UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                FORM 10-K/A
                              Amendment No. 2

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                     OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                      Commission file number 000-21043

                       Pacific Gateway Exchange, Inc.
           (Exact name of registrant as specified in its charter)


        Delaware                                          94-3134065
        --------                                          ----------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                         Identification No.)


       500 Airport Boulevard, Suite 340, Burlingame, California 94010
       --------------------------------------------------------------
                  (Address of principal executive offices)


                       Telephone Number: 650-375-6700
            ----------------------------------------------------
            (Registrant's telephone number, including area code)


        Securities registered pursuant to Section 12(g) of the Act:


        Preferred Share Purchase Rights, Par Value $.0001 per Share
                 Common Shares, Par Value $.0001 per Share
                              (Title of class)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes  [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the shares of all classes of voting stock of
the registrant held by non-affiliates of the registrant on March 31, 2000
was approximately $257,140,848, computed upon the basis of the closing
sales price of the Common Shares on that date. For the purposes of this
computation, shares held by directors (and shares held by any entities in
which they serve as officers) and executive officers of the registrant have
been excluded. Such exclusion is not intended, nor shall it be deemed to be
an admission that such persons are affiliates of the registrant.

As of March 31, 2000, there were outstanding 20,087,835 Common Shares of
$.0001 par value, of the registrant.




<PAGE>

<TABLE>
<CAPTION>

                         Summary Compensation Table


                                                                           Annual Compensation         Long-Term Compensation
                                                                      ---------------------------- -------------------------------
                                                                                           Other
                                                                                           Annual                      Securities
                                                        Year Ended                         Compen-   Restricted        Underlying
             Name and Principal Position                December 31    Salary      Bonus   sation    Stock Awards      Options (#)
------------------------------------------------------- -----------   --------   --------  -------  ---------------   ------------
<S>                                                      <C>          <C>        <C>       <C>        <C>               <C>
Howard A. Neckowitz...................................    1999        $600,000      ____   $137,699      ____            500,000
    Chairman, President,                                  1998        $600,000      ____     ____        ____            500,000
    Chief Executive Officer and                           1997        $300,000   $275,000    ____     $4,134,375(1)      500,000
    Director

Gail E. Granton.......................................    1999        $300,000      ____     ____        ____            115,000
    Co-Chief Operating Officer,                           1998        $200,000      ____     ____        ____             ____
    Global Marketing and Offshore                         1997        $160,000   $125,000    ____        ____            225,000
    Development, Secretary and Directort

Ronald D. Anderson....................................    1999        $175,000      ____     ____        ____             ____
    Executive Vice President, Operations and Engineering  1998        $175,000      ____     ____        ____            120,000(3)
                                                          1997        $124,992   $100,000    ____        ____            120,000

Thomas J. Murphy......................................    1999        $325,000   $125,000    ____        ____             30,000
    Co-Chief Operating Officer,                           1998        $171,000      ____     ____     $598,125(2)        150,000
    Network Development and                               1997          ____        ____     ____        ____             ____
    IP Services

Robert F. Craver......................................    1999        $165,000      ____     ____         ____            65,000
    Senior Vice President,                                1998        $157,500      ____     ____         ____            40,000(3)
    International Relations                               1997        $150,000   $ 39,961    ____         ____            40,000
</TABLE>

---------------
    (1)           The value of the restricted stock award was determined by
                  multiplying the number of shares awarded to Mr. Neckowitz
                  (75,000) by the closing price of the Company's common
                  stock on NASDAQ on December 30, 1997 ($55.125), the date
                  of the award. As of December 31, 1999, Mr. Neckowitz's
                  aggregate holding of 75,000 restricted shares had a value
                  of $1,279,688, based on the closing price of the
                  Company's common stock on that date of $17.0625. This
                  restricted stock vests at 10% per year and all restricted
                  stock becomes 100% vested upon a change in control,
                  death, disability or termination of employment by the
                  Company for reasons other than cause. During the
                  restricted period, Mr. Neckowitz is entitled to vote his
                  restricted stock, and, to the extent dividends were to be
                  declared on the Company's common stock, to receive
                  dividends on his restricted stock.

    (2)           The value of the restricted stock award was determined by
                  multiplying the number of shares awarded to Mr. Murphy
                  (15,000) by the closing price of the Company's common
                  stock on NASDAQ on August 14, 1998 ($39.875), the date of
                  the award. As of December 31, 1999, Mr. Murphy's
                  aggregate holding of 15,000 restricted shares had a value
                  of $255,938, based on the closing price of the Company's
                  common stock on that date of $17.0625. This restricted
                  stock vests at 20% per year and all restricted stock
                  becomes 100% vested upon a change in control, death,
                  disability or termination of employment by the Company
                  for reasons other than cause. During the restricted
                  period, Mr. Murphy is entitled to vote his restricted
                  stock, and, to the extent dividends were to be declared
                  on the Company's common stock, to receive dividends on
                  his restricted stock.

    (3)           This grant represents a repricing of options.


                     Option Grants in Last Fiscal Year

         The following table sets forth information with respect to options
granted to the Named Executive Officers in 1999:

                                    1
<PAGE>

<TABLE>
<CAPTION>


                                                                                          Value at
                                    Percent of                                             Grant-    Potential Realized Value at
                                       Total                                               Date       Assumed Annual Rates of
                       Number of      Options                     Market                   Market     Stock Price Appreciation
                        Options     Awarded to    Exercise or    Price on                  Price         for Option Term
                       Awarded in   Employees in  Base Price    the Date of   Expiration  ---------  ------------------------
     Name              Fiscal 1999  Fiscal 1999      ($/Sh)     Grant ($/Sh)      Date       0%           5%           10%
     ----              -----------  -----------   -----------   ------------  ----------  ---------  ------------------------
<S>                    <C>             <C>        <C>           <C>           <C>         <C>        <C>           <C>
Howard A. Neckowitz    500,000         17%         $28.125      $28.125         3/15/09      $0      $8,843,831    $22,412,003
Gail E. Granton.....   115,000          4%         $28.125      $28.125         3/15/09      $0      $2,034,081     $5,154,761
Ronald D. Anderson..     ____         ____           ____          ____         ____        ____        ____            ____
Thomas J. Murphy....    30,000          1%           $5.00      $24.563         7/29/09   $586,890   $1,050,316     $1,761,303
Robert F. Craver....    65,000          2%         $19.875      $19.875        10/13/09      $0        $812,453     $2,058,916


<CAPTION>

                          Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

         The following table sets forth information concerning exercisable and unexercisable stock options at
December 31, 1999 for the Named Executive Officers.



                                                        Number of Securities                Value of Unexercised
                                                       Underlying Unexercised              In-The-Money Options at
                                                    Options at Fiscal Year End (#)           Fiscal Year End ($)
                                                ----------------------------------     ------------------------------
Name                                              Exercisable      Unexercisable       Exercisable      Unexercisable
----                                              -----------      -------------       -----------      -------------
<S>                                               <C>              <C>                 <C>              <C>
Howard A. Neckowitz.........................          531,176          1,185,000        $1,464,757        $1,023,750
Gail E. Granton.............................          178,382            227,500          $564,115                $0
Ronald D. Anderson..........................          101,000             60,000          $351,063                $0
Thomas J. Murphy............................           49,875            145,125           $51,188          $566,625
Robert F. Craver............................           63,750             86,250          $354,922            $7,891

</TABLE>

Compensation of Directors

         Directors of the Company do not receive cash compensation for
services provided as a director. Effective with respect to the calendar
year 2000, under the Company's Long-Term Incentive Plan, non-employee
Directors will receive an initial option to purchase 20,000 shares of
Common Stock upon his or her initial appointment or election to the Board
of Directors. Thereafter, on each subsequent anniversary of such election
or appointment, the non-employee Director will receive an option to
purchase 6,000 shares of Common Stock and as of January 1 of each year, an
award of 3,000 shares of Common Stock. The exercise price of each share
underlying the option is equal to the fair market value of a share of
Common Stock on the date the option is granted (or on the previous business
date if the grant is made prior to the close of the market).

          In adddition, on October 3, 1999, the Company granted Mr. Calafell
fully vested options to purchase 8,333 shares of common stock of the
Company as compensation to work with the Company's investment bankers in
evaluating strategic opportunities available to the Company to maximize
shareholder value. Mr. Calafell agreed to spend approximately 25 working
days in the fall of 1999 to undertake these strategic evaluations. Mr.
Calafell may require the Company to repurchase these options from him on or
before December 30, 2001 for the price of $50,000.

Employment Contracts, Termination of Employment and Change in Control
Arrangements

         The Company entered into employment agreements, effective January
1, 1998, with each of the Named Executive Officers, other than Thomas
Murphy who has resigned from the Company. (Thomas Murphy's agreement was
entered into in conjunction with his commencement of employment with the
Company and became effective on August 16, 1998.)

                                     2
<PAGE>

         The Company's employment agreement with Howard A. Neckowitz
provides that he serves as President and Chief Executive Officer of the
Company, and, subject to election, as a director and Chairman of the Board.
The agreement provides for: an annual base salary of $600,000, which may be
increased pursuant to an annual review by the Compensation Committee; an
annual discretionary cash bonus to be determined by the Compensation
Committee; $3,000,000 of life insurance; participation in the Company's
benefit plans on the same terms as provided to the Company's other senior
management employees; the right to receive certain executive perquisites
(such as club memberships); and reimbursement of reasonably incurred legal
expenses in connection with negotiation and preparation of his employment
arrangements. The employment agreement is for a five-year term and is
automatically extended for 24-month periods unless notice of non-renewal is
provided by either party at least 90 days prior to the end of the
employment term.

         Pursuant to the terms of the employment agreement, on December 30,
1997 Mr. Neckowitz received options to purchase 500,000 shares of the
Company's Common Stock at $50.1875 per share and on December 30, 1998 Mr.
Neckowitz also received options to purchase 500,000 shares of the Company's
Common Stock at $47.75 per share, in each case the market price of the
Company's stock in effect on that date. The employment agreement originally
provided that Mr. Neckowitz would receive on December 30, 1999 a grant of
options to purchase 500,000 shares of the Company's Common Stock with an
exercise price equal to the market price of the Company's Common Stock on
that date. The employment agreement was amended so that instead of
receiving this grant, Mr. Neckowitz received on March 15, 1999 options to
purchase 500,000 shares of the Company's Common Stock at an exercise price
of $28 1/8 per share, the closing price of the Company's Common Stock on
March 12, 1999, which was the business date preceding the grant.

         If Mr. Neckowitz is terminated by the Company for reasons other
than Cause (and not on account of death or disability) or if he resigns for
Good Reason, then he shall receive a severance payment equal to the sum of
three years' salary and annual cash bonuses (the "Severance Payment"),
payable in equal monthly amounts over a three-year period, as well as
payment by the Company of his group-health premiums for such time period
that Mr. Neckowitz or any of his dependents is eligible for and elects
COBRA continuation coverage. Upon termination of employment on account of
death or disability, Mr. Neckowitz (or his estate) is generally entitled to
payments of salary for 90 days thereafter and payment by the Company of his
group-health premiums for such time period that Mr. Neckowitz or any of his
dependents is eligible for and elects COBRA continuation coverage and a pro
rata bonus payment. In addition, the Board has agreed that the Company will
either provide Mr. Neckowitz with $2 million of additional life insurance
or, if Mr. Neckowitz dies, the Company will make salary and bonus payments
to his estate until the later of the end of his contract term or two years
from his death. If the Company undergoes a Change in Control, then Mr.
Neckowitz shall receive from the Company, without regard to whether his
employment terminates in connection with such Change in Control, a lump sum
payment equal to the Severance Payment described above in lieu of such
Severance Payment. Mr. Neckowitz shall be entitled to reimbursement from
the Company for any excise tax (including any additional taxes resulting
from such reimbursement) incurred on account of compensation payable
pursuant to a Change in Control. Mr. Neckowitz's employment agreement also
imposes upon him certain obligations of confidentiality.

         Pursuant to a restricted stock agreement dated December 30, 1997,
Mr. Neckowitz was awarded 75,000 restricted shares of the Company's Common
Stock. Subject to certain conditions and exceptions, the restrictions on
such restricted shares expire as to 10% of such shares each year, provided,
however, that in the event of Mr. Neckowitz's death, total disability,
termination for reasons other than Cause or resignation for Good Reason or
in the event of a Change in Control, Mr. Neckowitz shall become vested in
the restricted shares as of such date.

         The employment agreements between the Company and Gail E. Granton,
Ronald D. Anderson, Thomas J. Murphy and Robert F. Craver provide for
annual base salaries of $200,000, $175,000, $325,000 and $165,000,
respectively (each subject to adjustment pursuant to an annual review); an
annual discretionary cash bonus determined by the President and based on
the performance of the executive, the performance of the Company and other
relevant factors; and participation in the Company's benefit plans on the


                                  3
<PAGE>

same terms as provided to the Company's other senior management employees.
In addition, Mr. Murphy's agreement provided for a one-time signing bonus
of $50,000; an initial grant of an option to purchase 150,000 shares of the
Company's Common Stock (with the options generally vesting over four
years); an award of 15,000 restricted shares of the Company's Common Stock
(with such restrictions generally expiring as to 20% of such shares each
year); and reimbursement by the Company for reasonable relocation expenses
and temporary housing. In the event that the Company chooses not to extend
Mr. Murphy's employment term beyond his initial three-year term, an
additional 20% of the restricted shares granted pursuant to his employment
agreement shall become unrestricted. Ms. Granton's, Mr. Anderson's and Mr.
Murphy's employment agreements are for three-year terms, while Mr. Craver's
is for a two-year term. At the end of their respective terms, each
employment agreement is automatically extended for 12-month periods,
unless notice of non-renewal is provided by either party at least 90 days
(60 days in the case of Mr. Murphy) prior to the end of the employment
term. Under the respective employment agreements, if employment is
terminated by the Company for any reason other than Cause (and not on
account of death, disability, voluntary resignation or mutual agreement) or
if the executive resigns for Good Reason, then the executive shall, subject
to certain limited exceptions, receive a severance payment equal to 18
months' salary (for Ms. Granton and Mr. Anderson), 12 months' salary (for
Mr. Murphy) or six months' salary (for Mr. Craver), and any unvested
options held by the executive at such time shall fully vest (and for Ms.
Granton, her outstanding options shall fully vest in the event of
non-renewal of her agreement) and shall be exercisable for the period after
termination as specified for vested options as stated in the option
agreement. In addition, in such circumstance with respect to Mr. Murphy,
the portion of the 15,000 restricted shares granted by his employment
agreement that are still subject to restrictions shall become unrestricted.
Termination of employment on account of voluntary resignation, mutual
agreement or Cause generally relieves the Company of any obligation to make
future payments or provide future benefits to the executive, while
termination of employment on account of death or disability would entitle
the executive officer (or his or her estate) to payments of salary
generally for a 30-day period.

         Under the employment agreements between the Company and Messrs.
Anderson, Murphy and Craver, if the Company undergoes a Change in Control
and within two years thereafter the Company terminates the executive for
reasons other than Cause or the executive terminates his employment for
Good Reason, then the executive shall be entitled to receive a lump sum
payment equal to 18 months' salary (for Mr. Anderson), 12 months' salary
(for Mr. Murphy) or six months' salary (for Mr. Craver). Pursuant to the
terms of the Long-Term Incentive Plan, a Change in Control will cause
outstanding options to immediately become exercisable and all shares of
restricted stock to immediately become fully vested. (In addition, Mr.
Murphy's contract expressly provides for similar acceleration.) Upon a
Change in Control, Ms. Granton shall receive, without regard to whether her
employment terminates in connection with such Change in Control, a lump sum
payment equal to 18 months' salary. Any such payment made to Ms. Granton
shall be in lieu of any severance payment otherwise payable to her and she
shall be entitled to reimbursement from the Company for any excise tax
(including any additional taxes resulting from such reimbursement) incurred
on account of compensation payable pursuant to a Change in Control. The
employment agreements between the Company and Ms. Granton and Messrs.
Anderson and Craver also impose upon each of them obligations of
confidentiality, while Messrs. Anderson, Murphy and Craver's employment
agreements also impose certain limited obligations not to compete against
the Company.

         As used in the employment agreements, "Change in Control" means
the earliest to occur of any one of the following events: (1) any person
(with certain limited exceptions) becomes the beneficial owner of 25% or
more of the Company's voting stock; (2) the majority of the Board of
Directors does not consist of individuals who are Incumbent Directors,
which term means the members of the Board as of the date of the applicable
agreement; provided that any person becoming a director subsequent to such
date whose election or nomination for election was supported by
three-quarters of the directors who then comprised the Incumbent Directors
shall be considered to be an Incumbent Director; (3) the Company adopts a
liquidation plan; (4) the merger or sale of substantially all of the assets
of the Company (unless proportional ownership of the Company's stock does
not change); or (5) the Company combines with any other company and is the
surviving corporation but the shareholders of the Company immediately prior
thereto own less than 50% of the voting stock. (See "Approval of Amendment
to Long-Term Incentive Plan" for the definition of "Change in Control"
under such plan.)


                                  4
<PAGE>

         During 1998, before entering the agreements with Messrs.
Neckowitz, Anderson and Craver and Ms. Granton, the Company retained a
professional consultant to research executive compensation levels of
similar companies and to advise the Board of Directors. The consultant
reviewed these employment agreements and concluded that they were fair and
reasonable.

Insider Participation in Compensation Decisions

         Compensation decisions are made by the Compensation Committee,
which consists of all of the directors of the Company. Mr. Neckowitz and
Ms. Granton do not vote on their respective compensation. Mr. Junewicz has
abstained from voting on compensation issues relating to Mr. Neckowitz and
Ms. Granton because his law firm represents the Company on various matters.
A subcommittee of the Compensation Committee consisting of Messrs.
Calafell, Dalfen and Volante makes awards under the Company's Long-Term
Incentive Plan, including stock options and restricted stock awards, to the
officers of the Company, in consultation with the other directors (except
that Mr. Neckowitz and Ms. Granton do not consult with respect to their own
awards). In addition, a subcommittee of the Compensation Committee
consisting of Mr. Neckowitz and Ms. Granton, makes awards under the
Supplemental Plan to newly hired individuals and to employees of the Company
who are not officers.

Report of the Compensation Committee of the Board of Directors on Executive
Compensation

         The Company's compensation program is designed to enable the
Company to attract, motivate and retain the best possible executive talent,
people who provide the experience and skills that are vital for the Company
to achieve its goals. The Company strives to align the personal financial
interests of its executives with the financial interests of stockholders in
an effort to maximize stockholder value.

         The Compensation Committee of the Board of Directors and, where
appropriate, a subcommittee of outside directors, sets the compensation of the
Company's key executive officers, including adjustments to base salaries,
bonuses and grants of equity-based awards. The Compensation Committee bases its
determinations of overall executive compensation, which include salary, bonus,
certain benefits and stock option awards and possibly other forms of
equity-based compensation, on subjective factors based upon consideration of,
among other factors: (1) the annual and long-term financial performance of the
Company, including the creation of stockholder value; (2) the historical
financial performance of the Company; (3) the individual executive
officer's contribution to the achievement of operating goals and business
objectives; and (4) levels of compensation in comparable companies at
similar stages of development, with particular emphasis on those operating
in the telecommunications industry. The Compensation Committee bases
executive compensation on the individual's personal contribution and
importance to the success of the Company and on financial performance
criteria, including the Company's financial performance and the price of
the Company's stock, in the context of the telecommunications industry as
well as the economy in general.

         All directors of the Company sit on the Compensation Committee of
the Board of Directors. However, Mr. Neckowitz and Ms. Granton do not vote
on their respective compensation. In addition, because of the relationship
of Mr. Junewicz's law firm with the Company, Mr. Junewicz abstains from
voting on matters voted upon by the Compensation Committee relating to the
compensation of Mr. Neckowitz and Ms. Granton. A subcommittee of the
Compensation Committee consisting of Messrs. Calafell, Dalfen and Volante
makes awards under the Company's Long-Term Incentive Plan, including stock
options and restricted stock awards, to the officers of the Company, in
consultation with the other directors (except that Mr. Neckowitz and
Ms. Granton do not consult with respect to their own awards). In addition, a
subcommittee of the Compensation Committee consisting of Mr. Neckowitz and
Ms. Granton makes awards under the Company's Supplemental Plan to newly
hired individuals and to employees who are not officers.

                                   5
<PAGE>

         During 1999, the salaries of the Company's executive officers,
including Mr. Neckowitz, were generally set pursuant to employment
agreements. In addition, Mr. Neckowitz received a payment of $137,699 to
reimburse him for taxes payable as a result of restricted stock he received
pursuant to his employment agreement.  In deciding to make this payment, the
Compensation Committee considered Mr. Neckowitz's significant efforts on behalf
of the Company and the fact that he did not receive a bonus in 1998. See
"Summary Compensation Table" and "Employment Contracts, Termination of
Employment and Change in Control Arrangements."

         The Company believes that equity-based compensation is an
effective way of aligning executive compensation with increases in
stockholder value. The Company uses the Long-Term Incentive Plan and the
Supplemental Plan in order to attract and retain employees and other service
providers and to identify such individuals with the Company's stockholders
through the use of equity-based compensation. The Compensation Committee
believes that option grants align executive interests with stockholder
interests by providing a direct link between compensation and stockholder
returns. The Compensation Committee believes that option grants pursuant to the
Long-Term Incentive Plan help retain key executives in the telecommunications
industry.

         The Company did not reprice Mr. Neckowitz's options when it
repriced options of other employees in 1998, but it recognized that the
options previously granted to Mr. Neckowitz pursuant to his employment
agreement were substantially "out-of-the-money." Accordingly, on March 15,
1999, pursuant to an agreement with Mr. Neckowitz, the Board accelerated
the grant of options to purchase 500,000 shares of the Company's stock that
was scheduled to be awarded to Mr. Neckowitz on December 31, 1999 pursuant
to his employment agreement so that these options were instead awarded to
Mr. Neckowitz on March 15, 1999 at an exercise price equal to the closing
pricing on March 12, 1999, the business day immediately preceding March 15,
1999. To help assure the availability of a tax deduction for the Company
with respect to the options, Mr. Neckowitz will not receive the shares
pursuant to the exercise of these options until after his employment
terminates. This action was taken to provide Mr. Neckowitz with stock
options having an exercise price equal to the current market price of the
Company's stock. By accelerating the grant of an option that Mr. Neckowitz
was already entitled to receive at a later time, the Board believed that it
enhanced the incentive and retention value of Mr. Neckowitz's overall
compensation package and gave him an immediate incentive to increase the
stock price from its level on March 15, 1999. Similarly, on March 15, 1999,
Ms. Gail Granton received a grant of options to purchase 115,000 shares of
common stock. Ms. Granton received this grant because she had agreed to
expand her duties significantly to include overall responsibility for the
implementation and success of the Company's retail marketing program, the
success of which is critical to achieving the Company's business plan. The
Company's independent compensation consultant advised the Board that taking
the above actions with respect to Mr. Neckowitz and Ms. Granton was
reasonable and appropriate in view of the considerations set forth above.

         Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") limits the Company's deduction for compensation paid to the
executive officers named in the Summary Compensation Table to $1 million
unless certain requirements are met. The policy of the Compensation
Committee with respect to section 162(m) is to establish and maintain a
compensation program that will optimize the deductibility of compensation.
In that regard, no executive officer received compensation in excess of $1
million during fiscal 1999. The Compensation Committee, however, reserves
the right to use its judgment, where merited by the Compensation
Committee's need for flexibility to respond to changing business conditions
or by an executive officer's individual performance, to authorize
compensation that may not, in a specific case, be fully deductible by the
Company.


                                    6

<PAGE>

                      By The Compensation Committee of the Board of Directors:
                      Howard A. Neckowitz
                      Gail E. Granton
                      Robert C. Calafell
                      Charles M. Dalfen
                      James J. Junewicz
                      Barry J. Volante





                          STOCK PERFORMANCE GRAPH

         The following graph compares the total return on the Company's
Common Stock with the cumulative total return on the Nasdaq Market
Index--U.S. Companies (a broad market index) and the Nasdaq
Telecommunications Index (an industry index) for the period from July 19,
1996, the date upon which the Common Stock was registered pursuant to
Section 12 of the Exchange Act, through December 31, 1999. The comparison
reflects the investment of $100 on July 19, 1996, and the reinvestment of
dividends (if paid), in each of the Company's Common Stock (for which no
dividends have been paid), the Nasdaq Market Index and the Nasdaq
Telecommunications Index. The stock price performance of the Company
reflected in this comparison is not necessarily indicative of the future
stock price performance of the Company's Common Stock.


                                             NASDAQ              NASDAQ
                    Pacific Gateway   Telecommunications     Market Index
                     Exchange, Inc.          Index          U.S. Companies

        7/19/96          100.00             100.00              100.00
       12/31/96          286.27             108.16              119.27
       12/31/97          422.06             159.76              146.36
       12/31/98          376.96             261.42              205.38
       12/31/99          134.97             463.16              381.74


                   ASSUMES $100 INVESTED ON JULY 19, 1996
                        ASSUMES DIVIDENDS REINVESTED
                    FISCAL YEAR ENDING DECEMBER 31, 1999


                                    7
<PAGE>

                                 Signatures

         Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in Burlingame, California, on the 15th day of June, 2000.

                                        PACIFIC GATEWAY EXCHANGE, INC.

                               By: /s/ Howard A. Neckowitz
                                   -----------------------------------
                                        Howard A. Neckowitz
                               President, Chief Executive Officer and
                                        Chairman of the Board

         Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following persons on
behalf of the Registrant and in the capacities indicated and on the 15th
day of June, 2000.


            Signature                         Title
            ---------                         -----

/s/ Howard A. Neckowitz                       President, Chief Executive
-------------------------------               Officer and Chairman of the Board
         Howard A. Neckowitz                  (Principal Executive Officer)


/s/ Gail E. Granton                           Co-Chief Operating Officer,
-------------------------------               Global Marketing and
         Gail E. Granton                      Offshore Development, Secretary
                                              and Director


/s/ Caye Hursey                               Acting Chief Financial Officer
-------------------------------               (Principal Financial Officer)
         Caye Hursey                          (Principal Accounting Officer)


/s/ Robert C. Calafell                         Director
-------------------------------
         Robert C. Calafell


/s/ Charles M. Dalfen                          Director
-------------------------------
         Charles M. Dalfen


/s/ James J. Junewicz                          Director
-------------------------------
         James J. Junewicz


/s/ Barry J. Volante                           Director
-------------------------------
         Barry J. Volante



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