequences to such Optionee of
          such exercise, the amount of the appropriate withholding tax and any
          other payments due by reason thereof.  Such Optionee must satisfy all
          of the preceding payment requirements in order to receive stock upon
          exercise of such Option.

     (B)  Option Period. Any Options granted pursuant to this Plan must be
          -------------
          granted within three years from the date the Plan was adopted by the
          Board of Directors of the Company (September 9, 1998).

               Each Option shall state the date upon which it is granted.
          Subject to the requirements under the Internal Revenue Code with
          respect to Incentive Stock Options, each Option shall be exercisable
          at such times and during such period as is determined by the Committee
          and set forth in the agreement evidencing the Option, but in no event
          shall an Option be exercisable after the expiration of ten years from
          the date of grant.  Subject to such limitations, the Committee shall
          have broad discretion to determine the circumstances under which each
          Option shall become exercisable, remain exercisable and terminate, and
          the Committee may waive any condition, restriction or limitation on
          the exercisability or duration of any outstanding Option.

     (C)  Assignability.  An Option granted pursuant to this Plan shall be
          -------------
          exercisable during the Optionee's lifetime only by the Optionee and
          shall not be assignable or transferable by the Optionee (except with
          the Committee's prior written approval, and only in any such
          additional circumstances as shall not affect the Plan's qualification
          with the requirements of the incentive stock option provisions of the
          Internal Revenue Code, the requirements of Rule 16b-3 under the
          Exchange Act, or the plan eligibility requirements for the use of Form
          S-8 of the Securities Act), and shall not be subject to levy,
          attachment or similar process. Upon any other attempt to transfer,
          assign, pledge or otherwise dispose of Options granted under this
          Plan, such Options shall immediately terminate and become null and
          void.

     (D)  Limit on 10% Shareholders. No Incentive Stock Option may be granted
          --------------------------
          under this Plan to any individual who would, immediately after the
          grant of such Incentive Stock Option directly or indirectly own more
          than 10% of the total combined voting power of all classes of stock of
          the Company or of any parent or subsidiary corporation unless (i) such
          Incentive Stock Option is granted at an Option Price not less than
          110% of the fair market value of a share on the date the Incentive
          Stock Option is granted, and (ii) such Incentive Stock Option expires
          on a date not later than five years from the date the Incentive Stock
          Option is granted.

     (E)  Limits on Options. Except as provided herein, an individual may be
          -----------------
          granted one or more Options, provided that the aggregate fair market
          value (determined as of the time the Option is granted) of Common
          Stock for which an individual may be granted Incentive Stock Options
          that are first exercisable in any calendar year (under all stock
          option plans of the Company and any parent or subsidiary corporations,
          if any) may not exceed $100,000 .

     (F)  Rights as Shareholder. An Optionee, or a transferee by will or
          ---------------------
          inheritance of an Option, shall have no rights with respect to any
          shares covered by an Option until the date of the issuance of a stock
          certificate for such shares and the recording of such issuance upon
          the Company's stock

                                       3
<PAGE>

          ledger by its duly appointed, regular transfer agent. No adjustment
          shall be made for dividends (ordinary or extraordinary, whether in
          cash, securities or other property) or distributions or other rights
          for which the record date is prior to such date, except as provided in
          Section 6 hereof.

     (G)  Additional Provisions. The Options granted under this Plan shall
          ---------------------
          contain such other provisions as the Board or Committee shall deem
          advisable, including, without limitation, further restrictions upon
          the exercise of the Option. Any Incentive Stock Option shall contain
          such limitations and restrictions upon the exercise of the Option as
          shall be necessary in order that the Option shall be an "incentive
          stock option" as defined in section 422 of the Internal Revenue Code.

     (H)  Compliance With Securities Laws. At the time of exercise of any
          -------------------------------
          Option, the Company may require the Optionee to execute any documents
          or take any action which may then be necessary to comply with the
          Securities Act and the rules and regulations adopted thereunder, or
          any other applicable federal or state laws regulating the sale and
          issuance of securities, and the Company may, if it deems necessary,
          include provisions in the Options to assure such compliance. The
          Company may from time to time change its requirements with respect to
          enforcing compliance with federal and state securities laws, including
          the request for, or insistence upon, letters of investment intent,
          such requirements to be determined by the Company in its judgment as
          necessary to assure compliance with such securities laws. Such changes
          may be made with respect to any particular Option or to any stock
          issued upon exercise thereof.

6.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.  In the event of any change in
     ------------------------------------------
the number of issued and outstanding shares of Common Stock which results from a
stock split, reverse stock split, the payment of a stock dividend or any other
change in the capital structure of the Company, such as a reorganization or
recapitalization, the Committee shall appropriately adjust (a) the maximum
number of shares which may be issued under this Plan, (b) the number of shares
subject to each outstanding Option, and (c) the Option Price per share thereof,
so that upon exercise of the Option the Optionee shall receive the same number
of shares the Optionee would have received had the Optionee been the holder of
all shares subject to such outstanding Options immediately before the effective
date of such change in the number of issued shares of the Common Stock of the
Company. Any such adjustment shall not result in or entitle the Optionee to the
issuance of fractional shares. Instead, appropriate adjustments to any such
Option and, in the aggregate, all other options of the Company of the same class
(that is, Incentive Stock Options or Nonqualified Stock Options) held by each
Optionee shall be made so that such Option and other options of the same class,
if any, held by any such Optionee cover the greatest whole number of shares of
the Common Stock which does not exceed the number of shares which would be
covered applying such adjustments in the absence of any restriction on the
issuance of fractional shares. Any excess fractional share shall be redeemed in
cash at the then-current fair market value of the Common Stock (determined as
provided in Section 5(A) hereof) multiplied by the appropriate fraction of a
share.

7.   TERMINATION OR AMENDMENT OF THE PLAN.  The Board of Directors may at any
     ------------------------------------
time suspend, amend, or terminate this Plan. No amendment may be adopted without
shareholder approval that will: (a) increase the number of shares of Common
Stock which may be issued under this Plan; (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c) effect any
other change requiring shareholder approval under the Internal Revenue Code. No
amendment or termination of the Plan shall, without the consent of the Optionee,
materially decrease any rights or benefits under any Option previously granted
under this Plan.

                                       4