SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                                 FORM 10-Q


                 Quarterly Report Under Section 13 or 15(d)
                   of the Securities Exchange Act of 1934


                    For Quarter Ended September 30, 1997
                       Commission File Number 1-4929




                             COMSAT CORPORATION
                           6560 Rock Spring Drive
                             Bethesda, MD 20817
                               (301) 214-3000



          District of Columbia                        52-0781863
      (State or other jurisdiction of             (I.R.S. Employer
      incorporation or organization)              Identification No.)





     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  twelve (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 ninety (90)
days. Yes [X] No [ ]

49,722,000  shares of the Registrant's  common stock were outstanding as of
September 30, 1997.








<PAGE>



PART I.     FINANCIAL INFORMATION

ITEM 1.     INTERIM FINANCIAL STATEMENTS FOR THE CORPORATION (UNAUDITED)

                    COMSAT CORPORATION AND SUBSIDIARIES
                  Condensed Consolidated Income Statements
<TABLE>
<CAPTION>
<S>                                                 <C>             <C>            <C>                 <C>



                                                     Quarter Ended September 30,    Nine Months Ended September 30,
                                                     ---------------------------    -------------------------------
In thousands, except per share amounts                   1997            1996                1997           1996
-------------------------------------------------------------------------------------------------------------------

REVENUES                                             $  147,122      $  143,085          $  422,222     $  407,724
                                                     -----------     -----------         -----------    -----------
Operating expenses:
     Cost of services                                    74,467          63,555             198,304        183,920
     Depreciation and amortization                       47,222          40,006             135,531        113,236
     Research and development                             2,381           2,777               6,175          7,600
     General and administrative                           5,399           5,835              17,996         18,453
                                                      -----------     -----------         -----------    -----------
     Total operating expenses                           129,469         112,173             358,006        323,209
                                                      -----------     -----------         -----------    -----------

OPERATING INCOME                                         17,653          30,912              64,216         84,515

Interest and other income (expense), net                  6,502          (3,182)              6,292        (10,502)
Interest expense, net of amounts capitalized            (11,190)        (10,135)            (31,028)       (25,748)
                                                     -----------     -----------         -----------    -----------
Income from continuing operations before taxes,        
     minority interest, and extraordinary item           12,965          17,595              39,480         48,265
Income tax expense                                       (4,208)        (10,301)            (14,462)       (23,760)
Minority interest in net losses of consolidated
     subsidiaries                                           638             914               1,574          3,177
                                                     -----------     -----------         -----------    -----------

INCOME FROM CONTINUING OPERATIONS BEFORE
     EXTRAORDINARY ITEM                                   9,395           8,208              26,592         27,682
                                                     -----------     -----------         -----------    -----------

Discontinued operations, net of income tax:
     Loss from operations                                     -          (3,171)            (17,572)        (7,536)
     Loss on disposal                                   (30,207)              -             (41,496)             -
                                                     -----------     -----------         -----------    -----------
     Discontinued operations                            (30,207)         (3,171)            (59,068)        (7,536)
                                                     -----------     -----------         -----------    -----------
Income (loss) before extraordinary item                 (20,812)          5,037             (32,476)        20,146
Extraordinary loss from early extinguishment
     of debt (net of tax)                                     -               -              (3,946)             -
                                                     -----------     -----------         -----------    -----------

NET INCOME (LOSS)                                    $  (20,812)     $    5,037          $  (36,422)    $   20,146
                                                     ===========     ===========         ===========    ===========

EARNINGS (LOSS) PER SHARE:
     Income from continuing operations               $     0.19      $     0.16          $     0.53     $     0.56
     Loss from discontinued operations                    (0.60)          (0.06)              (1.18)         (0.15)
     Extraordinary loss                                       -               -               (0.08)             -
                                                     -----------     -----------         -----------    -----------
     Net income (loss)                               $    (0.41)     $     0.10          $    (0.73)    $     0.41
                                                     ===========     ===========         ===========    ===========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     2

</TABLE>

<PAGE>



                    COMSAT CORPORATION AND SUBSIDIARIES
                   Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
<S>                                                                             <C>               <C>

                                                                                 September 30,     December 31,
In thousands                                                                              1997             1996
---------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                   $      7,361      $     7,659
     Receivables                                                                      167,615          133,952
     Other                                                                             21,812           18,395
     Net assets of discontinued operations                                            162,658          385,315
                                                                                 -------------     ------------
          Total current assets                                                        359,446          545,321
                                                                                 -------------     ------------

Property and equipment (net of accumulated depreciation
     of $1,113,853 in 1997 and $1,027,437 in 1996)                                  1,346,343        1,322,985
Investments                                                                            82,063          124,442
Goodwill                                                                               12,952           13,189
Other assets                                                                          107,564           98,486
                                                                                 -------------     ------------
     TOTAL ASSETS                                                                $  1,908,368      $ 2,104,423
                                                                                 =============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current maturities of long-term debt                                        $     10,376      $    13,802
     Commercial paper                                                                 135,627           17,993
     Accounts payable and accrued liabilities                                          77,617           73,426
     Due to related parties                                                            35,117           42,562
     Other                                                                             20,930           15,342
                                                                                 -------------     ------------
          Total current liabilities                                                   279,667          163,125
                                                                                 -------------     ------------

Long-term debt                                                                        468,659          578,379
Deferred income taxes and investment tax credits                                      123,744          131,827
Accrued postretirement benefit costs                                                   50,931           50,423
Other long-term liabilities                                                           173,792          134,523
Minority interest                                                                       5,113            4,329
Preferred Securities issued by subsidiary                                             200,000          200,000

STOCKHOLDERS' EQUITY:
     Common stock                                                                     358,647          340,691
     Retained earnings                                                                257,307          502,839
     Treasury stock                                                                    (1,332)          (3,006)
     Other                                                                             (8,160)           1,293
                                                                                 -------------     ------------
          Total stockholders' equity                                                  606,462          841,817
                                                                                 -------------     ------------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $  1,908,368      $ 2,104,311
                                                                                 =============     ============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     3
</TABLE>
    

<PAGE>



                    COMSAT CORPORATION AND SUBSIDIARIES
                Condensed Consolidated Cash Flow Statements

<TABLE>
<CAPTION>
<S>                                                                                   <C>              <C>

                                                                                  Nine Months Ended September 30,
                                                                                 ----------------------------------
In thousands                                                                              1997             1996
-------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss)                                                                 $  (36,422)     $    20,146
      Adjustments to reconcile net income (loss) to cash flow of
      continuing operations:
         Depreciation and amortization                                                     135,531          113,236
         Extraordinary loss from early extinguishment of debt                                3,946                -
         Loss from discontinued operations                                                  59,068            7,536
      Changes in operating assets and liabilities                                          (26,890)          10,640
      Other                                                                                  5,379            3,002
                                                                                        -----------     ------------
         Net cash provided by continuing operations                                        140,612          154,560
         Net cash used by discontinued operations                                          (27,690)         (23,023)
                                                                                        -----------     ------------
      Net cash provided by operating activities                                            112,922          131,537
                                                                                        -----------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of property and equipment                                                  (191,585)        (175,225)
      Investments in unconsolidated businesses                                              (9,831)         (31,733)
      Proceeds from sale of investments                                                      9,060                -
      Proceeds from note on sale of investment                                              15,655                -
      Net proceeds from sale of land                                                         9,293                -
      Insurance proceeds from satellite launch failure                                           -           54,443
      Decrease (increase) in INTELSAT ownership                                             23,024           (1,238)
      Decrease in Inmarsat ownership                                                             -            5,746
      Other                                                                                 (4,254)           2,067
                                                                                        -----------     ------------
      Net cash used in investing activities                                               (148,638)        (145,940)
                                                                                        -----------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Common stock issued                                                                   12,605            9,484
      Cash dividends paid                                                                  (14,476)         (28,212)
      Repayment/extinguishment of long-term debt                                          (110,952)          (7,479)
      Net short-term borrowings                                                            117,634                -
      Repayment against company-owned life insurance policies                               (3,736)         (51,443)
      Net proceeds from sale-leaseback financing                                            34,343                -
                                                                                        -----------     ------------
      Net cash provided by (used for) financing activities                                  35,418          (77,650)
                                                                                        -----------     ------------

Net decrease in cash and cash equivalents                                                     (298)         (92,053)
Cash and cash equivalents, beginning of period                                               7,659          109,512
                                                                                        -----------     ------------

Cash and cash equivalents, end of period                                                $    7,361      $    17,459
                                                                                        ===========     ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL  STATEMENTS.
(SEE NON-CASH DIVIDEND DISCUSSED IN NOTE 2 TO THE FINANCIAL STATEMENTS.)


                                     4


<PAGE>



                    COMSAT CORPORATION AND SUBSIDIARIES
      Notes to Condensed Consolidated Financial Statements (Unaudited)

1.   FINANCIAL STATEMENT PRESENTATION

     The accompanying unaudited condensed consolidated financial statements
have  been  prepared  by COMSAT  Corporation  (COMSAT  or the  corporation)
pursuant  to the rules  and  regulations  of the  Securities  and  Exchange
Commission  (the SEC).  These  financial  statements  should be read in the
context of the financial statements and notes thereto filed with the SEC in
the corporation's 1996 Annual Report on Form 10-K. 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  regulations.  The  accompanying
condensed  consolidated  financial  statements  reflect all adjustments and
disclosures  which, in the opinion of management,  are necessary for a fair
presentation.  All such adjustments are of a normal recurring  nature.  The
results  of  operations  for  the  interim   periods  are  not  necessarily
indicative of the results of the entire year.

2.   DISCONTINUED OPERATIONS

     The corporation placed Ascent Entertainment Group, Inc. (Ascent),  its
entertainment   subsidiary,   and  substantially  all  of  the  assets  and
operations of COMSAT RSI, Inc. (CRSI), its manufacturing  subsidiary,  into
discontinued  operations  during the second  quarter of 1997. The condensed
consolidated  financial statements have been restated for all prior periods
presented to reflect the results of operations and net assets of Ascent and
CRSI as discontinued operations.

ASCENT ENTERTAINMENT GROUP

     The corporation  distributed its 80.67%  ownership  interest in Ascent
through  a  tax-free  dividend  to  shareholders  on  June  27,  1997  (the
"Distribution").  COMSAT  shareholders  of record on June 19, 1997 received
0.4888 of a share of Ascent  common  stock for each share of COMSAT  common
stock owned. Ascent was placed in discontinued  operations on May 16, 1997,
the date on which the  corporation's  Board of  Directors  adopted a formal
plan to effect the Distribution. The book value of the net assets of Ascent
totaled  approximately  $195 million at June 27, 1997 and  consisted of the
following:

<TABLE>
<CAPTION>
<S>                                                                          <C>

In millions
------------------------------------------------------------------------------------------
Current assets                                                                 $     89.2
Property and equipment, net                                                         308.2
Intangible and other assets                                                         343.3
Short-term debt                                                                     176.0
Other current liabilities                                                           151.3
Long-term debt                                                                       50.0
Other non-current liabilities                                                       168.8
                                                                                ----------
Net assets                                                                      $   194.6
                                                                                ==========
</TABLE>

The  non-cash  dividend  was  recorded as an  adjustment  to retained earnings.


                                     5


<PAGE>


     The operating  results of the discontinued  entertainment  operations,
net of  minority  interests,  for the  periods  through  May 16,  1997  are
summarized  below. The loss on disposal  includes  Ascent's  operating loss
subsequent to May 16, 1997 through June 27, 1997 of $7.4 million, and costs
of $4.1 million incurred by COMSAT to facilitate the distribution.  The tax
expense associated with the loss on disposal also includes a charge of $4.4
million to recognize an additional tax provision on deferred  inter-company
gains while Ascent was included in COMSAT's consolidated tax return.

COMSAT RSI, INC.

     Substantially all of CRSI was placed in discontinued  operations as of
June 30, 1997. CRSI designs,  manufactures and integrates earth stations as
well as wireless and advanced antenna systems.  The assets of JEFA Wireless
Systems (JEFA),  a wholly-owned  subsidiary of CRSI engaged in the wireless
communications   integration   and   intelligent   transportation   systems
businesses,   are  being  disposed  of  in  a  separate  transaction.   The
corporation has determined to retain certain  non-manufacturing  businesses
of CRSI (E.G.,  CRSI's satellite control facility,  satellite  construction
monitoring  business  and  certain  government  contracts).   The  retained
businesses  are  reported  as  continuing  operations  within  the  Network
Services  segment.  See  "Management's  Discussion  and  Analysis - Segment
Operating Results" below.

     The operating results of the discontinued manufacturing operations for
the periods  through June 30, 1997 are summarized  below. At June 30, 1997,
no loss was  anticipated.  In the third  quarter of 1997,  the  corporation
recorded a provision  for an  estimated  loss on disposal of $46.7  million
($30.2  million  after tax).  This change in the estimate for  discontinued
operations  resulted  from  new  information,  obtained  in  part,  through
negotiation  activity and buyers' due diligence,  primarily with respect to
the estimated  sale price for the disposal of JEFA.  The estimated  loss on
disposal of CRSI includes the write-down of JEFA's assets to net realizable
value,  facility closure costs and the estimated  operating results through
the date of disposal of CRSI  (including  JEFA).  Included in the estimated
loss on disposal was an unanticipated third quarter loss from operations of
$15.7 million ($12.9 million after tax), which included operating losses at
JEFA and  adjustments in the estimated cost to complete  certain  long-term
contracts at CRSI.  The estimated  loss on disposal is subject to change in
the near  term due to  continuing  negotiations  and  does  not  include  a
potential additional material loss that may be incurred if negotiations are
concluded  successfully  within the range of sales prices  currently  being
discussed. See "Management's Discussion and Analysis - Outlook" below.



                                     6

<PAGE>

<TABLE>
<CAPTION>
<S>                                                 <C>                        <C>          <C>         <C>


                                                                QUARTER ENDED SEPTEMBER 30,
                                                     --------------------------------------------------------------
In millions                                             1997                                   1996
-------------------------------------------------------------------------------------------------------------------
                                                        CRSI                      Ascent       CRSI        Total
                                                     -----------                ----------  ----------  -----------

Revenues                                                                        $    38.1   $    52.8   $     90.9
                                                                                ==========  ==========  ===========

Income (loss) from operations before
    taxes and minority interest                                                      (8.3)        2.0         (6.3)
Income tax benefit (expense)                                                          2.5        (0.6)         1.9
Minority interest                                                                     1.4        (0.1)         1.3
                                                                                ----------  ----------  -----------
Income (loss) from operations                                                        (4.4)        1.3         (3.1)
                                                                                ----------  ----------  -----------

Loss on disposal before taxes                        $    (46.7)
Income tax benefit                                         15.8
Minority interest                                           0.7
                                                     -----------
Loss on disposal                                          (30.2)
                                                     -----------

Income (loss) on discontinued                        $    (30.2)                $    (4.4)  $     1.3   $     (3.1)
    operations                                       ===========                ==========  ==========  ===========



</TABLE>


<TABLE>
<CAPTION>
<S>                                     <C>            <C>     <C>              <C>         <C>        <C>



                                                              NINE MONTHS ENDED SEPTEMBER 30,
                                         --------------------------------------------------------------------------
In millions                                             1997                                   1996
-------------------------------------------------------------------------------------------------------------------
                                           Ascent       CRSI        Total         Ascent       CRSI        Total
                                         ----------  ----------- -----------    ----------  ----------  -----------

Revenues                                 $   177.5   $    121.3  $    298.8     $   166.5   $   147.5   $    314.0
                                         ==========  =========== ===========    ==========  ==========  ===========

Income (loss) from operations before
      taxes and minority interest            (34.7)        (0.4)      (35.1)        (22.1)        6.9        (15.2)
Income tax benefit (expense)                   6.2          0.2         6.4           6.7        (2.1)         4.6
Minority interest                             10.7          0.4        11.1           3.1                      3.1
                                         ----------  ----------- -----------    ----------  ----------  -----------
Income (loss) from operations                (17.8)         0.2       (17.6)        (12.3)        4.8         (7.5)
                                         ----------  ----------- -----------    ----------  ----------  -----------

Loss on disposal before taxes                (11.5)       (46.7)      (58.2)
Income tax benefit (expense)                  (2.0)        15.8        13.8
Minority interest                              2.2          0.7         2.9
                                         ----------  ----------- -----------
Loss on disposal                             (11.3)       (30.2)      (41.5)
                                         ----------  ----------- -----------

Income (loss) on discontinued            $   (29.1)  $    (30.0) $    (59.1)    $   (12.3)  $     4.8   $     (7.5)
operations                               ==========  =========== ===========    ==========  ==========  ===========


                                     7
</TABLE>
<PAGE>

      The net assets of the discontinued operations are summarized below:

<TABLE>
<CAPTION>
<S>                                                 <C>                        <C>         <C>          <C>

                                                 September 30, 1997                      December 31, 1996
                                         -----------------------------------    -----------------------------------
In millions                                             CRSI                      Ascent       CRSI        Total
-------------------------------------------------------------------------------------------------------------------

Current assets                                       $    169.7                 $    83.4   $   173.0   $    256.4
Fixed assets, net                                          33.3                     301.5        32.3        333.8
Intangible and other assets                                15.5                     351.4        13.0        364.4
Short-term debt                                             4.4                     145.5         0.4        145.9
Other current liabilities                                  30.2                     143.6        39.3        182.9
Provision for estimated loss on
     disposal of discontinued operations                   17.3
Long-term debt                                              1.8                      52.0         5.1         57.1
Other non-current liabilities                               2.1                     178.9         4.5        183.4
                                                     -----------                ----------  ----------  -----------
Net assets discontinued operations                   $    162.7                 $   216.3   $   169.0   $    385.3
                                                     ===========                ==========  ==========  ===========
</TABLE>

3.   SALE AND LEASEBACK OF THE CLARKSBURG PROPERTY

     During  the  third  quarter,  the  corporation  sold  its  Clarksburg,
Maryland office  building and the surrounding  land for $45.8 million in an
all cash transaction.  A gain of $7.3 million ($4.2 million net of tax) was
recognized  on the sale of land and is  included  in  "Interest  and  other
income (expense), net." As part of the transaction, the corporation entered
into a ten  year  lease-back  transaction  with the new  owner to  continue
occupying the office building, that principally houses COMSAT Laboratories.
The  sale-leaseback  of the office  building  has been  accounted  for as a
financing, wherein the historical cost of the building remains on the books
and continues to be depreciated.  A financing obligation,  of approximately
$36 million,  representing  the proceeds was recorded in other  current and
other  long-term  liabilities,  and will be reduced based on lease payments
under the lease.

4.   INTELSAT AND INMARSAT SHARE CHANGES

     The corporation's  ownership share of INTELSAT decreased from 19.1% at
December  31, 1996 to 18.0% as of September  30,  1997.  As a result of the
change in  ownership,  the  corporation  received a total of $23.0  million
during the first nine months of 1997.

     The  corporation's 23% ownership share of Inmarsat as of September 30,
1997 is unchanged from December 31, 1996.

5.   INVESTMENTS

     In January  1997,  the  corporation  sold its  remaining  interest  in
Philippine Global Communications,  Inc. (PhilCom) at book value in exchange
for cash and a collateralized note receivable totaling $34.3 million, to be
paid  in  installments   with  interest  through  December  31,  1998.  The
corporation  received cash proceeds of $17.3 million during the nine months
ended September 30, 1997.

                                     8

<PAGE>

     In the second quarter of 1997, the corporation sold certain marketable
equity  securities  and  recognized  a $2.0  million  pre-tax  gain that is
recorded in "Interest and other income (expense) net."

6.   REGULATORY MATTERS AND CONTINGENCIES

     GOVERNMENT REGULATION.  Under the Communications Satellite Act of 1962
(the Satellite Act), the International  Maritime Satellite Act of 1978 (the
Inmarsat  Act)  and  the  Communications  Act  of  1934,  as  amended  (the
Communications  Act),  COMSAT  is  subject  to  regulation  by the  Federal
Communications   Commission   (FCC)  with   respect  to  its   capital  and
organizational  structure, as well as COMSAT World Systems (CWS) and COMSAT
Mobile  Communications  (CMC) plant,  operations,  services and rates.  FCC
decisions  and policies  have had and will  continue to have a  significant
impact on the  corporation.  For a discussion of these matters refer to the
description  of the  corporation's  "Business"  and  Notes 10 and 11 to the
corporation's   1996   financial   statements   included  as  part  of  the
corporation's 1996 Form 10-K and the "Management's  Discussion and Analysis
-- Outlook" section of the Form 10-Q.

     LITIGATION.  COMSAT  and  its  subsidiaries  are a  party  to  various
lawsuits and arbitration  proceedings and are subject to various claims and
inquiries,  which  generally are  incidental to the ordinary  course of its
business.  The  outcome  of legal  proceedings  cannot  be  predicted  with
certainty.  Based on currently available information,  however,  management
does not  believe  that the  outcome  of any  matter  which is  pending  or
threatened, either individually or in the aggregate, will have a materially
adverse effect on the consolidated  financial  condition of the corporation
but could materially effect  consolidated  results of operations in a given
year or quarter.  Certain of those matters are discussed in Notes 10 and 11
to the  corporation's  1996  financial  statements  included as part of the
corporation's 1996 Form 10-K and "Item 1 - Legal Proceedings" of Part II of
the Form 10-Q herein.

7.   EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT

     During  the  period  March  25,  1997  through  April  9,  1997,   the
corporation offered to purchase for cash its 8.125% notes due April 1, 2004
in a fixed-spread  offering.  The corporation  repurchased $89.5 million of
the 8.125%  notes and $10.0  million of its 7.7%  medium  term notes  using
proceeds from short-term debt. The debt  extinguishment loss related to the
repurchases was $6.2 million ($3.9 million after tax) during the first half
of 1997.

8.   NEW ACCOUNTING PRONOUNCEMENTS

     In February  1997,  the Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting Standards No. 128, "Earnings Per Share."
This statement  establishes standards for computing and presenting earnings
per share. This statement is effective for financial  statements issued for
periods ending after December 15, 1997,  including  interim periods;  early
application is not permitted.  The corporation  will adopt this standard in
the fourth  quarter of 1997 and will restate all prior period  earnings per
share  data  presented  as  required.  Adoption  of this  statement  is not
expected to have a material effect on the corporation's reported net income
(loss) per common share.

                                     9

<PAGE>

     In  June  1997,  the  Financial   Accounting  Standards  Board  issued
Statement   of  Financial   Accounting   Standards   No.  130,   "Reporting
Comprehensive  Income" (SFAS No. 130) and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information"  (SFAS  No.  131).  SFAS  No.130  establishes   standards  for
reporting and display of comprehensive income and its components (revenues,
expenses,  gains and  losses)  in a full set of  general-purpose  financial
statements.  SFAS No. 131 establishes standards for the way public business
enterprises  report  information  about operating  segments and the related
disclosures  about  products  and  services,  geographic  areas,  and major
customers.  Both statements are effective for financial  statements  issued
for fiscal years  beginning  after  December 15, 1997.  The  corporation is
reviewing  what  effect the new  standards  will have on future  reporting;
however,  the new  standards  will  not  have any  material  effect  on the
corporation's financial condition.




                                     10

<PAGE>



ITEM 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997

                           ANALYSIS OF OPERATIONS

CONSOLIDATED OPERATIONS

     During the second quarter of 1997, the corporation  placed both Ascent
Entertainment  Group,  Inc.  (Ascent) and  substantially all of COMSAT RSI,
Inc.  (CRSI)  in  discontinued   operations.   The  condensed  consolidated
financial  statements  (unaudited)  have  been  restated  for  all  periods
presented to reflect them as discontinued operations.

CONTINUING OPERATIONS

     Consolidated  revenues from continuing operations in the third quarter
were $147.1 million,  an increase of $4.0 million over the third quarter of
1996.  The increase came  predominantly  in the Network  Services  segment.
Revenues from continuing  operations in the nine months ended September 30,
1997 were $422.2  million,  $14.5 million  higher than the same period last
year. This improvement was the result of a 35% increase in Network Services
revenues,  which was partially  offset by a decrease in Satellite  Services
due to lower  revenues in COMSAT  Mobile  Communications  (CMC).  The third
quarter 1996 revenues included $7.8 million of revenues in Network Services
related to an agreement that resolved patent-infringement disputes.

     Operating income from continuing  operations for the third quarter and
year-to-date was $17.6 million and $64.2 million, respectively, as compared
to $30.9 million and $84.5 million for the comparable periods of last year.
The lower operating income in the third quarter was primarily the result of
lower  operating  income at COMSAT  Laboratories  which was  related to the
third quarter 1996  agreement  that resolved  patent-infringement  disputes
which did not reoccur this year. The decline in the year-to-date  operating
income  was the  result  of lower  operating  income  in CMC as well as the
impact of the agreement at COMSAT  Laboratories noted above. Also affecting
operating income in the year-to-date  results were expenses of $1.8 million
related  to a  potential  proxy  contest  which was  settled  in the second
quarter and litigation  costs of $1.5 million  related to an action brought
against certain of the proxy contestants and the corporation's former chief
executive  officer  to enforce  certain  provisions  of the  Communications
Satellite  Act of 1962,  which  action was  dismissed  in  connection  with
settlement  of the  proxy  contest.  The  dispute  with  the  former  chief
executive officer was resolved in the third quarter of 1997. For additional
information concerning settlement of the proxy contest and such litigation,
see the corporation's Form 8-K dated June 9, 1997.

     Interest  and  other  income  (expense)  for  the  third  quarter  and
year-to-date  were income of $6.5 million and $6.3  million,  respectively,
compared  to net  expense  of  $3.2  million  and  $10.5  million  for  the
comparative  periods  in  1996.  The  improvement  in  both  periods  stems
primarily  from the impact of a gain of $7.3  million from the sale of real
estate. In addition,  the year-to-date  period includes a $2.0 million gain
related to the sale of marketable equity securities and increased  interest
income.

                                     11

<PAGE>


     Interest expense,  net of amounts  capitalized,  for the third quarter
and  first  nine  months  of 1997 was  $11.2  million  and  $31.0  million,
respectively,  which was $1.1  million  and $5.3  million  higher  than the
comparable  periods  last year.  The  increases  reflect  reduced  interest
capitalized due to the completion of several satellite projects.

     The consolidated tax rate on income from continuing  operations before
taxes, minority interest and extraordinary item, for both the third quarter
and  year-to-date,  has improved over the  comparable  periods of last year
principally because of a net reduction in non-deductible items.

     The  change  in  minority  interest  in  net  losses  of  consolidated
subsidiaries   primarily   reflects  the  increased   ownership  of  COMSAT
International's (CI) operations in Russia.

     Income from continuing  operations before  extraordinary  item for the
third  quarter was $9.4 million  ($0.19 per share),  which was $1.2 million
($0.03  per share)  better  than the third  quarter  of 1996.  Year-to-date
income  from  continuing  operations  before  extraordinary  item was $26.6
million  ($0.53 per  share),  $1.1  million  ($0.03  per  share)  below the
comparative period last year.

     Extraordinary loss from early  extinguishment of debt, net of tax, for
the  year-to-date  was $3.9 million ($0.08 per share).  This represents the
costs incurred in the first half of 1997 from the corporation's  repurchase
of $89.5  million of its 8.125% notes and $10.0  million of its 7.7% medium
term notes (see Note 7 to the financial statements).

DISCONTINUED OPERATIONS

     The loss  from  discontinued  operations,  net of tax,  for the  third
quarter  was $30.2  million  ($0.60 per share)  compared  to a loss of $3.2
million  ($0.06  per  share) for the same  period  last year.  For the nine
months ended  September  30, 1997,  the loss was $59.1  million  ($1.18 per
share) versus a loss of $7.65  million  ($0.15 per share) in the first nine
months  of  1996.   Discontinued   operations   include   both  Ascent  and
substantially all of CRSI.

     COMSAT placed substantially all of CRSI in discontinued  operations on
June 30, 1997. The third quarter charge in discontinued operations of $30.2
million,  after tax, is primarily attributable to losses now anticipated on
the separate  disposition of JEFA Wireless  Systems (JEFA), a subsidiary of
CRSI,  as well as  adjustments  in the estimated  cost to complete  certain
long-term  contracts  in  CRSI.  The  estimated  loss on  disposal  of CRSI
(including JEFA) is subject to change in the near term and does not include
a potential additional material loss that may be a incurred if negotiations
are concluded successfully within the range of sales prices currently being
discussed.  See  Note  2  to  the  financial  statements  and  Management's
Discussion and Analysis -- Outlook.

     Ascent  was placed in  discontinued  operations  on May 16,  1997 when
COMSAT's Board of Directors approved a plan to distribute the corporation's
80.67%  interest  in Ascent to  COMSAT's  shareholders.  On June 27,  1997,
COMSAT completed the spin-off of Ascent as a tax-free  dividend to COMSAT's
shareholders. The loss in discontinued operations for the first nine months
of 1997,  which is unchanged from June 30, 1997,  was $29.1 million,  after
tax.  The loss on disposal  of Ascent of $11.3  million  includes  COMSAT's
share of Ascent's  operating losses subsequent to May 16, 1997 through June
27, 1997,  costs  incurred by COMSAT to  facilitate  the  distribution  and
additional tax provision  recognized on deferred  inter-company  gains when
COMSAT  divested  its  ownership  in Ascent  (see  Note 2 to the  financial
statements).

                                     12

<PAGE>


CONSOLIDATED RESULTS

     On a consolidated  basis,  including  discontinued  operations and the
extraordinary  item,  the net loss for the third quarter was $20.8 million,
or $0.41 per share,  compared with net income of $5.0 million, or $0.10 per
share, in the same period last year. Through the first nine months of 1997,
the consolidated net loss was $36.4 million, or $0.73 per share, versus net
income of $20.1  million,  or $0.41 per share,  in the same  period of last
year.

SEGMENT OPERATING RESULTS

     Commencing  with the  second  quarter  of 1997,  the  corporation  has
reported  operating  results in two  segments  --  Satellite  Services  and
Network Services. The Satellite Services segment includes both COMSAT World
Systems (CWS) and COMSAT Mobile  Communications (CMC). The Network Services
segment  includes  COMSAT   International  (CI),  COMSAT  Laboratories  and
Government  Programs.  COMSAT  Laboratories and Government Programs results
now  include  certain  non-manufacturing  businesses  that were  previously
reported as part of CRSI.
 
RESULTS BY SEGMENT:
<TABLE>
<CAPTION>
<S>                                                <C>                <C>                         <C>               <C>


                                                     Quarter Ended September 30,              Nine Months Ended September 30,
                                                    ------------------------------         -------------------------------------
In millions                                            1997                1996                     1997               1996
--------------------------------------------------------------------------------------------------------------------------------

REVENUES
Satellite Services:
      World Systems                                 $     66.0         $     67.1                 $    199.3         $    200.2
      Mobile Communications                               41.6               38.4                      115.3              120.3
                                                    -----------        -----------                -----------        -----------
      Total Satellite Services                           107.6              105.5                      314.6              320.5
                                                    -----------        -----------                -----------        -----------

Network Services:
      International                                       25.1               15.6                       62.5               39.8
      Laboratories                                         8.9               14.4                       26.8               24.5
      Government Programs                                 15.6               13.5                       45.2               35.6
                                                    -----------        -----------                -----------        -----------
      Total Network Services                              49.6               43.5                      134.5               99.9
                                                    -----------        -----------                -----------        -----------

Eliminations and other                                   (10.1)              (5.9)                     (26.9)             (12.7)
                                                    -----------        -----------                -----------        -----------
      Total revenues                                $    147.1         $    143.1                 $    422.2         $    407.7
                                                    ===========        ===========                ===========        ===========

OPERATING INCOME (LOSS)
Satellite Services:
      World Systems                                 $     22.3         $     24.4                 $     77.6         $     74.1
      Mobile Communications                                6.8                7.3                       17.7               32.6
                                                    -----------        -----------                -----------        -----------
      Total Satellite Services                            29.1               31.7                       95.3              106.7
                                                    -----------        -----------                -----------        -----------

Network Services:
      International                                       (3.9)              (3.6)                     (10.5)             (12.1)
      Laboratories                                        (1.0)               8.4                       (1.3)               6.5
      Government Programs                                 (0.3)               1.4                        0.5                3.5
                                                    -----------        -----------                -----------        -----------
      Total Network Services                              (5.2)               6.2                      (11.3)              (2.1)
                                                    -----------        -----------                -----------        -----------

      Total segment operating income                      23.9               37.9                       84.0              104.6
General and administrative expense                        (5.4)              (5.8)                     (18.0)             (18.4)
Other                                                     (0.9)              (1.2)                      (1.8)              (1.7)
                                                    -----------        -----------                -----------        -----------
      Total operating income                        $     17.6         $     30.9                 $     64.2         $     84.5
                                                    ===========        ===========                ===========        ===========

</TABLE>

                                     13

<PAGE>


SATELLITE SERVICES

     Revenues in the  Satellite  Services  segment in the third quarter and
year-to-date  were $107.6 million and $314.6 million,  respectively,  which
was $2.1 million  better and $5.9 million below the same periods last year.
Operating  income for the third  quarter  and  year-to-date  1997 was $29.1
million  and $95.3  million,  respectively,  a decline of $2.6  million and
$11.4 million from the comparative periods of 1996.

     CWS  revenues  for the third  quarter and first nine months of 1997 at
$66.0  million  and $199.3  million,  respectively,  was 2% below the third
quarter of 1996 and was essentially unchanged from the first nine months of
last year.  Increased  revenues from Very Small  Aperture  Terminal  (VSAT)
leases and  International  Business  Service  (IBS)  traffic were offset by
declines in full-time voice and fiber-optic cable restoration revenues. The
lower voice revenues  stemmed  primarily from rate  reductions in long-term
carrier contracts. Operating income for the third quarter was $22.3 million
and for the  year-to-date  was  $77.6  million,  which  was 8% below and 5%
higher than the comparable  periods last year.  The Federal  Communications
Commission  regulations limit the amount that CWS can earn during the year.
During the second quarter of 1997,  CWS's operating income was increased by
the recovery of certain  litigation costs.  Accordingly,  the third quarter
results were lower. The year-to-date  increase  reflects  improved earnings
realized on  carrier-to-carrier  contracts,  offset in part,  by  increased
depreciation  from  placing in service two INTELSAT  satellites  during the
past 12 months.

     Revenues in CMC were $41.6 million in the third  quarter,  an increase
of 8% compared to the third quarter of last year. For the year-to-date, CMC
revenues were $115.3  million,  4% below the same period of last year.  The
higher revenues in the third quarter were the result of sales of Planet 1TM
terminals  and Planet 1SM  service  which did not  commence  service  until
January 1997. For the  year-to-date,  the lower revenues were primarily the
result of decreases in analog telephone  transmissions  and lower volume in
the bulk  service  contract  with IDB Mobile  Communications  (IDB).  CMC's
operating  income for the third  quarter was $6.8  million,  which was $0.5
million below the third quarter of 1996. For the first nine months of 1997,
the operating income was $17.7 million,  down $14.9 million from last year.
The decrease in  year-to-date  operating  income is  attributable  to lower
revenues,   increased   depreciation   associated  with  three   Inmarsat-3
satellites placed in service during the past 12 months, and increased costs
related to Planet 1SM service, which began commercial operation this year.

NETWORK SERVICES

     Network   Services   segment   revenues  in  the  third   quarter  and
year-to-date were $49.6 million and $134.5 million, respectively, which was
$6.1 million and $34.6 million better than the comparative periods of 1996.
The  operating  loss in the third  quarter  was $5.2  million,  compared to
operating income of $6.2 million in the third quarter of last year. For the
year-to-date, the operating loss was $11.3 million, compared to a operating
loss of $2.1 million over the same period last year.  The third  quarter of
1996 included revenues and operating income at COMSAT  Laboratories of $7.8
million related to a licensing  agreement that resolved patent infringement
disputes with certain manufacturers of television encryption and decryption
equipment.


                                     14

<PAGE>

     CI's revenues in the third quarter and year-to-date were $25.1 million
and $62.5 million,  respectively,  61% and 57% better than the same periods
of last year.  The  increase in revenues  in CI were  driven  primarily  by
advances in CI's  operations in Brazil.  CI's  operating  loss in the third
quarter was $3.9 million as compared to $3.6  million in the third  quarter
of 1996.  For the first nine months of 1997,  the operating  loss was $10.5
million,  which was $1.6 million better than the comparable  period of last
year. The improvement  year-to-date  was primarily the result of a decrease
in  losses  at  BelCom,  CI's  company  operating  in  Russia  and  in  the
Commonwealth  of  Independent  States  (CIS).   Revenue  commitments  under
long-term  contracts  increased to $287 million at September  30, 1997,  as
compared to $220 million at the end of 1996.

     In May 1997,  CI acquired  full  ownership of the Mexican  corporation
IntelCom Red S.A. de C.V. (IntelCom Mexico), which was previously a wholly-
owned  subsidiary  of ICG  Satellite  Services,  Inc.,  and named it COMSAT
Mexico  S.A.  de  C.V.  (COMSAT  Mexico).  COMSAT  Mexico  offers  business
customers  digital,  domestic and  international  private-line  services to
support voice,  data and image  applications.  In January 1997, CI sold its
remaining interest in Philippine Global  Communications,  Inc. (PhilCom) at
book value (see Note 5 to the financial statements).

     COMSAT  Laboratories'  revenues for the third quarter and year-to-date
were $8.9 million and $26.8 million, as compared to $14.4 million and $24.5
million in the respective periods of 1996. Exclusive of the $7.8 million of
revenues  related  to the  agreement  in the  third  quarter  of 1996  that
resolved patent disputes,  COMSAT Laboratories  revenues were up 35% in the
quarter and 61% for the nine months ending  September  30, 1997,  primarily
driven by improvements in technical consulting revenues. The operating loss
for the third  quarter and the first nine months was $1.0  million and $1.3
million,  respectively, as compared to operating income of $8.4 million and
$6.5 million for the same periods of last year.  Exclusive of the impact of
the agreement on patent  disputes,  the operating result in the quarter was
$1.6  million  lower than the same period last year and  unchanged  for the
year-to-date  period.  The Laboratories'  backlog at September 30, 1997 was
$25.4 million, which was 19% higher than at the end of 1996.

     Government  Programs  revenues in the third  quarter and  year-to-date
were $15.6 million and $45.2 million, respectively,  which was $2.1 million
and $9.6 million  better than the same periods of last year.  The increased
revenues were related to the Commercial Satellite Communications Initiative
(CSCI)  contract  and were  offset  by  lower  revenues  from  two  Marisat
satellites  that  ceased  operating  in the third  quarter of 1996 after 20
years of operation.  Operating  loss for the third quarter was $0.3 million
and the operating income for the  year-to-date was $0.5 million,  which was
$1.7 million and $3.0 million below the  comparative  periods in 1996.  The
lower  operating  results were  primarily the result of the impact of lower
revenues  from the  loss of the  Marisat  satellites  and  increased  costs
associated with the CSCI contract.

                                  OUTLOOK

MANY OF THE  STATEMENTS  THAT  FOLLOW  ARE  FORWARD-LOOKING  AND  RELATE TO
ANTICIPATED FUTURE OPERATING RESULTS.  STATEMENTS THAT LOOK FORWARD IN TIME
ARE BASED ON MANAGEMENT'S CURRENT  EXPECTATIONS AND ASSUMPTIONS,  WHICH MAY
BE  AFFECTED  BY  SUBSEQUENT  DEVELOPMENTS  AND  BUSINESS  CONDITIONS,  AND
NECESSARILY  INVOLVE  RISKS AND  UNCERTAINTIES.  THESE  STATEMENTS  AND THE
CORPORATION'S  FUTURE  OPERATING  RESULTS MAY BE AFFECTED BY THE TIMING AND
OUTCOME  OF  PENDING  REGULATORY  AND  LEGISLATIVE   ACTIONS,   EFFORTS  TO


                                    15

<PAGE>


RESTRUCTURE INTELSAT AND INMARSAT,  COMPETITIVE  BUSINESS  CONDITIONS,  THE
DISPOSITION OF DISCONTINUED OPERATIONS AND OTHER FACTORS.  THEREFORE, THERE
CAN BE NO ASSURANCE THAT ACTUAL FUTURE  RESULTS WILL NOT DIFFER  MATERIALLY
FROM  ANTICIPATED  RESULTS.  ALTHOUGH  THE  CORPORATION  HAS  ATTEMPTED  TO
IDENTIFY  SOME OF THE  IMPORTANT  FACTORS THAT MAY CAUSE ACTUAL  RESULTS TO
DIFFER  MATERIALLY  FROM THOSE  ANTICIPATED,  THOSE  FACTORS  SHOULD NOT BE
VIEWED AS THE ONLY FACTORS WHICH MAY AFFECT FUTURE OPERATING RESULTS.

     In March 1997,  COMSAT's Board of Directors  approved a strategic plan
to refocus the corporation on international  satellite services and digital
networking  services and technology as discussed in the corporation's  1996
Annual Report on form 10-K. As a part of the strategic plan the corporation
decided to divest its ownership interest in Ascent,  sell substantially all
of the assets and operations of CRSI, and other  non-core  assets.  On June
27, 1997, the corporation  distributed its ownership  interest in Ascent to
its shareholders through a tax-free dividend.

     Negotiations for the sale of substantially all of CRSI (including JEFA
Wireless Systems, a wholly-owned subsidiary of CRSI which is being disposed
of in a separate transaction) are continuing. Although the negotiations are
at an advanced  stage,  the  corporation  is unable to predict  whether the
negotiations  will be concluded on acceptable  terms. In the event that the
corporation   is  unable  to  conclude   negotiations   successfully,   the
corporation  would  evaluate  all options then  available to it,  including
selling or retaining and  continuing to operate all or portions of CRSI. If
negotiations are successfully concluded, based on the range of sales prices
currently  being  discussed,  it  appears  that  the  corporation  would be
required to recognize an additional loss on disposal which is materially in
excess of that recorded to date for discontinued operations.  The magnitude
of the  additional  potential  loss on disposal is estimated to be within a
range of $20  million to $30  million.  If  negotiations  are  successfully
concluded,  the sale process  likely will not be completed  until the first
quarter of 1998 or as soon as reasonably possible  thereafter.  The timing,
completion and estimated  losses on disposal of  substantially  all of CRSI
are  subject  to, and may be  affected  adversely  by, a number of factors,
including   factors  which  are  not  wholly  within  the  control  of  the
corporation   (E.G.,   completion  of  due  diligence  by  the  prospective
purchasers,  negotiation  of definitive  agreements  on  acceptable  terms,
receipt of any  necessary  third-party  consents  and  satisfaction  of any
conditions agreed to between the parties).

     The  corporation's  operating  results are  expected to continue to be
constrained in the near term  predominantly due to the effect of regulation
on CWS  operations.  Following  is a  discussion  on COMSAT's  two business
segments.

SATELLITE SERVICES

     INTELSAT AND INMARSAT RESTRUCTURING.  In the third quarter,  continued
progress was made in the  corporation's  ongoing efforts to restructure the
International  Telecommunications Satellite Organization (INTELSAT) and the
International Mobile Satellite Organization (Inmarsat).

      The restructuring  proposal currently under consideration at INTELSAT
would create a separate entity (referred to as "INC") to which an as yet to
be  determined  number of  satellites  would be  transferred.  An  internal
working group has made provisional recommendations to the INTELSAT Board of
Governors on several key outstanding issues, including INC's ownership

                                     16

<PAGE>

structure and competitive  safeguards.  As currently  proposed,  INTELSAT's
direct  ownership in INC would be limited to 10%, and individual  ownership
levels  would be limited to between  15% and 20%.  The  proposal,  however,
would  grandfather  the  corporation's  direct  ownership  in  INC  pending
completion  of  the  initial  public   offering  to  the  extent  that  the
corporation's   direct   ownership   would  exceed  the  limit   ultimately
established.  The issue of which  satellites would be transferred to INC is
not expected to be resolved  until the next round of working group meetings
scheduled  for  December   1997.   An  Assembly  of  Parties   (meeting  of
governments) is now scheduled for March 1998 at which final approval for an
overall  restructuring plan is to be considered.  Assuming that schedule is
maintained, INC would be formally established as a separate business entity
in the second quarter of 1998, and an initial public offering for INC would
be expected to occur sometime during the first half of 1999.

     At Inmarsat,  a  provisional  agreement  has been  reached  within the
Inmarsat  Council on the broad  contours of a  restructuring  proposal.  As
proposed,  the operating assets of the current  Inmarsat  intergovernmental
organization  would be  transferred  to a new  company.  While the  company
initially would not be publicly-traded, it is expected that the new company
would proceed with an initial  public  offering  within 24 months after its
creation. A number of significant  details,  both political and commercial,
remain  to be  determined  before  the  proposal  is  submitted  for  final
approval.  An Assembly of Parties is  scheduled in April 1998 to review and
approve the restructuring  proposal, with implementation then envisioned in
late 1998 or early 1999 assuming the proposal is adopted.

     Final approval of the restructuring  proposals under  consideration at
INTELSAT  and  Inmarsat  will  require a vote of  two-thirds  of the member
governments  that are present and voting (up to 142 in the case of INTELSAT
and 81 in the case of Inmarsat,  with each having one vote) at the Assembly
of Parties at which final  approval is  presented.  The  corporation,  as a
minority  shareholder and the U.S. signatory to both  organizations,  lacks
the ability to  independently  effect a restructuring of either INTELSAT or
Inmarsat. The success and timing of the corporation's privatization efforts
will be  dependent  upon the  corporation's  ability to achieve a consensus
among other signatories and participating member governments.

     REGULATORY   AND   LEGISLATIVE   DEVELOPMENTS.   In  April  1997,  the
corporation  petitioned  the Federal  Communications  Commission  (FCC) for
classification  as a non-dominant  carrier and for regulatory  forbearance.
The  petition  requests  that  limits on the  company's  rate of return and
structural  separation  requirements  be removed and that CWS be allowed to
change  its tariff  rates and  introduce  new  services  over the  INTELSAT
satellite  system on  one-day  notice.  The  petition  has been  opposed by
certain of the  corporation's  competitors  and customers.  The corporation
expects  that the FCC will act on the  petition  in 1998.  The  outcome and
timing  of  FCC  regulatory  action,  however,  cannot  be  predicted  with
accuracy.

     In June 1997, Congressmen Thomas Bliley and Edward Markey introduced a
bill   captioned  as  the   "Communications   Satellite   Competition   and
Privatization   Act  of  1997"   (H.R.   1872)   in  the   U.S.   House  of
Representatives.  The  bill's  stated  objective  is  to  promote  a  fully
competitive  global market for satellite  communications  services by fully
privatizing INTELSAT and Inmarsat.  If enacted as proposed,  however,  H.R.
1872 would  adversely  affect  COMSAT by placing  restrictions  on COMSAT's
ability to offer certain  existing and future services via the INTELSAT and
Inmarsat satellite systems and would require the return of


                                    17

<PAGE>

orbital  positions and spectrum  currently  needed in INTELSAT and Inmarsat
operations.  The bill would direct the FCC not to act on the  corporation's
pending petition for non-dominant carrier status for as long as three years
or until  direct  access to INTELSAT  and  Inmarsat is  available  for U.S.
users.  Moreover, the bill would direct the FCC to require direct access to
INTELSAT and Inmarsat in the U.S. market and discontinue COMSAT's exclusive
provider  role.  The bill also  specifies  privatization  criteria  for the
anticipated INTELSAT  restructuring  proposal that, if not agreed to by the
other member  nations of INTELSAT,  would bar INC from  accessing  the U.S.
market.  In  addition,   if  privatization  of  INTELSAT  and  Inmarsat  in
accordance  with the criteria  were not effected by a mandatory  timetable,
all non-core  INTELSAT and Inmarsat  services would be foreclosed from U.S.
markets.  In October  1997,  Senator  Daniel  Inouye  introduced  companion
legislation  (S. 1328) in the U.S.  Senate.  The  corporation  is, and will
continue,  opposing H.R.  1872 and S. 1328,  unless they are modified in an
acceptable,  pro-competitive  manner  that would not  adversely  affect the
corporation's business and the value of its investments in the INTELSAT and
Inmarsat satellite systems.

     Satellite  Services  operating  income is expected to be lower in 1997
than in 1996 due to anticipated  decreased earnings at CMC. CWS's operating
results in 1997 are expected to be at approximately  the same level as last
year as a result of the continued  effects of increased  earnings  realized
from carrier-to-carrier contracts and the recovery in the second quarter of
1997 of  certain  litigation  costs,  offset  by higher  depreciation  from
INTELSAT satellites placed in service.  Operating income in CMC is expected
to be lower in 1997  compared to 1996,  because of  continuing  competition
among  existing   Inmarsat  service   providers,   increased   depreciation
associated with Inmarsat-3  satellites placed in service, and costs related
to Planet 1SM service, which began commercial operations in January 1997.

NETWORK SERVICES

     Network   Services   1997   operating   losses  are   expected  to  be
approximately  at the same  level as last  year,  excluding  the  impact to
operating  income  of $7.8  million  in  revenues  at  COMSAT  Laboratories
associated with the resolution of a patent dispute that was recorded in the
third quarter of 1996.

     CI's  operating  loss  in 1997  is  expected  to  improve  over  1996.
Improvements  in CI's more mature  companies  are  expected to be partially
offset by start-up costs in CI's newer companies. The corporation is in the
process of either seeking a strategic  partner or selling the non-strategic
portions  of  BelCom's  operations  in Russia  and in the  Commonwealth  of
Independent  States. It is the corporation's  current expectation that this
process will be completed in the first quarter of 1998.

     In  September  1997,  the  Communications   Secretariat  of  Argentina
(Secretariat)  issued a resolution  that permits  Telintar,  the  exclusive
provider of  international  voice telephony and data services in Argentina,
to provide  switched  domestic  Internet  services  within  Argentina.  The
resolution  is drafted  broadly  enough  that it may be also  construed  to
permit Telintar to provide switched domestic data services. Presently it is
unclear,  however, whether the Secretariat will interpret the resolution to
apply to data services.  COMSAT  Argentina has challenged the resolution on
the grounds that  domestic  switching of Internet  and/or data  services by
Telintar is

                                     18

<PAGE>


not permitted  under its  franchise.  In November  1997,  COMSAT  Argentina
received a preliminary injunction suspending the resolution. The injunction
will remain in effect  until the  Secretariat  rules on COMSAT  Argentina's
request  for  administrative  structure  relief  from the  resolution.  The
resolution,   together  with  other  recent  actions  by  the  Secretariat,
including its  resolutions  awarding  Nahuelsat the exclusive right to sell
domestic Ku-band  capacity in Argentina,  appears to indicate a willingness
of the Secretariat to adopt  initiatives  that benefit large,  domestic and
incumbent   telecommunications   service  providers  to  the  detriment  of
competitors,  such as COMSAT Argentina, which are smaller than the domestic
incumbents. For additional information concerning the Nahuelsat matter, see
the  "Management's   Discussion  &  Analysis  -  Outlook"  section  of  the
corporation's 1996 Form 10-K. The corporation intends to monitor regulatory
developments in Argentina closely. There can be no assurance, however, that
recent actions of the Secretariat or other  regulatory  developments  those
actions will be resolved without any material affect on COMSAT  Argentina's
future business prospects.

     Excluding  the impact to  operating  income  from the patent  revenues
noted above, COMSAT  Laboratories  operating loss in 1997 is expected to be
higher than 1996 as the Labs  continue to expand its  technical  consulting
and  communications  products  business.  COMSAT  Laboratories  results now
include  Satellite  Construction  Monitoring  (SCM)  which  was  previously
reported as a part of CRSI.  SCM's operating  income in 1997 is expected to
be lower than 1996.

     Government  Programs  operating income is expected to be lower in 1997
than last year  because of the loss of revenues  related to two 20-year old
Marisat  satellites  which  ceased  operation in the third half of 1996 and
costs associated with the CSCI contract.

                      LIQUIDITY AND CAPITAL RESOURCES

     The  primary  sources  of  cash  in  the  nine  months  of  1997  were
operations,  short-term  borrowings,  proceeds  received  from the sale and
leaseback of the Clarksburg, Maryland property (see Note 3 to the financial
statements)  and from  the sale of  PhilCom  (see  Note 5 to the  financial
statements)  . Cash was used  primarily  for the  purchase of property  and
equipment.

     The  corporation's  working  capital at  September  30, 1997 was $79.8
million,  which was $302.4  million  lower than at December 31,  1996.  The
decrease  in  working  capital  during  the first  nine  months of 1997 was
primarily the result of the reduction in current  assets of $216.3  million
due to the spin-off of Ascent on June 27, 1997 (see Note 2 to the financial
statements)  and the use of commercial  paper to repurchase  long-term debt
(see Note 7 to the financial statements).

     The  corporation  has access to short-term and long-term  financing at
favorable rates. The  corporation's  current  long-term debt ratings are A-
from Standard and Poor's and A3 from  Moody's.  The  corporation's  current
commercial  paper  ratings  are A2 from  Standard  and  Poor's  and P2 from
Moody's. The corporation's $200 million commercial paper program had $135.6
million in  borrowings  outstanding  at September  30, 1997. A $200 million
credit agreement,  expiring in 1999, backs up the corporation's  commercial
paper program.  The corporation plans to reduce short-term debt if proceeds
become  available  from the sale of  substantially  all of the  assets  and
operations  of CRSI.  Consummation  of the sale of CRSI,  however,  remains
subject  to a number  of  contingencies  (see  "Management's  Discussion  &
Analysis - Outlook").


                                     19

<PAGE>


     During the first half of 1997, the corporation  repurchased a total of
$89.5 million of its 8.125% notes due 2004 using  proceeds from  short-term
debt.  This reduced the total  outstanding  of the 8.125% notes from $160.0
million at December  31, 1996 to $70.5  million at September  30, 1997.  In
addition,  the corporation in the second quarter  repurchased $10.0 million
of its medium-term notes. This reduced the corporation's  total outstanding
medium-term  notes from $74.0 million at December 31, 1996 to $64.0 million
at September 30, 1997. The  corporation  had $36 million  remaining under a
$100  million   medium-term   note  program  at  September  30,  1997.  The
medium-term  note program is part of a $200 million debt  securities  shelf
registration program initiated in 1994.

     The corporation's capital structure and debt-financing  activities are
regulated   by  the  FCC.   The   corporation   is  required  to  submit  a
capitalization plan to the FCC for review annually. In August 1997, the FCC
approved the corporation's 1997 capitalization plan. Under the approved FCC
guidelines,  the  corporation  is  subject  to a limit of $200  million  in
short-term debt, a maximum long-term debt to total capital ratio of 45% and
an  interest  coverage  ratio of 2.3 to 1. The  latter two  guidelines  are
measured  at year end.  The  corporation  was in  compliance  with the $200
million  short-term  debt limit as of September 30, 1997.  The  corporation
expects to be in compliance with the other  guidelines at the year-end 1997
measurement dates.

     If the  corporation  were to fail  to  satisfy  one or more of the FCC
guidelines as of an applicable  measurement  date, the corporation would be
required to seek advance FCC approval of future  financing  activities on a
case-by-case  basis.  If such  approval were not granted,  the  corporation
could be  required to reduce or  reschedule  planned  capital  investments,
reduce cash outlays, reduce debt or sell assets.

                                    20
<PAGE>


PART II.     OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS
             See  Item 3 of the  Corporation's  1996  Form  10-K,  which is
             incorporated herein by reference.

             As discussed in Note 11 to the 1996 financial  statements,  in
             September  1996,  the U.S.  District  Court  for the  Southern
             District  of New York  granted  the  corporation's  motion for
             summary  judgment in an  anti-trust  suit  brought by PanAmSat
             Corporation  and  dismissed  the  complaint  in its  entirety.
             PanAmSat subsequently filed an appeal. In April 1997, the U.S.
             Court of Appeals  for the  Second  Circuit  denied  PanAmSat's
             appeal.  PanAmSat did not seek Supreme Court  review,  and the
             Second Circuit decision has become final.

             In October  1997,  CRSI  commenced an  arbitration  proceeding
             against Associated Universities, Inc. (AUI) in accordance with
             the rules of the American  Arbitration  Association in McLean,
             Virginia.  The  arbitration  demand  relates to a $55  million
             contract  entered  into  between AUI and CRSI (then  Radiation
             Systems,  Inc.) on December 19, 1990 for the construction of a
             100-meter radio telescope to be constructed in Greenbank, West
             Virginia.  CRSI is seeking  approximately  $29  million,  plus
             interest, as a contract price adjustment or damages in respect
             of alleged  breaches  of  contract  and  changes  in  contract
             requirements   by  AUI.   In  November   1997,   AUI  filed  a
             counterclaim  in  the  arbitration   proceeding  seeking  $4.5
             million in estimated  damages for alleged  delayed  completion
             and undetermined  damages for alleged potential defects in the
             telescope's back-up structure.


ITEM 2.      CHANGE IN SECURITIES
             None

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES
             None

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
             At the  Corporation's  Annual Meeting of Shareholders  held on
             August  15,  1997 (the  "Annual  Meeting"),  all twelve of the
             Corporation's  nominees  for  director  were  elected  by vote
             totals noted below:

<TABLE>
<CAPTION>
<S>                                                 <C>                         <C>

             NOMINEE                                 FOR                        WITHHELD
             -------                                 ---                        --------
             Betty C. Alewine                        39,208,025                   776,528
             Marcus C. Bennett                       39,021,001                   963,552
             Lucy Wilson Benson                      37,636,565                 2,347,988
             Edwin I. Colodny                        37,645,666                 2,338,887
             Lawrence S. Eagleburger                 37,442,568                 2,541,985
             Neal B. Freeman                         37,671,467                 2,313,086
             Caleb B. Hurtt                          37,636,717                 2,347,836
             Peter W. Likins                         37,615,535                 2,369,018
             Larry G. Schafran                       39,121,231                   863,322
             Robert G. Schwartz                      37,647,850                 2,336,703
             Kathryn C. Turner                       38,988,550                   996,003
             Guy P. Wyser-Pratte                     39,126,340                   858,213
</TABLE>
                                    21

<PAGE>

             The  Corporation  also has two directors,  Peter S. Knight and
             Charles T. Manatt, who are appointed by the President pursuant
             to the Satellite Act of 1962 and whose terms  continued  after
             the  Annual  Meeting.  A third  director  position  is  vacant
             pending appointment by the President.

             The following  additional  matters were approved at the Annual
             Meeting:

             o    amendment of the Non-Employee Directors Stock Plan to (1)
                  authorize  the  grant of share  awards or  phantom  stock
                  units in lieu of the annual cash retainer for  Directors,
                  and (2)  authorize the Chairman of the Board of Directors
                  to elect to receive stock or stock options in lieu of all
                  or a  portion  of his or her  annual  cash  compensation,
                  which amendment was approved by a vote of 38,104,264 for,
                  1,324,658 against and 554,631 abstentions.

             o    appointment  of  Deloitte  &  Touche  LLP as  independent
                  public accountants of the Corporation for the fiscal year
                  ending  December 31, 1997 which  appointment was approved
                  by a vote of 39,723,037 for,  141,173 against and 120,343
                  abstentions.

             A shareholder  proposal  requiring the corporation to reaffirm
             its  political  non-partisanship  and require the reporting of
             certain  practices  was defeated by a vote of  3,661,791  for,
             25,486,724 against and 3,381,677 abstentions.

             A potential proxy contest was settled in the second quarter of
             1997.  The  corporation  incurred  expenses  of  $1.8  million
             related to the potential proxy contest and litigation costs of
             $1.5 million  related to an action brought  against certain of
             the  proxy  contestants  and the  corporation's  former  chief
             executive  officer  to  enforce  certain   provisions  of  the
             Communications   Satellite  Act  of  1962,  which  action  was
             dismissed in connection  with settlement of the proxy contest.
             The  dispute  with the  former  chief  executive  officer  was
             resolved  in third  quarter  of 1997  (see  Exhibit  10).  For
             additional  information  concerning  settlement  of the  proxy
             contest and such litigation,  see the  corporation's  Form 8-K
             dated June 9, 1997.

ITEM 5.      OTHER INFORMATION
             None

ITEM 6.      (a)  EXHIBITS
                  No. 10 - Settlement Agreement between the corporation and
                           Bruce L. Crockett dated as of September 17, 1997.

                  No. 11 - Computation of Earnings per Share

                  No. 27 - Financial Data Schedule

             (b)  REPORTS ON FORM 8-K
                  None



                                     22

<PAGE>



                                 SIGNATURES

     Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.


                             COMSAT CORPORATION


                             By  /s/  Alan G. Korobov
                                 --------------------
                                 Alan G. Korobov
                                 Controller


Date:  November 14, 1997

                                     23