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 September 30, 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 November 9, 2000, the registrant had 36,575,218 of its Class A common
stock, par value $0.00457 per share, and 24,267,283 of its 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

     Condensed Consolidated Balance Sheets as of
         September 30, 2000 (Unaudited) and December 31, 1999................. 1

     Condensed Consolidated Statements of Operations for the
        Three Month and Nine Month Periods Ended September 30, 2000
        (Unaudited) and 1999 (Unaudited)...................................... 2

     Condensed Consolidated Statements of Cash Flows for the Nine Month
         Periods Ended September 30, 2000 (Unaudited) and 1999 (Unaudited).... 3

     Notes to Condensed Consolidated Financial Statements..................... 4

    Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations ......................................11

    Item 3. Quantitative and Qualitative Disclosures About Market Risk........27

PART II - OTHER INFORMATION

    Item 1.  Change in Securities and Use of Proceeds.........................28

    Item 2.  Other Information................................................28

    Item 3.  Exhibits and Reports on Form 8-K.................................29

Signatures....................................................................30

Exhibit Index.................................................................31
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements.

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

<TABLE>
<CAPTION>
                                                        As of          As of
                                                    September 30,   December 31,
                                                        2000            1999
                                                        ----            ----
                                                     (unaudited)
<S>                                                 <C>             <C>
Assets

Cash and Cash Equivalents ......................    $    98,648     $   238,724
Accounts Receivable, Net .......................        279,983         258,983
Marketable Securities - Available for Sale .....         52,752          72,813
Prepaid Expenses and Other Current Assets ......        153,863         116,929
                                                    -----------     -----------
Total Current Assets ...........................        585,246         687,449
                                                    -----------     -----------
Marketable Securities - Available for Sale .....             --          11,341
Property and Equipment .........................        700,746         610,095
Less: Accumulated Depreciation .................       (193,087)       (134,559)
                                                    -----------     -----------
Property and Equipment, Net ....................        507,659         475,536
Investment in Unconsolidated Subsidiaries ......          1,657          16,872
Goodwill and Other Intangibles, Net ............        699,763         606,039
Deposits and Other Assets ......................         30,173           6,071
                                                    -----------     -----------
     Total Assets ..............................    $ 1,824,498     $ 1,803,308
                                                    ===========     ===========

Liabilities and Shareholders' Deficit

Accounts Payable and Other Liabilities .........    $   484,608     $   500,371
Short-term Debt ................................         49,478          23,348
                                                    -----------     -----------
Total Current Liabilities ......................        534,086         523,719
                                                    -----------     -----------
Total Long-term Debt ...........................      1,529,392       1,273,961
Other Liabilities - Noncurrent .................         14,597          15,986
                                                    -----------     -----------
Total Liabilities ..............................      2,078,075       1,813,666
                                                    -----------     -----------
Minority Interest ..............................         63,997          73,254
                                                    -----------     -----------
Shareholders' Capital ..........................        799,196         641,778
Accumulated Deficit ............................     (1,116,770)       (725,390)
                                                    -----------     -----------
Total Shareholders' Deficit ....................       (317,574)        (83,612)
                                                    -----------     -----------
     Total Liabilities and Shareholders' Deficit    $ 1,824,498     $ 1,803,308
                                                    ===========     ===========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                              Three Months Ended               Nine Months Ended
                                                                September 30,                    September 30,
                                                             2000            1999            2000            1999
                                                             ----            ----            ----            ----
<S>                                                      <C>             <C>             <C>             <C>
Revenues ............................................    $   382,843     $   368,831     $ 1,149,273     $ 1,076,812
Operating Costs and Expenses:
  Cost of Services (exclusive of depreciation and
   amortization shown separately below) .............        282,264         256,131         816,480         765,009
  Selling, General and Administrative Expenses ......        154,254         112,573         412,403         323,470
  Non-cash Compensation Expense .....................          2,204           2,676           8,329           5,602
  Write Down for Impairment of Assets ...............             --              --          48,267              --
  Special Charge ....................................             --          30,143              --          30,143
  Depreciation and Amortization .....................         53,496          46,032         154,658         126,115
                                                         -----------     -----------     -----------     -----------
Total Operating Costs and Expenses ..................        492,218         447,555       1,440,137       1,250,339
                                                         -----------     -----------     -----------     -----------
Loss From Operations ................................       (109,375)        (78,724)       (290,864)       (173,527)
Interest Income .....................................          2,288           5,408          11,176          16,502
Interest Expense ....................................        (45,007)        (35,546)       (123,832)        (95,820)
Other Income/(Expense) - Net ........................         (3,221)            326          (7,380)            506
Foreign Exchange Transaction Gain (Loss) - Net ......          7,205          (3,468)         15,879          10,560
Minority Interest ...................................          5,338          (4,791)         13,318          (3,969)
Loss in Equity Interest of
  Unconsolidated Subsidiaries - Net .................         (3,477)         (1,184)         (7,903)         (1,560)
Income Tax Expense ..................................           (459)           (918)         (1,773)         (1,408)
                                                         -----------     -----------     -----------     -----------
Net Loss ............................................    $  (146,708)    $  (118,897)    $  (391,379)    $  (248,716)
                                                         ===========     ===========     ===========     ===========

Basic and Diluted  Net Loss Per Share of Common Stock    $     (2.51)    $     (2.17)    $     (6.89)    $     (4.63)

Weighted Average Number of Shares of Common Stock
  Outstanding .......................................         58,440          54,702          56,835          53,676
</TABLE>

            See notes to condensed consolidated financial statements.


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                               September 30,
                                                                               -------------
                                                                             2000          1999
                                                                             ----          ----
<S>                                                                       <C>           <C>
Net loss .............................................................    $(391,379)    $(248,716)
Depreciation and amortization ........................................      154,658       126,115
Working capital change and other .....................................      (20,538)       (1,215)
                                                                          ---------     ---------
     Net cash used in operations .....................................     (257,259)     (123,816)
                                                                          ---------     ---------

Acquisitions of subsidiaries .........................................      (81,765)      (38,209)
Purchase of property and equipment ...................................     (141,459)     (159,679)
Proceeds from maturity of marketable securities ......................       28,324         9,715
Proceeds from maturity of restricted securities ......................           --        21,150
Other ................................................................        1,385           307
                                                                          ---------     ---------
     Net cash used in investing activities ...........................     (193,515)     (166,716)
                                                                          ---------     ---------

Proceeds from the issuance of Notes ..................................      197,123       169,748
Payment of offering costs ............................................      (10,908)         (256)
Proceeds from short term debt ........................................       25,000        40,486
Payment of short term debt ...........................................       (1,123)      (37,310)
Proceeds from Issuance of Long-Term Debt .............................        8,672            --
Proceeds from Issuance of Convertible Preferred Stock ................      115,000            --
Proceeds from issuance of Class A shares .............................          401         1,475
Principal payments under capital lease obligations ...................      (10,495)      (14,970)
                                                                          ---------     ---------
     Net cash provided by financing activities .......................      323,670       159,173
                                                                          ---------     ---------

Decrease in cash and cash equivalents ................................     (127,104)     (131,359)
Effects of foreign currency on cash and cash equivalents .............      (12,972)       (1,453)
Cash and cash equivalents at beginning of period .....................      238,724       367,823
                                                                          ---------     ---------

Cash and cash equivalents at end of period ...........................    $  98,648     $ 235,011
                                                                          =========     =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest ...............................................    $  78,741     $  57,960
                                                                          =========     =========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Exchange of Class A Common Stock for stock of subsidiaries ...........    $  41,916     $  36,783
                                                                          =========     =========
Assets acquired under capital lease obligations ......................    $  60,535     $  12,385
                                                                          =========     =========
Stock of Subsidiaries Issued .........................................    $  10,450     $      --
                                                                          =========     =========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                            RSL COMMUNICATIONS, LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 ("RSL PLC") and RSL COM
U.S.A., Inc. ("RSL COM U.S.A"), our subsidiaries, 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.

As a result of our continued efforts to build out our network, combined with the
increasing competitive market for telecommunications services, we continue to
experience losses and have a deficiency of assets. Our financial statements have
been prepared on a going-concern basis of accounting. Our ability to realize our
assets is dependent upon our ability to generate liquidity to fund our ongoing
losses and our reduced capital expenditure plan. While there can be no
assurances, we believe that our remaining net cash balance, together with
availability under our short-term line of credit, overdraft facilities from
local banks, and other cash resources, will be sufficient to fund our operations
into early 2001. We believe that any proceeds received from the potential sales
of non-core assets, in addition to proceeds received from the potential early
monetization of Telegate Holding in January 2001 will be sufficient to fund our
capital expenditures, operations and other obligations through mid-2001.

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 RSL COM, 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:

<TABLE>
<CAPTION>
                                                 Three Months Ended          Nine Months Ended
                                                    September 30,               September 30,
                                                 2000          1999          2000          1999
                                                 ----          ----          ----          ----
                                                                 (unaudited)
                                                                 (in thousands)
<S>                                           <C>           <C>           <C>           <C>
Net Loss .................................    $(146,708)    $(118,897)    $(391,379)    $(248,716)
Other Comprehensive Income (Loss)
  Foreign currency translation adjustments       (2,540)          615       (19,052)       (1,002)
</TABLE>


                                       4
<PAGE>

<TABLE>
<S>                                           <C>           <C>           <C>           <C>
  Unrealized (loss)/gain on securities ...           48          (523)        2,476          (182)
                                              ---------     ---------     ---------     ---------
                                                 (2,492)           92       (16,576)       (1,184)
                                              ---------     ---------     ---------     ---------
Total Comprehensive Loss .................    $(149,200)    $(118,805)    $(407,955)    $(249,900)
                                              =========     =========     =========     =========
</TABLE>

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.

4. SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION

Presented below are condensed consolidating financial statement data as of and
for the nine months and the quarter ended September 30, 2000. The notes issued
by RSL PLC are fully and unconditionally guaranteed by us and by RSL COM U.S.A.
on a joint and several basis.

For the nine months ended September 30, 2000:

<TABLE>
<CAPTION>
                                                                     Non-Guarantor                  Consolidated
(unaudited)            RSL Ltd.        RSL PLC       RSL COM USA     Subsidiaries    Adjustments    Total
                       --------        -------       -----------     ------------    -----------    -----
<S>                  <C>             <C>             <C>             <C>             <C>             <C>
Revenues             $        --     $   707,102     $   265,022     $   177,149     $        --     $ 1,149,273

Operating
Expenses                  25,299         868,359         303,258         246,542          (3,321)      1,440,137
                          ------         -------         -------         -------          ------       ---------
(Loss)/Income
from Operations          (25,299)       (161,257)        (38,236)        (69,393)          3,321        (290,864)

Other Inc./(Exp.)          7,885        (109,100)         (6,819)          9,024          (1,505)       (100,515)
                          ------         -------         -------         -------          ------       ---------
Net (Loss)/Income    $   (17,414)    $  (270,357)    $   (45,055)    $   (60,369)    $     1,816     $  (391,379)
                     -------------------------------------------------------------------------------------------
</TABLE>


                                       5
<PAGE>

For the  quarter ended September 30, 2000

<TABLE>
<CAPTION>
                                                            Non-Guarantor                RSL
(unaudited)         RSL Ltd.      RSL PLC     RSL COM USA   Subsidiaries   Adjustments   Consolidated
                    --------      -------     -----------   ------------   -----------   ------------
<S>                <C>           <C>           <C>           <C>           <C>           <C>
Revenues           $      --     $ 233,331     $  87,644     $  61,868     $      --     $ 382,843

Operating
Expenses              13,789       290,084       107,611        82,035        (1,301)      492,218
                      ------       -------       -------        ------        ------       -------
(Loss)/ Income
from Operations      (13,789)      (56,753)      (19,967)      (20,167)        1,301      (109,375)

Other
Inc./(Exp.)            1,881       (39,673)       (2,485)        3,437          (493)      (37,333)
                      ------       -------       -------        ------        ------       -------

Net Loss           $ (11,908)    $ (96,426)    $ (22,452)    $ (16,730)    $     808     $(146,708)
                   -------------------------------------------------------------------------------
</TABLE>


                                       6
<PAGE>

As of September 30, 2000:

<TABLE>
<CAPTION>
                                                                       Non-Guarantor                 RSL
(unaudited)               RSL Ltd.       RSL PLC       RSL COM USA     Subsidiaries   Adjustments    Consolidated
                          --------       -------       -----------     ------------   -----------    ------------
<S>                     <C>            <C>             <C>             <C>            <C>             <C>
Curr. Assets            $ 1,234,255    $   344,328     $   104,671     $   139,173    $(1,237,181)    $   585,246

PP&E - net                    7,535        367,926          78,510          53,688             --         507,659
Goodwill
&Other
Intangibles-net              37,185        449,412         161,365          51,801             --         699,763
Other Assets                294,149         27,741             857          44,857       (335,774)         31,830
                        -----------------------------------------------------------------------------------------
Total Assets            $ 1,573,124    $ 1,189,407     $   345,403     $   289,519    $(1,572,955)    $ 1,824,498
                        -----------------------------------------------------------------------------------------
Liabilities &
Shareholders  Equity
(Deficit)

Short Term Debt         $    24,108    $    15,409     $     3,749     $     6,212    $        --     $    49,478
Accounts Payable
and Other
Liabilities               1,107,866        (68,988)        488,584         189,437     (1,232,291)        484,608
Long-term debt and
Other                         1,150      2,015,142          10,607          61,755       (480,668)      1,607,986
Shareholders  Equity
(Deficit)                   440,000       (772,156)       (157,537)         32,115        140,004        (317,574)
                        -----------------------------------------------------------------------------------------
Total Liabilities &
Stockholders'
Equity/(Deficit)        $ 1,573,124    $ 1,189,407     $   345,403     $   289,519    $(1,572,955)    $ 1,824,498
                        -----------------------------------------------------------------------------------------
</TABLE>


                                       7
<PAGE>

For the Nine Months ended September 30, 2000:

<TABLE>
<CAPTION>
                                                                       Non-Guarantor     RSL
(unaudited)                    RSL Ltd.      RSL PLC       RSL USA     Subsidiaries   Consolidated
                               --------      -------       -------     ------------   ------------
<S>                           <C>           <C>           <C>           <C>           <C>
Net Cash used in Operating
Activities                    $ (11,281)    $(236,843)    $   4,646     $ (13,781)    $(257,259)
Net cash used in Investing
Activities                      (18,469)      (97,077)       (7,356)      (70,613)     (193,515)
Net cash provided by
Financing Activities             25,401       301,758        (3,361)         (128)      323,670
</TABLE>

5. Significant Events

In July 2000, we announced that we intend to sell or close our operations in
Canada, Japan and Hong Kong. In connection with this decision, as of June 30,
2000, we recorded a non-cash asset write-down for the impairment of assets of
$48.3 million. As of September 30, 2000 we have shut down our operations in Hong
Kong, are in the process of finalizing a sale of our Japan operations, and have
continued our Canadian operations while we pursue a sale. We recorded revenues
and an operating loss for the quarter ended September 30, 2000 for our Canadian
operations of $10.9 million and $2.8 million, respectively.

In July 2000, we signed an agreement with our Chairman and principal
shareholder, Ronald S. Lauder, for an unsecured loan facility totaling $100
million, available until June 30, 2001. All loans under the facility are due and
payable on or before June 30, 2001 or earlier upon the monetization of telegate
AG or other asset sales. The rate of interest is LIBOR plus 4.5% on any amounts
drawn under the facility and we are obligated to issue to Mr. Lauder warrants to
purchase 75,000 Class A common shares at $11.50 per share for each $5 million
drawn under the facility. As of September 30, 2000, we have drawn $25 million
under this facility and have issued 375,000 warrants to Mr. Lauder. The value
assigned to the warrants was estimated at approximately $1 million and was
recorded as additional paid in capital.

In August 2000, we announced the appointment of Paul B. Domorski as our
President and CEO, which became effective August 21, 2000. Mr. Domorski,
formerly President of British Telecom Syncordia Solutions, succeeds Itzhak
Fisher. Mr. Domorski's office is located in the United Kingdom. In addition,
Donald R. Shassian, our Chief Operating Officer, has left our company to pursue
other opportunities.

6. Subsequent Events

In October 2000, pursuant to its agreement with Seat Pagine Gialle Spa.
("SEAT"), our German subsidiary RSL COM Deutschland GmbH sold an initial portion
of its equity interest in Telegate Holding, the holding company for our share
ownership in Telegate AG, to SEAT for gross proceeds of approximately 15.3
million Euros. As a result of this and the expected sale of the balance of our
interest, we changed our accounting for this investment from the consolidation
method to the equity method.


                                       8
<PAGE>

In October 2000, we retained the investment banking firm of Wasserstein Perella
& Co., Inc. to assist us in exploring strategic alternatives.

As of November 13, 2000 we have drawn $55 million under our facility with Ronald
S. Lauder and have issued 825,000 warrants to him.

7. 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 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. We have not
participated in any hedging activities in connection with foreign currency
exposure. We will adopt SFAS No. 133 in the first quarter of 2001. We do not
expect this to have a material effect on our results of operations or financial
position.

8. Segment Data

European Operations

<TABLE>
<CAPTION>
                                                    Three Months Ended          Nine Months Ended
                                                       September 30,             September 30,
                                                     2000        1999         2000          1999
                                                     ----        ----         ----          ----
                                                                     (unaudited)
                                                           (in thousands, except percentages)
<S>                                               <C>          <C>          <C>          <C>
Revenue ......................................... $ 222,425    $ 186,957    $ 671,303    $ 517,371
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ............   160,098      116,251      461,103      329,188
                                                  ---------    ---------    ---------    ---------
Gross margin ....................................    62,327       70,706      210,200      188,183
Selling, general and administrative expenses ....    85,721       62,998      230,352      172,413
Depreciation and amortization ...................    24,751       17,110       64,844       44,581
                                                  ---------    ---------    ---------    ---------

Loss from operations ............................ $ (48,145)   $  (9,402)   $ (84,996)   $ (28,811)
                                                  =========    =========    =========    =========
</TABLE>


                                       9
<PAGE>

North American Operations

<TABLE>
<CAPTION>
                                                    Three Months Ended         Nine Months Ended
                                                       September 30,             September 30,
                                                     2000         1999         2000         1999
                                                     ----         ----         ----         ----
                                                                      (unaudited)
                                                            (in thousands, except percentages)
<S>                                               <C>          <C>          <C>          <C>
Revenue .......................................   $  98,551    $ 132,799    $ 300,822    $ 426,428

Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ..........      81,085      105,033      242,214      343,223
                                                  ---------    ---------    ---------    ---------

Gross margin ..................................      17,466       27,766       58,608       83,205
Selling, general and administrative expenses ..      22,464       26,575       63,421       85,318
Non-cash compensation .........................         686           --        2,059           --
Write-down for impairment of assets ...........          --           --       37,382           --
Depreciation and amortization .................      17,129       11,113       40,487       33,705
                                                  ---------    ---------    ---------    ---------

Loss from operations ..........................   $ (22,813)   $  (9,922)   $ (84,741)   $ (35,818)
                                                  =========    =========    =========    =========

 Asia/Pacific and Other Operations
Revenue .......................................   $  56,301    $  47,727    $ 166,533    $ 130,658
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ..........      37,106       31,928      106,665       88,907
                                                  ---------    ---------    ---------    ---------
Gross margin ..................................      19,195       15,799       59,868       41,751
Selling, general and administrative expenses ..      22,049       18,310       65,051       48,878
Write-down for impairment of assets ...........          --           --       10,885           --
Depreciation and amortization .................       5,220        9,769       17,714       18,730
                                                  ---------    ---------    ---------    ---------
Loss from operations ..........................   $  (8,074)   $ (12,280)   $ (33,782)   $ (25,857)
                                                  =========    =========    =========    =========

 deltathree.com Operations
Revenue .......................................   $   5,566    $   1,348    $  10,615    $   2,355
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ..........       3,975          963        6,498        1,734
                                                  ---------    ---------    ---------    ---------
Gross margin ..................................       1,591          385        4,117          621
Selling, general and administrative expenses ..       9,016          468       25,624        5,596
Non-cash compensation .........................       1,374        2,286        5,530        2,286
Depreciation and amortization .................       2,150        1,271        5,407        2,642
                                                  ---------    ---------    ---------    ---------

Loss from operations ..........................   $ (10,949)   $  (3,640)   $ (32,444)   $  (9,903)
                                                  =========    =========    =========    =========
</TABLE>


                                       10
<PAGE>

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

Overview

We are a 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, Italy, 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
107 points of presence in 40 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 And Nine Month Periods
Ended September 30, 2000 Compared To The Three Month And Nine Month Periods
Ended September 30, 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 somewhat offset by increased
minute volumes and decreased operating costs per minute.

Revenues increased to $382.8 million for the three months ended September 30,
2000 compared to $368.8 million for the three months ended September 30, 1999,
an increase of 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 third quarter 1999 foreign currency
exchange rates to the third quarter 2000 local currency amounts, reported
revenue would have increased by an additional $36.7 million. For the nine months
ended September 30, 2000, revenues increased to $1,149.3 million, compared to
$1,076.8 million for the nine months ended September 30, 1999, an increase of
7%. This increase is due primarily to the growth in customers in our European
operations partially offset by competitive pricing pressures in several of the
markets in which we operate. Had we applied the year to date average 1999
foreign currency exchange rates to the year to date 2000 local currency amounts,
revenue would have increased by an additional $73.3 million. The unfavorable
impact due to exchange rates on revenues is substantially mitigated by the
favorable impact from foreign currency exchange rates on costs.


                                       11
<PAGE>

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
telecommunications network, RSL-NET. The majority of our cost of services is
variable, including local access charges and transmission capacity leased on a
per-minute-of-use basis. For certain key markets, we have made significant
investments in indefeasible rights of use, or IRUs, minimum investments units,
or MIUs and domestic circuits and, as a result, an increasing amount of our
total operating costs have become fixed, as the volume of our calls carried over
our own facilities increases. Our continued ability to migrate increasing
amounts of traffic from leased facilities to owned facilities is limited due to
our capital constraints (see liquidity and capital resources). 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. 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 should decrease to the
extent that we are able to bypass the settlement rates associated with the
transport of international traffic.

We have been expanding and upgrading our Pan-European network connecting ten
European international switching centers in nine countries. We expect that this
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, although the
phase-in has been somewhat delayed from our original expectations due to
technical difficulties encountered by our vendor, and is now expected to be
implemented in the fourth quarter of 2000 and the first quarter of 2001.

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 $282.3 million for the three months ended
September 30, 2000 from $256.1 million for the three months ended September 30,
1999, an increase of 10%. Cost of services for the nine months ended September
30, 2000 were $816.5 million, as compared to $765.0 million for the same period
last year, an increase of 7%. The increase in costs is primarily due to
additional facility costs in certain countries. As a percentage of revenues,
cost of services increased to 73.7%, for the third quarter of 2000 compared to
69.4% for the third quarter of 1999. For the first nine months of 2000, cost of
services as a percentage of revenue remained essentially the same, 71.0%, as for
the same period last year.

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


                                       12
<PAGE>

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 certain 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. 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 costs
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 the past, we have incurred 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. Many of our operations
are in different stages 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 September
30, 2000 increased by $41.7 million, or 37%, to $154.3 million from $112.6
million for the three months ended September 30, 1999. For the nine months ended
September 30, 2000, selling, general and administrative expense increased to
$412.4 million, from $323.5 million for the nine months ended September 30,
1999, an increase of $88.9 million or 27%. Selling, general and administrative
expense as a percentage of revenues increased to 40.3% in the third quarter of
2000 compared to 30.5%, in the third quarter 1999. Selling, general and
administrative expense as a percentage of revenues increased to 35.9% for the
first nine months of 2000 compared to 30.0%, for the first nine months of 1999.
The percentage increase is primarily due to significant increases in costs at
our subsidiaries in Australia and Canada, as well as at deltathree.com and
telegate AG as they implement their aggressive expansion plans in new markets.
The increase is also attributable to the impact of our recent acquisitions in
Spain, the expense relating to a one-time corporate marketing campaign in the
second and third quarters of 2000 as well as corporate severance charges
pertaining to staff reductions and management changes and the expansion efforts
of our Canadian operations.


                                       13
<PAGE>

Write-Down for Impairment of Assets

In July 2000, we announced our intention to sell or close our operations in
Canada, Japan and Hong Kong. In connection with this decision, we recorded a
non-cash asset write-down for the impairment of assets of $48.3 million during
the second quarter. These assets are primarily property, plant and equipment and
the amount of the impairment was based upon fair market value, as determined by
current estimates of realizable value upon sale to third parties. This write
down impacts the results of the North American and Asia/Pacific/Other operating
segments. These three operations had annual revenues of $52.3 million in 1999
and had revenues for the nine months ended September 30, 2000 of approximately
$35.9 million, with substantially all of the revenue having been generated in
Canada.

Non-cash Compensation Expense

Non-cash compensation expense relates to variable stock incentive awards that
were previously granted to employees in various subsidiaries, primarily
deltathree.com. Non-cash compensation expense for the third quarter and first
nine months of 2000 was $2.2 million and $8.3 million, respectively, compared to
$2.7 million and $5.6 million for the third quarter and nine months ended
September 30,1999.

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
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 September 30, 2000 the reserve balance was $2.9
million primarily for severance payments to be paid out over the next several
months in accordance with local legal requirements to former employees who have
already been severed.

Depreciation and Amortization Expense

Depreciation and amortization expense increased 16% to $53.5 million for the
three months ended September 30, 2000 from $46.0 million for the three months
ended September 30, 1999. Depreciation and amortization expense increased 23% to
$154.7 million for the nine months ended September 30, 2000 from $126.1 million
for the nine months ended September 30, 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.

Interest Income

Interest income decreased from $5.4 million for the three months ended September
30, 1999 to $2.3 million for the three months ended September 30, 2000. Interest
income decreased from $16.5 million for the nine months ended September 30, 1999
to $11.2 million for the nine months ended September 30, 2000. This decline is
primarily a result of a decline in the average outstanding balance of
interest-bearing investments in 2000 compared to last year.


                                       14
<PAGE>

Interest Expense

Interest expense increased to $45.0 million for the three months ended September
30, 2000 from $35.5 million for the three months ended September 30, 1999. For
the nine months ended September 30, 2000, interest expense increased to $123.8
million, from $95.8 million for the first nine months of 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, as well as increases in capital lease obligations and
the impact of the amounts drawn under the Ronald S. Lauder facility.

Other Income (Expense) - Net

Other income (expense)- net for the three and nine months ended September 30,
2000 primarily reflects the accrual of regular quarterly distributions on our
$115 million 7 1/2% Series A Convertible Preferred Shares which we issued on
February 22, 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 $19.1 million as a
component of equity as of September 30, 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 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 $7.2 million for the three months ended
September 30, 2000 compared to a foreign exchange loss of $3.5 million for the
three month period ended September 30, 1999. For the nine months ended September
30, 2000 we recorded a foreign exchange gain of $15.9 million compared to a gain
of $10.6 million for the nine month period ended September 30, 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 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.


                                       15
<PAGE>

Loss in Equity Interest of Unconsolidated Subsidiaries - Net

We recorded a loss in equity interest of unconsolidated subsidiaries - net of
$3.5 million for the three months ended September 30, 2000 compared to a net
loss of $1.2 million for the three months ended September 30, 1999. For the nine
months ended September 30, 2000 we recorded a loss in equity interest of
unconsolidated subsidiaries - net of $7.9 million, compared to a net loss of
$1.6 million recorded for the nine months ended September 30, 1999. This
increased loss reflects additional allocable loss in the investments of Maxitel
Servicos e Gestao de Telecommunicacoes, S.A., a Portugese international
telecommunications carrier, and the recording of losses associated with Banda
Ancha, a consortium formed in April 2000 to develop an LMDS network in Spain.

Net Loss

The net loss increased to $146.7 million for the three months ended September
30, 2000, as compared to the net loss of $118.9 million for the three months
ended September 30, 1999. For the nine months ended September 30, 2000, the net
loss increased to $391.4 million, as compared to the net loss of $248.7 million
for the same period last year. The increase is due to the factors described
above, and in the following discussion of segment results. In particular,
results were negatively impacted by our decision to sell or close our operations
in Canada, Hong Kong and Japan, which resulted in a non-cash charge of $48.3
million, discussed above. Net loss per share for the first nine months of 2000
was $6.89, compared to a net loss per share of $4.63 for the nine months ended
September 30, 1999.

Segment Information

European Operations

<TABLE>
<CAPTION>
                                                      Three Months Ended          Nine Months Ended
                                                         September 30,               September 30,
                                                      2000          1999          2000          1999
                                                      ----          ----          ----          ----
                                                                       (unaudited)
                                                            (in thousands, except percentages)
<S>                                                <C>           <C>           <C>           <C>
Revenue ........................................   $ 222,425     $ 186,957     $ 671,303     $ 517,371
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ...........     160,098       116,251       461,103       329,188
                                                   ---------     ---------     ---------     ---------

Gross margin ...................................      62,327        70,706       210,200       188,183
Selling, general and administrative expenses ...      85,721        62,998       230,352       172,413
Depreciation and amortization ..................      24,751        17,110        64,844        44,581
                                                   ---------     ---------     ---------     ---------

Loss from operations ...........................   $ (48,145)    $  (9,402)    $ (84,996)    $ (28,811)
                                                   =========     =========     =========     =========

Other Financial Data:
EBITDA (as defined) (1) ........................   $ (23,394)    $   7,708     $ (20,152)    $  15,770
Revenue as a percentage of consolidated revenue         58.1%         50.7%         58.4%         48.0%
</TABLE>


                                       16
<PAGE>

<TABLE>
<S>                                                     <C>           <C>           <C>           <C>
Gross margin as a percentage of revenue ........        28.0%         37.8%         31.3%         36.4%
Selling, general and administrative expense as a
   percentage of revenue .......................        38.5%         33.7%         34.3%         33.3%
</TABLE>

----------
(1)   EBITDA, as used herein, consists of loss from operations before
      depreciation and amortization. It 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.

Revenue from our European operations increased by 19% to $222.4 million for the
three months ended September 30, 2000 compared to $187.0 million for the same
period in 1999. Revenue from our European operations increased by 30% to $671.3
million for the nine months ended September 30, 2000 compared to $517.4 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, partially offset
by competitive pricing pressures. European revenues as a percentage of
consolidated revenues increased from 50.7% in the third quarter of 1999 to
58.1%, in the third quarter of 2000. For the nine months ended September 30,
2000 European revenues represented 58.4% of consolidated revenue, as compared to
48.0% during the same period last year. This growth is consistent with our
strategy of expansion in Europe as well as the decision made in September 1999
to discontinue certain prepaid calling card plans and exit the telemarketing
business in the United States. Europe currently represents our largest market
segment.

Cost of services increased 38% to $160.1 million in the third quarter of 2000
from $116.3 million in the third quarter of 1999. Cost of services increased 40%
to $461.1 million in the first nine months of 2000 from $329.2 million in the
comparable period of 1999. Costs of services as a percentage of revenues in the
third quarter of 2000 was 72.0% compared to the 62.2 % recorded in the third
quarter of 1999. The increase in the cost of services as a percentage of revenue
is primarily attributable to competitive pricing pressures particularly in the
United Kingdom and the absence of high margin revenues related to a contract
which was terminated in October 1999.

Selling, general and administrative expense in the third quarter of 2000
increased 36% to $85.7 million from $63.0 million in the third quarter of 1999.
For the first nine months, selling, general and administrative costs increased
34% to $230.4 million, from $172.4 million for the same period last year.
Selling, general and administrative expenses as a percentage of revenue in the
third quarter of 2000 was 38.5% and for the first nine months was 34.3%, as
compared to 33.7% and 33.3% in the same periods last year. The increase in
expenses during the quarter relate primarily to the expansion into new markets
by telegate, our German directory services provider, as well as the impact of
our recent acquisitions of Cetel and Alo in Spain and their aggressive customer
growth strategy.


                                       17
<PAGE>

Depreciation and amortization in the third quarter of 2000 increased 45% to
$24.8 million from $17.1 million recorded in the third quarter of 1999.
Depreciation and amortization during the first nine months increased 45% to
$64.8 million from the $44.6 million recorded during the first nine months 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 third quarter of 2000 increased to
$48.1 million from $9.4 million recorded in the third quarter of 1999. Year to
date net loss from European operations increased to $85.0 million, from $28.8
million for the same period last year. The decline reflects the substantially
higher revenue which was more than offset by the competitive pricing pressures,
the costs of expansion into new markets and the absence of the impact of the
contract terminated in October 1999.


                                       18
<PAGE>

North American Operations

<TABLE>
<CAPTION>
                                                     Three Months Ended           Nine Months Ended
                                                        September 30,               September 30,
                                                     2000          1999           2000         1999
                                                     ----          ----           ----         ----
                                                                       (unaudited)
                                                            (in thousands, except percentages)
<S>                                                <C>           <C>           <C>           <C>
Revenue ........................................   $  98,551     $ 132,799     $ 300,822     $ 426,428
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ...........      81,085       105,033       242,214       343,223
                                                   ---------     ---------     ---------     ---------
Gross margin ...................................      17,466        27,766        58,608        83,205
Selling, general and administrative expenses ...      22,464        26,575        63,421        85,318
Non-cash compensation ..........................         686            --         2,059            --
Write-down for impairment of assets ............          --            --        37,382            --
Depreciation and amortization ..................      17,129        11,113        40,487        33,705
                                                   ---------     ---------     ---------     ---------

Loss from operations ...........................   $ (22,813)    $  (9,922)    $ (84,741)    $ (35,818)
                                                   =========     =========     =========     =========

Other Financial Data:
EBITDA (as defined) (1) ........................   $  (4,998)    $   1,191     $  (4,813)    $  (2,113)
Revenue as a percentage of consolidated revenue         25.7%         36.0%         26.2%         39.6%
Gross margin  as a percentage of revenue .......        17.7%         20.9%         19.5%         19.5%
Selling, general and administrative expense as a
   percentage of revenue .......................        22.8%         20.0%         21.1%         20.0%
</TABLE>

----------

(1)   EBITDA, as used herein, consists of loss from operations before
      depreciation and amortization. EBITDA has also been normalized to exclude
      non-cash compensation expense and the write-down for impairment of assets
      in Canada. 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 and
medium-sized businesses and have restructured our pricing of wholesale services
to other carriers.

In July 2000, we announced our intention to sell our Canadian operations. In
connection with this decision, we recorded a non-cash asset write-down for the
impairment of assets of $37.4 million to second quarter earnings. These assets
are primarily property, plant and equipment and the amount of the impairment was


                                       19
<PAGE>

based upon fair market value, as determined by current estimates of realizable
value upon sale to a third party. The Canadian operations had annual revenues of
$48.5 million in 1999 and had revenues and operating losses for the nine months
ended September 30, 2000 of $35.8 million and $9.1 million, respectively. For
the three months ended September 30, 2000, the Canadian operations had revenues
of $10.9 million and operating losses of $2.8 million. Canada's increasing
EBITDA losses and operating losses primarily reflect its attempt earlier this
year to expand into Canada's eastern markets.

Revenue from our North American operations decreased to $98.6 million for the
three months ended September 30, 2000 compared to $132.8 million for the same
period in 1999, a 25.8% decrease primarily as a result of our discontinuance of
certain unprofitable prepaid calling card plans and telemarketing businesses
beginning in September 1999. For the nine months ended September 30, 2000 North
American revenues were $300.8 million, as compared to $426.4 million for the
same period last year.

North American revenues as a percentage of consolidated revenues decreased from
36.0% in the third quarter of 1999 to 25.7% in the third quarter of 2000. On a
year to date basis, North American revenues as a percentage of consolidated
revenues decreased from 39.6% last year to 26.2% in 2000. This decline is
primarily a result of our effort to reduce our dependence on certain prepaid and
telemarketing businesses and low-margin wholesale markets, and the expansion of
our presence in Europe.

Cost of services for our North American operations decreased 22.8% to $81.1
million in the third quarter of 2000 from $105.0 million in the third quarter of
1999. The decrease is primarily a result of lower revenues. Cost of services as
a percentage of revenues in the third quarter of 2000 was 82.3%, compared with
the 79.1% in the third quarter of 1999. This increase is primarily due to the
expansion efforts in the eastern portion of Canada. Excluding the Canadian
operation, cost of services as a percentage of revenue declined as a result of
competitive pricing pressures. Year to date, cost of services as a percentage of
revenues was 80.5%, comparable with the same period last year.

Selling, general and administrative expenses for our North American operations
in the third quarter of 2000 decreased to $22.5 million from $26.6 million in
the third quarter of 1999. On a year to date basis, selling, general and
administrative expenses decreased to $63.4 million, from $85.3 million for the
same period last year. Selling, general and administrative expenses as a
percentage of revenues, increased to 22.8% in the third quarter of 2000 as
compared to 20.0% recorded in the third quarter of 1999, due primarily to the
expansion efforts of direct sales force personnel in the United States and the
expansion of our Canadian operations. Year to date, selling, general and
administrative expenses as a percent of revenues increased to 21.1% from 20.0%
during the same period last year.

Depreciation and amortization for our North American operations in the third
quarter and the first nine months of 2000 were $17.1 million and $40.5 million,
respectively. For the same periods last year, depreciation and amortization were
$11.1 million for the third quarter and $33.7 million for the first nine months.
The increase is primarily due to additional capital investment made over the
last year.

Loss from operations in North America increased from $9.9 million in the third
quarter of 1999 to $22.8 million in the third quarter of 2000. For the first
nine months of 2000, loss from operations in North America increased to $84.7
million, from $35.8 million last year. The increase is primarily due to the
asset impairment charge pertaining to the disposition of our Canadian
operations. Excluding the impairment charge, loss from operations for the first
nine months of 2000 was $47.4 million, a 32.2% increase from the $35.8 million
in the same period last year due to competitive pricing pressures and sales
force expansion in the United States as well as the Eastern Canadian expansion
efforts.


                                       20
<PAGE>

Asia/Pacific and Other Operations

<TABLE>
<CAPTION>
                                                       Three Months Ended           Nine Months Ended
                                                          September 30,                September 30,
                                                       2000           1999          2000           1999
                                                       ----           ----          ----           ----
                                                                          (unaudited)
                                                              (in thousands, except percentages)
<S>                                                 <C>            <C>            <C>            <C>
Revenue ........................................    $  56,301      $  47,727      $ 166,533      $ 130,658
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ...........       37,106         31,928        106,665         88,907
                                                    ---------      ---------      ---------      ---------
Gross margin ...................................       19,195         15,799         59,868         41,751
Selling, general and administrative expenses ...       22,049         18,310         65,051         48,878
Write-down for impairment of assets ............           --             --         10,885             --
Depreciation and amortization ..................        5,220          9,769         17,714         18,730
                                                    ---------      ---------      ---------      ---------
Loss from operations ...........................    $  (8,074)     $ (12,280)     $ (33,782)     $ (25,857)
                                                    =========      =========      =========      =========

Other Financial Data:
EBITDA (as defined) (1) ........................    $  (2,854)     $  (2,511)     $  (5,183)     $  (7,127)
Revenues as a percentage of consolidated revenue         14.7%          12.9%          14.5%          12.1%
Gross margin as a percentage of revenue ........         34.1%          33.1%          35.9%          32.0%
Selling, general and administrative expense as a
     percentage of revenue .....................         39.2%          38.4%          39.1%          37.4%
</TABLE>

----------

(1)   EBITDA, as used herein consists of loss from operations before
      depreciation and amortization. EBITDA has also been normalized to exclude
      non-cash compensation expense and the write-down for impairment of assets
      in Japan and Hong Kong. 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.

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 operations in Venezuela and Mexico, as
well as the operations in Japan and Hong Kong which were shut down in the third
quarter of 2000.

In July 2000, we announced our intention to sell or shut down our operations in
Japan and Hong Kong. In connection with this decision, we recorded a non-cash
asset write-down for the impairment of assets of $10.9 million to second quarter
2000 earnings. These assets are primarily property, plant and equipment and the
amount of the impairment was based upon fair market value, as determined by
current estimates of realizable value upon sale to third parties. Together,
these operations had annual revenues of $3.8 million in 1999 and had revenues
for the nine months ended September 30, 2000 of $0.1 million. There were no
revenues recorded in the third quarter of 2000.

In May 2000, we announced the launch of an initial public offering of our
Australian subsidiary, through which we intended to divest 100% of our interest
in this operation as part of the IPO. However, due to


                                       21
<PAGE>

weakness in the IPO market, we suspended this effort and we have engaged an
investment bank to seek a private buyer for our Australian operations.

Revenues from our Asia/Pacific and Other operations increased 18.0% to $56.3
million for the three months ended September 30, 2000 compared to $47.7 million
for the same period in 1999. Revenues for the nine months ended September 30,
2000 were $166.5 million, compared to $130.7 million for the same period in
1999, an increase of $35.9 million or 27.5%. The increase is primarily due to
customer growth in Australia, partially offset by competitive pricing pressures.

Revenues from our Asia/Pacific and Other operations as a percentage of
consolidated revenues increased to 14.7% in the third quarter of 2000 from 12.9%
the third quarter of 1999. For the first nine months, revenues from Asia/Pacific
and Other operations represented 14.5% of consolidated revenues compared to
12.1% during the same period last year. The increase is primarily as a result of
the growth in customers in Australia over the past year.

Cost of services in the third quarter of 2000 increased to $37.1 million from
$31.9 million recorded in the third quarter of 1999. For the nine months ended
September 30, 2000 cost of services increased to $106.7 million from $88.9
million recorded in the same period last year. These higher costs are primarily
a result of the higher revenues as well as additional costs resulting from
network congestion difficulties encountered earlier in the year. Cost of
services as a percentage of revenues in the third quarter decreased to 65.9%
from 66.9% for the same period in 1999. On a year to date basis, cost of
services as a percentage of revenues declined from 68.0% in 1999 to 64.1% this
year.

Selling, general and administrative expense in the third quarter of 2000
increased to $22.0 million as compared to $18.3 million in the third quarter of
1999 due primarily to higher customer acquisition costs. For the nine month
period ended September 30, 2000, selling, general and administrative expense
increased to $65.1 million compared to $48.9 million for the same period last
year. Selling, general and administrative expenses as a percent of revenues in
the third quarter 2000 increased to 39.2% from 38.4% in the third quarter 1999.
For the first nine months, selling, general and administrative expense as a
percentage of revenue increased from 37.4% in 1999 to 39.1% in 2000 due to high
customer acquisition costs in Australia.

Depreciation and amortization in the third quarter of 2000 decreased from $9.8
million in the third quarter last year, to $5.2 million this year. For the first
nine months of 2000, depreciation and amortization decreased from $18.7 million
in 1999 to $17.7 million in 2000 due to the absence of assets written off in
connection with the shut down of Japan and Hong Kong, partially offset by
capital expenditures in Australia.

The loss from the Asia/Pacific and Other operations for the third quarter of
2000 declined to $8.1 million from $12.3 million recorded in the third quarter
of 1999. For the first nine months of 2000, operating loss from Asia/Pacific and
Other operations increased to $33.8 million, compared to $25.9 million last
year. The increased operating losses are primarily due to the start-up costs
incurred in our Latin America operations and the asset impairment charge
recorded for our Japan and Hong Kong operations, partially offset by improved
results in Australia.


                                       22
<PAGE>

deltathree.com Operations (1)

<TABLE>
<CAPTION>
                                                      Three Months Ended          Nine Months Ended
                                                         September 30,               September 30,
                                                      2000          1999          2000          1999
                                                      ----          ----          ----          ----
                                                                        (unaudited)
                                                           (in thousands, except percentages)
<S>                                                 <C>           <C>           <C>           <C>
Revenue ........................................    $  5,566      $  1,348      $ 10,615      $  2,355
Operating costs and expenses:
Cost of services (exclusive of depreciation and
amortization shown separately below) ...........       3,975           963         6,498         1,734
                                                    --------      --------      --------      --------
Gross margin ...................................       1,591           385         4,117           621
Selling, general and administrative expenses ...       9,016           468        25,624         5,596
Non-cash compensation ..........................       1,374         2,286         5,530         2,286
Depreciation and amortization ..................       2,150         1,271         5,407         2,642
                                                    --------      --------      --------      --------

Loss from operations ...........................    $(10,949)     $ (3,640)     $(32,444)     $ (9,903)
                                                    ========      ========      ========      ========

Other Financial Data:
EBITDA (as defined) (2) ........................    $ (7,425)     $    (83)     $(21,507)     $ (4,975)
Revenues as a percentage of consolidated revenue         1.5%          0.4%          0.9%          0.2%
Gross margin as a percentage of revenue ........        28.6%         28.6%         38.8%         26.4%
Selling, general and administrative expense as a
  percentage of revenue ........................       162.0%         34.7%        241.4%        237.6%
</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 and because prior period results have been restated by
      deltathree.com for items that were not material to our results.

(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. 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 $1.3 million in the third
quarter of 1999 to $5.6 million in the third quarter of 2000, and from $2.4
million for the first nine months of 1999 to $10.6 million for the same period
this year. This increase is primarily as a result of integration service fees
received from deltathree.com's online partners as well as a greater number of
PC-to-phone and phone-to-phone calls being placed by an increasing user base.

Cost of services for deltathree.com increased from $1.0 million in the third
quarter and $1.7 million for the first nine months of 1999 to $4.0 million for
the third quarter and $6.5 million for the first nine months of 2000 primarily
as a result of higher revenues and the increased cost of terminating traffic.


                                       23
<PAGE>

Selling, general and administrative expenses increased from $0.5 million in the
third quarter of 1999 to $9.0 million in the third quarter of 2000 and from $5.6
million for the first nine months of 1999 to $25.6 million for the first nine
months of 2000, primarily due to the expansion of marketing, advertising and
promotional activities, and additional personnel and occupancy costs as
deltathree.com 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 nine months ended September 30, 2000
totaled $257.3 million compared with $123.8 million for the same period in 1999
reflecting the use of cash to fund operating losses, working capital
requirements, and higher quarterly cash interest payments. Capital expenditures,
which include assets acquired under capital lease obligations, for the nine
months ended September 30, 2000 were $202.0 million compared with $172.1 million
for the comparable period in 1999. Cash used for the purchase of property and
equipment for the first nine months of 2000 was $141.5 million, compared to
$159.7 million for the same period last year. The decline is attributable to the
implementation of certain cash conservation measures in the third quarter of
2000. 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 our Spanish operations. Cash expended for acquisitions were
approximately $81.8 million during the nine months ended September 30, 2000
compared with $38.2 million for the first nine months of 1999. At September 30,
2000, we had $51.2 million of working capital as compared to $163.7 million of
working capital at December 31, 1999. We are continuing to stringently review
and control our ongoing cash expenditures including for acquisitions and capital
expenditures and expect to continue to reduce our expenditures through the end
of 2000 from historical levels.

Our indebtedness was approximately $1.5 billion at September 30, 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 us 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"). The Notes were issued under indentures containing certain restrictive
covenants which impose limitations on our 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.

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 in either cash or Class A common shares. We have made the first two
distributions in Class A common shares in August and November 2000. Beginning in
February 2005, we will have the right to redeem some or all of the Preferred
Shares at a predetermined


                                       24
<PAGE>

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.

In May 2000, RSL COM Deutschland GmbH ("RSL Germany"), our German subsidiary,
entered into a joint venture agreement and an option agreement with Seat Pagine
Gialle Spa. ("SEAT"), a leading publisher of telephony directories in Italy.
Under the agreements, RSL Germany sold a portion of its equity interest in
Telegate Holding, the holding company for our shares owned in Telegate AG
("Telegate"), representing 101,813 shares of Telegate, for 150 Euros per share,
and received gross proceeds of approximately 15.3 million Euros in October 2000.
In addition, under the option agreement, RSL Germany has the right, beginning in
January 2001, to sell to SEAT all of its remaining equity interest in Telegate
Holding. The amount of consideration RSL Germany will receive following exercise
of the put option, will be determined based on the average value of a share of
Telegate, as reported on the Frankfurt Neuer Market, during the month of January
2001; provided, however, that SEAT will be required to pay a minimum of
approximately 400 million Euros and a maximum of approximately 510 million Euros
for our remaining ownership interest in Telegate Holding. Under the option
agreement, SEAT has the option to pay for our remaining Telegate Holding
interest in either cash or shares of SEAT; provided, however, that if in shares,
SEAT will have no more than 105 days following the exercise of the put option to
issue the shares, and RSL Germany has arranged with SEAT a method of
monetization of such shares so that RSL Germany will ultimately receive cash
proceeds. We are discussing with financial institutions methods of accelerating
the monetization of the option agreement so that RSL Germany may receive a
substantial portion of the gross cash proceeds of the transaction in January
2001.

In July 2000, we signed an agreement with our Chairman and principal
shareholder, Ronald S. Lauder, for an unsecured loan facility totaling $100
million, available until June 30, 2001. All loans under the facility are due and
payable on or before June 30, 2001 or earlier upon the monetization of telegate
AG or other asset sales. We will pay LIBOR plus 4.5% on any amounts drawn under
the facility and will issue to Mr. Lauder warrants to purchase 75,000 Class A
common shares at $11.50 per share for each $5 million drawn under the facility.
As of September 30, 2000, we have drawn $25 million under this facility and have
issued 375,000 warrants to Mr. Lauder. The value assigned to the warrants was
estimated at approximately $1 million and was recorded as additional paid in
capital. As of November 13, 2000 we have drawn $55 million under our facility
with Ronald S. Lauder and have issued 825,000 warrants to him.

Cash and cash equivalents on hand as of September 30, 2000 was $98.6 million.
Excluding amounts recorded by deltathree.com and Telegate, which are not
generally available for funding our core operations, our net cash balance was
$50.1 million.

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. Given the current market environment, we believe that we


                                       25
<PAGE>

will be unable to complete any public equity financing in the short term. We
believe that our remaining net cash balance, together with availability under
our short-term line of credit, overdraft facilities from local banks, and other
cash resources, will be sufficient to fund our operations into early 2001.

If additional funds are not immediately available to us in 2001, RSL Germany
expects to exercise the put option under the agreement between RSL Germany and
SEAT, and sell its remaining interest in Telegate Holding. However, even upon
exercise of the put option, it may take several months for RSL Germany to
receive cash proceeds from the transaction. We are discussing with financial
institutions methods of accelerating the monetization of the option agreement so
that RSL Germany may receive a substantial portion of the gross cash proceeds of
the transaction in January 2001. We are also attempting to sell certain of our
non-core assets, including our operations in Canada, Japan and Australia.

We believe that any proceeds received from these potential sales, in addition to
proceeds received from the potential early monetization of Telegate Holding will
be sufficient to fund our capital expenditures, operations and other obligations
through mid-2001. However, there can be no assurance that any of these potential
sales or the early monetization will occur. 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. There can be no assurance that we will be able to raise any
such additional capital when needed.

In order to reduce interest costs and improve our financial condition, we may
also refinance or retire long-term debt on an opportunistic basis, including
through open market repurchases. Any repurchase will depend on market conditions
and other considerations, such as our cash availability, cash requirements and
the availability of replacement debt or equity financing on acceptable terms.

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 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. We have not
participated in any hedging activities in connection with foreign currency
exposure. We will adopt SFAS No. 133 in the first quarter of 2001. We do not
expect this to have a material effect on our results of operations or financial
position.

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.


                                       26
<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 $19.1 million as a component of
equity as of September 30, 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
September 30, 2000, we had recorded a foreign currency gain of approximately
$7.2 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. On
September 30, 2000, the fair value of our long-term debt (excluding capital
lease obligations) which had a net book value of $1.4 billion was estimated to
be $234 million. Market risk is estimated as the potential decrease in fair
value of our long-term debt resulting from a hypothetical increase of 107 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 $ 27.4
million decrease in fair value of our long-term debt.


                                       27
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Change in Securities and Use of Proceeds

In August 2000, we issued to Reed Smith Shaw & McClay LLP 150,000 Class A common
shares as payment for professional services rendered to us. The issuance of such
Class A common shares was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof.

In August 2000, we issued to Ronald S. Lauder warrants to purchase 375,000 Class
A common shares at an exercise price of $11.50 per share. The warrants were
issued under the terms of the $100 million loan facility provided by Mr. Lauder
to us in connection with our initial drawdown of $25 million. The warrants are
exercisable until the seventh anniversary of the date of issuance. The issuance
of such warrants was exempt from registration under the Securities Act pursuant
to Section 4(2) thereof.

Item 2. Other Information

Nasdaq

We have been notified by the Nasdaq Stock Market that, based on the current
trading price of our Class A common shares, we do not meet the standards for
continued listing on the Nasdaq National Market. We have a period of time during
which we must either regain compliance or file an appeal with the Nasdaq. We
intend to monitor our compliance with the Nasdaq listing requirements as we
approach the December 27, 2000 deadline set by the Nasdaq and will evaluate all
of our options as this date draws closer.

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 our control, including, but not limited to 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.), the integration of acquisitions and new operations,
substantial capital requirements, pricing pressures, the availability of
transmission facilities, reliance on sophisticated information systems,
devaluation and currency risks, general economic conditions in the markets in
which we operate, as well as other risks referenced from time to time in our
filings with the Securities and Exchange Commission and, accordingly, there can
be no assurance with regard to such statements.


                                       28
<PAGE>

Item 3. 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)).
10.1  Employment Agreement, dated as of August 1, 2000, by and between Paul B.
      Domorski and RSL Communications, Ltd. (filed herewith).
10.2  Senior Standby Loan and Warrant Agreement by and among RSL Communications
      PLC, RSL Communications, Ltd., RSL COM U.S.A., Inc. and Ronald S. Lauder
      (filed herewith)
10.3  Form of Warrant under the Senior Standby Loan and Warrant Agreement (filed
      herewith)
10.4  Joint Venture Agreement dated May 6, 2000, by and between Seat Pagine
      Gialle SpA and RSL COM Deutschland GmbH (filed herewith)
10.5  Amendment Agreement to the Joint Venture Agreement, dated May 10, 2000 by
      and among Seat Pagine Gialle SpA, RSL COM Deutschland GmbH and J.P. Morgan
      Securities Ltd. (filed herewith)
10.6  Option Agreement dated May 6, 2000, by and between Seat Pagine Gialle SpA
      and RSL COM Deutschland GmbH (filed herewith)
10.7  Agreement regarding certain clarifications dated May 10, 2000 by and among
      Seat Pagine Gialle SpA, RSL COM Deutschland GmbH, Ligapart AG, Morgan
      Stanley Bank AG and J.P. Morgan Securities Ltd. (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 July 17, 2000, reporting that we had
issued a press release regarding our plans to dispose of our operations in Hong
Kong, Japan and Canada. The press release was filed as an exhibit to the Form
8-K.

We filed a Form 8-K with the SEC dated July 20, 2000, reporting that we had
issued a press release regarding a $100 million line of credit we had obtained
from Ronald S. Lauder, our Chairman and principal shareholder. The press release
was filed as an exhibit to the Form 8-K.

We filed a Form 8-K with the SEC dated August 3, 2000, reporting that we had
issued press releases regarding (i) our second quarter financial results and
(ii) changes in senior management. The press releases were filed as exhibits to
the Form 8-K.


                                       29
<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: November 14, 2000                 By /S/ Joel S. Beckoff
                                          --------------------------------------
                                          Name:  Joel S. Beckoff
                                          Title: Vice President - Controller
                                                 and Chief Accounting Officer


                                       30
<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)).
10.1  Employment Agreement, dated as of August 1, 2000, by and between Paul B.
      Domorski and RSL Communications, Ltd. (filed herewith).
10.2  Senior Standby Loan and Warrant Agreement by and among RSL Communications
      PLC, RSL Communications, Ltd., RSL COM U.S.A., Inc. and Ronald S. Lauder
      (filed herewith)
10.3  Form of Warrant under the Senior Standby Loan and Warrant Agreement (filed
      herewith)
10.4  Joint Venture Agreement dated May 6, 2000, by and between Seat Pagine
      Gialle SpA and RSL COM Deutschland GmbH (filed herewith)
10.5  Amendment Agreement to the Joint Venture Agreement, dated May 10, 2000 by
      and among Seat Pagine Gialle SpA, RSL COM Deutschland GmbH and J.P. Morgan
      Securities Ltd. (filed herewith)
10.6  Option Agreement dated May 6, 2000, by and between Seat Pagine Gialle SpA
      and RSL COM Deutschland GmbH (filed herewith)
10.7  Agreement regarding certain clarifications dated May 10, 2000 by and among
      Seat Pagine Gialle SpA, RSL COM Deutschland GmbH, Ligapart AG, Morgan
      Stanley Bank AG and J.P. Morgan Securities Ltd. (filed herewith)
27.1  Financial Data Schedule (filed herewith).


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