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 March 31, 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 April 30, 1998, the registrant had 13,765,840 of the Class A common stock,
par value $0.00457 per share, and 28,455,081 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.................................................16

    Item 2. Change in Securities and Use of Proceeds..........................16

    Item 5. Other Information.................................................16

    Item 6. Exhibits and Reports on Form 8-K..................................17

Signatures....................................................................18

Exhibit Index.................................................................19
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements.

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

                                                           As of        As of
                                                         March 31,  December 31,
                                                           1998         1997
                                                           ----         ----
                                                       (unaudited)

Assets

Cash and Cash Equivalents                              $   564,026    $ 144,894
Accounts Receivable, Net                                    86,994       70,610
Marketable Securities - Available for Sale                   4,968       13,858
Prepaid Expenses and Other Current Assets                   33,861       16,073
Marketable Securities - Held to Maturity                    69,862       68,836
Property and Equipment                                     105,801       85,581
Less: Accumulated Depreciation                             (17,862)     (13,804)
Goodwill and Other Intangibles, Net                        241,552      214,983
Deposits and Other Assets                                   11,368        4,633
                                                       -----------    ---------

     Total Assets                                      $ 1,100,570    $ 605,664
                                                       ===========    =========

Liabilities and Shareholders' Equity

Accounts Payable and Other Liabilities                 $   176,975    $ 154,324
Short-term Debt                                              9,630        8,033
Long-term Debt                                              22,215       20,108
Senior Notes and Senior Discount Notes, Net                797,916      296,500
Other Liabilities - Noncurrent                               5,106           --
Shareholders' Equity                                        88,728      126,699
                                                       -----------    ---------

     Total Liabilities and Shareholders' Equity        $ 1,100,570    $ 605,664
                                                       ===========    =========

            See notes to condensed consolidated financial statements.


                                       1
<PAGE>

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

                                                           Three Months Ended

                                                           March 31,  March 31,
                                                           ---------  ---------
                                                              1998       1997
                                                              ----       ----

REVENUES ................................................  $ 131,635   $ 42,168
COST OF SERVICES ........................................    113,037     36,969
                                                           ---------   --------
GROSS PROFIT ............................................     18,598      5,199
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ............     35,635     13,812
DEPRECIATION AND AMORTIZATION ...........................      9,548      4,263
                                                           ---------   --------
LOSS FROM OPERATIONS ....................................    (26,585)   (12,876)
INTEREST INCOME .........................................      4,806      3,792
INTEREST EXPENSE ........................................    (14,464)    (9,431)
OTHER INCOME (EXPENSE)-NET ..............................         48       (255)
MINORITY INTEREST .......................................      1,083       (119)

INCOME TAXES ............................................       (222)      (258)
                                                           ---------   --------

NET LOSS ................................................  $ (35,334)  $(19,147)
                                                           =========   ========

LOSS PER SHARE OF COMMON STOCK ..........................  $  (0.85)   $  (1.82)

            See notes to condensed consolidated financial statements.


                                       2
<PAGE>

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

                                                    Three Months Ended March 31,
                                                    ----------------------------

                                                          1998          1997
                                                          ----          ----

Net loss ...........................................   $ (35,334)     $ (19,147)
Depreciation and amortization ......................       9,548          4,263
Working capital change and other ...................     (15,725)         2,026
                                                       ---------      ---------
    Net cash used in operations ....................     (41,511)       (12,858)
                                                       ---------      ---------

Acquisitions of subsidiaries .......................     (23,605)        (1,402)
Purchase of property and equipment .................     (18,337)        (2,936)
Proceeds from sales of marketable securities .......       8,889         16,099
Other ..............................................         610             --
                                                       ---------      ---------
    Net cash (used in) provided by investing
     activities ....................................     (32,443)        11,761
                                                       ---------      ---------

Proceeds from issuance of 1998 Notes ...............     499,045             --
Payment of offering cost ...........................      (5,417)            --
Proceeds from notes payable ........................       2,338             --
Payment of notes payable ...........................      (2,223)          (156)
Proceeds from issuance of Class A shares ...........         189             --
Other ..............................................        (520)          (208)
                                                       ---------      ---------
    Net cash provided by (used in) financing
     activities ....................................     493,412           (364)
                                                       ---------      ---------

Increase (decrease) in cash and cash
  equivalents ......................................     419,458         (1,461)
Effects of foreign currency on cash and cash
  equivalents ......................................        (326)          (696)
Cash and cash equivalents at beginning of period ...     144,894        104,068
                                                       ---------      ---------

Cash and cash equivalents at end of period .........   $ 564,026      $ 101,911
                                                       =========      =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Cash paid for interest .............................   $     641      $      38
                                                       =========      =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:

Assets acquired under capital lease obligations ....   $   1,069      $   1,127
                                                       =========      =========

            See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                            RSL COMMUNICATIONS, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED MARCH 31, 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

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 $99.1 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.

3. WARRANT REGISTRATION

The Company has registered 1,152,715 shares of Class A Common Stock to be issued
pursuant to the terms of the 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 


                                       4
<PAGE>

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 both of these
Standards during the three month period ended March 31, 1998.

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) income for the three months ended March 31,
1998 and March 31, 1997 of ($3.8) million and $1.1 million, respectively,
represented foreign currency translation adjustment. Accumulated other
comprehensive (loss) gain included in the accompanying condensed consolidated
balance sheet as of March 31, 1998 and March 31, 1997 was ($8.9) million and
$40.5 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 month period ended March 31, 1997 has 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.

                                                          Three Months Ended
                                                       March 31,       March 31,
                                                       ---------       ---------
                                                         1998            1997
                                                         ----            ----
                                                            (in thousands)

Weighted average number of shares of common stock 
  outstanding .....................................     41,777          10,541

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

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


                                       5
<PAGE>

7. SUMMARIZED FINANCIAL INFORMATION FOR RSL PLC

The following presents summarized financial information of RSL PLC as of March
31, 1998 and 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
disclosures 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.

                                                  As of              As of
                                                March 31,         December 31,
                                                   1998               1997
                                             ($ in thousands)   ($ in thousands)
                                             ----------------   ----------------

Current assets..............................    $ 647,571          $ 212,568

Non-current assets..........................      338,556            324,118

Current liabilities.........................      159,463            122,672

Non-current liabilities.....................      970,923            557,448

                                               Three Months       Three Months
                                                   ended             ended
                                                  March 31,         March 31,
                                                    1998              1997
                                              ($ in thousands)  ($ in thousands)
                                              ----------------  ----------------

Net revenue.................................      $ 109,446         $  42,168

Gross profit................................         16,021             5,199

Net loss....................................        (29,860)          (17,224)

8. SUBSEQUENT EVENTS

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"). 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 closing
of the WestComm Acquisition, which is subject to the receipt of certain
regulatory and other third party approvals, is expected to occur prior to the
end of the second quarter of 1998.


                                       6
<PAGE>

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 of the net proceeds
from the 1998 DM Offering 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 will be expensed in the second quarter of 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 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 66% 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 16 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. In addition, the Company
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.

U.S. Operations

                                                           Three Months Ended
                                                         March 31,    March 31,
                                                          1998          1997
                                                          ----          ----
                                                             (unaudited)

                                                (in thousands, except percentage
                                                 of consolidated revenues)

Revenues ...........................................    $ 74,526      $ 26,560
Percentage of consolidated revenues ................        56.6%         63.0%
Cost of services ...................................      63,775        24,397
                                                        --------      --------
Gross profit .......................................      10,751         2,163
Selling, general and administrative expenses .......      11,134         4,914
Depreciation and amortization ......................       2,031         1,257
                                                        --------      --------
Loss from operations ...............................    $ (2,414)     $ (4,008)
                                                        ========      ========


                                       8
<PAGE>

Prior to 1997, the Company's revenues had been primarily derived from its
operation 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. The Company has derived increased revenues from its commercial and
prepaid card customers, as it continues to reduce its reliance on wholesale
carrier revenues.

European Operations

                                                           Three Months Ended
                                                        March 31,      March 31,
                                                          1998           1997
                                                          ----           ----
                                                             (unaudited)

                                                (in thousands, except percentage
                                                 of consolidated revenues)

Revenues ...........................................    $ 35,265      $ 15,608
Percentage of consolidated revenues ................        26.8%         37.0%
Cost of services ...................................      30,088        12,572
                                                        --------      --------
Gross profit .......................................       5,177         3,036
Selling, general and administrative expenses .......      18,168         7,429
Depreciation and amortization ......................       3,273         1,017
                                                        --------      --------
Loss from operations ...............................    $(16,264)     $ (5,410)
                                                        ========      ========

The Company commenced its 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 and
Denmark 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. 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.

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.

Asia and Pacific Rim Operations

The Company commenced its Asia and Pacific Rim Operations in the fourth quarter
of 1996. Through an 


                                       9
<PAGE>

asset acquisition, the Company acquired a large customer base in Australia in
the second quarter of 1997 and acquired additional operations in the fourth
quarter of 1997. In the first quarter of 1998, the Company acquired the mobile
telephony customer base from two switchless mobile telecommunications resellers
in Australia. As a result, the Company's Australian operation has grown
significantly and consists primarily of commercial customers. The Company offers
its customers in Australia local services and domestic and international long
distance services, in addition to prepaid cards to residential customers.

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 in 1998.

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 "RSL-NET," its
integrated digital telecommunications network. 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 cable systems on which it holds
indefeasible rights of use ("IRUs"), minimum investment units ("MIUs") and using
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 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
operations of the Company in each country (the "Local Operations") in Europe and
the United States utilizing lines leased on a fixed cost point-to-point basis
and 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. By integrating its operations in this manner, the Company
expects to continue to improve its gross margins. 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 services is 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.


                                       10
<PAGE>

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
substantially deregulated than in those which are partially deregulated. In
countries that are not substantially 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
traffic originating within a country and terminating in the same country or 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 the Company believes
will result in an improved cost structure for the Company as a whole. However,
the foregoing is a forward looking statement and there can be no assurance that
deregulation will proceed as expected or lower the Company's cost of services.

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 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 more established Local Operations.

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 $2.8 million
for the three months ended March 31, 1998. 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


                                       11
<PAGE>

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.

Results Of Operations For The Three Months Ended March 31, 1998 Compared To The
Three Months Ended March 31, 1997

      Revenues. Revenues increased to $131.6 million for the three months ended
March 31, 1998 compared to $42.2 million for the three months ended March 31,
1997, an increase of 212%. This increase is due primarily to an increase in the
Company's U.S. revenues from $26.6 million for the three months ended March 31,
1997 to $74.5 million for the same period this year and the Company's European
revenues, which increased from $15.6 million for the three months ended March
31, 1997 to $35.3 million for the same period this year. The Company has revenue
generating operations in the United States, 14 European countries, Venezuela and
Australia during the first quarter of 1998. The increase in the Company's U.S.
revenues was primarily due to both increased traffic volume from existing
customers and significant increases in the Company's U.S. commercial customer
base. Revenue from the Company's European operations increased as a result of
the increased traffic volume from existing customers, as a result of increases
in sales of prepaid calling cards and through acquisitions. Revenues from the
Company's Australian operations totaled $21.7 million for the three months ended
March 31, 1998. The Company's Australian operations had no revenues in the first
quarter of 1997.

      Cost of Services. Cost of services increased to $113.0 million for the
three months ended March 31, 1998 from $37.0 million for the three months ended
March 31, 1997, an increase of 206%. 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 85.9% for
the three months ended March 31, 1998 from 87.7% for the three months ended
March 31, 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 represent 56.4% of the Company's total cost of services.
The Company will continue to purchase additional capacity as soon as
practicable, if regulations permit, in each of the Company's respective country
of operation, on routes on which it has experienced, or anticipates
experiencing, overflow traffic, in order to reduce costs.


                                       12
<PAGE>

      Gross Margins. The Company's consolidated gross margins increased to 14.1%
for the three months ended March 31, 1998 from 12.3% for the three months ended
March 31, 1997 primarily due to significant improvement in the Company's U.S.
operations as 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. Gross margins for the Company's U.S.
operations increased to 14.4% for the first quarter of 1998 from 8.1% for the
first quarter of 1997. Gross margins for the Company's European operations
decreased to 14.7% for the first quarter of 1998 from 19.5% for the first
quarter of 1997. This reduction in gross margins is primarily attributed to
increased traffic in the Company's operations in Germany and France which,
because of the status of deregulation in such countries, resulted in higher
costs producing significantly lower gross margins than the majority of the
Company's other European operations.

      Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the three months ended March 31, 1998
increased by $21.8 million, or 158%, to $35.6 million from $13.8 million for the
three months ended March 31, 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 $18.2 million or 51.0% of the Company's consolidated SG&A, although
such operations accounted for only 26.8% of the Company's total revenues. SG&A
expense as a percentage of revenues will continue to increase as a result of
start-up costs and infrastructure expansion attributable to new local
operations.

      Depreciation and Amortization Expense. Depreciation and amortization
expense increased 124% to $9.5 million for the three months ended March 31, 1998
from $4.3 million for the three months ended March 31, 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 $4.8 million for the three
months ended March 31, 1998 from $3.8 million for the three months ended March
31, 1997, primarily as a result of interest earned on the proceeds of the 1998
Notes.

      Interest Expense. Interest expense increased to $14.5 million for the
three months ended March 31, 1998 from $9.4 million for the three months ended
March 31, 1997, primarily as a result of interest related to the 1998 Notes.

      Net Loss. Net loss increased to $35.3 million for the three months ended
March 31, 1998, as compared to net loss of $19.1 million for the three months
ended March 31, 1997 due to the factors described above.

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 three months ended March 31, 1998
totaled $41.5 million compared with $12.9 million for the same period in 1997.
Capital expenditures for the three months ended March 31, 1998 were $19.4
million compared with $4.1 million for the comparable period in 1997. These
capital 


                                       13
<PAGE>

expenditures are principally for switches and related telecommunications
equipment. Funds expended for acquisitions were $23.6 million during the three
months ended March 31, 1998 compared with $1.4 million for the three months
ended March 31, 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 $70.0
million at March 31, 1998.

On February 27, 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.

On March 16, 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 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 $806.9 million at March 31, 1998 of
which $801.3 million represents long-term debt and $5.6 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
March 31, 1998 and the full amount of such facility was available. The Revolving
Credit Facility is payable on demand or is otherwise due and payable by the
Company on June 30, 1998.

The Company through one of its subsidiaries has a $10.0 million revolving credit
facility. There was $4.8 million outstanding under this facility at March 31,
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 March 31, 1998, approximately
$29.0 million was available under this facility. 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's 1998 planned network facilities expansion is comprised primarily
of both international gateway and domestic switches and is projected to require
approximately a total of $15.0 million of the currently available $29.0 million
under the Company's vendor financing facility.

The Company anticipates that it will enter 7-10 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 


                                       14
<PAGE>

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, the 1996 Unit 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 12 to 20 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 U.S. Dollar Notes
Offerings and the 1998 DM Offering, and the 1996 Units 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.

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 end 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
currently estimates that the cost to become Year 2000 compliant is approximately
$3.0 million. Costs associated with software modification are expensed by the
Company when incurred.

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 both of these
Standards during the three month period ended March 31, 1998.


                                       15
<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 March 31, 1998. For information with respect to the
Company's legal proceedings see the Company's Form 10-K for the year ended
December 31, 1997.

Item 2. Change in Securities and Use of Proceeds

In October 1997, the Company sold 8,280,000 shares of Class A Common Stock in an
initial public offering of shares of Class A Common Stock (the "Initial Public
Offering"). The shares of Class A Common Stock 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. On April 3, 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.

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 (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,
etc.) and, accordingly, there can be no assurance with regard to such
statements.


                                       16
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

        Exhibits:

                  27.1     Financial Data Schedule

        Reports on Form 8-K:

                  On February 19, 1998, the Company filed a Current Report on
                  Form 8-K, in accordance with Item 5, in connection with the
                  1998 U.S. Offering.


                                       17
<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:  May 15, 1998                   By /s/  Mark Hirschhorn
                                        --------------------------
                                        Name: Mark Hirschhorn
                                        Title: Vice President Finance-Global 
                                               Controller (Authorized Officer 
                                               and Chief Accounting Officer)


                                       18
<PAGE>

                                  Exhibit Index

27.1  Financial Data Schedule


                                       19