UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended June 30, 1998

                         Commission file number 0-23139

                            RSL COMMUNICATIONS, LTD.
                            ------------------------
           (Exact name of the registrant as specified in its charter)

          Bermuda                                               N/A
          -------                                               ---
(State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         identification No.)

                                 Clarendon House
                                  Church Street
                             Hamilton HM CX Bermuda
                             ----------------------
                    (Address of principal executive offices)

                                 (441) 295-2832
                                 --------------
                         (Registrant's telephone number)

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.

                                Yes |X|     No |_|

As at July 31, 1998, the registrant had 17,343,599 of the Class A common stock,
par value $0.00457 per share, and 26,899,795 of the Class B common stock, par
value $0.00457 per share, outstanding.

<PAGE>

                            RSL COMMUNICATIONS, LTD.

                                Table of Contents


                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

    Item 1.  Financial Statements..............................................1

    Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations.........................................8

PART II - OTHER INFORMATION

    Item 1.  Legal Proceedings................................................19

    Item 2.  Change in Securities and Use of Proceeds.........................19

    Item 4.  Submission of Matters to a Vote of Security Holders..............20

    Item 5.  Other Information................................................20

    Item 6.  Exhibits and Reports on Form 8-K.................................20

Signatures....................................................................22

Exhibit Index.................................................................23

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements.


                            RSL COMMUNICATIONS, LTD.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                          As of        As of
                                                         June 30,   December 31,
                                                          1998          1997
                                                          ----          ----
                                                       (unaudited)
Assets

Cash and Cash Equivalents                               $ 319,613     $ 144,894
Accounts Receivable, Net                                  100,602        70,610
Marketable Securities - Available for Sale                     --        13,858
Prepaid Expenses and Other Current Assets                  48,060        16,073
Marketable Securities - Held to Maturity                   51,885        68,836
Property and Equipment                                    134,711        85,581
Less: Accumulated Depreciation                            (23,035)      (13,804)
Goodwill and Other Intangibles, Net                       293,579       214,983
Deposits and Other Assets                                  59,973         4,633
                                                        ---------     ---------

     Total Assets                                       $ 985,388     $ 605,664
                                                        =========     =========

Liabilities and Shareholders' Equity

Accounts Payable and Other Liabilities                  $ 185,964     $ 154,324
Short-term Debt                                            12,917         8,033
Long-term Debt                                             21,461        20,108
Senior Notes and Senior Discount Notes, Net               680,997       296,500
Other Liabilities - Noncurrent                             52,650          --
Other Shareholders' Capital                               276,648       274,638
Accumulated Deficit                                      (245,249)     (147,939)
                                                        ---------     ---------

     Total Liabilities and Shareholders' Equity         $ 985,388     $ 605,664
                                                        =========     =========


            See notes to condensed consolidated financial statements.


                                       1
<PAGE>

                            RSL COMMUNICATIONS, LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                    (in thousands, except for loss per share)

<TABLE>
<CAPTION>
                                                                 Three Months Ended               Six Months Ended
                                                               June 30,        June 30,        June 30,        June 30,
                                                               --------        --------        --------        --------
                                                                1998             1997            1998            1997
<S>                                                           <C>             <C>             <C>             <C>      
REVENUES ...............................................      $ 166,567       $  67,193       $ 298,202       $ 109,361
COST OF SERVICES .......................................       (138,828)        (59,828)       (251,865)        (96,797)
                                                              ---------       ---------       ---------       ---------
GROSS PROFIT ...........................................         27,739           7,365          46,337          12,564
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...........        (44,182)        (24,401)        (79,817)        (38,213)
DEPRECIATION AND AMORTIZATION ..........................        (11,576)         (4,697)        (21,124)         (8,960)
                                                              ---------       ---------       ---------       ---------
LOSS FROM OPERATIONS ...................................        (28,019)        (21,733)        (54,604)        (34,609)
INTEREST INCOME ........................................          6,028           3,332          10,834           7,124
INTEREST EXPENSE .......................................        (18,866)         (9,822)        (33,330)        (19,252)
OTHER INCOME (EXPENSE)-NET .............................         (1,552)          6,862          (1,504)          6,606
MINORITY INTEREST ......................................          1,645            (110)          2,728            (229)
INCOME TAXES ...........................................           (412)            (99)           (634)           (357)
                                                              ---------       ---------       ---------       ---------
NET LOSS BEFORE EXTRAORDINARY ITEM .....................        (41,176)        (21,570)        (76,510)        (40,717)
EXTRAORDINARY ITEM .....................................        (20,800)             --         (20,800)             --
                                                              ---------       ---------       ---------       ---------
NET LOSS AFTER EXTRAORDINARY ITEM ......................      $ (61,976)      $ (21,570)      $ (97,310)      $ (40,717)
                                                              =========       =========       =========       =========
LOSS PER SHARE OF COMMON STOCK BEFORE EXTRAORDINARY
   ITEM ................................................      $   (0.97)      $   (1.90)      $   (1.82)      $   (3.72)
LOSS PER SHARE OF COMMON STOCK AFTER
   EXTRAORDINARY ITEM ..................................      $   (1.47)      $   (1.90)      $   (2.32)      $   (3.72)
</TABLE>


            See notes to condensed consolidated financial statements.


                                       2
<PAGE>

                            RSL COMMUNICATIONS, LTD.
                 CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                                   (unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                  Six Months Ended June 30,
                                                                  -------------------------
                                                                     1998            1997
                                                                     ----            ----
<S>                                                               <C>             <C>       
Net loss ...................................................      $ (97,310)      $ (40,717)
Depreciation and amortization ..............................         21,124           8,960
Working capital change and other ...........................        (32,019)        (13,490)
                                                                  ---------       ---------
     Net cash used in operations ...........................       (108,205)        (45,247)
                                                                  ---------       ---------

Acquisitions of subsidiaries ...............................        (81,375)         (5,455)
Purchase of property and equipment .........................        (37,098)         (7,511)
Proceeds from sales of marketable securities ...............         13,858          17,031
Proceeds from restricted securities ........................         18,750          22,665
Other ......................................................            729             132
                                                                  ---------       ---------
     Net cash (used in) provided by investing activities ...        (85,136)         26,862
                                                                  ---------       ---------

Proceeds from issuance of 1998 Notes .......................        499,045              --
Payment of offering cost ...................................         (5,647)             --
Retirement of 1996 Notes ...................................       (127,493)             --
Proceeds from notes payable ................................          4,094              --
Payment of notes payable ...................................             --          (1,987)
Proceeds from issuance of Class A shares ...................            281              --
Other ......................................................         (1,709)           (820)
                                                                  ---------       ---------
     Net cash provided by (used in) financing activities ...        368,571          (2,807)
                                                                  ---------       ---------

Increase (decrease) in cash and cash equivalents ...........        175,230         (21,192)
Effects of foreign currency on cash and cash equivalents ...           (511)           (884)
Cash and cash equivalents at beginning of period ...........        144,894         104,068
                                                                  ---------       ---------

Cash and cash equivalents at end of period .................      $ 319,613       $  81,992
                                                                  =========       =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest .....................................      $  17,356       $  23,089
                                                                  =========       =========

SUPPLEMENTAL SCHEDULE OF NON-
CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of Class A Common Stock ...........................      $   8,712       $  32,582
                                                                  =========       =========
Assets acquired under capital lease obligations ............      $   4,703       $   6,359
                                                                  =========       =========
Acquisition of distribution rights .........................      $  44,000       $      --
                                                                  =========       =========
</TABLE>


            See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                            RSL COMMUNICATIONS, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1998


1. BASIS OF PRESENTATION

The condensed consolidated financial statements of which these notes are part
have been prepared by RSL Communications, Ltd. ("RSL") and RSL Communications
PLC, a wholly owned subsidiary of RSL ("RSL PLC" and, together with RSL and
their direct and indirect subsidiaries, the "Company"), pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations; however,
in the opinion of management of the Company, the Condensed Consolidated
Financial Statements include all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial information for
such periods. These Condensed Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements of RSL and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.

2. PRIVATE PLACEMENT OF NOTES AND EXCHANGE OFFER AND EXTRAORDINARY ITEM

On February 27, 1998, RSL PLC completed concurrent offerings (the "1998 U.S.
Offerings") of $200.0 million principal amount of 9 1/8% Senior Notes due 2008
and $328.1 million principal amount at maturity ($200.0 million initial accreted
value) of 10 1/8% Senior Discount Notes due 2008 (together, the "1998 U.S.
Notes"). The 1998 U.S. Offerings generated gross proceeds to the Company of
$400.0 million. On March 16, 1998, RSL PLC completed an offering (the "1998 DM
Offering," and together with the 1998 U.S. Offerings, the "Offerings") of 182.0
million Deutsche Mark denominated 10% Senior Discount Notes due 2008 (the "1998
DM Notes," and together with the 1998 U.S. Notes, the "1998 Notes"). The 1998 DM
Offering generated proceeds to the Company of $99.0 million. The 1998 Notes and
the 12 1/4% Senior Notes due 2006 (the "1996 Notes") of RSL PLC are collectively
referred to herein as the "Notes". The Notes are unconditionally guaranteed as
to payment of principal, interest and any other amounts thereof by RSL.

In connection with the Offerings, RSL PLC entered into Registration Rights
Agreements for the benefit of the holders of the 1998 Notes (the "Registration
Rights Agreements"), pursuant to which RSL PLC agreed to offer to exchange the
1998 Notes for substantially identical notes registered under the Securities
Act. In May 1998, in accordance with the Registration Rights Agreements, RSL and
RSL PLC offered for exchange the 1998 Notes for substantially identical notes
registered under the Securities Act. The Company's Registration Statement on
Form S-4 (Registration No.333-49857) filed with the Commission with respect to
such offering was declared effective by the Commission on May 12, 1998.

In April 1998, the Company used approximately $101.0 million of the net proceeds
from its initial public offering of shares of Class A Common Stock (the "Initial
Public Offering") in 1997 to redeem (the "Equity Clawback") $90.0 million of the
1996 Notes at a premium of $11.0 million, as permitted under the 1996 Indenture.
In April 1998, the Company used approximately $43.1 million to redeem (the
"Buyback") $37.5 million of the 1996 Notes at a premium of $5.6 million, as
permitted under the 1996 Indenture. The redemption premiums, and part of the
discount and offering cost were expensed in the amount of $20.8 million in the
second quarter of 1998 as an extraordinary item.


                                       4
<PAGE>

3. REGISTRATION OF SHARES

In March 1998, the Company registered 1,152,715 shares of Class A Common Stock
to be issued pursuant to the terms of a warrant agreement governing the Warrants
(the "Warrant Registration") and 300,000 shares of Class A Common Stock to be
sold by Bukfenc, Inc. a corporation wholly owned by Andrew Gaspar, former Vice
Chairman of the Company, and members of his family (the "Selling Shareholder")
(which necessarily assumes the conversion by the Selling Shareholder of an
identical number of shares of Class B Common Stock). The Warrant Registration
was required pursuant to a registration rights agreement entered into in
connection with the private offering (the "1996 Units Offering") of 300,000
units (the "Units") each consisting of (i) $1,000 principal amount of 12 1/4%
Senior Notes due 2006 and (ii) one warrant to purchase 3.975 shares of Class A
Common Stock of RSL (each a "Warrant").

4. EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." The Company adopted SFAS No. 130
during the six month period ended June 30, 1998. The Company has determined to
present the data on a geographical basis for SFAS No. 131.

SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, it has no impact on the
Company's net income. Comprehensive income includes both net income and other
comprehensive income. Other comprehensive loss for the six months ended June 30,
1998 and June 30, 1997 of $7.0 million and $0.5 million, respectively,
represented foreign currency translation adjustment. Accumulated other
comprehensive loss included in the accompanying condensed consolidated balance
sheet as of June 30, 1998 and June 30, 1997 was $12.3 million and $1.1 million,
respectively, consisting of the accumulated foreign currency translation
adjustment.

5. NET LOSS PER SHARE

Net loss per share is computed on the basis of the weighted average number of
common shares outstanding during the period. The average number of shares
outstanding for the three and six month periods ended June 30, 1997 have been
presented retroactively to give effect to the Company's recapitalization in
September 1997 and also reflects the conversion by certain shareholders of Class
B common shares into Class A common shares in September 1997.

<TABLE>
<CAPTION>
                                                        Three Months Ended      Six Months Ended
                                                      June 30,    June 30,    June 30,    June 30,
                                                      --------    --------    --------    --------
                                                        1998        1997        1998        1997
                                                        ----        ----        ----        ----
                                                                     (in thousands)
<S>                                                    <C>         <C>         <C>         <C>   
Weighted average number of shares of common stock
 outstanding ....................................      42,295      11,378      42,021      10,957
</TABLE>

Fully diluted income (loss) per share amounts are not presented because the
inclusion of these amounts would be anti-dilutive. Fully diluted income (loss)
per share amounts for the current period do not differ materially from basic
earnings per share amounts.


                                       5
<PAGE>

6. ACQUISITIONS

In March 1998, RSL COM Australia Pty. Ltd., a subsidiary of the Company,
acquired the customer base of First Direct Communications Pty, Limited and Link
Telecommunications Pty Ltd., two switchless mobile telecommunications resellers,
for approximately $18 million. The acquisition has been accounted for by the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired based on their estimated fair value at the date
of acquisition and is being amortized using the straight-line method over
fifteen years.

In April 1998, the Company entered into an agreement with CBS Corporation
("CBS") pursuant to which the Company agreed to acquire the business of
Westinghouse Communications ("WestComm"), a division of CBS, for a cash purchase
price of approximately $90.0 million (the "WestComm Acquisition") plus the
assumption of certain liabilities. WestComm provides both voice telephony and
data services (including frame relay and TCP/IP networks) to a customer base
consisting primarily of small to medium size businesses in the United States.
WestComm operates six switches strategically located in the United States and
employs approximately 280 people. The transaction closed in July 1998.

In May 1998, the Company acquired a 27.19% economic interest in Telegate AG, a
directory information provider in Germany, for approximately $33.6 million. The
purchase price was included in the calculation of "Deposits and Other Assets" on
the Condensed Consolidated Balance Sheets.

In June 1998, RSL COM Europe, Ltd. ("RSL COM Europe"), a subsidiary of the
Company, entered into an agreement (the "Metro Agreement") with Metro Holding AG
("Metro Holding"), a German wholesale and retail management holding company,
pursuant to which Metro Holding's appropriate subsidiaries agreed to promote,
market, sell and distribute the Company's services through Metro Holding's
wholesale and retail operations in Europe. Metro Holding received a 12.5 percent
interest in the equity of RSL COM Europe and the option to acquire up to an
additional 7.5 percent of RSL COM Europe (the "Additional Option").

In June 1998, the Company agreed to acquire Motorola Telecom, a division of
Motorola's European Cellular Subscriber Group, for $75 million in cash and
assumption of working capital deficit of approximately $25 million. Motorola
Telecom is a provider of cellular airtime services and related products in
Europe with operations in the United Kingdom, France, Germany and Belgium. The
acquisition is subject to receipt of various third party and work council
approvals.

The valuation of the above acquired assets is preliminary and as a result, the
allocation of the acquisition costs may change, including goodwill.

7. SUMMARIZED FINANCIAL INFORMATION FOR RSL PLC

The following presents summarized financial information of RSL PLC as of June
30, 1998 and as of December 31, 1997. RSL PLC had no independent operations
other than serving solely as a foreign holding company for the Company's U.S.
and European operations. The Notes issued by RSL PLC are fully and
unconditionally guaranteed by RSL. RSL has not presented separate financial
statements and other related disclosure concerning RSL PLC because management
has determined that such information is not material to shareholders or holders
of the Notes. RSL's financial statements are, except for RSL's capitalization,
Delta Three operations, Australian operations, Latin American operations,
corporate overhead expenses and available credit facilities, identical to the
financial statements of RSL PLC.


                                       6
<PAGE>

                                               As of                As of
                                              June 30,           December 31,
                                               1998                 1997
                                               ----                 ----
                                                     (in thousands)

Current Assets .......................       $ 429,298            $ 212,568

Non-current Assets ...................         430,994              324,118

Current Liabilities ..................         172,263              122,672

Non-current Liabilities ..............         895,395              557,448


                                             Six Months           Six Months
                                               ended                ended
                                              June 30,             June 30,
                                               1998                 1997
                                               ----                 ----
                                                     (in thousands)

Net Revenue ..........................       $ 242,909            $ 102,175

Gross Profit .........................          36,948               11,995

Net Loss .............................         (86,802)             (33,738)


8. SUBSEQUENT EVENTS

In July 1998, RSL COM Europe and Metro Holding, entered into an amended and
restated share subscription, share option and shareholders agreement and a
related exchange agreement, pursuant to which, among other things, Metro Holding
converted all of its shares in RSL COM Europe into newly issued shares of the
Class A Common Stock of the Company. Accordingly, the Company issued Metro
Holding 1,607,142 shares (the "RSL Shares") of RSL's Class A Common Stock, par
value $0.00457 per share, in exchange for 142,857 common shares of RSL Europe
and, the Additional Option granted pursuant to the Metro Agreement was
cancelled. All of the RSL Shares acquired by Metro Holding are restricted from
transfer until April 1, 2001.

In July 1998, the Company agreed to acquire Westel Telecommunications, Ltd.
("Westel"), a Canadian facilities based telecommunications company, from British
Columbia Railway Company, for approximately $38 million. In connection with the
transaction, the Company, together with Michael Kedar, formed MK Telecom
Network, Inc., a Canadian corporation, which will control the transmission
facilities owned by Westel in order to comply with Canadian regulatory
restrictions. The transaction closed in August 1998.


                                       7
<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Overview

The Company is a rapidly growing multinational telecommunications company which
provides a broad array of international and domestic telephone services to both
carrier and commercial (including business and residential) accounts. These
services include international long distance calling to over 200 countries,
calling card, private line and value-added services. The Company focuses on
providing international long distance voice services to small and medium-sized
businesses in key markets. The Company currently has revenue generating
operations in the United States, the United Kingdom, France, Germany, Sweden,
Finland, the Netherlands, Belgium, Denmark, Italy, Austria, Spain, Switzerland,
Luxembourg, Venezuela and Australia. The Company will begin generating revenues
in Canada in the third quarter of 1998 and the Company is in the process of
commencing operations through its investments in majority owned entities in
Mexico and Japan and through its 39% investment in a Portuguese
telecommunications company. In 1996, approximately 70% of all international long
distance telecommunications minutes originated in these markets. The Company
plans to expand its operations and network into additional key markets which
account for a significant portion of the world's remaining international
traffic. The Company also provides Internet telephony services through its
wholly-owned subsidiary, Delta Three, Inc. and its network of Internet gateway
servers located within key metropolitan areas in target countries.

Revenues

The Company provides both domestic and international long distance services and
derives its revenues principally from the provision of international long
distance voice telecommunication services. Revenues are derived from the number
of minutes of use (or fractions thereof) billed by the Company ("revenue
minutes") and are recorded upon completion of calls. The Company also derives
revenues from prepaid calling cards. These revenues are recognized at the time
of usage or upon expiration of the card. The Company maintains local market
pricing structures for its services and generally prices its services at a
discount to the prices charged by the local government-owned post, telegraph and
telephone monopolies ("PTTs") and major carriers. The Company has experienced,
and expects to continue to experience, declining revenue per minute in all of
its markets as a result of increasing competition in telecommunications, which
the Company expects will be offset by increased minute volumes and decreased
operating costs per minute.

North American Operations

<TABLE>
<CAPTION>
                                                            Three Months Ended                  Six Months Ended
                                                         June 30,         June 30,         June 30,         June 30,
                                                           1998             1997             1998             1997
                                                           ----             ----             ----             ----
                                                                                (unaudited)
                                                         (in thousands, except percentage of consolidated revenues)
<S>                                                     <C>              <C>              <C>              <C>      
Revenues .........................................      $  85,417        $  43,329        $ 159,943        $  69,889
Percentage of consolidated revenues ..............           51.3%            64.5%            53.6%            63.9%
Cost of services .................................         72,452           39,531          136,227           63,928
                                                        ---------        ---------        ---------        ---------
Gross profit .....................................         12,965            3,798           23,716            5,961
Selling, general and administrative expenses .....         15,101            6,636           26,235           11,550
Depreciation and amortization ....................          1,877            1,323            3,908            2,580
                                                        ---------        ---------        ---------        ---------
Loss from operations .............................      $  (4,013)       $  (4,161)       $  (6,427)       $  (8,169)
                                                        =========        =========        =========        =========
</TABLE>


                                       8
<PAGE>

Prior to 1997, the Company's revenues had been primarily derived from its
operations within the United States. The Company's U.S. revenues result
primarily from the sale of long distance voice services on a wholesale basis to
other carriers, on a retail basis to commercial customers and on a bulk discount
basis to distributors of prepaid calling cards. The Company has experienced, and
expects to continue to experience, significant month to month changes in
revenues generated by its carrier customers. The Company believes such carrier
customers will react to temporary price fluctuations and spot market
availability that will impact the Company's carrier revenues. The Company has
shifted its marketing focus in the United States to small and medium-sized
businesses and has restructured its pricing of wholesale services to other
carriers. As a result of the Company's acquisition of LDM Systems, Inc., ("LDM")
in 1997, the Company has derived increased revenues from its commercial
customers, as it continues to reduce its reliance on wholesale carrier revenues.
The Company will also begin deriving revenues from its recent acquisition of
operations in Canada.

European Operations

<TABLE>
<CAPTION>
                                                            Three Months Ended                  Six Months Ended
                                                         June 30,         June 30,         June 30,         June 30,
                                                           1998             1997             1998             1997
                                                           ----             ----             ----             ----
                                                                                (unaudited)
                                                         (in thousands, except percentage of consolidated revenues)
<S>                                                     <C>              <C>              <C>              <C>      
Revenues .........................................      $  48,686        $  16,678        $  83,951        $  32,286
Percentage of consolidated revenues ..............           29.2%            24.8%            28.2%            29.5%
Cost of services .................................         40,406           13,680           70.494           26,252
                                                        ---------        ---------        ---------        ---------
Gross profit .....................................          8,280            2,998           13,457            6,034
Selling, general and administrative expenses .....         19,832           13,178           38,000           20,607
Depreciation and amortization ....................          4,958            1,387            8,231            2,404
                                                        ---------        ---------        ---------        ---------
Loss from operations .............................      $ (16,510)       $ (11,567)       $ (32,774)       $ (16,977)
                                                        =========        =========        =========        =========
</TABLE>

The Company commenced European operations with the introduction of operations in
the United Kingdom, Finland and Sweden in the second quarter of 1996. In
addition, the Company acquired operations in France and Germany during the
second quarter of 1996 and acquired operations in the Netherlands in the fourth
quarter of 1996. During 1997, the Company commenced or acquired operations in
Belgium, Italy, Spain, Switzerland, Luxembourg, Austria and, through its 39%
investment, Portugal.

Substantially all revenues from the Company's European operations are derived
from commercial sales to end-users. Sales are targeted at small to medium-sized
corporate customers, as well as to niche consumer markets (including selected
ethnic communities). To reduce its credit risk to such niche consumer markets,
the Company primarily offers prepaid products to its targeted consumers. Each of
the countries in which the Company operates has experienced different levels of
deregulation, resulting in various levels of competition and differing ranges of
services which the Company is permitted to offer. The Company also believes that
as it pursues its strategic growth strategy it will continue to encounter
various degrees of start-up time.


                                       9
<PAGE>

Asia and Pacific Rim Operations

<TABLE>
<CAPTION>
                                                            Three Months Ended                  Six Months Ended
                                                         June 30,         June 30,         June 30,         June 30,
                                                           1998             1997             1998             1997
                                                           ----             ----             ----             ----
                                                                                (unaudited)
                                                         (in thousands, except percentage of consolidated revenues)
<S>                                                     <C>              <C>              <C>              <C>      
Revenues .........................................      $  32,365        $   7,186        $  54,063        $   7,186
Percentage of consolidated revenues ..............           19.4%            10.7%            18.1%             6.6%
Cost of services .................................         25,871            6,616           44,912            6,616
                                                        ---------        ---------        ---------        ---------
Gross profit .....................................          6,494              570            9,151              570
Selling, general and administrative expenses .....          6,585            1,057           10,787            1,370
Depreciation and amortization ....................          1,211              110            2,243              125
                                                        ---------        ---------        ---------        ---------
Loss from operations .............................      $  (1,302)       $    (597)       $  (3,879)       $    (925)
                                                        =========        =========        =========        =========
</TABLE>

The Company commenced revenue producing operations in its Asian and Pacific Rim
operations through its Australian entity with the acquisition of a customer base
in Australia in the second quarter of 1997. The Company's Australian entity also
acquired additional operations in the fourth quarter of 1997. In the first
quarter of 1998, the Company acquired the customer bases of two switchless
mobile telecommunications resellers in Australia. The Company offers its
customers in Australia local services, mobile and domestic and international
long distance services.

Effect of Deregulation on Revenues

The Company operates or will soon operate in various countries in Europe, each
of which is in a different state of deregulation. In certain of these countries,
current regulatory restrictions limit the Company's ability to offer a broader
array of products and services and limit the availability of those services to
customers. Accordingly, the Company anticipates that deregulation will have a
favorable impact on revenues because (i) customers will be able to access the
Company's services more easily and (ii) the Company will have the ability to
provide a broader array of products and services. It is anticipated that most
European countries will deregulate various aspects of the telecommunications
industry during 1998 and 1999.

The other countries in which the company operates or will soon operate also have
experienced different levels of deregulation. As a result, the level of
competition in each country varies. The Company believes that as it pursues its
strategic growth strategy, the commencement of new operations will entail
varying degrees of time and cost.

Cost of Services

The Company's cost of services is comprised of costs associated with gaining
local access and the transport and termination of calls over the Company's
network ("RSL-NET"). The majority of the Company's cost of services are
variable, including local access charges and transmission capacity leased on a
per-minute of use basis. The Company expects that an increasing amount of its
total operating costs will be fixed in the future, as the volume of the
Company's calls carried over its indefeasible rights of use ("IRUs"), minimum
investment units ("MIUs) and point-to-point fixed cost leases increases. The
depreciation expense with respect to the Company's MIUs and IRUs is not
accounted for in cost of services. In addition, the Company intends to lower


                                       10
<PAGE>

its variable cost of termination as a percentage of revenues by carrying traffic
pursuant to more of its existing operating agreements and by negotiating
additional operating agreements on strategic routes. The Company has directly
linked certain of its local operators in Europe and the United states utilizing
lines leased on a fixed cost point over MIUs and IRUs. To the extent traffic can
be transported between two local operators over MIUs or IRUs, there is only
marginal cost to the Company with respect to the international portion of a call
other than the fixed lease payment or the capital expenditure incurred in
connection with the purchase of the MIUs or IRUs. Accordingly, variable costs
will continue to be a majority of the Company's cost of services for the
foreseeable future. The Company's cost of transport and termination will
decrease to the extent that it is able to bypass the settlement rates associated
with the transport of international traffic. By integrating its operations in
this manner, the Company expects to continue to improve its gross margins.

The Company's cost of services is primarily affected by the volume of traffic
relative to its owned facilities and facilities leased on a point-to-point fixed
cost basis and capacity leased on a per minute basis with volume discounts. To
the extent that volume exceeds capacity on leased facilities that have been
arranged for in advance, the Company is forced to acquire capacity from
alternative carriers on a spot rate per-minute ("overflow") basis at a higher
cost. Acquiring capacity on an overflow basis has a negative impact on margins,
but enables the Company to maintain uninterrupted service to its customers.

Effect of Deregulation on Costs of Services

The Company's current cost structure varies from country to country as a result
of the different level of regulatory policies in place in each country. In
general, the Company's cost structure is lower in countries that have been fully
deregulated than in those which are partially deregulated. In countries that are
not fully deregulated, the Company's access to the local exchange network is
subject to more expensive means (i.e., leased lines or dial-in access). This
results in higher costs to the Company for carrying international traffic
originating within a country and terminating in another country. In addition,
local regulations in many countries restrict the Company from purchasing
capacity on international cable and fiber systems. The Company must instead
either enter into long-term lease agreements for international capacity at a
high fixed cost or purchase per-minute of use termination rates from the
dominant carrier. Deregulation in countries in which the Company operates is
expected to permit the Company to (i) interconnect its switches with the local
exchange network and (ii) purchase its own international facilities. The Company
believes that as a result of deregulation, its cost structure will improve.
Deregulation is also expected to permit the Company to terminate international
inbound traffic in a country which will result in an improved cost structure for
the Company as a whole.

Selling, General and Administrative Expenses

The Company's selling, general and administrative expenses consist of costs
incurred to support the continued expansion of RSL-NET, the introduction of new
services and the provision of ongoing customer service. These costs are
principally comprised of costs associated with employee compensation, occupancy,
insurance, professional fees, sales and marketing (including sales commissions)
and bad debt expenses. In addition, as the Company commences operations in
different countries, it incurs significant start-up costs, particularly for
hiring, training and retention of personnel, leasing of office space and
advertising. In addition, the Company's selling, general and administrative
expense includes the settlement of various claims and disputes relating to
pre-acquisition periods.

The Company has grown and intends to continue to grow by establishing operations
in countries that are in the process of being deregulated and that originate and
terminate large volumes of international traffic or offer other strategic
benefits. Each of the Company's operations is in a different stage of
development. The early stages of


                                       11
<PAGE>

development of a new operation involve substantial start-up costs in advance of
revenues. Upon the commencement of such operations, the Company generally incurs
additional fixed costs to facilitate growth. The Company expects that during
periods of significant expansion, selling, general and administrative expenses
will increase materially. Accordingly, the Company's consolidated results of
operations will vary depending on the timing and speed of the Company's
expansion strategy and, during a period of rapid expansion, will not necessarily
reflect the performance of the Company's more established local operators.

Foreign Exchange

The Company is exposed to fluctuations in foreign currencies relative to the
U.S. dollar, as its revenues, costs, assets and liabilities are, for the most
part, denominated in local currencies. The results of operations of the
Company's subsidiaries, as reported in U.S. dollars, may be significantly
affected by fluctuations in the value of the local currencies in which the
Company transacts business.

The Company recorded a foreign currency translation adjustment of $4.2 million
and $7.0 million for the three months and six months ended June 30, 1998,
respectively. Such amount is recorded upon the translation of the foreign
subsidiaries' financial statements into U.S. dollars, and is dependent upon the
various foreign exchange rates and the magnitude of the foreign subsidiaries'
financial statements.

The Company incurs settlement costs when it exchanges traffic via operating
agreements with foreign correspondents. These costs currently represent a small
portion of total costs; however, as the Company's international operations
increase, it expects that these costs will become a more significant portion of
its cost of services. Such costs are settled by utilizing a net settlement
process with the Company's foreign correspondents comprised of special drawing
rights ("SDRs"). SDRs are the established method of settlement among
international telecommunications carriers. The SDRs are valued based upon a
basket of foreign currencies and the Company believes that this mitigates, to
some extent, its foreign currency exposure. The Company has monitored and will
continue to monitor its currency exposure.


                                       12
<PAGE>

Results Of Operations For The Three Months Ended June 30, 1998 Compared To The
Three Months Ended June 30, 1997

      Revenues. Revenues increased to $166.6 million for the three months ended
June 30, 1998 compared to $67.2 million for the three months ended June 30,
1997, an increase of 148%. This increase is due primarily to an increase in the
Company's U.S. revenues from $43.3 million for the three months ended June 30,
1997 to $85.4 million for the same period this year and the Company's European
revenues, which increased from $16.7 million for the three months ended June 30,
1997 to $48.7 million for the same period this year. The Company had revenue
generating operations in the United States, 13 European countries, Venezuela and
Australia during the second quarter of 1998. The increase in the Company's U.S.
revenues was primarily due to increased traffic volume from existing customers,
the LDM acquisition, significant increases in the Company's U.S. commercial
customer base, and increased sales of prepaid cards. Revenues from the Company's
European operations increased as a result of the increased traffic volume from
existing customers, increased sales of prepaid calling cards and through
acquisitions. Revenues from the Company's Australian operations increased to
$32.4 million for the three months ended June 30, 1998, compared with $7.2
million for the second quarter of 1997 primarily because of various acquisitions
which had taken place throughout the period.

      Cost of Services. Cost of services increased to $138.8 million for the
three months ended June 30, 1998 from $59.8 million for the three months ended
June 30, 1997, an increase of 132%. This increase is primarily due to increased
traffic and, to a certain extent, increased rates paid to the Company's carrier
vendors. As a percentage of revenues, cost of services decreased to 83.3% for
the three months ended June 30, 1998 from 89.0% for the three months ended June
30, 1997. The decrease in cost of services as a percentage of revenues is
primarily attributable to the improvement in the Company's U.S. operations'
costs of services which represented 52.2% of the Company's total cost of
services in the period. In order to reduce costs, the Company intends to
purchase additional capacity, if and when regulations permit, in each of the
Company's respective countries' of operation, on routes on which it has
experienced, or anticipates experiencing, overflow traffic.

      Gross Margins. The Company's consolidated gross margins increased to 16.7%
for the three months ended June 30, 1998 from 11.0% for the three months ended
June 30, 1997. The increase in gross margins was primarily a result of lower
termination rates to the Company's most highly trafficked destinations and the
higher profitability contribution from it's small and medium sized customer base
in the Company's U.S. operations. Gross margins for the Company's U.S.
operations increased to 15.2% for the second quarter of 1998 from 8.8% for the
second quarter of 1997. Gross margins for the Company's European operations
decreased to 17.0% for the second quarter of 1998 from 18.0% for the second
quarter of 1997. This reduction in gross margins for the Company's European
operations is primarily attributed to increased prepaid card sales which,
because of the status of deregulation in Germany and France, have produced low
and in certain cases negative gross margins for the Company's prepaid operations
in Germany and France.

      Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the three months ended June 30, 1998
increased by $19.8 million, or 81%, to $44.2 million from $24.4 million for the
three months ended June 30, 1997. This increase is primarily attributable to
costs of start-ups in and expansion of the Company's European operations and the
hiring of new personnel in Europe and Australia. Due to a greater proportion of
start-up and expansion costs in Europe, the Company's European operations
generated $19.8 million or 44.9% of the Company's consolidated SG&A for the
three month period ended June 30, 1998, although such operations accounted for
only 29.2% of the Company's total revenues for such period. SG&A expense will
continue to increase as a result of start-up costs and infrastructure expansion
attributable to new local operations.


                                       13
<PAGE>

      Depreciation and Amortization Expense. Depreciation and amortization
expense increased 146% to $11.6 million for the three months ended June 30, 1998
from $4.7 million for the three months ended June 30, 1997. This increase is
primarily attributable to the increased amortization of goodwill recorded as a
result of the Company's acquisitions. Depreciation and amortization expense is
expected to increase in the future as the Company acquires additional businesses
and assets.

      Interest Income. Interest income increased to $6.0 million for the three
months ended June 30, 1998 from $3.3 million for the three months ended June 30,
1997, primarily as a result of interest earned on the proceeds of the 1998
Notes.

      Interest Expense. Interest expense increased to $18.9 million for the
three months ended June 30, 1998 from $9.8 million for the three months ended
June 30, 1997, primarily as a result of interest related to the 1998 Notes.

      Net Loss Before Extraordinary Item. Net loss before extraordinary item
increased to $41.2 million for the three months ended June 30, 1998, as compared
to net loss of $21.6 million for the three months ended June 30, 1997 due to the
factors described above. An extraordinary item of $20.8 million for the three
months ended June 30, 1998 represents primarily the premium paid to retire
approximately $127 million of the original $300 million of the Company's 1996
Notes. The Company had no such expense in the second quarter of 1997.


                                       14
<PAGE>

Results Of Operations For The Six Months Ended June 30, 1998 Compared To The Six
Months Ended June 30, 1997

      Revenues. Revenues increased to $298.2 million for the six months ended
June 30, 1998 compared to $109.4 million for the six months ended June 30, 1997,
an increase of 173%. This increase is due primarily to an increase in the
Company's U.S. revenues from $69.9 million for the six months ended June 30,
1997 to $159.9 million for the same period this year and the Company's European
revenues, which increased from $32.3 million for the six months ended June 30,
1997 to $84.0 million for the same period this year. The Company had revenue
generating operations in the United States, 13 European countries, Venezuela and
Australia during the first six month period of 1998. The increase in the
Company's U.S. revenues was primarily due to increased traffic volume from
existing customers, the LDM acquisition, and significant increases in the
Company's U.S. commercial customer base. Revenues from the Company's European
operations increased as a result of the increased traffic volume from existing
customers, increased sales of prepaid calling cards and through acquisitions.
Revenues from the Company's Australian operations increased to $54.1 million for
the six months ended June 30, 1998, compared with $7.2 million for the same
period of 1997 as a result of various acquisitions which had taken place
throughout the period.

      Cost of Services. Cost of services increased to $251.9 million for the six
months ended June 30, 1998 from $96.8 million for the six months ended June 30,
1997, an increase of 160%. This increase is primarily due to increased traffic
and, to a certain extent, increased rates paid to the Company's carrier vendors.
As a percentage of revenues, cost of services decreased to 84.5% for the six
months ended June 30, 1998 from 88.5% for the six months ended June 30, 1997.
The decrease in cost of services as a percentage of revenues is primarily
attributable to the improvement in the Company's U.S. operations' costs of
services which represented 54.1% of the Company's total cost of services in the
period. In order to reduce costs, the Company intends to purchase additional
capacity, if and when regulations permit, in each of the Company's respective
countries' of operation, on routes on which it has experienced, or anticipates
experiencing, overflow traffic.

      Gross Margins. The Company's consolidated gross margins increased to 15.5%
for the six months ended June 30, 1998 from 11.5% for the six months ended June
30, 1997. This increase in gross margins was primarily a result of lower
termination rates to the Company's most highly trafficked destinations and the
higher profitability contribution from it's small and medium sized customer base
in the Company's U.S. operations. Gross margins for the Company's U.S.
operations increased to 14.8% for the first six month period of 1998 from 8.5%
for the first six month period of 1997. Gross margins for the Company's European
operations decreased to 16.0% for the first six month period of 1998 from 18.7%
for the first six month period of 1997. This reduction in gross margins for the
Company's European operations is primarily attributed to increased prepaid card
sales which, because of the status of deregulation in Germany and France, have
produced low and in certain cases negative gross margins for the Company's
prepaid operations in Germany and France.

      Selling, General and Administrative Expense. SG&A expense for the six
months ended June 30, 1998 increased by $41.6 million, or 109%, to $79.8 million
from $38.2 million for the six months ended June 30, 1997. This increase is
primarily attributable to costs of start-ups in and expansion of the Company's
European operations and the hiring of new personnel in Europe and Australia. Due
to a greater proportion of start-up and expansion costs in Europe, the Company's
European operations generated $38.0 million or 47.6% of the Company's
consolidated SG&A for the six months ended June 30, 1998, although such
operations accounted for only 28.2% of the Company's total revenues in such
period. SG&A expense will continue to increase as a result of start-up costs and
infrastructure expansion attributable to new local operations.


                                       15
<PAGE>

      Depreciation and Amortization Expense. Depreciation and amortization
expense increased 136% to $21.1 million for the six months ended June 30, 1998
from $9.0 million for the six months ended June 30, 1997. This increase is
primarily attributable to the increased amortization of goodwill recorded as a
result of the Company's acquisitions. Depreciation and amortization expense is
expected to increase in the future as the Company acquires additional businesses
and assets.

      Interest Income. Interest income increased to $10.8 million for the six
months ended June 30, 1998 from $7.1 million for the six months ended June 30,
1997, primarily as a result of interest earned on the proceeds of the 1998
Notes.

      Interest Expense. Interest expense increased to $33.3 million for the six
months ended June 30, 1998 from $19.3 million for the six months ended June 30,
1997, primarily as a result of interest related to the 1998 Notes.

      Net Loss Before Extraordinary Item. Net loss before extraordinary item
increased to $76.5 million for the six months ended June 30, 1998, as compared
to net loss of $40.7 million for the six months ended June 30, 1997 due to the
factors described above. An extraordinary item of $20.8 million for the six
months ended June 30, 1998 represents primarily the premium paid to retire
approximately $127 million of the original $300 million of the Company's 1996
Notes. The Company had no such expense in the six month period ended June 30,
1997.

Liquidity and Capital Resources

The Company has incurred significant operating and net losses, due in large part
to the start-up and development of the Company's operations and the development
of the Company's telecommunications network infrastructure. The Company expects
that such net losses will increase as the Company implements its growth strategy
in 1998. Historically, the Company has funded its operating losses and capital
expenditures through capital contributions, borrowings, the Company's Initial
Public Offering and the Notes.

Cash used in operating activities for the six months ended June 30, 1998 totaled
$108.2 million compared with $45.2 million for the same period in 1997. Capital
expenditures for the six months ended June 30, 1998 were $41.8 million compared
with $13.9 million for the comparable period in 1997. These capital expenditures
are principally for switches, fiber, and related telecommunications equipment.
Funds expended for acquisitions were $81.4 million during the six months ended
June 30, 1998 compared with $5.5 million for the six months ended June 30, 1997.

In connection with the issuance of the 1996 Notes by RSL PLC, the Company was
required to purchase and maintain marketable securities, which are held by the
trustee under the Indenture governing the 1996 Notes, in order to secure the
payment of the first six scheduled interest payments on the 1996 Notes. The
market value of such restricted marketable securities was approximately $51.9
million at June 30, 1998.

In February 1998, RSL PLC consummated concurrent offerings of $200 million 
9 1/8% Senior Notes due 2008 and $328.1 million ($200 million initial accreted
value) 10 1/8% Senior Discount Notes due 2008. The two offerings generated gross
proceeds to the Company of $400.0 million.

In March 1998, RSL PLC consummated an offering of DM 296.0 million
(approximately $99.1 million initial accreted value) 10% Senior Discount Notes
due 2008.

In April 1998, the Company through the Equity Clawback and Buyback redeemed
$90.0 million and $37.5


                                       16
<PAGE>

million of the 1996 Notes, respectively, at a premium of $11.0 million and $5.6
million, respectively, as permitted under the 1996 Indenture.

The Indentures governing the Notes contain certain restrictive covenants which
impose limitations on the Company and certain of its subsidiaries' ability to,
among other things: (i) incur additional indebtedness, (ii) pay dividends or
make certain other distributions, (iii) issue capital stock of certain
subsidiaries, (iv) guarantee debt, (v) enter into transactions with shareholders
and affiliates, (vi) create liens, (vii) enter into sale-leaseback transactions,
and (viii) sell assets.

The Company's indebtedness was approximately $690.8 million at June 30, 1998 of
which $682.9 million represents long-term debt and $7.9 million represents
short-term debt. Substantially all such indebtedness is attributable to the
Offerings.

The Company has a $7.5 million revolving credit facility with a bank (the
"Revolving Credit Facility"). The Company was not utilizing this facility at
June 30, 1998 and the full amount of such facility was available. The Revolving
Credit Facility was due and payable by the Company on June 30, 1998. The Company
is negotiating an extension to the Revolving Credit Facility.

The Company through one of its subsidiaries has a $10.0 million revolving credit
facility. There was $7.2 million outstanding under this facility at June 30,
1998. This facility is payable in full on September 30, 2000 and accrues
interest at prime rate plus 2.5% per annum.

One of the Company's primary equipment vendors has provided to the Company $50.0
million in vendor financing to fund the purchase of additional switching and
related telecommunications capital equipment. At June 30, 1998, this facility
was fully utilized. Borrowings from this equipment vendor accrue interest at a
rate of LIBOR plus either 5.25% or 4.5% depending on the equipment purchased.

The Company anticipates that it will enter six to ten new markets over the next
two years. The costs to be incurred in the first year in order to capitalize
such operations are projected to range from $500,000 to $2.0 million per market,
exclusive of costs related to the acquisition of switching and network equipment
which is expected to be vendor financed, and the cost of funding any losses
incurred.

The Company believes that the net proceeds from the 1998 U.S. Offerings and the
1998 DM Offering, together with the available borrowings under the Revolving
Credit Facility, vendor financing and short-term lines of credit and overdraft
facilities from local banks, should be sufficient to fund the Company's planned
expansion of its existing operations and operating losses for approximately six
to nine months. If the Company's plans or assumptions change or prove to be
inaccurate, if the Company consummates acquisitions in addition to those
currently contemplated, if the Company experiences unanticipated costs or
competitive pressures or if the net proceeds from the 1998 U.S. Offerings and
the 1998 DM Offering, together with the proceeds of the Revolving Credit
Facility and such vendor financing otherwise prove to be insufficient, the
Company may be required to seek additional capital.

Effects of Recently Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." The Company adopted SFAS No. 130
during the six month period ended June 30, 1998. The Company has determined to
present the data on a geographical basis for SFAS No. 131.


                                       17
<PAGE>

SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, it has no impact on the
Company's net income. Comprehensive income includes both net income and other
comprehensive income. Other comprehensive loss for the six months ended June 30,
1998 and June 30, 1997 of $7.0 million and $0.5 million, respectively,
represented foreign currency translation adjustment. Accumulated other
comprehensive loss included in the accompanying condensed consolidated balance
sheet as of June 30, 1998 and June 30, 1997 was $12.3 million and $1.1 million,
respectively, consisting of the accumulated foreign currency translation
adjustment.

Seasonality

The Company's European operations experience seasonality during July and August,
December and January, and, to a lesser extent, March, as these months are
traditional holiday months in most European countries and many European
businesses, which are the Company's principal European customers, are closed
during portions of these months.

Year 2000 Technology Risks

The Company is in the process of reviewing its computer systems and operations
to identify and determine the extent to which any systems will be vulnerable to
potential errors and failures as a result of the "Year 2000" problem. The Year
2000 problem is the result of computer programs being written using two digits,
rather than four digits, to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations.

The Company is upgrading its computer system in an effort to prevent major
system failures which could result upon the transition from 1999 to the year
2000. There can be no assurance that any such upgrades will be successfully
implemented or that additional steps will not be necessary. The Company
anticipates that it will be fully Year 2000 compliant by the middle of 1999;
however a failure of the Company's computer system or the failure of the
Company's vendors or customers to effectively upgrade their software and systems
for transition to the year 2000 could have a material adverse effect on the
Company's business and financial position or results of operations. The Company
is also seeking confirmation from its primary vendors that they are developing
and implementing plans to become Year 2000 compliant. The Company currently
estimates that its cost to become Year 2000 compliant is approximately $7.0
million. Costs associated with software modification are expensed by the Company
when incurred.


                                       18
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

There have been no material developments in the Company's legal proceedings
during the quarter ended June 30, 1998 except as set forth below. For
information with respect to the Company's legal proceedings see the Company's
Form 10-K for the year ended December 31, 1997 and its Form 10-Q for the quarter
ended March 31, 1998.

In March 1998 and in May 1998, the Attorney General of the State of Florida
served a subpoena on each of LDM Systems, Inc. ("LDM") and RSL COM U.S.A., Inc.
("RSL USA"), respectively, seeking information relating to the unauthorized
changing or combining of local and long distance telephone service providers or
billing for telephone related services ("slamming"). LDM and RSL USA are
subsidiaries of RSL. The Florida subpoenas relate to alleged activity by LDM
which would have primarily occurred prior to LDM's acquisition by RSL USA.
Pursuant to the terms of the stock purchase agreement, between RSL USA and the
shareholders of LDM, RSL USA is entitled to indemnification for losses, costs
and expenses as a result of, among other things, "slamming" and related matters.

Item 2. Change in Securities and Use of Proceeds

In October 1997, the Company sold 8,280,000 shares of Class A Common Stock, par
value $0.00457 per share, (the "Shares") in an initial public offering of Shares
(the "Initial Public Offering"). The Shares sold in the Initial Public Offering
were offered both in the United States and internationally. The Company's
Registration Statement on Form S-1 (File No. 333-34281) filed with the
Commission with respect to the Initial Public Offering was declared effective by
the Commission on September 30, 1997. The aggregate net proceeds of the Initial
Public Offering, after deducting underwriting discounts and commissions and
expenses, were approximately $167.5 million. In April 1998, the Company used
approximately $101.0 million of the net proceeds of the Initial Public Offering
to redeem $90 million of the 1996 Notes, as permitted under the 1996 Indenture.
In April 1998, the Company used approximately $43.1 million to redeem $37.5
million of the 1996 Notes, as permitted under the 1996 Indenture.

In July 1998, RSL Europe and Metro Holding, entered into an amended and restated
share subscription, share option and shareholders agreement and a related
exchange agreement, pursuant to which, among other things, Metro Holding
converted all of its shares in RSL Europe into newly issued Shares. Accordingly,
the Company issued Metro Holding 1,607,142 Shares (the "RSL Shares"), in
exchange for 142,857 common shares of RSL Europe, and the Additional Option
granted pursuant to the Metro Agreement was cancelled. All of the RSL Shares
acquired by Metro Holding are restricted from transfer until April 1, 2001. The
RSL Shares were issued pursuant to a private placement exemption under Section
4(2) of the Securities Act of 1933, as amended, and the certificates evidencing
the RSL Shares have been legended as restricted securities.

Pursuant to an Agreement and Plan of Merger (the "Merger"), dated as of March
31, 1998, between the Company, Delta Three, Inc. ("Delta Three"), Jacob Davidson
("Davidson"), and Pioneer Management Services LLC ("Pioneer," and together with
Davidson, the "Delta Shareholders"), Delta Three was merged into a wholly-owned
subsidiary of RSL. As a result of the Merger, the Company (i) received 1,750,000
shares of Delta Three, (ii) paid to each Delta Shareholder a total cash payment
of $438,500 and (iii) issued to each Delta Shareholder 187,299 Shares. The
Shares were issued pursuant to a private placement exemption


                                       19
<PAGE>

under Section 4(2) of the Securities Act of 1933, as amended, and the
certificates evidencing the Shares have been legended as restricted securities.

Item 4. Submission of Matters to a Vote of Security Holders

On May 7, 1998, the Company held its annual general meeting (the "Meeting") of
shareholders of the Company. At the Meeting, there were present in person or by
proxy a total of 636,114 shares of Class A Common Stock out of a total
11,364,196 shares of such stock issued and outstanding and entitled to vote at
the Meeting, and a total of 30,110,555 shares of Class B Common Stock of the
Company out of a total of 30,460,722 issued and outstanding and entitled to vote
at the meeting (or, in the aggregate 301,741,664 votes out of a total of
315,971,416 potential votes).

The shareholders voted in favor of the election of the following eight directors
to serve on the Company's Board of Directors until the next annual general
meeting of shareholders: Ronald S. Lauder, Itzhak Fisher, Jacob Z. Schuster,
Gustavo A. Cisneros, Fred H. Langhammer, Leonard A. Lauder, Eugene A. Sekulow
and Nicolas G. Trollope. Each of the nominees for director received 301,741,664
votes in favor of his election, 0 votes against his election, and 0 abstention
votes.

In addition, the shareholders voted in favor of the adoption of the financial
statements of the Company for the Company's fiscal year ended December 31, 1997,
together with the auditor's report thereon, as follows: 301,741,264 votes for, 0
votes against and 400 abstention votes. The shareholders also voted in favor of
the appointment of Deloitte & Touche LLP as auditors for the Company and the
delegation to the Company's Audit Committee the authority to fix the auditor's
fee for the current fiscal year as follows: 301,741,664 votes for, 0 votes
against and 0 abstention votes.

Item 5. Other Information

      Forward-Looking Statements

Certain matters discussed in this Report under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operation
Liquidity and Capital Resources" contain certain forward-looking statements
which involve risks and uncertainties and depend upon certain assumptions, some
of which may be beyond the Company's control, including changing market
conditions, competitive and regulatory matters (such as timing and extent of
deregulation of telecommunications market, the size and financial resources of
competitors, etc.), general economic conditions in the markets in which the
Company operates, Year 2000 readiness of the Company's customers and suppliers,
etc. and, accordingly, there can be no assurance with regard to such statements.

Item 6. Exhibits and Reports on Form 8-K

            Exhibits:

                  27.1  Financial Data Schedule


            Reports on Form 8-K:

                  On April 29, 1998, the Company filed a Current Report on Form
                  8-K, in accordance with Item 5, in connection with its
                  acquisition of Westinghouse Communications, a


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<PAGE>

                  division of CBS Corporation. On August 12, 1998, the Company
                  filed a Current Report on Form 8-K/A, in accordance with Item
                  2, in connection with its acquisition of Westinghouse
                  Communications.

                  On May 18, 1998, the Company filed a Current Report on Form
                  8-K, in accordance with Item 5, in connection with its
                  completion of the 1998 U.S. Offering.

                  On May 18, 1998, the Company filed a Current Report on Form
                  8-K, in accordance with Item 5, in connection with the 1998 DM
                  Offering.

                  On June 25, 1998, the Company filed a Current Report on Form
                  8-K, in accordance with Item 5, in connection with the Metro
                  Agreement.


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<PAGE>

                                   SIGNATURES


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned thereunto duly authorized.


                                          RSL COMMUNICATIONS, LTD.


Date:  August 13, 1998                    By  /s/ Mark Hirschhorn
       ---------------------                  ----------------------------------
                                          Name:  Mark Hirschhorn
                                          Title: Vice President Finance-
                                                 Global Controller
                                                 (Authorized Officer and
                                                 Chief Accounting Officer)


                                       22
<PAGE>

Exhibit Index


27.1        Financial Data Schedule


                                       23