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

                                   FORM 10-Q/A

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

For the quarterly period ended September 30, 1998
                               ------------------

                         Commission file number 0-23139

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X| No |_|

As at October 31, 1998, the registrant had 18,024,569 of the Class A common
stock, par value $0.00457 per share, and 26,724,795 of the Class B common stock,
par value $0.00457 per share, outstanding.
<PAGE>

This Quarterly Report on Form 10-Q reflects certain amendments made by the
Registrant restating its condensed consolidated financial statements for the
period presented herein as described in Note 9 to the Registrant's condensed
consolidated financial statements. The restatement relates to the Company's
change in the method of accounting for its investment in unconsolidated
subsidiaries from the cost method of accounting to the equity method of
accounting and a change in the Company's estimate regarding the life of a
customer base acquired from 15 years to 5 years.

Unless otherwise noted, all information provided in this Quarterly Report on
Form 10-Q is current as of November 10, 1998, the original filing date of the
Form 10-Q.
<PAGE>

                            RSL COMMUNICATIONS, LTD.

                          Table of Contents (Restated)

                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

    Item 1.  Financial Statements (Restated)

     Condensed Consolidated Balance Sheets as of
        September 30, 1998 (Unaudited) and December 31, 1997..................1

     Condensed Consolidated Statements of Operations for the
        Three and Nine Month Periods Ended September 30, 1998
        (Unaudited) And 1997 (Unaudited)......................................2

     Condensed Consolidated Statements of Cash Flows for the Nine Month
        Periods Ended September 30, 1998 (Unaudited) and 1997 (Unaudited).....3

     Notes to Condensed Consolidated Financial Statements..................4-11

    Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations ...................................12-24

PART II - OTHER INFORMATION

    Item 1.  Legal Proceedings...............................................25

    Item 2.  Change in Securities and Use of Proceeds........................25

    Item 5.  Other Information...............................................25

    Item 6.  Exhibits and Reports on Form 8-K................................26

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

Exhibit Index................................................................28
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements.

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

                                                      As of           As of
                                                   September 30,   December 31,
                                                       1998            1997
                                                       ----            ----
                                                   (As restated;   
                                                    see Note 9)   
                                                    (unaudited)   
Assets                                                             
                                                                   
Cash and Cash Equivalents                          $    82,196     $   144,894
Accounts Receivable, Net                               185,744          70,610
Available for Sale Securities                               --          13,858
Prepaid Expenses and Other Current Assets               85,379          16,073
                                                   -----------     -----------
Total Current Assets                                   353,319         245,435
                                                   -----------     -----------
Marketable Securities - Held to Maturity                30,579          68,836
Property and Equipment                                 227,526          85,581
Less: Accumulated Depreciation                         (32,069)        (13,804)
Investment in Unconsolidated Subsidiaries               35,458              --
Goodwill and Other Intangibles, Net                    516,856         214,983
Deposits and Other Assets                               35,380           4,633
                                                   -----------     -----------
                                                                   
     Total Assets                                  $ 1,167,049     $   605,664
                                                   ===========     ===========
Liabilities and Shareholders' Equity                               

Accounts Payable and Other Liabilities             $   364,260     $   154,324
Short-term Debt                                         17,700           8,033
                                                   -----------     -----------
Total Current Liabilities                              381,960         162,357
                                                   -----------     -----------
Long-term Debt                                          21,197          20,108
Senior Notes and Senior Discount Notes, Net            697,570         296,500
Other Liabilities - Noncurrent                          48,303              --
                                                   -----------     -----------
Total Liabilities                                    1,149,030         478,965
                                                   -----------     -----------
Other Shareholders' Capital                            322,209         274,638
Accumulated Deficit                                   (304,190)       (147,939)
                                                   -----------     -----------
Total Shareholders' Equity                              18,019         126,699
                                                   -----------     -----------
     Total Liabilities and Shareholders' Equity    $ 1,167,049     $   605,664
                                                   ===========     ===========

            See notes to condensed consolidated financial statements.


                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                        Three Months Ended      Nine Months Ended
                                                            September 30,          September 30,
                                                          1998        1997       1998         1997
                                                          ----        ----       ----         ----
                                                          (As                     (As    
                                                        restated;              restated; 
                                                       see Note 9)            see Note 9)
                                                         ----                    ----
<S>                                                    <C>         <C>         <C>         <C>      
Revenues ............................................  $ 265,916   $  83,243   $ 564,118   $ 192,604
Operating Costs and Expenses:
     Cost of Services (exclusive of depreciation
     and amortization shown separately below) .......   (210,316)    (74,406)   (462,181)   (171,203)
     Selling, General and Administrative Expenses ...    (67,677)    (23,871)   (147,494)    (62,085)
     Depreciation and Amortization ..................    (22,158)     (5,407)    (43,282)    (14,367)
                                                       ---------   ---------   ---------   ---------
                                                        (300,151)   (103,684)   (652,957)   (247,655)
                                                       ---------   ---------   ---------   ---------
Loss From Operations ................................    (34,235)    (20,441)    (88,839)    (55,051)
Interest Income .....................................      2,405       2,823      13,239       9,947

Interest Expense ....................................    (18,316)     (9,657)    (51,646)    (28,910)

Other Income (Expense)-Net ..........................        241         (35)        445       6,572
Foreign Exchange Loss ...............................     (8,913)         --     (10,621)         --

Minority Interest ...................................      1,594          16       4,322        (212)
Income Taxes ........................................        (92)        (48)       (726)       (405)
Loss in equity interest of unconsolidated
  subsidiaries ......................................     (1,625)         --      (1,625)         --
                                                       ---------   ---------   ---------   ---------
Loss Before Extraordinary Item ......................    (58,941)    (27,342)   (135,451)    (68,059)
Extraordinary Item ..................................         --          --     (20,800)         --
                                                       ---------   ---------   ---------   ---------
Net Loss After Extraordinary Item ...................  $ (58,941)  $ (27,342)  $(156,251)  $ (68,059)
                                                       =========   =========   =========   =========
Basic and Diluted Loss Per Share of
  Common Stock Before Extraordinary Item ............  $   (1.34)  $   (0.85)  $   (3.17)  $   (2.16)
Basic and Diluted Loss Per Share of
  Common Stock From Extraordinary Item ..............  $      --   $      --   $   (0.49)  $      --
Basic and Diluted Loss Per Share of
  Common Stock After Extraordinary Item .............  $   (1.34)  $   (0.85)  $   (3.66)  $   (2.16)
</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,
                                                             -------------------------------
                                                                   1998           1997
                                                                   ----           ----
                                                               (As restated; 
                                                                see Note 9)  
<S>                                                             <C>            <C>        
Net loss ...................................................    $ (156,251)    $  (68,059)
Depreciation and amortization ..............................        43,279         14,367
Working capital change and other ...........................        (3,395)        (6,751)
                                                                ----------     ----------
     Net cash used in operations ...........................      (116,367)       (60,443)
                                                                ----------     ----------

Acquisitions of subsidiaries ...............................      (271,162)       (26,828)
Purchase of property and equipment .........................       (99,882)       (14,267)
Proceeds from sales of marketable securities ...............        13,858         43,735
Proceeds from maturities of restricted securities ..........        18,750         22,665
Proceeds from sales of restricted securities ...............        21,889             --
Other ......................................................         3,775             --
                                                                ----------     ----------
     Net cash (used in) provided by investing activities ...      (312,772)        25,305
                                                                ----------     ----------

Proceeds from issuance of 1998 Notes .......................       499,090             --
Payment of offering cost ...................................        (5,647)            --
Retirement of 1996 Notes ...................................      (127,493)            --
Proceeds from notes payable ................................         3,189             --
Payment of notes payable ...................................            --        (13,542)
Proceeds from issuance of Class A shares ...................           538             --
Other ......................................................        (2,666)        (1,434)
                                                                ----------     ----------
     Net cash provided by (used in) financing activities ...       367,011        (14,976)
                                                                ----------     ----------

Decrease in cash and cash equivalents ......................       (62,128)       (50,114)
Effects of foreign currency on cash and cash equivalents ...          (570)        (1,248)
Cash and cash equivalents at beginning of period ...........       144,894        104,068
                                                                ----------     ----------

Cash and cash equivalents at end of period .................    $   82,196     $   52,706
                                                                ==========     ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest .....................................    $   22,561     $   23,185
                                                                ==========     ==========

SUPPLEMENTAL SCHEDULE OF NON-
CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of Class A Common Stock ...........................    $    8,712     $   32,582
                                                                ==========     ==========
Assets acquired under capital lease obligations ............    $    4,986     $   12,568
                                                                ==========     ==========
Acquisition of distribution rights .........................    $   45,000     $       --
                                                                ==========     ==========
</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, 1998

1. BASIS OF PRESENTATION

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

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

On February 27, 1998, RSL PLC completed concurrent offerings (the "1998 U.S.
Offerings") of $200.0 million principal amount of 9 1/8% Senior Notes due 2008
and $328.1 million principal amount at maturity ($200.0 million initial accreted
value) of 10 1/8% Senior Discount Notes due 2008 (together, the "1998 U.S.
Notes"). The 1998 U.S. Offerings generated gross proceeds to the Company of
$400.0 million. On March 16, 1998, RSL PLC completed an offering (the "1998 DM
Offering," and together with the 1998 U.S. Offerings, the "Offerings") of 182.0
million Deutsche Mark denominated 10% Senior Discount Notes due 2008 (the "1998
DM Notes," and together with the 1998 U.S. Notes, the "1998 Notes"). The 1998 DM
Offering generated proceeds to the Company of $99.1 million. The 1998 Notes and
the 12 1/4% Senior Notes due 2006 (the "1996 Notes") of RSL PLC are collectively
referred to herein as the "Notes". The Notes are fully and unconditionally
guaranteed as to payment of principal, interest and any other amounts thereof by
RSL.

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

In April 1998, the Company used approximately $101.0 million of the net proceeds
from its initial public offering of shares of Class A Common Stock (the "Initial
Public Offering") in 1997 to redeem (the "Equity Clawback") $90.0 million of the
1996 Notes at a premium of $11.0 million, as permitted under the 1996 Indenture.
In April 1998, the Company used approximately $43.1 million to redeem (the
"Buyback") $37.5 million of the 1996 Notes at a premium of $5.6 million, as
permitted under the 1996 Indenture. The 


                                       4
<PAGE>

redemption premiums, and part of the discount and offering cost, were expensed
in the amount of $20.8 million in the second quarter of 1998 as an extraordinary
item.

3. REGISTRATION OF SHARES

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

In August 1998, the Company filed a registration statement for a public offering
by the Company and certain of its shareholders of shares of Class A Common Stock
(the "Pending Registration").

4. EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, it has no impact on the
Company's net income. Comprehensive income includes both net income and other
comprehensive income. Other comprehensive loss for the nine months ended
September 30, 1998 and September 30, 1997 of $6.7 million and $1.2 million,
respectively, represented foreign currency translation adjustment. Accumulated
other comprehensive loss included in the accompanying condensed consolidated
balance sheet as of September 30, 1998 and September 30, 1997 was $12.0 million
and $1.8 million, respectively, consisting of the accumulated foreign currency
translation adjustment.

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. The
Company does not have any derivative instruments.


                                       5
<PAGE>

5. NET LOSS PER SHARE

Net loss per share is computed on the basis of the weighted average number of
common shares outstanding during the period. The average number of shares
outstanding for the three and nine month periods ended September 30, 1997 have
been presented retroactively to give effect to the Company's recapitalization in
September 1997.

                                      Three Months Ended       Nine Months Ended
                                         September 30,           September 30,
                                       1998        1997        1998        1997
                                       ----        ----        ----        ----
                                                     (in thousands)

Weighted average number of shares 
  of common stock outstanding......   44,124      32,230      42,740      31,541

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

6. ACQUISITIONS

In January 1998, RSL Finland purchased 90% of the equity of Telecenter Oy, an
independent sales agent in Finland, for approximately $30.5 million.

In March 1998, RSL COM Australia Pty. Ltd., a subsidiary of the Company,
acquired the customer base of First Direct Communications Pty, Limited and Link
Telecommunications Pty. Ltd., two switchless mobile telecommunications
resellers, for approximately $18 million.

In April 1998, the Company entered into an agreement with CBS Corporation
("CBS") pursuant to which the Company agreed to acquire the business of
Westinghouse Communications ("WestComm"), a division of CBS, for a cash purchase
price of approximately $90.0 million (the "WestComm Acquisition") plus the
assumption of certain liabilities amounting to less than $5.0 million. WestComm
provides both voice telephony and data services (including frame relay and
TCP/IP networks) to a customer base consisting primarily of small to medium size
businesses in the United States. WestComm operates six switches strategically
located in the United States and employs approximately 280 people. The
transaction closed in July 1998.

In May 1998, RSL Sweden purchased 100% of the equity of Tele 2001, a Swedish
Telecommunications reseller, for approximately $1.0 million.

In May 1998, the Company acquired for approximately $33.6 milion a 49.86%
ownership interest in Telegate Holding GmbH ("Telegate Holding"), which holds a
54.55% ownership interest in Telegate AG ("Telegate"), resulting in a 27.19%
economic interest in Telegate. Telegate is a directory information provider in
Germany. The Company is accounting for the investment using the equity method of
accounting. The investment is included in investment in unconsolidated
subsidiaries and has been adjusted for the Company's pro-rata allocable loss.


                                       6
<PAGE>

In connection with this transaction, the Company granted to Metro Holding, a
minority shareholder of Telegate Holding, the right (the "Telegate Put Option")
to exchange its shares in Telegate Holding, representing 25% on a fully diluted
basis of the shares of Telegate, for Class A Common Stock of the Company. The
Telegate Put Option is only exercisable if Telegate has a positive EBITDA (as
defined) for a three month period ending on or before May 31, 1999 and if any
class of securities of Telegate is not, at such time, publicly traded. If the
Telegate Put Option is exercised, at such time, the equity values of Telegate
Holding and the Company would be determined. The exercise of the Telegate Put
Option will require the Company to begin accounting for Telegate as a majority
controlled consolidated subsidiary. The Company will also be required, at such
time, to commence a fair value study to determine the allocation of its purchase
price for the additional Telegate Holding shares, between the proportionate net
assets acquired and liabilities assumed. Currently, there has been no accounting
treatment applied to the Telegate Put Option.

In June 1998, the Company entered into agreement with British Colombia Railway
Company pursuant to which the Company agreed to acquire (the "Westel
Acquisition") 100% of Westel Telecommunications Ltd. ("Westel") for a cash
purchase price of approximately $36.7 million. Westel offers a broad range of
enhanced telecommunications services (including long distance, data, private
line and Internet access) to a customer base consisting primarily of commercial
and residential customers located in British Colombia. The Westel Acquisition
closed on July 31, 1998. The Company has accounted for the Westel Acquisition
under the purchase method of accounting.

In connection with the Westel Acquisition and in compliance with the Canadian
Telecommunications Act (the "Telecom Act"), the Company agreed to transfer (the
"MK Network Transfer") Westel's "telecommunications facilities" (as defined in
the Telecom Act) to MK Telecom Network Inc. ("MK Network"), an entity in which
the Company owns a 46.7% beneficial interest, for a purchase price of
approximately $6.5 million, the Company's historical cost basis of the assets
transferred to MK Network (such assets were purchased in the Westel
acquisition). The MK Network transfer was effective as of July 31, 1998. The
Company recorded its investment in MK Network as an equity investment which was
completed through a transfer of assets, which was recorded at the Company's
historical cost basis (which also approximates net realizable value). The assets
transferred consist of telecommunications microwave facilities. Westel and MK
Network are not related parties.

In June 1998, the Company entered into a marketing and distribution services
agreement with Metro Holding AG ("Metro Holding"), the management holding
company for Metro AG, one of the largest retailers in Europe. Under this
agreement, Metro Holding will assist the Company in promoting, marketing,
selling and distributing the Company's services through Metro AG's wholesale and
retail operations in Europe. This arrangement is designed to provide the Company
access to Metro AG's extensive distribution network and customer base (which
includes a large number of small and medium-sized businesses) and is expected to
significantly accelerate the Company's penetration into key European markets. In
connection with its alliance with the Company, Metro Holding initially acquired
in April 1998 a 12.5% equity interest in RSL Europe. In June 1998, Metro holding
converted all of its interest in RSL Europe into 1,607,142 shares of Class A
Common Stock (based on value for value) and purchased an equal number of Class A
Common Stock from certain shareholders of the Company. In the aggregate, Metro
Holding acquired approximately 7.2% of the outstanding stock of the Company,
which it is required to hold until at least April 1, 2001. The Company has
recorded in the financial statements the issuance of such equity at fair market
value, $45 million, based on the quoted market value of the Company's stock at
the time of the transaction, and has recorded the distribution rights as an
asset in a like amount which is being amortized over the five-year life of the
agreement.


                                       7
<PAGE>

In July 1998, RSL Italy acquired 75% of the equity of Comesa, a
telecommunications company located in Northern Italy, for approximately $1.0
million.

In July 1998, RSL COM France purchased 100% of the equity of Geovox SARL, a
prepaid calling card company operating in Paris, France for approximately $6.5
million.

In July 1998, RSL Austria acquired 100% of the equity of TC Telecom GmbH, a
telecommunications reseller located in Austria, for approximately $1.1 million.

In August 1998, the Company acquired the business of Motorola Tel.co, in the
United Kingdom, Germany and Belgium from Motorola, Inc. ("Motorola") for
approximately $68.1 million. Motorola Tel.co resells wireless services and
related products in these countries to a base of approximately 360,000
subscribers. This transaction significantly increases the number of direct
customer relationships in Europe and will allow the Company to cross sell long
distance and wireless services.

All of the above acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired based on their estimated fair value at the date of acquisition and is
being amortized using the straight-line method over fifteen years.

The valuation of the above acquired assets and liabilities, is final at
September 30, 1998, including goodwill.

7. SUMMARIZED FINANCIAL INFORMATION FOR RSL PLC

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

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

Current Assets ...........................           $302,699        $212,568

Non-current Assets .......................            737,064         324,118

Current Liabilities ......................            349,782         122,672

Non-current Liabilities ..................            938,967         557,448


                                       8
<PAGE>

                                               Nine Months         Nine Months
                                                  ended                ended
                                               September 30,       September 30,
                                                   1998                1997
                                                   ----                ----
                                                        (in thousands)

Net Revenue ........................            $ 473,482           $ 178,711

Net Loss ...........................             (138,506)            (58,243)

8. SUBSEQUENT EVENTS

In October 1998, the Company obtained from a group of its officers and directors
and affiliates thereof (the "New Lenders") commitments for up to $35 million of
revolving credit (the "New Credit Facility"), subject to the negotiation and
execution of final documentation. The New Lenders have committed to provide
senior unsecured financing which will rank pari passu in right of payment to the
Company's 1996 Notes and 1998 Notes. Amounts borrowed under the New Credit
Facility will accrue interest at LIBOR plus 5% per annum. RSL PLC will be the
borrower and RSL will guaranty any obligations of RSL PLC under the New Credit
Facility. The commitments of the New Lenders under the New Credit Facility will
expire on the earlier of January 15, 2000 and the date of any change of control
of RSL.

In October 1998 and November 1998, the Company filed amendments No. 1 and No. 2,
respectively, to the registration statement for the Pending Registration.

In November 1998, RSL PLC agreed to issue (the "New Offering") $100 million
aggregate principal amount at maturity of 12% Senior Notes due 2008 (the "New
Notes"). The New Notes will generate proceeds to the Company of approximately
$90.5 million. The New Notes are fully and unconditionally guaranteed as to
payment of principal, interest and any other amounts thereof by RSL.


                                       9
<PAGE>

9. RESTATEMENT

Subsequent to the issuance of the Company's 1998 Form 10-Q for the quarterly
period ended September 30, 1998, the Company determined that it should change
from the cost to the equity method of accounting for its investment in its
unconsolidated subsidiaries Maxitel and Telegate. Additionally, the Company
determined that its estimated life of the customer base acquired from First
Direct did not accurately reflect the assumed customer life. As a result, the
Condensed Consolidated Balance Sheet as of September 30, 1998, the Condensed
Consolidated Statements of Operations for the three and nine month periods ended
September 30, 1998, and the Condensed Consolidated Statements of Cash Flows for
the nine month period ended September 30, 1998 have been restated from the
amounts previously reported to reflect the change in the Company's accounting
for its investment in unconsolidated subsidiaries under the equity method and
the change in the estimated useful life of the customer base from 15 years to 5
years. The Company has also reclassified to other current assets the current
portion of its distribution agreement which had been previously included in
Goodwill and other Intangibles - Net.

A summary of the significant effects of the restatement is as follows:

Statements of Operations
For the Periods Ended September 30:

<TABLE>
<CAPTION>
                                                                     Three Months             Nine Months
                                                                     ------------             -----------
                                                                  As                       As
                                                              previously                previously        As
                                                               reported    As restated   reported     restated
                                                               --------    -----------   --------     --------
                                                                 (in thousands, except for loss per share)
<S>                                                           <C>          <C>          <C>          <C>       
Depreciation and Amortization .............................   $ (21,058)   $ (22,158)   $ (42,182)   $ (43,282)
Loss From Operations ......................................     (33,135)     (34,235)     (87,739)     (88,839)
Loss in Equity Interest of Unconsolidated Subsidiaries ....        --         (1,625)        --         (1,625)
Loss Before Extraordinary Item ............................     (56,216)     (58,941)    (132,726)    (135,451)
Net Loss After Extraordinary Item .........................     (56,216)     (58,941)    (153,526)    (156,251)
Loss Per Share of Common Stock Before
   Extraordinary Item .....................................       (1.27)       (1.34)       (3.11)       (3.17)
Loss Per Share of Common Stock After
   Extraordinary Item .....................................       (1.27)       (1.34)       (3.59)       (3.66)
</TABLE>

Balance Sheet
At September 30, 1998
                                                        As
                                                     previously           As
                                                      reported         restated
                                                      --------         --------
                                                           (in thousands)
                                                                         
Available for Sale Securities ..................     $   33,661      $     --
Prepaid Expenses and Other Current Assets ......         76,379          85,379
Total Current Assets ...........................        377,980         353,319
Investment in Unconsolidated Subsidiaries ......           --            35,458
Goodwill and Other Intangibles, Net ............        526,956         516,856
Deposits and Other Assets ......................         38,802          35,380
Total Assets ...................................      1,169,774       1,167,049
Accumulated Deficit ............................       (301,465)       (304,190)
Total Shareholders' Equity .....................         20,744          18,019
Total Liabilities and Shareholders' Equity .....      1,169,774       1,167,049


                                       10
<PAGE>

Summarized Financial Information for RSL PLC
For the Period Ended September 30, 1998                              
                                                         As
                                                      previously          As
                                                       reported        restated
                                                       --------        --------

Net Loss .......................................       (135,781)       (138,506)

At September 30, 1998
                                                         As
                                                      previously          As
                                                       reported        restated
                                                       --------        --------

Current Assets .................................        336,360         302,699
Non-current Assets .............................        706,128         737,064


                                       11
<PAGE>

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

Overview

The Company is a rapidly growing multinational telecommunications company which
provides a broad array of services, with a focus on international long distance
voice services to small and medium-sized businesses in key markets. The
Company's services include international and national fixed and wireless,
calling card, fax, data, Internet, private line and other value-added
telecommunications services. The Company currently has revenue generating
operations in Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Italy, Japan, Luxembourg, the Netherlands, Portugal, Spain, Sweden,
Switzerland, the United Kingdom, the United States and Venezuela. In 1997,
approximately 70% of all international long distance telecommunications minutes
originated in these markets. The Company is also in the process of commencing
start-up operations through its investments in an entity in Mexico. The Company
plans to expand its operations and network into additional key markets which
account for a significant portion of the world's remaining international
traffic. The Company also provides Internet telephony services through its
wholly-owned subsidiary, Delta Three, Inc. and its network of Internet gateway
servers located within key metropolitan areas in target countries.

Subsequent to the issuance of the Company's 1998 Form 10-Q for the quarterly
period ended September 30, 1998, the Company determined that it should change
from the cost to the equity method of accounting for its investment in its
unconsolidated subsidiaries Maxitel and Telegate. Additionally, the Company
determined that its estimated life of the customer base acquired from First
Direct did not accurately reflect the assumed customer life. As a result, the
Condensed Consolidated Balance Sheet as of September 30, 1988, and the Condensed
Consolidated Statements of Operations and Cash Flows for the three and nine
month periods ended September 30, 1998, have been restated from the amounts
previously reported to reflect the change in the Company's accounting for its
investment in unconsolidated subsidiaries under the equity method and the change
in the estimated useful life of the customer base from 15 years to 5 years. The
Company has also reclassified to other current assets the current portion of its
distribution agreement which had been previously included in Goodwill and Other
Intangibles - Net.

Revenues

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


                                       12
<PAGE>

North American Operations

<TABLE>
<CAPTION>
                                                                Three Months Ended            Nine Months Ended        
                                                                   September 30,                September 30,          
                                                                 1998         1997            1998         1997        
                                                                 ----         ----            ----         ----        
                                                                                   (unaudited)
                                                           (in thousands, except percentage of consolidated revenues)
<S>                                                           <C>          <C>             <C>          <C>            
Revenues ..................................................   $ 145,730    $  57,602       $ 305,673    $ 127,491      
Percentage of consolidated revenues .......................        54.8%        69.2%           54.2%        66.2%     
Operating costs and expenses:                                                                                          
   Cost of services (exclusive of depreciation                                                                         
       and amortization shown separately below) ...........     116,972       53,738         253,200      117,666      
   Selling, general and administrative expenses ...........      27,113        8,929          53,348       20,478      
   Depreciation and amortization ..........................       4,106        1,428           8,014        4,009      
                                                              ---------    ---------       ---------    ---------      
                                                                148,191       64,095         314,562      142,153      
                                                              ---------    ---------       ---------    ---------      
Loss from operations ......................................   $  (2,461)   $  (6,493)      $  (8,889)   $ (14,662)     
                                                              =========    =========       =========    =========      
</TABLE>

Prior to 1997, the Company's revenues had been substantially derived from its
operations within the United States. The Company's U.S. revenues result
primarily from the sale of long distance voice services on a wholesale basis to
other carriers, on a retail basis to commercial customers and on a bulk discount
basis to distributors of prepaid calling cards. The Company experiences
significant month to month changes in revenues generated by its carrier
customers (i.e. customers who acquire the Company's services for the purpose of
reselling such services on a wholesale basis to other carriers or on a retail
basis to end users). The Company believes such carrier customers will react to
temporary price fluctuations and spot market availability that will impact the
Company's carrier revenues. Over the past two years, the Company has shifted its
marketing focus in the United States to small and medium-sized businesses and
has restructured its pricing of wholesale services to other carriers. The
Company has derived increased revenues from its commercial customers, and it
continues to reduce its reliance on wholesale carrier revenues.

European Operations

<TABLE>
<CAPTION>
                                                                Three Months Ended            Nine Months Ended        
                                                                   September 30,                September 30,          
                                                                 1998         1997            1998         1997        
                                                                 ----         ----            ----         ----        
                                                                                   (unaudited)
                                                           (in thousands, except percentage of consolidated revenues)
<S>                                                           <C>          <C>             <C>          <C>            
Revenues ..................................................   $  84,721    $  18,934       $ 168,672    $  51,220       
Percentage of consolidated revenues .......................        31.9%        22.7%           29.9%        26.6%      
Operating costs and expenses:                                                                                           
   Cost of services (exclusive of depreciation and                                                                      
       amortization shown separately below) ...............      66,287       14,494         136,779       40,746       
      Selling, general and administrative expenses ........      26,117       12,272          64,118       32,879       
      Depreciation and amortization .......................       6,067        1,893          14,298        4,298       
                                                              ---------    ---------       ---------    ---------       
                                                                 98,471       28,659         215,195       77,923       
                                                              ---------    ---------       ---------    ---------       
Loss from operations ......................................   $ (13,750)   $  (9,725)      $ (46,523)   $ (26,703)      
                                                              =========    =========       =========    =========       
</TABLE>


                                       13
<PAGE>

The Company commenced European operations in certain countries in the second
quarter of 1996 and has since established operations in many additional European
countries.

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

Asia and Pacific Rim Operations

<TABLE>
<CAPTION>
                                                                Three Months Ended            Nine Months Ended        
                                                                   September 30,                September 30,          
                                                                 1998         1997            1998         1997        
                                                                 ----         ----            ----         ----        
                                                                                   (unaudited)
                                                           (in thousands, except percentage of consolidated revenues)
<S>                                                           <C>          <C>             <C>          <C>            

Revenues ..................................................   $  35,156    $   6,650       $  89,219    $  13,836        
Percentage of consolidated revenues .......................        13.2%         8.0%           15.8%         7.2%       
Operating costs and expenses:                                                                                            
   Cost of services (exclusive of depreciation and                                                                       
       amortization shown separately below) ...............      26,827        6,139          71,738       12,756        
   Selling, general and administrative expenses ...........       9,767        1,304          20,555        2,674        
   Depreciation and amortization ..........................       1,361          143           3,604          268        
                                                              ---------    ---------       ---------    ---------        
                                                                 37,955        7,586          95,897       15,698        
                                                              ---------    ---------       ---------    ---------        
Loss from operations ......................................   $  (2,799)   $    (936)      $  (6,678)   $  (1,862)       
                                                              =========    =========       =========    =========        
</TABLE>

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

Effect of Deregulation on Revenues

The Company operates in various countries in Europe, each of which is in a
different state of deregulation. In certain of these countries, current
regulatory restrictions limit the Company's ability to offer a broader array of
products and services and limit the availability of those services to customers.
Accordingly, the Company anticipates that deregulation will have a favorable
impact on revenues because (i) customers will be able to access the Company's
services more easily and (ii) the Company will have the ability to provide a
broader array of products and services. It is anticipated that most European
countries will deregulate various aspects of the telecommunications industry
during 1998 through 2000.

The other countries in which the company operates or will soon operate also have
experienced different levels


                                       14
<PAGE>

of deregulation. As a result, the level of competition in each country varies.
The Company believes that as it pursues its strategic growth strategy, the
commencement of new operations will entail varying degrees of time and cost.

Cost of Services (exclusive of depreciation and amortization)

The Company's cost of services is comprised of costs associated with gaining
local access and the transport and termination of calls over the Company's
network ("RSL-NET"). The majority of the Company's cost of services are
variable, including local access charges and transmission capacity leased on a
per-minute of use basis. The Company plans to make significant investments in
indefeasible rights of use ("IRUs"), minimum investment units ("MIUs") and
domestic circuits and, as a result, expects that an increasing amount of its
total operating costs will become fixed, as the volume of the Company's calls
carried over its own facilities increases. The depreciation expense with respect
to the Company's MIUs and IRUs is not accounted for in cost of services. In
addition, the Company intends to lower its variable cost of termination as a
percentage of revenues by carrying traffic pursuant to more of its existing
operating agreements and by negotiating additional operating agreements on
strategic routes. The Company has directly linked certain of its local operators
in Europe and the United States utilizing lines leased on a fixed cost point to
point basis and over MIUs and IRUs. To the extent traffic can be transported
between two local operators over MIUs or IRUs, there is only marginal cost to
the Company with respect to the international portion of a call other than the
fixed lease payment or the capital expenditure incurred in connection with the
purchase of the MIUs or IRUs. The Company's cost of transport and termination
will decrease to the extent that it is able to bypass the settlement rates
associated with the transport of international traffic.

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

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

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

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


                                       15
<PAGE>

with the local exchange network and (ii) purchase its own international
facilities. The Company believes that as a result of deregulation, its cost
structure will improve. Deregulation in a particular country is also expected to
permit the Company to terminate international inbound traffic in a country which
will result in an improved cost structure for the Company as a whole.

Selling, General and Administrative Expenses

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

The Company has grown and intends to continue to grow by establishing operations
in countries that are in the process of being deregulated and that originate and
terminate large volumes of international traffic or offer other strategic
benefits. Each of the Company's operations is in a different stage of
development. The early stages of development of a new operation involve
substantial start-up costs in advance of revenues. Upon the commencement of such
operations, the Company generally incurs additional fixed costs to facilitate
growth. The Company expects that during periods of significant expansion,
selling, general and administrative expenses will increase materially.
Accordingly, the Company's consolidated results of operations will vary
depending on the timing and speed of the Company's expansion strategy and,
during a period of rapid expansion, will not necessarily reflect the performance
of the Company's more established local operators.

Foreign Exchange

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

The Company recorded a foreign currency translation adjustment of $(0.3) million
and $6.7 million for the three months and nine months ended September 30, 1998,
respectively. Such amount is recorded upon the translation of the foreign
subsidiaries' financial statements into U.S. dollars, and is dependent upon the
various foreign exchange rates and the magnitude of the foreign subsidiaries'
financial statements.

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


                                       16
<PAGE>

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

      Revenues. Revenues increased to $265.9 million for the three months ended
September 30, 1998 compared to $83.2 million for the three months ended
September 30, 1997, an increase of 219%. This increase is due primarily to the
growth in the Company's North American revenues from $57.6 million for the three
months ended September 30, 1997 to $145.7 million for the same period this year
and the Company's European revenues, which increased from $18.9 million for the
three months ended September 30, 1997 to $84.7 million for the same period this
year. The Company had revenue generating operations in the United States,
Canada, 14 European countries, Venezuela, Australia and Japan during the third
quarter of 1998. The increase in the Company's North American revenues was
primarily due to acquisitions, which contributed $61.1 million and $0.0 for the
three months ended September 30, 1998 and 1997, respectively, a significant
increase in the Company's U.S. commercial customer base, and increased traffic
volume from existing customers. Revenues from the Company's European operations
increased as a result of increased sales of prepaid calling cards, which
contributed $6.4 million and $0.0 for the three months ended September 30, 1998
and 1997, respectively, and through acquisitions, primarily the Motorola Tel.co
acquisition, completed after September 30, 1997, which contributed $45.3 million
and $0.0 for the three months ended September 30, 1998 and 1997 European
revenues, respectively, and an increase in the Company's European customer base.
Revenues from the Company's Asia/Pacific Rim operations increased to $35.2
million for the three months ended September 30, 1998, compared with $6.7
million for the third quarter of 1997 primarily as a result of various
acquisitions which had taken place throughout the period.

      Cost of Services (exclusive of Depreciation and Amortization discussed
separately below). Cost of services increased to $210.3 million for the three
months ended September 30, 1998 from $74.4 million for the three months ended
September 30, 1997, an increase of 183%. This increase is primarily due to
increased traffic and, to a certain extent, increased rates paid to the
Company's carrier vendors. As a percentage of revenues, cost of services
decreased to 79.1% for the three months ended September 30, 1998 from 89.4% for
the three months ended September 30, 1997. The decrease in cost of services as a
percentage of revenues is primarily attributable to the increased
diversification in the Company's customer base, increases in commercial accounts
and mobile subscribers which positively impacted the Company's profitability,
and the improvement in the Company's North American operations' costs of
services which represented 55.6% of the Company's total cost of services in the
period. This was offset by the Company's European operations which experienced
problems in purchasing capacity in Germany and France due to certain delays in
implementing deregulation in these countries. Accordingly, traffic arising from
increased prepaid card sales in these countries had to be carried over
uneconomical overflow capacity which produced low and in certain cases negative
gross margins for the Company's prepaid operations in Germany and France. The
Company believes that these capacity problems were temporary and had since been
corrected. In order to reduce costs, the Company intends to purchase additional
capacity, if and when regulations permit, in each of the Company's respective
countries of operation, on routes on which it has experienced, or anticipates
experiencing, overflow traffic.


                                       17
<PAGE>

      Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the three months ended September 30, 1998
increased by $43.8 million, or 184%, to $67.7 million from $23.9 million for the
three months ended September 30, 1997. This increase is primarily attributable
to costs of start-ups in and expansion of the Company's European operations, the
hiring of new personnel in Europe and as a result of acquisitions in North
America and Australia. The Company's European operations contributed $26.1
million or 38.6% of the Company's consolidated SG&A for the three month period
ended September 30, 1998, although such operations accounted for only 31.9% of
the Company's total revenues for such period. European SG&A expense increased as
a result of the Motorola Tel.co acquisition and the significant increase in
employees in many of the Company's European operations. SG&A expense will
continue to increase as a result of start-up costs and infrastructure expansion
and start-up costs attributable to new local operations.

      Depreciation and Amortization Expense. Depreciation and amortization
expense increased 310% to $22.2 million for the three months ended September 30,
1998 from $5.4 million for the three months ended September 30, 1997. This
increase is primarily attributable to the increased amortization of goodwill
recorded as a result of the Company's acquisitions. Depreciation and
amortization expense is expected to increase in the future as the Company
acquires additional businesses and assets.

      Interest Income. Interest income decreased to $2.4 million for the three
months ended September 30, 1998 from $2.8 million for the three months ended
September 30, 1997.

      Interest Expense. Interest expense increased to $18.3 million for the
three months ended September 30, 1998 from $9.7 million for the three months
ended September 30, 1997, primarily as a result of interest related to the 1998
Notes.

      Foreign Exchange Loss. Foreign exchange loss increased to $8.9 million for
the three months ended September 30, 1998 from $0.0 for the three months ended
September 30, 1997, primarily as a result of the increase in the Deutsche mark
against the U.S. dollar in connection with the Company's 1998 Deutsche mark
denominated Senior Discount Notes.

      Loss in Equity Interest of Unconsolidated Subsidiaries. Loss in equity
interest of unconsolidated subsidiaries increased to $1.6 million for the three
months ended September 30, 1998 from $0.0 for the three months ended September
30, 1997 to account for the Company's pro-rata allocable loss in the investments
of Maxitel and Telegate.

      Loss Before Extraordinary Item. Loss before extraordinary item increased
to $58.9 million for the three months ended September 30, 1998, as compared to
net loss of $27.3 million for the three months ended September 30, 1997 due to
the factors described above.


                                       18
<PAGE>

Results Of Operations For The Nine Months Ended September 30, 1998 Compared To
The Nine Months Ended September 30, 1997

      Revenues. Revenues increased to $564.1 million for the nine months ended
September 30, 1998 compared to $192.6 million for the nine months ended
September 30, 1997, an increase of 193%. This increase is due primarily to the
growth in the Company's North American revenues from $127.5 million for the nine
months ended September 30, 1997 to $305.7 million for the same period this year
and the Company's European revenues, which increased from $51.2 million for the
nine months ended September 30, 1997 to $168.7 million for the same period this
year. The Company had revenue generating operations in the United States,
Canada, 14 European countries, Venezuela, Australia and Japan during the first
nine month period of 1998. The increase in the Company's North American revenues
was primarily due to acquisitions, which contributed $98.1 million and $0.0 for
the nine months ended September 30, 1998 and 1997, respectively, a significant
increase in the Company's U.S. commercial customer base and increased traffic
volume from existing customers. Revenues from the Company's European operations
increased as a result of increased sales of prepaid calling cards, which
contributed $20.6 million and $0.0 for the nine months ended September 30, 1998
and 1997, respectively, through acquisitions, primarily the Motorola Tel.co
acquisition, completed after September 30, 1997, which contributed $62.6 million
and $0.0 for the nine months ended September 30, 1998 and 1997 European
revenues, respectively, and an increase in the Company's European customer base.
Revenues from the Company's Asia/Pacific operations increased to $89.2 million
for the nine months ended September 30, 1998, compared with $13.8 million for
the same period of 1997, primarily as a result of various acquisitions which had
taken place throughout the period.

      Cost of Services (exclusive of Depreciation and Amortization discussed
separately below). Cost of services increased to $462.2 million for the nine
months ended September 30, 1998 from $171.2 million for the nine months ended
September 30, 1997, an increase of 170%. This increase is primarily due to
increased traffic and, to a certain extent, increased rates paid to the
Company's carrier vendors. As a percentage of revenues, cost of services
decreased to 81.9% for the nine months ended September 30, 1998 from 88.9% for
the nine months ended September 30, 1997. The decrease in cost of services as a
percentage of revenues is primarily attributable to the increased
diversification in the Company's customer base, increases in commercial accounts
and mobile subscribers which positively impacted the Company's profitability,
and the improvement in the Company's North American operations' costs of
services which represented 54.8% of the Company's total cost of services in the
period. In order to reduce costs, the Company intends to purchase additional
capacity, if and when regulations permit, in each of the Company's respective
countries' of operation on routes on which it has experienced or anticipated
experiencing, overflow traffic. This was offset by the Company's European
operations which experienced problems in purchasing capacity in Germany and
France due to certain delays in implementing deregulation in these countries.
Accordingly, traffic arising from increased prepaid card sales in these
countries had to be carried over uneconomical overflow capacity which produced
low and in certain cases negative gross margins for the Company's prepaid
operations in Germany and France. The Company believes that these capacity
problems were temporary and had since been corrected.

      Selling, General and Administrative Expense. SG&A expense for the nine
months ended September 30, 1998 increased by $85.4 million, or 138%, to $147.5
million from $62.1 million for the nine months ended September 30, 1997. This
increase is primarily attributable to costs of start-ups in and expansion of the
Company's European operations, and the hiring of new personnel in Europe and as
a result of acquisitions in North America and Australia. The Company's European
operations contributed $64.1 million or 43.5% of the Company's consolidated SG&A
for the nine months ended September 30, 1998, although such operations accounted
for only 29.9% of the Company's total revenues in such period. European SG&A
expense increased 


                                       19
<PAGE>

as a result of the Motorola Tel.co acquisition and the significant increase in
employees in many of the Company's European operations. SG&A expense will
continue to increase as a result of start-up costs and infrastructure expansion
and start-up costs attributable to new local operations.

      Depreciation and Amortization Expense. Depreciation and amortization
expense increased 201% to $43.3 million for the nine months ended September 30,
1998 from $14.4 million for the nine months ended September 30, 1997. This
increase is primarily attributable to the increased amortization of goodwill
recorded as a result of the Company's acquisitions. Depreciation and
amortization expense is expected to increase in the future as the Company
acquires additional businesses and assets.

      Interest Income. Interest income increased to $13.2 million for the nine
months ended September 30, 1998 from $9.9 million for the nine months ended
September 30, 1997, primarily as a result of interest earned on the proceeds of
the 1998 Notes (as defined herein).

      Interest Expense. Interest expense increased to $51.6 million for the nine
months ended September 30, 1998 from $28.9 million for the nine months ended
September 30, 1997, primarily as a result of interest related to the 1998 Notes.

      Foreign Exchange Loss. Foreign exchange loss increased to $10.6 million
for the nine months ended September 30, 1998 from $0.0 for the nine months ended
September 30, 1997, primarily as a result of the increase in the Deutsche mark
against the U.S. dollar in connection with the Company's 1998 Deutsche mark
denominated Senior Discount Notes.

      Loss in Equity Interest of Unconsolidated Subsidiaries. Loss in equity
interest of unconsolidated subsidiaries increased to $1.6 million for the nine
months ended September 30,1998 from $0.0 for the nine months ended September 30,
1997 to account for the Company's pro-rata allocable loss in the investments of
Maxitel and Telegate.

      Loss Before Extraordinary Item. Loss before extraordinary item increased
to $135.5 million for the nine months ended September 30, 1998, as compared to
net loss of $68.1 million for the nine months ended September 30, 1997 due to
the factors described above. An extraordinary item of $20.8 million for the nine
months ended September 30, 1998 represents primarily the premium paid to retire
approximately $127 million of the original $300 million of the Company's 1996
Notes. The Company had no such expense in the nine month period ended September
30, 1997.


                                       20
<PAGE>

Liquidity and Capital Resources

The Company has incurred significant operating and net losses and negative cash
flow, due in large part to the start-up and development of the Company's
operations and the development of RSL-Net. The Company expects that its net
losses and negative cash flow will increase as the Company implements its growth
strategy. Historically, the Company has funded its losses and capital
expenditures through capital contributions, borrowings, and a portion of the net
proceeds of prior securities offerings.

Cash used in operating activities for the nine months ended September 30, 1998
totaled $116.4 million compared with $60.4 million for the same period in 1997.
Capital expenditures for the nine months ended September 30, 1998 were $104.9
million compared with $26.8 million for the comparable period in 1997. These
capital expenditures are principally for switches, fiber, and related
telecommunications equipment. The Company intends to increase significantly its
capital expenditures to expand and develop the Company's infrastructure, in part
by replacing leased transmission facilities with owned transmission lines,
purchasing IRU's and interests in inter-city fiber routes in European countries
and installing additional national and international telephone gateway switches.
Funds expended for acquisitions were $271.2 million during the nine months ended
September 30, 1998 compared with $26.8 million for the nine months ended
September 30, 1997. At September 30, 1998, the Company had $28.6 million of
working capital deficit as compared to $83.1 million of working capital on
December 31, 1997.

The Company's indebtedness was approximately $712.0 million at September 30,
1998 of which $699.4 million represented long-term debt and $12.6 million
represented short-term debt. Substantially all such indebtedness is attributable
to the debt securities issued by RSL PLC and guaranteed by RSL.

In October 1996, RSL PLC consummated the offering of $300.00 million of 12 1/4%
Senior Notes due 2006, $127.5 million of which was redeemed by RSL PLC in April
1998. In February 1998, RSL PLC consummated the offering of $200.0 million of 9
1/8% Senior Notes due 2008 and $328.1 million ($200.0 million initial accreted
value) of 10 1/8% Senior Discount Notes due 2008. In March 1998, RSL PLC
Consummated the offering of DM296.0 million (the "New Offering") (approximately
$99.1 million initial accreted value) of 10% Senior Discount Notes (the "New
Notes"). In addition, upon the closing of the New Offering on November 9, 1998,
the Company will issue $100 million ($94.5 million initial accreted value) of
12% Senior Notes due 2008. The foregoing debt securities were issued (or, in the
case of the New Notes will be issued) under indentures containing certain
restrictive covenants which impose limitations on the Company's ability to,
among other things: (i) incur additional indebtedness, (ii) pay dividends or
make certain other distributions, (iii) issue capital stock of certain
subsidiaries, (iv) guarantee debt, (v) enter into transactions with shareholders
and affiliates, (vi) create liens, (vii) enter into sale-leaseback transactions,
and (viii) sell assets.

In connection with the issuance of the 1996 Notes, RSL PLC was required to
purchase and maintain restricted marketable securities, which are held by the
indenture trustee for the 1996 Notes, in order to secure the payment of the
first six scheduled interest payments on the 1996 Notes. The market value of
such restricted marketable securities was approximately $68.9 million at
December 31, 1997. The market value of such securities at September 30, 1998, as
adjusted to reflect the redemption of $127.5 million of the 1996 Notes, was
$31.0 million.

One of the Company's primary equipment vendors has provided to the Company $75.0
million in vendor financing to fund the purchase of additional switching and
related telecommunications capital equipment. At 


                                       21
<PAGE>

September 30, 1998, there was approximately $7.3 million available under this
facility. Borrowings from this equipment vendor accrue interest at a rate of
LIBOR plus either 5.25% or 4.5% depending on the equipment purchased.

In October 1998, the Company obtained from a group of its officers and directors
and affiliates thereof (the "New Lender") commitments for up to $35 million of
revolving credit under the New Credit Facility; subject to the negotiation and
execution of final documentation. Amounts borrowed under the New Credit Facility
will accrue interest at LIBOR plus 5% per annum. RSL PLC will be the borrower
and RSL will guarantee any obligations of RSL PLC under the New Credit Facility.
The commitments of the New Lenders under the New Credit Facility will expire on
the earlier of January 15, 2000 and the date of any change of control of RSL.

In November 1998, RSL PLC agreed to issue $100 million aggregate principal
amount at maturity of 12% Senior Notes due 2008. The New Notes will generate
proceeds to the Company of approximately $90.5 million. The New Notes are fully
and unconditionally guaranteed as to payment of principal, interest and any
other amount thereof by RSL.

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

The commitment under the Company's revolving credit facility with The Chase
Manhattan Bank was $7.5 million at June 30, 1998, which amount was permanently
reduced to $5 million at July 1, 1998. Approximately $3.5 million of the
commitment under the facility was utilized at September 30, 1998. The facility
is payable on June 30, 1999 and accrues interest, at the Company's option, at
(i) the lender's prime rate per annum or (ii) LIBOR plus 1% per annum. The
Company, through LDM, has a $10.0 million revolving credit facility. There was
$8.1 million outstanding under this facility at September 30, 1998. This
Facility is payable in full on September 30, 2000 and accrues interest at prime
rate plus 2.5% per annum.

When market conditions are favorable, the Company plans to raise substantial
additional capital to fund its capital expenditures, acquisitions, strategic
alliances, start-up operations and anticipated substantial net losses. If market
conditions are not favorable, the Company believes that the net proceeds from
the Offerings and the New Offering, together with the remaining net proceeds of
prior securities offerings and availability under its revolving credit
facilities, vendor financing facility and short-term lines of credit, New Credit
Facility, and overdraft facilities from local banks, will be sufficient to fund
a reduced capital expenditure and expansion plan for its existing operations, as
well as continuing net losses, for approximately 9 to 12 months. However, the
Company may be required to raise additional capital regardless of market
conditions, if the Company's plans or assumptions change or prove to be
inaccurate, if the Company identifies additional required or desirable
infrastructure investments or acquisitions, if the Company experiences
unanticipated costs or competitive pressures or if the net proceeds from the
Offerings and New Offering, together with the remaining proceeds of prior
securities offerings and other sources of liquidity otherwise prove to be
insufficient.


                                       22
<PAGE>

Effects of Recently Issued Accounting Standards

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

SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, it has no impact on the
Company's net income. Comprehensive income includes both net income and other
comprehensive income. Other comprehensive loss for the nine months ended
September 30, 1998 and September 30, 1997 of $6.7 million and $1.2 million,
respectively, represented foreign currency translation adjustment. Accumulated
other comprehensive loss included in the accompanying condensed consolidated
balance sheet as of September 30, 1998 and September 30, 1997 was $12.0 million
and $1.8 million, respectively, consisting of the accumulated foreign currency
translation adjustment.

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. The
Company does not have any derivative instruments.

Seasonality

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

Year 2000 Technology Risks

The Company is in the process of reviewing its computer systems and operations
to identify and determine the extent to which any systems will be vulnerable to
potential errors and failures as a result of the "Year 2000" problem. The Year
2000 problem is the result of computer programs being written using two digits,
rather than four digits, to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations, causing disruptions of operations including, among
other things, a temporary inability to process transactions, billing and
customer service or to engage in similar normal business activities.

The Company is conducting a comprehensive review of its computer systems to
ensure that all such systems are, or prior to the end of 1999 will be, Year 2000
compliant. The Company's plan for its Year 2000 project includes the following
phases: (i) conducting a comprehensive inventory of the Company's internal
systems, including information technology systems and non-information technology
systems (which include switching, billing and other platforms and electrical
systems) and the systems acquired or to be acquired by the Company, (ii)
assessing and prioritizing any required remediation, (iii) remediating any
problems by repairing or, if appropriate, replacing the non-compliant systems
and (iv) testing all remediated systems for Year 2000 compliance. The Company
has also retained a Year 2000 solution provider as a consultant to assist the
Company in its assessment and remediation projects and to manage and coordinate
Year 2000 compliance for each of the Local Operators on a global basis.


                                       23
<PAGE>

In addition to assessing its own systems, the Company is conducting an external
review o fits vendors and suppliers, including equipment and system providers
and other telecommunications service providers, to determine their vulnerability
to Year 2000 problems and any potential impact on the Company. Based on
preliminary discussions with L.M. Ericsson A.B. ("Ericsson"), the Company's
primary equipment vendor, the Company believes that the equipment provided to
the Company by Ericsson will be Year 2000 compliant. The Company may experience
problems to the extent that other telecommunications carriers whose services are
resold by the Company or to which the Company sends traffic for termination are
not Year 2000 compliant. There can be no assurance that such problems will not
have a material adverse effect on the Company.

The Company expects to complete all of the phases of the process described above
by June 30, 1999 and further expects that all of its computer systems will be
fully Year 2000 compliant before the end of 1999. There can be no assurance,
however, that the Company will achieve full Year 2000 compliance before the end
of 1999 or that effective contingency plans will be developed or implemented. A
failure of the Company's computer systems or the failure of the Company's
vendors or customers to effectively upgrade their software and systems for
transition to the year 2000 could have a material adverse effect on the
Company's business, financial position and results of operations.

The Company has completed numerous acquisitions during recent periods and is in
the process of integrating the systems of the acquired businesses into the
Company's operations. Those systems are included in the Company's Year 2000
review and remediation project. The Company expects to complete additional
acquisitions prior to the end of 1999. During the process of evaluating
businesses for potential acquisition, and after any such acquisition, the
Company will evaluate the extent of the Year 2000 problems associated with such
acquisitions and the cost and timing of the remediation. No assurance can be
given, however, that the systems of any acquired business will be Year 2000
compliant when acquired or will be capable of timely remediation.

The Company estimates that it will incur costs of between $7 million and $10
million to become Year 2000 compliant; although the Company's evaluation of the
Year 2000 problem is not yet complete and actual costs may be significantly
higher. Costs associated with software modification are expensed by the Company
when incurred. None was incurred as of September 30, 1998.

Following the completion of the Company's Year 2000 assessment, the Company
plans to determine the nature and extent of any contingency plans that may be
required. Even if the Company's assessment is completed without identifying any
additional material non-compliant systems operated by, or in control of, the
Company, or of third parties, the most reasonably likely worse case scenario
would be a systems failure beyond the control of the Company to remedy. Such a
failure could materially prevent the Company from operating its business. The
Company believes that such a failure would likely lead to lost revenues,
increased operating costs, loss of customers or other business interruptions of
a material nature.


                                       24
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 2. Change in Securities and Use of Proceeds

In October 1997, the Company sold 8,280,000 shares of Class A Common Stock, par
value $0.00457 per share, (the "Shares") in an initial public offering of Shares
(the "Initial Public Offering"). The Shares sold in the Initial Public Offering
were offered both in the United States and internationally. The Company's
Registration Statement on Form S-1 (File No. 333-34281) filed with the
Commission with respect to the Initial Public Offering was declared effective by
the Commission on September 30, 1997. The aggregate net proceeds of the Initial
Public Offering, after deducting underwriting discounts and commissions and
expenses, were approximately $167.5 million. In April 1998, the Company used
approximately $101.0 million of the net proceeds of the Initial Public Offering
to redeem $90 million of the 1996 Notes, as permitted under the 1996 Indenture.
In April 1998, the Company used approximately $43.1 million to redeem $37.5
million of the 1996 Notes, as permitted under the 1996 Indenture. The remaining
$23.5 million of proceeds were used for acquisitions and to fund the Company's
operating losses.

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

In October 1998, the Company issued to Arnold Goodstein 32,269 shares of the
Company's Class A Common Stock in exchange for 19.7375 shares of RSL COM
PrimeCall, Inc., a subsidiary of the Company. The issuance of such shares was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof and the certificates evidencing such shares have been legended as
restricted securities.

Item 5. Other Information

      Forward-Looking Statements

Certain matters discussed in this Report under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources" contain certain forward-


                                       25
<PAGE>

looking statements which involve risks and uncertainties and depend upon certain
assumptions, some of which may be beyond the Company's control, including
changing market conditions, competitive and regulatory matters (such as timing
and extent of deregulation of telecommunications market, the size and financial
resources of competitors, etc.), general economic conditions in the markets in
which the Company operates, Year 2000 readiness of the Company's customers and
suppliers, etc. and, accordingly, there can be no assurance with regard to such
statements.

Item 6. Exhibits and Reports on Form 8-K

      Exhibits:

            27.1 Financial Data Schedule

      Reports on Form 8-K:

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

            On August 14, 1998, the Company filed a Current Report on Form 8-K,
            in accordance with Item 2, in connection with the acquisition of
            Motorola Tel.co.


                                       26
<PAGE>

                                   SIGNATURES

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

                                          RSL COMMUNICATIONS, LTD.

Date:  November 9, 1998                   By /s/  Mark Hirschhorn
       ----------------                      -----------------------------------
                                             Name:  Mark Hirschhorn
                                             Title: Vice President Finance-
                                                    Global Controller
                                                    (Authorized Officer and
                                                    Chief Accounting Officer)


                                       27
<PAGE>

Exhibit Index

27.1 Financial Data Schedule


                                       28