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, 2000

                         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 of May 10, 2000, the registrant had 32,026,486 of its Class A common shares,
par value $0.00457 per share, and 24,267,283 of its Class B common shares, par
value $0.00457 per share, outstanding.

<PAGE>

                            RSL COMMUNICATIONS, LTD.

                                Table of Contents

                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

    Item 1.  Financial Statements

       Condensed Consolidated Balance Sheets as of
           March 31, 2000 (Unaudited) and December 31, 1999.................  3

       Condensed Consolidated Statements of Operations for the
           Three Month Periods Ended March 31, 2000
           (Unaudited) and 1999 (Unaudited).................................  4

       Condensed Consolidated Statements of Cash Flows for the Three Month
           Periods Ended March 31, 2000 (Unaudited) and 1999 (Unaudited)....  5

       Notes to Condensed Consolidated Financial Statements.................  6

    Item 2.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations ..................................  9

    Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 22

PART II - OTHER INFORMATION

    Item 2.  Change in Securities and Use of Proceeds....................... 23

    Item 4.  Submission of Matters to a Vote of Security Holders............ 23

    Item 5.  Other Information.............................................. 24

    Item 6.  Exhibits and Reports on Form 8-K............................... 24

Signatures.................................................................. 27

Exhibit Index............................................................... 28


                                       2
<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,
                                                         2000           1999
                                                     -----------    -----------
                                                     (unaudited)
Assets
------

Cash and Cash Equivalents ........................   $   361,722    $   238,724
Accounts Receivable, Net .........................       287,061        258,983
Marketable Securities - Available for Sale .......        83,603         72,813
Prepaid Expenses and Other Current Assets ........       131,707        116,929
                                                     -----------    -----------
Total Current Assets .............................       864,093        687,449
                                                     -----------    -----------

Marketable Securities - Available for Sale .......        11,341         11,341
Property and Equipment ...........................       639,643        610,095
Less: Accumulated Depreciation ...................      (157,752)      (134,559)
                                                     -----------    -----------
Property and Equipment, Net ......................       481,891        475,536
Investment in Unconsolidated Subsidiaries ........        15,344         16,872
Goodwill and Other Intangibles, Net ..............       607,516        606,039
Deposits and Other Assets ........................        10,041          6,071
                                                     -----------    -----------
     Total Assets ................................   $ 1,990,226    $ 1,803,308
                                                     ===========    ===========

Liabilities and Shareholders' Deficit
-------------------------------------

Accounts Payable and Other Liabilities ...........   $   431,692    $   500,371
Short-term Debt ..................................        21,430         23,348
                                                     -----------    -----------
Total Current Liabilities ........................       453,122        523,719
                                                     -----------    -----------
Total Long-term Debt .............................     1,481,466      1,273,961
Other Liabilities - Noncurrent ...................        19,396         15,986
                                                     -----------    -----------
Total Liabilities ................................     1,953,984      1,813,666
                                                     -----------    -----------
Minority Interest ................................        72,587         73,254
                                                     -----------    -----------
Shareholders' Equity .............................       774,288        641,778
Accumulated Deficit ..............................      (810,633)      (725,390)
                                                     -----------    -----------
Total Shareholders'Deficit .......................       (36,345)       (83,612)
                                                     -----------    -----------

     Total Liabilities and Shareholders'Deficit ..   $ 1,990,226    $ 1,803,308
                                                     ===========    ===========

            See notes to condensed consolidated financial statements.


                                       3
<PAGE>

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


                                                           Three Months Ended
                                                                March 31,
                                                            2000         1999
                                                         ---------    ---------

Revenues .............................................   $ 375,883    $ 340,281
Operating Costs and Expenses:
Cost of Services (exclusive of depreciation and
  amortization shown separately below) ...............     261,366      250,391
Selling, General and Administrative Expenses .........     119,661       97,842
Non-cash Compensation Expense ........................       3,055           --
Depreciation and Amortization ........................      49,252       37,079
                                                         ---------    ---------
Total Operating Costs and Expenses ...................     433,334      385,312
                                                         ---------    ---------
Loss From Operations .................................     (57,451)     (45,031)
Interest Income ......................................       4,874        6,055
Interest Expense .....................................     (38,559)     (28,998)
Other Income (Expense)- Net ..........................        (392)         115
Foreign Exchange Transaction Gain- Net ...............       5,049        9,688
Minority Interest ....................................       3,332        1,431
Loss in Equity Interest of
  Unconsolidated Subsidiaries - Net ..................      (1,927)        (224)
Income Tax Expense ...................................        (169)          --
                                                         ---------    ---------
Net Loss .............................................   $ (85,243)   $ (56,964)
                                                         =========    =========

Basic and Diluted  Net Loss Per Share of Common Stock    $   (1.54)   $   (1.08)

Weighted Average Number of Shares of Common Stock
  Outstanding                                               55,374       52,930

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>

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

                                                            Three Months Ended
                                                            ------------------
                                                                 March 31,
                                                                 ---------
                                                              2000       1999
                                                           ---------  ---------
Net loss ................................................. $ (85,243) $ (56,964)
Depreciation and amortization ............................    49,252     37,079
Working capital change and other .........................   (79,304)   (32,297)
                                                           ---------  ---------
     Net cash used in operations .........................  (115,295)   (52,182)
                                                           ---------  ---------

Acquisitions of subsidiaries .............................    (5,542)   (16,653)
Purchase of property and equipment .......................   (46,614)   (52,442)
Purchase of marketable securities ........................   (10,788)   (69,067)
Other ....................................................        32      1,274
                                                           ---------  ---------
     Net cash used in investing activities ...............   (62,912)  (136,888)
                                                           ---------  ---------

Proceeds from the issuance of Notes ......................   197,123         --
Proceeds from the issuance of preferred shares ...........   115,000         --
Payment of underwriting fees and expenses ................    (9,687)        --
Proceeds from long term debt .............................     7,671     14,287
Payment of short term debt ...............................    (4,758)   (17,845)
Proceeds from issuance of Class A shares .................       343        864
                                                           ---------  ---------
Net cash provided by financing activities ................   305,692     (2,694)
                                                           ---------  ---------
Increase (Decrease) in cash and cash equivalents .........   127,485   (191,764)
Effects of foreign currency on cash and cash equivalents .    (4,487)    (1,104)
Cash and cash equivalents at beginning of period .........   238,724    367,823
                                                           ---------  ---------
Cash and cash equivalents at end of period ............... $ 361,722  $ 174,955
                                                           =========  =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest ................................... $  13,074  $  10,197
                                                           =========  =========
SUPPLEMENTAL DISCLOSURE OF NON-
CASH INVESTING AND FINANCING ACTIVITIES:
Exchange of Class A Common Stock for stock of subsidiaries $   2,840  $      --
                                                           =========  =========
Assets acquired under capital lease obligations .......... $   6,749  $   1,747
                                                           =========  =========
Stock of subsidiaries issued.............................. $  10,450  $      --
                                                           =========  =========
            See notes to condensed consolidated financial statements.


                                       5
<PAGE>

                            RSL COMMUNICATIONS, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000

1. BASIS OF PRESENTATION

The condensed consolidated financial statements of which these notes are part
have been prepared by us and RSL Communications PLC, our wholly owned subsidiary
("RSL PLC"), pursuant to the rules and regulations of the Securities and
Exchange 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 our management, 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 our Consolidated Financial Statements and the notes
thereto included in our Annual Report on Form 10-K, as amended, for the year
ended December 31, 1999.

2. COMPREHENSIVE LOSS

Comprehensive loss consists of net loss and other gains and losses affecting
shareholder's equity that, under generally accepted accounting principles, are
excluded from net income. For us, such items consist of foreign currency
translation gains and losses and unrealized gains and losses on marketable
equity investments.

The components of total comprehensive loss for interim periods are presented in
the following table:

                                                           Three Months Ended
                                                                March 31,
                                                           2000          1999
                                                         --------      --------
                                                              (unaudited)
                                                             (in thousands)

Net Loss ...........................................     $(85,243)     $(56,964)
Other Comprehensive Income (Loss)
    Foreign currency translation adjustments .......        5,526        (7,252)
    Unrealized gain (loss) on securities ...........            7            (8)
                                                         --------      --------
Total Comprehensive Loss ...........................     $(79,710)     $(64,224)
                                                         ========      ========

3. 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. Diluted loss per share amounts are
not presented because the inclusion of these amounts would be anti-dilutive.


                                       6
<PAGE>

4. SUMMARIZED FINANCIAL INFORMATION FOR RSL PLC

The following presents summarized financial information of RSL PLC as of
March 31, 2000 and as of December 31, 1999. RSL PLC had no independent
operations other than serving solely as a foreign holding company for our North
American and European operations. Notes issued by RSL PLC are fully and
unconditionally guaranteed by us and RSL COM USA. We have not presented separate
financial statements and other related disclosures concerning RSL PLC because
management has determined that such information is not material to shareholders
or holders of the notes issued by RSL PLC. Our financial statements are, except
for our capitalization, deltathree.com operations, Asia/Pacific operations,
Latin American operations, corporate overhead expenses and drawn credit
facilities, identical to the financial statements of RSL PLC.

                                                As of                 As of
                                               March 31,           December 31,
                                                 2000                 1999
                                             -----------          -----------
                                                        (unaudited)
                                                      (in thousands)

Current Assets .......................       $   706,268          $   520,411

Non-current Assets ...................       $   975,063          $   972,319

Current Liabilities ..................       $   397,468          $   453,089

Non-current Liabilities ..............       $ 1,834,803          $ 1,635,765

                                                    Three Months Ended
                                                        March 31,
                                                 2000                 1999
                                             -----------          -----------
                                                        (unaudited)
                                                       (in thousands)

Revenues .............................       $   321,543          $   300,530

Net Loss .............................       $   (71,619)         $   (46,125)

5. ACQUISITIONS

In February 2000, our subsidiary deltathree.com announced that it acquired
YourDay.com for 229,443 shares of deltathree.com common stock.

In March 2000, we entered into an agreement to acquire REDNET Limited, one of
the United Kingdom's leading business-to-business Internet Service Providers
(ISP). This transaction is expected to close in the second quarter.


                                       7
<PAGE>

6. SUBSEQUENT EVENTS

In April 2000, we entered into an agreement to acquire Voyager Internet Limited
and Voyager Networks Limited, ISPs specializing in network design and business
internet access in the United Kingdom. This acquisition is expected to close in
the second quarter.

In April 2000, we acquired the remaining 67% outstanding interest in Consorcio
Europeo para las Telecomunicaciones S.A. (Cetel). We also announced the
acquisition of the 70% interest in ALO Comunicaciones, S.A. (ALO) that was not
already owned by Cetel. The shareholders of Cetel and ALO will receive
approximately 7% of the total equity in our subsidiary RSL COM Spain as
consideration for the acquisitions.

In May 2000, we formed an alliance with Seat Pagine Gialle Spa. (SEAT), a
leading publisher of telephony directories and a leading Internet business in
Italy. As a part of the transaction (the "Telegate Transaction"), we and SEAT
entered into a joint venture agreement under which we will provide SEAT with
various Internet/data communications services on a non-exclusive basis for the
European and United States expansion of telegate, our German directory
subsidiary. In addition, the agreement provides that (i) we will sell
approximately 2% of our interest in Telegate Holding in the second quarter of
2000 and (ii) upon termination of the alliance with SEAT, we have the right to
sell to SEAT, and SEAT will have the right to purchase from us, our remaining
equity interest in Telegate Holding for consideration with value of a minimum
of approximately 415 and a maximum of 525 million Euros. The total amount of
consideration will be determined based on the average value of a telegate share
during a predetermined reference period. The transaction is subject to customary
closing conditions.

In May 2000, we launched an initial public offering of our Australian subsidiary
to divest 100% of our interest in this operation. Subject to market conditions
and the determination of the final price, we expect to receive gross proceeds of
between $185 million and $235 million, based on the indicative price range. The
disposition of our Australian operations is consistent with the recent decision
to focus on our core markets in Europe and North America. The proceeds of the
public offering will be used to enhance our business in these regions.


                                       8
<PAGE>

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

Overview

We are a rapidly growing facilities-based communications company that provides a
broad range of voice, data / Internet and value-added products and service
solutions primarily to small and medium-sized businesses and residential
customers in selected markets around the globe. We have built a local presence
and currently have revenue-generating operations in Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, Luxembourg,
Mexico, The Netherlands, New Zealand, Portugal, Spain, Sweden, Switzerland, the
United Kingdom, the United States and Venezuela. Through our subsidiary,
deltathree.com, we also own and operate a privately-managed Internet Protocol
(IP) telephony network with 46 points of presence in 29 countries around the
world. deltathree.com completed its initial public offering on November 29, 1999
and as a result we currently own approximately 68% of the equity of
deltathree.com. Accordingly, we will continue to report the financial results of
deltathree.com as a part of our consolidated results of operations. Prior to its
initial public offering, we combined results from deltathree.com's operation
with our other operations. We currently present the results of deltathree.com's
operations as a separate segment.

Consolidated Results Of Operations For The Three Month Period Ended March 31,
2000 Compared To The Three Month Period Ended March 31, 1999

Revenues

Revenues from our voice services are derived primarily from the number of
minutes of use (or fractions thereof) that we bill and are recorded upon
completion of telephone calls. We also derive revenues from prepaid calling
cards. Revenues from prepaid calling cards are recognized at the time of usage
or upon expiration of the card. Data service revenue is derived from both fixed
monthly charges and variable charges based on usage. We maintain local market
pricing structures for our services and generally price our services at a
discount to prices charged by the local incumbent telecommunications operators
and other established carriers. We have experienced, and expect to continue to
experience, declining revenue per minute in all of our markets as a result of
increasing competition, which we expect will be offset by increased minute
volumes and decreased operating costs per minute.

Revenues increased to $375.9 million for the three months ended March 31, 2000
compared to $340.3 million for the three months ended March 31, 1999, an
increase of 10.4%. The general strengthening of the U.S. dollar over the past
year relative to most foreign currencies in which we operate negatively impacted
the growth in revenues. Had we applied the first quarter 1999 foreign currency
exchange rates to the first quarter 2000 local currency amounts, reported
revenue would have increased by an additional $21 million. This increase is due
primarily to the growth in customers in our European operations partially offset
by declines in our North American operations.

Cost of Services (exclusive of depreciation and amortization shown separately
below)

Our cost of services is primarily comprised of costs associated with gaining
local access and the transport and termination of calls over our integrated
digital telecommunications network, RSL-NET. The majority of our costs of
services are variable, including local access charges and transmission capacity
leased on a per-minute-of-use basis. For certain key markets, we plan to make
significant investments in indefeasible rights of use, or IRUs, minimum
investments units, or MIUs and domestic circuits and, as a result, expect that
an increasing amount of out total operating costs will become fixed, as the
volume of our calls carried over our own facilities


                                       9
<PAGE>

increases. As we migrate increasing amounts of traffic from leased facilities to
owned facilities, we experience improving operating results in those operations
where such traffic migration occurs. The depreciation expense with respect to
our MIUs and IRUs is not accounted for in cost of services. We have directly
linked certain of our local operators in Europe and the United States utilizing
lines leased on a fixed-cost, point-to-point basis and utilizing MIUs and IRUs.
To the extent traffic can be transported between local operators over MIUs and
IRUs, there is only marginal cost to us 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. Our cost of
transport and termination will decrease to the extent that we are able to bypass
the settlement rates associated with the transport of international traffic.

We are expanding and upgrading our Pan-European network connecting ten European
international switching centers in nine countries. We expect that the new
network will replace more expensive, short-term leases for lower capacity
circuits, will improve our least-cost routing efficiency and will handle the
growing number of minutes of traffic on our European network. It is expected
that the network will be phased-in in three regions of Europe with the first
phase coming on-line late in the second quarter and the remaining phases to be
operational in the second half of the year.

While we intend to purchase or construct additional international transmission
facilities where such facilities are available for purchase or may be
constructed and such investments are cost effective and warranted by traffic
patterns, a significant percentage of our international transmission facilities
will continue to be leased on a variable cost basis. Accordingly, variable costs
will continue to be a majority of our cost of services for the foreseeable
future.

Our cost of services is primarily affected by the volume of traffic relative to
our 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, we are forced to acquire capacity from alternative carriers on a
spot rate per-minute basis at a higher cost. Acquiring capacity on such an
overflow basis has a negative impact on margins, but enables us to maintain
uninterrupted service to our customers.

Cost of services increased to $261.4 million for the three months ended March
31, 2000 from $250.4 million for the three months ended March 31, 1999, an
increase of 4.4%. However, as a percentage of revenues, cost of services
decreased to 69.5%, for the first quarter of 2000 compared to 73.6% for the
first quarter of 1999. The decrease in cost of services as a percentage of
revenues is primarily attributable to the increased utilization of our owned
facilities in Australia and North America, increases in higher-volume commercial
accounts and an increase in higher margin wireless subscribers.

Effect of Deregulation on Costs of Services (exclusive of depreciation and
amortization)

Our cost structure varies from country to country and is significantly impacted
by the extent of regulation in place in each country. In general, our cost
structure is lower in countries that have been substantially deregulated than in
those which are only partially deregulated. In countries that are not
substantially deregulated, our access to the local network is through more
expensive means (i.e. leased lines or dial-in access). This results in higher
costs to us for carrying international traffic into or out of such a country. In
addition, local regulations in many countries restrict us from purchasing
capacity on international cable and fiber systems. We 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.
Further deregulation in countries in which we operate is expected to better
enable us to interconnect our switches with the local exchange network and to
purchase our own international facilities. We believe that as a result of
further


                                       10
<PAGE>

deregulation, particularly in certain countries in which we operate, our cost
structure will improve. Deregulation in a particular country is also expected to
permit us to terminate international inbound traffic in such country which we
expect will result in an improved cost structure for us as a whole.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of cost
incurred to gain new customers, introduce new products and services, provide
ongoing customer service and continue the expansion of RSL-NET. 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 we commence operations in different
countries we incur significant start-up costs, particularly for hiring, training
and retention of personnel, leasing of office space and advertising.

We have grown by establishing operations in countries that were in the process
of being deregulated and that originate and terminate large volumes of
international traffic or offer other strategic benefits. Each of our operations
is in a different stage of development. The early stages of development of a new
operation have involved substantial start-up costs in advance of revenue. Upon
the commencement of such operations, we generally have incurred additional fixed
costs to facilitate growth. We expect that during periods of significant
expansion, selling, general and administrative expenses will increase
materially. Accordingly, our consolidated results of operations will vary
depending on the timing and speed of our expansion strategy and, during a period
of rapid expansion, will not necessarily reflect the performance of our more
established local operators.

Selling, general and administrative expense for the three months ended March 31,
2000 increased by $21.9 million, or 22.3%, to $119.7 million from $97.8 million
for the three months ended March 31, 1999. Selling, general and administrative
expense as a percentage of revenues increased to 31.8% in the first quarter of
2000 compared to 28.8%, in the first quarter 1999. The percentage increase is
due to significant increases in marketing, advertising, promotional, and start
up costs at our subsidiaries deltathree.com and telegate AG as these companies
expand their customer base and product offerings. The increase is also
attributable to higher customer acquisition costs.

Non-cash Compensation Expense

Non-cash compensation expense relates to variable stock incentive awards that
were previously granted to employees in various of our subsidiaries, primarily
deltathree.com. Non-cash compensation expense for the first quarter of 2000 was
$3.1 million.


                                       11
<PAGE>

Special Charge

During the third quarter of 1999, we recorded a special charge of approximately
$32.1 million, primarily for consolidating locations, streamlining operations,
discontinuing certain prepaid calling card plans and exiting the telemarketing
business. The special charge was comprised of approximately $13.1 million for
terminating various operating leases, $12.4 million for the severance of 74
telemarketing employees, as well as world-wide staff reductions of 115
employees, and $6.6 million for the write down of certain telemarketing and
prepaid calling card assets of which $2.0 million was associated with the
write-off of inventory. As of March 31, 2000 the reserve balance was $12.9
million, of which $8.3 million is for terminating leases and $4.6 million is for
severance payments to be paid out primarily to former employees who have already
been severed, during the second and third quarters of 2000 in accordance with
local legal requirements.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 32.8% to $49.3 million for the
three months ended March 31, 2000 from $37.1 million for the three months ended
March 31, 1999. This increase is primarily attributable to the increased
amortization of goodwill and other intangibles recorded as a result of our
acquisitions and higher depreciation due to increased capital expenditures.
Depreciation expense is expected to increase in the future as we continue to
expand and enhance our network.

Interest Income

Interest income decreased from $6.1 million for the three months ended March 31,
1999 to $4.9 million for the three months ended March 31, 2000 primarily as a
result of a decline in the average outstanding balance of interest-bearing
investments in the first quarter of 2000 compared to the first quarter of 1999.

Interest Expense

Interest expense increased to $38.6 million for the three months ended March 31,
2000 from $29.0 million for the three months ended March 31, 1999. The increase
is primarily a result of the $175 million 9 7/8% Senior Notes issued in May 1999
and the $100 million and 100 million Euro-denominated 12 7/8% Senior Notes
issued in February 2000.

Foreign Exchange

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

We recorded a foreign currency translation adjustment of $5.5 million as a
component of equity as of March 31, 2000. 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.

We incur settlement costs when we exchange traffic via operating agreements with
foreign correspondents. These costs currently represent a small portion of total
costs, however, as our international operations increase, we expect that these
costs will become a more significant portion of our cost of services. Such costs
are settled


                                       12
<PAGE>

by utilizing a net settlement process with our 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 we believe that this mitigates, to
some extent, our foreign currency exposure. We have monitored and will continue
to monitor our currency exposure.

We recorded a foreign exchange gain of $5.0 million for the three months ended
March 31, 2000 compared to $9.7 million for the three month period ended March
31, 1999. The gains are primarily a result of the decline in the value of the
Deutsche mark against the U.S. dollar associated with our 1998 Deutsche mark
denominated Senior Discount Notes. Also contributing to the foreign exchange
gain during the first quarter of 2000 is the gain in U.S. dollar terms
associated with the decline in the value of the Euro associated with our
Euro-denominated debt issued in February 2000.

Loss in Equity Interest of Unconsolidated Subsidiaries - Net

We recorded a loss in equity interest of unconsolidated subsidiaries - net of
$1.9 million for the three months ended March 31, 2000 compared to a loss of $.2
million for the three months ended March 31, 1999 and reflects additional
allocable loss in the investments of Maxitel Servicos e Gestao de
Telecommunicacoes, S.A., a Portugese international telecommunications carrier,
MK Telecom Network Inc., a Canadian microwave telecommunications facilities
company and Cetel, a Spanish international telecommunications carrier.

Net Loss

The net loss increased to $85.2 million for the three months ended March 31,
2000, as compared to the net loss of $57.0 million for the three months ended
March 31, 1999. The increase is due to the factors described above and in the
following discussion of segment results.

Segment Information

European Operations

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                   March 31,
                                                                              2000            1999
                                                                           ---------       ---------
                                                                                 (unaudited)
                                                                      (in thousands, except percentages)

<S>                                                                        <C>             <C>
Revenue ..............................................................     $ 222,076       $ 152,111
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) .................................       150,273          99,326
                                                                           ---------       ---------
Gross margin .........................................................        71,803          52,785
Selling, general and administrative expenses .........................        69,603          51,019
Non-cash compensation ................................................           276              --
Depreciation and amortization ........................................        18,773          13,323
                                                                           ---------       ---------

Loss from operations .................................................     $ (16,849)      $ (11,557)
                                                                           =========       =========

Other Financial Data:
EBITDA (as defined) (1) ..............................................     $   2,200       $   1,766
</TABLE>


                                       13
<PAGE>

<TABLE>
<S>                                                                        <C>             <C>
Revenue as a percentage of consolidated revenue ......................          59.1%           44.7%
Gross margin as a percentage of revenue ..............................          32.3%           34.7%
Selling, general and administrative expense as a percentage of revenue          31.3%           33.5%
</TABLE>

----------
(1)  EBITDA, as used herein, consists of loss from operations before
     depreciation and amortization and also excludes non-cash compensation.
     EBITDA is provided because it is a measure commonly used in the
     telecommunications industry. It is presented to enhance an understanding of
     our operating results and is not intended to represent cash flow or results
     of operations in accordance with U.S. GAAP for the periods indicated. Our
     definition of EBITDA may be different than that used by other companies.

We derive our European revenues primarily from the provision of international
and domestic long distance voice services, including directory information
services in Germany and the sale and resale of wireless services in certain
countries in which we operate. We have introduced several new product groups,
such as data, Internet, value-added services and web based applications and
broadened existing services such as fixed voice and wireless services.
Substantially all revenues from our European operations are derived from
commercial sales to end-users. Sales are targeted towards small to medium-sized
corporate customers, and niche consumer markets. To reduce our credit risk to
such niche consumer markets, we primarily offer prepaid products to these
targeted consumers.

We 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 our ability to offer a broader array of products and services and limit
the availability of those services to customers. We anticipate that deregulation
will have a favorable impact on revenues because (i) customers will be able to
access our services more easily and (ii) we will have the ability to provide a
broader array of products and services. We believe that, with established or
start-up operations in 14 European countries, we are well positioned to benefit
from the anticipated continued deregulation of European markets. We expect that
most European countries will further deregulate various aspects of the
telecommunications industry through 2000.

Revenue from our European operations increased by 46.0% to $222.1 million for
the three months ended March 31, 2000 compared to $152.1 million for the same
period in 1999. The increase in our European revenues was attributable to a
substantial increase in the number of business, residential and wireless
customers. The total number of customers in Europe increased by 330,000 or 74.2%
from 442,000 as of March 31, 1999 to 772,000 as of March 31, 2000. European
revenues as a percentage of consolidated revenues increased from 44.7% in the
first quarter of 1999 to 59.1%, in the first quarter of 2000. Europe currently
represents our largest market segment.

Cost of services increased 51.0% to $150.0 million in the first quarter of 2000
from $99.3 million in the first quarter of 1999. Costs of services as a
percentage of revenues in the first quarter of 2000 was 67.7% compared to the
65.3% recorded in the first quarter of 1999. The increase in the cost of
services as a percentage of revenue is primarily attributable to more traffic
carried on leased network capacity from other carriers rather than on our own
network, which is less expensive. We expect these costs to decrease as we
continue to implement our Pan-European network during the year.

Selling, general and administrative expense in the first quarter of 2000
increased to $69.6 million from $51.0 million in the first quarter of 1999.
Selling, general and administrative expenses as a percentage of revenue in the
first quarter of 2000 was 31.3%, as compared to 33.5% in the first quarter of
1999. These reductions were primarily attributable to lower start-up costs in
countries in which operations had already been established in the past year.

Depreciation and amortization in the first quarter of 2000 increased to $18.8
million from $13.3 million


                                       14
<PAGE>

recorded in the first quarter of 1999. These increases were primarily
attributable to the amortization of intangible assets, principally goodwill,
recorded in connection with several acquisitions. Depreciation expense also
increased as a result of the substantial capital investment made over the past
year.

Net loss from European operations in the first quarter of 2000 increased to
$16.3 million from $11.6 million recorded in the first quarter of 1999. The
decline reflects the substantially higher revenue which was more than offset by
higher costs primarily due to increased customer acquisitions costs.

North American Operations

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                March 31
                                                           2000            1999
                                                       ---------       ---------
                                                              (unaudited)
                                                   (in thousands, except percentages)
<S>                                                    <C>             <C>
Revenue ............................................   $  99,467       $ 148,419
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ...............      77,283         120,171
                                                       ---------       ---------
Gross margin .......................................      22,184          28,248
Selling, general and administrative expenses .......      18,435          28,909
Non-cash compensation ..............................         292              --
Depreciation and amortization ......................      11,822          12,267
                                                       ---------       ---------

Loss from operations ...............................   $  (8,365)      $ (12,928)
                                                       =========       =========

Other Financial Data:
EBITDA (as defined) (1) ............................   $   3,749       $    (661)
Revenue as a percentage of consolidated revenue ....        26.5%           43.6%
Gross margin  as a percentage of revenue ...........        22.3%           19.0%

Selling, general and administrative expense as a
  percentage of revenue ............................        18.5%           19.5%
</TABLE>

----------
(1)   EBITDA, as used herein, consists of loss from operations before
      depreciation and amortization and also excludes non-cash compensation.
      EBITDA is provided because it is a measure commonly used in the
      telecommunications industry. It is presented to enhance an understanding
      of our operating results and is not intended to represent cash flow or
      results of operations in accordance with U.S. GAAP for the periods
      indicated. Our definition of EBITDA may be different than that used by
      other companies.

Our North American revenues result primarily from the sale of long distance
voice services on a retail basis to commercial customers, on a wholesale basis
to other carriers and to a lesser extent on a bulk discount basis to
distributors of prepaid calling cards. We discontinued certain unprofitable
prepaid calling card plans and our telemarketing business beginning in September
1999. We also generate revenues from data, Internet and other value-added
services in North America. We experience significant month to month changes in
revenues generated by our carrier customers (i.e. customers who acquire our
services for the purpose of reselling such services on a wholesale basis to
other carriers or on a retail basis to end users). We believe such carrier
customers will react to temporary price fluctuations and spot market
availability that will impact our carrier revenues. Over the past two years, we
have shifted our marketing focus in the United States to focus on small


                                       15
<PAGE>

and medium-sized businesses and have restructured our pricing of wholesale
services to other carriers.

Revenue from our North American operations decreased to $99.5 million for the
three months ended March 31, 2000 compared to $148.4 million for the same period
in 1999, a 33% decrease primarily as a result of our discontinuance of certain
unprofitable prepaid card and telemarketing businesses beginning in September
1999. The number of residential and business customers in North America declined
27.1% from 180,000 as of March 31, 1999 to 131,000 as of March 31, 2000. The
revenue decline was also partially attributable to lower low-margin carrier
revenues.

North American revenues as a percentage of consolidated revenues decreased from
43.6% in the first quarter of 1999 to 26.5% in the first quarter of 2000. This
decline is a result of our effort to reduce our dependence on certain prepaid
and telemarketing businesses and low-margin wholesale markets.

Cost of services decreased 35.7% to $77.3 million in the first quarter of 2000
from $120.2 million in the first quarter of 1999. The decrease is primarily a
result of lower revenues. Costs of services as a percentage of revenues in the
first quarter of 2000 was 77.7% an improvement from the 81.0% in the first
quarter of 1999, as a result of the focus to more profitable customer segments.

Selling, general and administrative expenses in the first quarter of 2000
decreased to $18.4 million from $28.9 million in the first quarter of 1999.
Selling, general and administrative expenses as a percentage of revenues,
decreased to 18.5% in the first quarter of 2000 as compared to 19.5% recorded in
the first quarter of 1999. The decrease is primarily a result of reduced
spending for customer acquisition and administration.

Depreciation and amortization in the first quarter of 2000 was $11.8 million
compared to $12.3 million recorded in the first quarter of 1999.

Loss from operations in North America decreased from $12.9 million in the first
quarter of 1999 to $8.4 million in the first quarter of 2000. The decrease is
primarily due to lower selling, general and administrative expenses.

Asia/Pacific and Other Operations

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                  2000           1999
                                                                --------       --------
                                                                      (unaudited)
                                                          (in thousands, except percentages)
<S>                                                             <C>            <C>
Revenue .....................................................   $ 52,528       $ 39,308
</TABLE>


                                       16
<PAGE>

<TABLE>
<S>                                                             <C>            <C>
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ........................     32,879         30,669
                                                                --------       --------
Gross margin ................................................     19,649          8,639
Selling, general and administrative expenses ................     20,357         12,942
Non-cash compensation expense ...............................         89             --
Depreciation and amortization ...............................      6,562          2,723
                                                                --------       --------

Loss from operations ........................................   $ (7,359)      $ (7,026)
                                                                ========       ========
Other Financial Data:
EBITDA (as defined) (1) .....................................   $   (708)      $ (4,303)
Revenues as a percentage of consolidated revenue ............       14.0%          11.6%
Gross margin as a percentage of revenue .....................       37.4%          22.0%

Selling, general and administrative expense as
  a percentage of revenue ...................................       38.8%          32.9%
</TABLE>

----------
(1)   EBITDA, as used herein consists of loss from operations before
      depreciation and amortization and also excludes non-cash compensation.
      EBITDA is provided because it is a measure commonly used in the
      telecommunications industry. It is presented to enhance an understanding
      of our operating results and is not intended to represent cash flow or
      results of operations in accordance with U.S. GAAP for the periods
      indicated.

Asia/Pacific and other operations are comprised primarily of domestic and
international long distance and wireless services operations in Australia. This
segment also includes relatively small start-up operations in Venezuela, Mexico,
Hong Kong and Japan.

On May 2, 2000 we announced the launch of an initial public offering of our
Australian subsidiary and our intention to divest 100% of our interest in this
operation as a part of the IPO. Subject to market conditions and the
determination of the final price, we expect to receive gross proceeds of between
$185 million and $235 million, based on the indicative price range. This
announcement is consistent with the recent decision to focus on our core markets
in Europe and North America. We expect the proceeds of the public offering will
be used to enhance our business in these regions.

Revenues from our Asia/Pacific and Other operations increased 33.6 % to $52.5
million for the three months ended March 31, 2000 compared to $39.3 million for
the same period in 1999. The number of customers in Asia/Pacific and Other
operations increased by 96,000 or 53.5% from 178,000 as of March 31, 1999 to
274,000 as of March 31, 2000.

Revenues from our Asia/Pacific and Other operations as a percentage of
consolidated revenues increased to 14.0%, in the first quarter of 2000 from
11.6% the first quarter of 1999. The increase is primarily as a result of the
growth in customers in Australia over the past year.

Cost of services in the first quarter of 2000 increased to $32.9 million from
$30.7 million recorded in the first quarter of 1999 as a result of the higher
revenues. However, cost of services as a percentage of revenues in the first
quarter declined to 62.6 % from 78.0% as compared to the same period in 1999.

Selling, general and administrative expense in the first quarter of 2000
increased to $20.4 million from $12.9 million in the first quarter of 1999.
These increases were primarily due to the costs to acquire and retain customers.
Selling, general and administrative expenses as a percent of revenues in the
first quarter 2000


                                       17
<PAGE>

increased to 38.8 % from 32.9 % in the first quarter 1999. The increase is a
result of the initial start-up costs incurred in Latin America and Japan and
costs incurred to acquire and retain customers in Australia.

Depreciation and amortization in the first quarter of 2000 increased to $6.6
million from $2.7 million primarily as a result of the increased depreciation
resulting from the network expansion primarily in Australia over the past year.

The loss from the Asia/Pacific and Other operations for the first quarter of
2000 increased to $7.3 million from $7.0 million recorded in the first quarter
of 1999. The increased operating losses are primarily due to the start-up costs
incurred in our Latin America and Japan operations substantially offset by
improved results in Australia.

deltathree.com Operations (1)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                          March 31,
                                                                   2000             1999
                                                                 --------         --------
                                                                        (unaudited)
                                                            (in thousands, except percentages)
<S>                                                              <C>              <C>
Revenue .....................................................    $  1,812         $    443
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ........................         931              224
                                                                 --------         --------
Gross margin ................................................         881              219
Selling, general and administrative expenses ................       7,314              252
Non-cash compensation .......................................       2,398               --
Depreciation and amortization ...............................       1,353               30
                                                                 --------         --------

Loss from operations ........................................    $(10,184)        $    (63)
                                                                 ========         ========

Other Financial Data:
EBITDA (as defined) (2) .....................................    $ (6,433)        $    (33)
Revenues as a percentage of consolidated revenue ............         0.4%             0.1%
Gross margin as a percentage of revenue .....................        48.6%            49.4%

Selling, general and administrative expense as
  a percentage of revenue ...................................       403.6%            56.9%
</TABLE>
----------

(1)   The amounts presented are as included in our consolidated financial
      results and differ from the separately reported results of deltathree.com
      because our results exclude our intercompany transactions with
      deltathree.com.
(2)   EBITDA, as used herein, consists of loss from operations before
      depreciation and amortization and also excludes non-cash compensation
      expense. EBITDA is provided because it is a measure commonly used in the
      telecommunications industry. It is presented to enhance an understanding
      of our operating results and is not intended to represent cash flow or
      results of operations in accordance with U.S. GAAP for the periods
      indicated. Our definition of EBITDA may be different than that used by
      other companies.

We acquired a 51% controlling interest in deltathree.com in 1997 and the
remaining 49% interest by April 1998. In November 1999, deltathree.com sold 6.9
million shares of common stock in its initial public offering at a price of $15
per share and received net proceeds from the offering of $96.2 million. These
proceeds will enable deltathree.com to provide its growing base of subscribers
expanded worldwide infrastructure, new distribution channels as well as fund
additional marketing, advertising, promotional, and technological


                                       18
<PAGE>

initiatives. After the initial public offering of its common stock, we continue
to own approximately 68% of the equity of deltathree.com

Revenues from deltathree.com operations increased from $.4 million in the first
quarter of 1999 to $1.8 million in the first quarter of 2000 primarily as a
result of the growth in subscribers from .5 million last year to 2.2 million as
of March 31, 2000.

Cost of services for deltathree.com increased from $.2 million the first quarter
of 1999 to $.9 million of the first quarter of 2000 primarily as a result of the
increased costs of terminating traffic.

Selling, general and administrative expenses increased from $.3 million in the
first quarter of 1999 to $7.3 million in the first quarter of 2000 primarily due
to the expansion of marketing, advertising and promotional activities, and
additional personal and occupancy costs as the Company executes its aggressive
growth strategy.

Liquidity and Capital Resources

We have incurred significant operating losses, net losses and negative cash flow
from operations, due in large part to the start-up and development of our
operations and the development of RSL-NET our integrated digital
telecommunications network. We expect that our net losses and negative cash flow
will continue as we continue to implement our growth strategy. Historically, we
have funded our losses and capital expenditures through borrowings, capital
contributions, and a portion of the net proceeds of prior securities offerings.

Cash used in operating activities for the three months ended March 31, 2000
totaled $115.3 million compared with $52.2 million for the same period in 1999
reflecting the use of cash to fund operating losses and working capital
requirements. Capital expenditures, which include assets acquired under capital
lease obligations, for the three months ended March 31, 2000 were $53.4 million
compared with $54.2 million for the comparable period in 1999. These capital
expenditures are principally for switches, fiber, and related telecommunications
equipment as well as the build-out of our Pan-European network. We also began
the build-out of the wireless local loop network in Spain as a result of the
award of a license to a consortium in which we have a 30% economic interest. We
intend to continue to expand and develop our infrastructure, in part by
replacing leased transmission facilities with owned transmission lines,
purchasing IRUs and interests in inter-city fiber routes in certain key markets
and installing additional national and international telephone gateway switches.
Excluding the capital requirements of our build-out in Spain, we expect to
invest in the aggregate approximately $260 million in 2000 to expand and enhance
our communications network. We expect our share of the working capital and
capital expenditures for the new network in Spain to be in the range of $20
million to $30 million. Cash expended for acquisitions were $5.5 million during
the three months ended March 31, 2000 primarily reflecting payments for
properties acquired at the end of 1999 compared with $16.7 million for the first
quarter of 1999. At March 31, 2000, we had $411.0 million of working capital as
compared to $163.7 million of working capital at December 31, 1999.

Our indebtedness was approximately $1.5 billion at March 31, 2000, substantially
all of which represented long-term debt. Nearly all of our indebtedness is
attributable to the debt securities issued by RSL PLC and guaranteed by RSL COM
and RSL COM U.S.A. These debt securities include various Senior Notes and Senior
Discount Notes which are due from 2006 through 2010 (the "Notes"), totaling $1.4
billion, net, as of March 31, 2000. The Notes were issued under indentures
containing certain restrictive covenants which impose limitations on the
Company's 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


                                       19
<PAGE>

debt, (v) enter into transactions with shareholders and affiliates, (vi) create
liens, (vii) enter into sale-leaseback transactions, and (viii) sell assets.

At March 31, 2000 our subsidiary telegate had $40 million of revolving credit
facilities with various banks that accrue interest at a weighted average rate of
approximately 6.0%, all of which was available.

One of our primary equipment vendors has provided to certain of our subsidiaries
$50 million in vendor financing commitments to fund the purchase of additional
switching and related telecommunications capital equipment. At March 31, 2000,
all available amounts were utilized 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.

In February 2000, we issued 2.3 million Series A Cumulative Convertible
Preferred Shares ("Preferred Shares") at a price of $50 per share, and received
net proceeds of approximately $111 million. The Preferred Shares are convertible
at any time by the holders into our Class A common shares at a conversion rate
of 2.2584 shares for each Preferred Share subject to adjustments under certain
circumstances. Dividends accrue at the rate of 7 1/2% per year and are payable
quarterly. Beginning in February 2005, we will have the right to redeem some or
all of the Preferred Shares at a predetermined redemption price plus accrued
dividends, if any. We will be required to redeem any Preferred Shares still
outstanding on February 1, 2012 at a redemption price of $50 per share plus
accrued dividends. Holders of the Preferred Shares are generally not entitled to
any voting rights. The Preferred Shares, which have a liquidation value of $50
per share, rank junior to all of our existing and future debts and obligations.

Concurrent with the issuance of the preferred shares, RSL PLC issued $100
million and 100 million Euro-denominated Senior Notes due 2010 (the "2000
Notes"). The 2000 Notes, which are guaranteed by us and by RSL COM U.S.A., a
wholly owned subsidiary of RSL PLC, bear interest at an annual rate of 12 7/8%.
The debt isssuances generated combined proceeds to us of approximately $ 192.2
million. In connection with the guarantee of the 2000 Notes, RSL COM U.S.A. also
became a guarantor of RSL PLC's previously issued and outstanding Notes.

The limitation under our most restrictive covenants will likely prohibit us from
incurring any significant amount of additional indebtedness to fund net losses
unless we complete an equity offering or generate significant positive cash flow
from operations. We believe that the remaining net proceeds from the issuance of
the 2000 Notes and the Preferred Shares, together with the proceeds from the
initial public offering of our Australian operation and the Telegate
Transaction, and availability under our revolving credit facilities, short-term
lines of credit and overdraft facilities from local banks, will be sufficient to
fund our capital expenditures and operations through at least the end of 2001.
However, we may be required to raise additional capital regardless of market
conditions, if our plans or assumptions change or prove to be inaccurate, we
identify additional required or desirable infrastructure investments or
acquisitions, if we experience unanticipated costs or competitive pressures or
if the net proceeds from the issuance of our debt and equity securities,
together with other sources of liquidity otherwise prove to be insufficient.
Regardless, we plan to raise additional capital in 2000 to ensure that adequate
funding is available for capital expenditures and operations for the year 2001
and beyond.

Effects of Recently Issued Accounting Standards

In June 1998, the FASB issued SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires that an entity recognize all derivatives as either an asset or
liability and


                                       20
<PAGE>

measure those instruments at fair value, as well as identify the conditions for
which a derivative may be specially designed as a hedge. SFAS No.133 is
effective for fiscal years beginning after June 15, 2000. Management is
currently addressing the financial reporting measures that will be needed in
order to comply with this disclosure. We have not participated in any hedging
activities in connection with foreign currency exposure.

Seasonality

Our European operations experience seasonality during January, August, October
and December, and, to a lesser extent, March, as these months are traditional
holiday months in most European countries and many European businesses, which
are our principal European customers, are closed during portions of these
months.


                                       21
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have not entered into any financial instruments for trading or hedging
purposes.

We are exposed to fluctuations in foreign currencies relative to the U.S.
dollar, as our revenues, costs, assets and liabilities are, for the most part,
denominated in local currencies. The results of operations of our subsidiaries,
as reported in U.S. dollars, may be significantly affected by fluctuations in
the value of the local currencies in which we transact business. We recorded a
foreign currency translation adjustment of $5.5 million as a component of equity
as of March 31, 2000. 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. For the three month period ended March 31,
2000, we had recorded a foreign currency transaction gain of approximately $5.0
million, primarily as a result of the decrease in the Deutsche mark against the
U.S. dollar in connection with the DM296 million 10% Senior Discount Notes
issued during 1998 and the decrease in the Euro against the U.S. dollar in
connection with the 100 million Euro 12 7/8% Senior Notes issued in February
2000.

We incur settlement costs when we exchange traffic via operating agreements with
foreign correspondents. These costs currently represent a small portion of the
total costs of services; however, as our international operations increase, we
expect that these costs will become a more significant portion of our cost of
services. Such costs are settled by utilizing a net settlement process with our
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 we
believe that this mitigates, to some extent, our foreign currency exposure. We
have monitored and will continue to monitor our foreign currency exposure, and,
if necessary, may enter into forward contracts and/or similar instruments to
mitigate the potential impacts of such risks.

We are currently not exposed to material future earnings or cash flow exposures
from changes in interest rates on long-term debt obligations since the majority
of our long-term debt obligations are at fixed rates. We are exposed to interest
rate risk, as additional financing may be required due to the large operating
losses and capital expenditures associated with establishing and expanding our
networks and facilities. The interest rate that we will be able to obtain on
additional financing will depend on market conditions at that time, and may
differ from the rates we have has secured on our current debt. We do not
currently anticipate entering into interest rate swaps and/or similar
instruments.

The carrying value of our cash and cash equivalents, accounts receivable,
accounts payable, marketable securities - available for sale, accrued expenses
and notes payable is a reasonable approximation of their fair value.

At March 31, 2000, the fair value of our long-term debt (excluding capital lease
obligations) was estimated to be $1.3 billion based on the overall weighted
average rate of our long-term debt of 10.8% and an overall weighted average
maturity of 8.4 years compared to terms and rates currently available in
long-term financing markets. Market risk is estimated as the potential decrease
in fair value of our long-term debt resulting from a hypothetical increase of
108 basis points in interest rates (ten percent of our overall weighted average
borrowing rate). Such an increase in interest rates would result in
approximately a $91.3 million decrease in fair value of our long-term debt.


                                       22
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 2. Change in Securities and Use of Proceeds

            In February 2000, we, through RSL Communications PLC, issued $100
      million aggregate principal amount at maturity of 12 7/8% Senior Notes due
      2010 and [EURO]100 million Senior Notes due 2010 (which we refer to
      collectively as the 12 7/8% Notes) unconditionally guaranteed by us and
      RSL COM U.S.A., Inc. pursuant to indentures governing the 12 7/8% Notes.
      The placement agents for the offering of the 12 7/8% Notes were Goldman,
      Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce Fenner & Smith
      Incorporated and Morgan Stanley & Co. Incorporated. The aggregate
      commissions were approximately $5.0 million. The 12 7/8% Notes were sold
      outside the U.S. to non-U.S. persons in reliance on Regulation S under the
      Securities Act and in the U.S. only to "qualified institutional buyers" in
      reliance on Rule 144A under the Securities Act.

            In February 2000, we issued $100 million aggregate liquidation
      preference of our 7 1/2% Series A preferred shares. The placement agents
      for the Series A preferred shares were Goldman, Sachs & Co., Lehman
      Brothers Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and
      Morgan Stanley & Co. Incorporated. In March 2000, the placement agents
      exercised their over-allotment option with respect to an additional $15
      million aggregate liquidation preference of Series A preferred shares. The
      aggregate commissions were approximately $4.0 million. The Series A
      preferred shares were sold outside the U.S. to non-U.S. persons in
      reliance on Regulation S under the Securities Act and in the U.S. only to
      "qualified institutional buyers" in reliance on Rule 144A under the
      Securities Act.

            In February 2000, we issued to Jean Paul Flachsman 11,765 Class A
      common shares in connection with our acquisition of Prime Line AG, a
      company controlled by Mr. Flachsman. The issuance of such Class A common
      shares was exempt from registration under the Securities Act pursuant to
      Section 4(2) thereof.

            In March 2000, we issued to European Telecom Inc., Leigh Smith,
      Lucien Gaumier, Bernard Burton, Marc de Mote, Mohammed Chtouki and Rudi
      van Laer, an aggregate of 82,611 Class A common shares in exchange for
      shares of RSL COM Belgium N.V. owned by such persons. The issuance of such
      Class A common shares was exempt from registration under the Securities
      Act pursuant to Section 4(2) thereof.

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

            On February 10, 2000, we held a special general meeting of our
      shareholders. At the meeting, there were present in person or by proxy a
      total of 10,601,359 Class A common shares out of a total 31,026,791 shares
      of such stock issued and outstanding and entitled to vote at the meeting,
      and a total of 24,267,283 Class B common shares out of a total of
      24,267,283 issued and outstanding and entitled to vote at the meeting (or,
      in the aggregate 253,274,189 votes out of a total of 273,699,621 potential
      votes).

            Our shareholders voted in favor of the proposal to amend our
      bye-laws to authorize the issuance of preferred shares by our board of
      directors, without any further action by our


                                       23
<PAGE>

      shareholders, from time to time in one or more series with the
      designations, preferences, rights, qualifications, limitations and
      restrictions relating to such series, including voting rights, dividend
      rights, dividend rates, conversion rights, terms of redemption, redemption
      prices, liquidation preferences and the number of shares constituting any
      series, as our board of directors sees fit as follows: 249,625,037 votes
      for, 3,649,112 votes against and 40 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, but not limited to changing market conditions,
      competitive matters (such as the size and financial resources of
      competitors, pricing pressures, etc.), regulatory environment (such as
      timing and extent of deregulation of telecommunications market), the
      integration of acquisitions and new operations, substantial capital
      requirements, the availability of transmission facilities, reliance on
      sophisticated information systems, devaluation and currency risks, general
      economic conditions in the markets in which the Company operates, as well
      as other risks referenced from time to time in the Company's filings with
      the Securities and Exchange Commission and, accordingly, there can be no
      assurance with regard to such statements.

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits:

3.1     Certificate of Incorporation of RSL Communications, Ltd., issued by the
        Bermuda Registrar of Companies on March 14, 1996 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No.333-25749)).

3.2     Memorandum of Association of RSL Communications, Ltd., filed with the
        Bermuda Registrar of Companies on March 14, 1996 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No.333-25749)).

3.3     Bye-Laws of RSL Communications, Ltd., as amended to date (incorporated
        by reference to Registrant's Annual Report on Form 10-K for the fiscal
        year ended December 31, 1999).

3.4     Certificate of Designation relating to 7 1/2% Series A Convertible
        Preferred Shares (incorporated by reference to the Registrant's
        Registration Statement on Form S-3 (Registration No. 333-35864)).

4.1     Form of Class A Common Share (incorporated by reference to Registrant's
        Registration Statement on Form S-1 (Registration No. 333-34281)).

4.2     Note Deposit Agreement, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Book-Entry Depositary (incorporated by reference to
        Registrant's Registration Statement on Form S-4 (Registration No.
        333-36494)).

4.3     Dollar Note Indenture, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Trustee (incorporated by reference to Registrant's Registration
        Statement on Form S-4 (Registration No. 333-36494)).

4.4     Euro Note Indenture, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Trustee (incorporated by reference to Registrant's Registration
        Statement on Form S-4 (Registration No. 333-36494)).


                                       24
<PAGE>

10.1    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 9 7/8% Senior Notes due 2009 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.2    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee regarding 10 1/2% Senior Notes due 2008 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.3    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 9 1/8% Senior Notes due 2008 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.4    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 12 1/4% Senior Notes due 2006 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.5    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 12% Senior Notes due 2008 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.6    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 10 1/8% Senior Discount Notes due 2008
        (incorporated by reference to Registrant's Registration Statement on
        Form S-4 (Registration No. 333-36494)).

10.7    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 10% Senior Discount Notes due 2008
        (incorporated by reference to Registrant's Registration Statement on
        Form S-4 (Registration No. 333-36494)).

10.8    Registration Rights Agreement, dated as of February 22, 2000 among RSL
        Communications, Ltd. and the Initial Purchasers named therein
        (incorporated by reference to the Registrant's Registration Statement on
        Form S-3 (Registration No. 333-35864)).

10.9    Exchange and Registration Rights Agreement, dated as of February 22,
        2000 among RSL Communications, Ltd., RSL Communications PLC, and
        Goldman, Sachs the Initial Purchasers named therein (incorporated by
        reference to the Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.10   Put and Call Option Agreement dated March 28, 2000 relating to the sale
        and purchase of the entire issued share capital of Voyager Networks
        Limited and Voyager Internet Limited, by and among RSL Communications,
        Ltd., J.B. Shaw, C.L. Windley, N.P. Williams and Walbrook Trustees (IOM)
        Limited (filed herewith).

27.1    Financial Data Schedule (filed herewith).

        (b) Reports on Form 8-K.

        We filed a Form 8-K with the SEC dated January 25, 2000, reporting that
        we had issued press releases regarding (i) the purchase of network
        capacity for our European operations and our expectations regarding 4th
        quarter 1999 EBITDA and (ii) offerings of our cumulative convertible
        preferred stock, and senior notes of our wholly-owned subsidiary, RSL
        Communications PLC. The press releases were filed as exhibits to the
        Form 8-K.


                                       25
<PAGE>

        We filed a Form 8-K with the SEC dated February 10, 2000, reporting that
        deltathree.com, Inc., our subsidiary, had issued a press release
        regarding its fourth quarter financial results. The press release was
        filed as an exhibit to the Form 8-K.

        We filed a Form 8-K with the SEC dated March 2, 2000, reporting that we
        had issued a press release regarding our fourth quarter financial
        results. The press release was filed as an exhibit to the Form 8-K.

        We also filed a Form 8-K with the SEC dated March 16, 2000, reporting
        that we had issued press releases announcing that we had entered into
        agreements relating to the acquisition of Rednet Limited and Voyager
        Internet Limited and Voyager Networks Limited. The press releases were
        filed as exhibits to the Form 8-K.


                                       26
<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, 2000                     By /s/ Joel S. Beckoff
                                          -----------------------------
                                          Name: Joel S. Beckoff
                                          Title: Vice President - Controller
                                                 and Chief Accounting Officer


                                       27
<PAGE>

Exhibit Index

3.1     Certificate of Incorporation of RSL Communications, Ltd., issued by the
        Bermuda Registrar of Companies on March 14, 1996 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No.333-25749)).

3.2     Memorandum of Association of RSL Communications, Ltd., filed with the
        Bermuda Registrar of Companies on March 14, 1996 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No.333-25749)).

3.3     Bye-Laws of RSL Communications, Ltd., as amended to date (incorporated
        by reference to Registrant's Annual Report on Form 10-K for the fiscal
        year ended December 31, 1999).

3.4     Certificate of Designation relating to 7 1/2% Series A Convertible
        Preferred Shares (incorporated by reference to the Registrant's
        Registration Statement on Form S-3 (Registration No. 333-35864)).

4.1     Form of Class A Common Share (incorporated by reference to Registrant's
        Registration Statement on Form S-1 (Registration No. 333-34281)).

4.2     Note Deposit Agreement, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Book-Entry Depositary (incorporated by reference to
        Registrant's Registration Statement on Form S-4 (Registration No.
        333-36494)).

4.3     Dollar Note Indenture, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Trustee (incorporated by reference to Registrant's Registration
        Statement on Form S-4 (Registration No. 333-36494)).

4.4     Euro Note Indenture, dated as of February 22, 2000, among RSL
        Communications PLC, RSL Communications, Ltd. and the Chase Manhattan
        Bank, as Trustee (incorporated by reference to Registrant's Registration
        Statement on Form S-4 (Registration No. 333-36494)).

10.1    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 9 7/8% Senior Notes due 2009 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.2    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee regarding 10 1/2% Senior Notes due 2008 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.3    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 9 1/8% Senior Notes due 2008 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.4    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 12 1/4% Senior Notes due 2006 (incorporated
        by reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.5    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 12% Senior Notes due 2008 (incorporated by
        reference to Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.6    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 10 1/8% Senior Discount Notes due 2008
        (incorporated by reference to Registrant's Registration Statement on
        Form S-4 (Registration No. 333-36494)).


                                       28
<PAGE>

10.7    Second Supplemental Indenture, dated as of February 22, 2000, by RSL
        Communications PLC and RSL Communications, Ltd. to The Chase Manhattan
        Bank, as Trustee, regarding 10% Senior Discount Notes due 2008
        (incorporated by reference to Registrant's Registration Statement on
        Form S-4 (Registration No. 333-36494)).

10.8    Registration Rights Agreement, dated as of February 22, 2000 among RSL
        Communications, Ltd. and the Initial Purchasers named therein
        (incorporated by reference to the Registrant's Registration Statement on
        Form S-3 (Registration No. 333-35864)).

10.9    Exchange and Registration Rights Agreement, dated as of February 22,
        2000 among RSL Communications, Ltd., RSL Communications PLC, and
        Goldman, Sachs the Initial Purchasers named therein (incorporated by
        reference to the Registrant's Registration Statement on Form S-4
        (Registration No. 333-36494)).

10.10   Put and Call Option Agreement dated March 28, 2000 relating to the sale
        and purchase of the entire issued share capital of Voyager Networks
        Limited and Voyager Internet Limited, by and among RSL Communications,
        Ltd., J.B. Shaw, C.L. Windley, N.P. Williams and Walbrook Trustees (IOM)
        Limited (filed herewith).

27.1    Financial Data Schedule (filed herewith).


                                       29