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 March 31, 1998
                       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 [ ]

51,815,836  shares of the Registrant's  common stock were outstanding as of
March 31, 1998.





                                     

<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>

                                                                                      Three Months Ended March 31,
                                                                                      -----------------------------
In thousands, except per share amounts                                                       1998             1997
-------------------------------------------------------------------------------------------------------------------

REVENUES                                                                               $  144,717      $   133,531
                                                                                       -----------     ------------

Operating expenses:
      Cost of services                                                                     65,945           59,623
      Depreciation and amortization                                                        51,495           43,463
      Research and development                                                              1,798            1,490
      General and administrative                                                            5,803            5,804
      Total operating expenses                                                            125,041          110,380
                                                                                       -----------     ------------

OPERATING INCOME                                                                           19,676           23,151

Other income (expense), net                                                                (2,825)            (619)
Interest expense, net of amounts capitalized                                              (11,332)          (9,662)
                                                                                       -----------     ------------
Income from continuing operations before taxes and extraordinary item                       5,519           12,870
Income tax expense                                                                         (1,669)          (4,771)
                                                                                       -----------     ------------

INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM                                 3,850            8,099

Loss from discontinued operations, net of tax                                                   -          (12,380)
                                                                                       -----------     ------------
Income (loss) before extraordinary item                                                     3,850           (4,281)
Extraordinary loss from early extinguishment of debt (net of tax)                               -           (1,010)
                                                                                       -----------     ------------

NET INCOME (LOSS)                                                                      $    3,850      $    (5,291)
                                                                                       ===========     ============

EARNINGS (LOSS) PER COMMON SHARE - BASIC:
      Income from continuing operations before extraordinary item                      $     0.08      $      0.17
      Loss from discontinued operations                                                         -            (0.26)
      Extraordinary loss                                                                        -            (0.02)
                                                                                       -----------     ------------
      Net income (loss)                                                                $     0.08      $     (0.11)
                                                                                       ===========     ============

EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION:
      Income from continuing operations before extraordinary item                      $     0.07      $      0.16
      Loss from discontinued operations                                                         -            (0.25)
      Extraordinary loss                                                                        -            (0.02)
                                                                                       -----------     ------------
      Net income (loss)                                                                $     0.07      $     (0.11)
                                                                                       ===========     ============

DIVIDENDS DECLARED PER COMMON SHARE                                                    $     0.05      $     0.195
                                                                                       ===========     ============

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>

                                                                                    March 31,     December 31,
In thousands                                                                             1998             1997
---------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
      Cash and cash equivalents                                                  $      7,995      $     5,757
      Receivables                                                                     157,585          147,621
      Other                                                                            35,240           22,387
      Net assets of discontinued operations                                           131,873          142,484
                                                                                 -------------     ------------
         Total current assets                                                         332,693          318,249
                                                                                 -------------     ------------

Property and equipment (net of accumulated depreciation
      of $1,207,420 in 1998 and $1,161,242 in 1997)                                 1,387,555        1,359,293
Investments                                                                           111,565           91,543
Goodwill                                                                               12,519           12,722
Other assets                                                                          116,014          112,968
                                                                                 -------------     ------------
      TOTAL ASSETS                                                               $  1,960,346      $ 1,894,775
                                                                                 =============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
      Current maturities of long-term debt                                       $     13,632      $    13,785
      Commercial paper                                                                144,828          149,506
      Accounts payable and accrued liabilities                                         79,716           89,772
      Due to related parties                                                           29,194           34,664
      Other                                                                             7,597            8,919
                                                                                 -------------     ------------
         Total current liabilities                                                    274,967          296,646
                                                                                 -------------     ------------

Long-term debt                                                                        458,458          461,960
Deferred income taxes and investment tax credits                                      126,244          121,749
Accrued post-retirement benefit costs                                                  49,552           49,246
Other long-term liabilities                                                           209,499          178,903
Preferred securities issued by subsidiary                                             200,000          200,000

STOCKHOLDERS' EQUITY:
      Common stock                                                                    414,630          366,901
      Retained earnings                                                               228,105          226,785
      Treasury stock                                                                   (6,823)          (1,758)
      Unearned compensation                                                            (5,792)          (4,739)
      Accumulated other comprehensive income (loss)                                    11,506             (918)
         Total stockholders' equity                                                   641,626          586,271
                                                                                 -------------     ------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $  1,960,346      $ 1,894,775
                                                                                 =============     ============

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>

                                                                                      Three Months Ended March 31,
                                                                                      -----------------------------
In thousands                                                                                 1998             1997
-------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss)                                                                $    3,850      $    (5,291)
      Adjustments to reconcile net income (loss) to cash flow of
      continuing operations:
         Depreciation and amortization                                                     51,495           43,463
         Write-off of investment                                                            1,950                -
         Extraordinary loss from early extinguishment of debt                                   -            1,010
         Loss from discontinued operations                                                      -           12,380
      Changes in operating assets and liabilities                                         (26,869)          (6,401)
      Other                                                                                 1,345            9,338
                                                                                       -----------     ------------
         Net cash provided by continuing operations                                        31,771           54,499
         Net cash used by discontinued operations                                          (2,557)          (5,801)
                                                                                       -----------     ------------
      Net cash provided by operating activities                                            29,214           48,698
                                                                                       -----------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of property and equipment                                                  (52,861)         (64,260)
      Investments in unconsolidated businesses                                             (5,113)          (9,121)
      Proceeds from sale of investments                                                     1,200            9,060
      Proceeds from note on sale of investment                                                  -            6,809
      Decrease in Inmarsat ownership                                                        6,101                -
      Other                                                                                   545             (162)
                                                                                       -----------     ------------
      Net cash used in investing activities                                               (50,128)         (57,674)
                                                                                       -----------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Common stock issued                                                                  30,513            3,314
      Cash dividends paid                                                                  (2,530)          (9,542)
      Repayment/extinguishment of long-term debt                                                -          (29,611)
      Net short-term borrowings (repayments)                                               (4,831)          45,494
                                                                                       -----------     ------------
      Net cash provided by financing activities                                            23,152            9,655
                                                                                       -----------     ------------

Net decrease in cash and cash equivalents                                                   2,238              679
Cash and cash equivalents, beginning of period                                              5,757            7,659
                                                                                       -----------     ------------

Cash and cash equivalents, end of period                                               $    7,995      $     8,338
                                                                                       ===========     ============

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


                                     4
</TABLE>

<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  1997  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 began accounting for Ascent  Entertainment Group, Inc.
     (Ascent), its former entertainment  subsidiary,  and substantially all
     of  the  assets  and  operations  of  COMSAT  RSI,  Inc.  (CRSI),  its
     manufacturing  subsidiary,  as  discontinued  operations in the second
     quarter  of 1997.  The  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.

     The income (loss) from discontinued operations, net of tax, for Ascent
     and CRSI for the quarter ended March 31, 1997, is summarized below:

<TABLE>
<CAPTION>
     <S>                                                                                          <C>
     
     In thousands                                                                                         1997
     ----------------------------------------------------------------------------------------------------------
     Ascent                                                                                        $   (13,920)
     CRSI                                                                                                1,540
                                                                                                   ------------
     Total                                                                                         $   (12,380)
                                                                                                   ============
</TABLE>

     COMSAT RSI, INC.

     Substantially all of CRSI was accounted for as discontinued operations
     beginning on June 30, 1997. CRSI designs,  manufactures and integrates
     earth stations as well as wireless and advanced antenna systems.

     In February 1998, the corporation sold substantially all of the assets
     of JEFA Wireless  Systems  (JEFA),  a wholly owned  subsidiary of CRSI
     engaged in the wireless  communications  integration  and  intelligent
     transportation  systems business, in a separate transaction.  Pursuant
     to the sale  agreement,  the  corporation  assigned  to the  buyer its
     rights in certain contracts and made a payment of $4,663,000, net of a
     working capital adjustment at closing, to complete the transaction.

                                     5

<PAGE>



     On March 16,  1998,  the  corporation  entered  into a stock  purchase
     agreement  to  sell  substantially  all of  the  remainder  of  CRSI's
     businesses for cash of $116,500,000, subject to an adjustment based on
     intercompany  loans and advances  between the  corporation and CRSI at
     closing.  Closing  for the CRSI sale is expected to occur on or before
     June 30, 1998, and is dependent upon completion of certain  conditions
     agreed to by the parties, third party consents and regulatory filings.


     Certain  of CRSI's  assets  were  excluded  from the  sale,  including
     Electromechanical   Systems,  Inc.  (EMS)  and  CRSI's  53%  ownership
     interest  in  Plexsys   International   Corporation   (Plexsys).   See
     "Management's  Discussion  and  Analysis - Outlook."  COMSAT also will
     retain and  complete a  long-term  construction  contract  for a radio
     astronomy telescope in Green Bank, West Virginia.


     Discontinued  operations  include  management's  best estimates of the
     amounts  expected to be realized on the sale of net assets,  operating
     losses through anticipated disposal dates,  facility closure costs and
     the estimated costs to complete the long-term contract retained by the
     corporation.  These  estimates  could change as  additional  costs are
     incurred to complete the disposals and the long-term contract.

     The net  assets  of CRSI's  discontinued  operations  included  in the
     condensed  consolidated  balance  sheets  as of  March  31,  1998  and
     December 31, 1997 are as follows:

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

                                                                       March 31,             December 31,
     In thousands                                                           1998                     1997
     -----------------------------------------------------------------------------------------------------

     Current assets                                                $     171,840           $      181,456
     Fixed assets, net                                                    30,187                   33,871
     Intangible and other assets                                          10,243                   12,989
     Short-term debt                                                       4,615                    4,422
     Other current liabilities                                            36,919                   28,790
     Provision for estimated loss on disposal                             34,604                   49,504
     Long-term debt                                                        1,540                    1,540
     Other non-current liabilities                                         2,719                    1,576
                                                                   --------------           --------------
     Net assets of discontinued operations                         $     131,873           $      142,484
                                                                   ==============           ==============
</TABLE>


     ASCENT ENTERTAINMENT GROUP, INC.

     The  corporation  distributed  its 80.67% interest in Ascent through a
     tax-free   dividend  to   shareholders   on  June  27,  1997.   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 accounted for as a discontinued  operation beginning on May
     15,  1997,  the date on which  the  corporation's  Board of  Directors
     adopted  a  formal  plan to  effect  the  distribution.  The  tax-free
     dividend of approximately  $195 million was recorded as a reduction of
     COMSAT's consolidated retained earnings.


                                     6

<PAGE>



3.   CHANGE IN SATELLITE ACCOUNTING POLICIES

     Effective  January 1, 1998,  the  corporation  changed its  accounting
     policy  with  respect to the cost of  satellites  lost at launch or in
     orbit.  Such  costs  will be  expensed  in the  period  in  which  the
     satellite is lost at launch or  experiences  a total failure in orbit.
     Previously,  the costs of failed  satellites were amortized over their
     original useful lives. Partial in-orbit failures will be evaluated for
     impairment  according  to the  provisions  of  Statement  of Financial
     Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
     Long-lived  Assets to be Disposed of." Also effective January 1, 1998,
     the  corporation   changed  its  accounting  policy  with  respect  to
     satellite  performance  incentive  payments paid to  manufacturers  to
     capitalize  the net present  value of such costs as a component of the
     cost of the  satellite.  Previously,  certain of these  payments  were
     expensed as paid.  These changes did not have a material effect on the
     corporation's financial statements.

4.   COMPREHENSIVE INCOME

     In January  1998,  the  corporation  adopted SFAS No. 130,  "Reporting
     Comprehensive   Income."  SFAS  No.  130  establishes   standards  for
     reporting and the display of  comprehensive  income and its components
     in the corporation's  financial  statements;  however, the adoption of
     this  statement  had  no  impact  on  the  corporation's   results  of
     operations  or  stockholders'  equity.  SFAS No. 130 requires  minimum
     pension  liability  adjustments,  unrealized  gains and  losses on the
     corporation's   available-for-sale  securities  and  foreign  currency
     translation  adjustments,   which  prior  to  adoption  were  reported
     separately  in   stockholders'   equity,   to  be  included  in  other
     comprehensive  income.  Total  comprehensive  income  (loss)  for  the
     quarters ended March 31 were:

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

     In millions                                                        1998                              1997
     ----------------------------------------------------------------------------------------------------------
     Net income (loss)                                            $      3.9                       $      (5.3)
     Other comprehensive income (loss)                                  12.4                              (4.4)
                                                                  -----------                      ------------
     Total comprehensive income (loss)                            $     16.3                       $      (9.7)
                                                                  ===========                      ============

</TABLE>

     During  the  three  months  ended  March  31,  1998  and  1997,  other
     comprehensive  income (loss)  consisted  principally of the unrealized
     gain  (loss) on  available-for-sale  securities,  net of tax, of $12.2
     million and $(3.3) million, respectively.

5.   INTELSAT AND INMARSAT SHARE CHANGES

     The corporation's  18.0% ownership share of INTELSAT is unchanged from
     December 31, 1997.

     The corporation's  ownership share of Inmarsat decreased from 23.0% at
     December  31, 1997 to 22.3% as of March 31,  1998.  As a result of the
     change in ownership,  the corporation received a total of $6.1 million
     during the first quarter of 1998.

                                     7

<PAGE>


6.   INVESTMENTS

     In March  1998,  the  corporation  wrote  off its $2.0  million  ($1.3
     million net of tax) investment in  Superconducting  Core Technologies,
     Inc. (SCT). The non-cash charge is reported in Other income (expense),
     net on the condensed consolidated income statement.

7.   REGULATORY ENVIRONMENT AND LITIGATION

     REGULATORY ENVIRONMENT. 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.

     In April  1998,  the FCC  granted  the  corporation's  petition  to be
     deregulated and  reclassified as a  "non-dominant"  telecommunications
     carrier in the major  markets of CWS.  The FCC's  decision  eliminates
     rate-of-return  restrictions,  structural  separation  regulation  and
     14-day advance tariff  notification in regard to 85% - 90% of COMSAT's
     INTELSAT  business.  It also allows CWS to integrate earth station and
     space  segment  services,   requiring  only  that  COMSAT  list  those
     offerings  separately  in tariff  filings  at the FCC.  The FCC denied
     requests by major  INTELSAT  users to condition  non-dominant  carrier
     status on the grant of direct  access for users to INTELSAT  satellite
     capacity. The FCC also declined to act on a "fresh look" petition that
     challenged   the   enforceablility   of  COMSAT's  long  term  carrier
     contracts.  However,  the FCC  indicated  that it would begin a future
     proceeding to consider direct access implications. For a discussion of
     these  matters  refer to  "Management's  Discussion  and  Analysis  --
     Outlook"  section  of  the  Form  10-Q  and  the  description  of  the
     corporation's  "Business" and Notes 8 and 9 to the corporation's  1997
     financial  statements  included as part of the corporation's 1997 Form
     10-K.

     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 8 and 9 to the  corporation's  1997
     financial  statements  included as part of the corporation's 1997 Form
     10-K and  "Item 1 - Legal  Proceedings"  of Part II of the  Form  10-Q
     herein.

                                     8

<PAGE>




8.   EARNINGS PER SHARE

     The  following  reconciliation  illustrates  the  calculation  of  the
     corporation's  basic and diluted  earnings  per share  amounts for the
     quarter ended March 31:

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

     In thousands, except per share amounts                                               1998            1997
     ----------------------------------------------------------------------------------------------------------
     Income from continuing operations before
       extraordinary item                                                          $     3,850     $     8,099
                                                                                   ============    ============

     Basic:
          Weighted average shares                                                       50,406          48,535
                                                                                   ============    ============
          Per share                                                                $      0.08     $      0.17
                                                                                   ============    ============

     Assuming dilution:
            Weighted average shares                                                     50,406          48,535
            Stock options                                                                1,598             617
            Restricted stock awards and units                                              233             333
                                                                                   ------------    ------------
            Total                                                                       52,237          49,485
                                                                                   ============    ============
                 Per share                                                         $      0.07     $      0.16
                                                                                   ============    ============
</TABLE>

9.   NEW ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial  Accounting  Standards Board (FASB) issued
     SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
     Information"  and in February  1998  issued SFAS No. 132,  "Employers'
     Disclosures  about Pensions and Other  Postretirement  Benefits." 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. SFAS No. 132 requires revised disclosures about pension and
     post-retirement  benefit plans. Adoption of SFAS No. 132 will not have
     a material  effect on the  corporation's  presentation  of pension and
     post-retirement   benefit   disclosures.   In  light  of  the   recent
     developments in the corporation's  regulatory  environment (see Note 7
     and the  "Management's  Discussion and Analysis -- Outlook" section of
     the  Form  10-Q),   the   corporation  is  evaluating  the  effect  of
     implementing  SFAS No. 131 on its  presentation of operating  segments
     and related disclosures.  The corporation will adopt SFAS Nos. 131 and
     132 in the fourth quarter of 1998.



                                     9

<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

CONTINUING OPERATIONS

     Consolidated  revenues from continuing operations in the first quarter
of 1998 were $144.7 million, $11.2 million higher than the same period last
year.  This  improvement  was  primarily  the result of a 36%  increase  in
Network Services segment revenues.

     Operating income in the first quarter was $19.7 million,  $3.5 million
below the comparative  period of 1997. The decrease in operating income was
primarily  the result of an  increase in  depreciation  expense in both the
Satellite Services segment as several new satellites were placed in service
and the Network  Services segment where new equipment was placed in service
in COMSAT  International  (CI). The first  quarter's  results also included
costs  related to the  completion  of two customer  contracts in CI and the
resignation of the former president and general manager of CI.

     Other income (expense) for the first quarter was a net expense of $2.9
million,  $2.2  million  higher  than the  first  quarter  last  year.  The
increased  expense was a result of the first quarter non-cash  write-off of
the  corporation's  $2.0  million   investment  in   Superconducting   Core
Technologies,  Inc.  in 1998 and a  currency  gain  recorded  in the  first
quarter of 1997 related to the sale of an equity investment.

     Interest expense,  net of amounts capitalized for the first quarter of
1998,  was $11.3  million,  $1.6 million  higher than the first  quarter of
1997. The increase was primarily the result of a reduction in the amount of
interest capitalized due to the completion of several satellite projects.

     Income tax expense for the first quarter was $1.6 million,  a decrease
of $3.2 million from the same period last year.  The decline  resulted from
lower income on which tax expense is calculated.

     Income from continuing  operations before  extraordinary  item for the
first  quarter  of 1998 was $3.9  million,  $4.2  million  below  the first
quarter of 1997.

     Basic  earnings  per share  for  continuing  operations  for the first
quarter was $0.08,  $0.09  below the  comparative  period of 1997.  Diluted
earnings per share for  continuing  operations  was $0.07,  $0.09 below the
same period in 1997.

     During  the  first  half of 1997,  the  corporation  repurchased  $100
million of its long-term debt. This early  extinguishment  of debt resulted
in an  extraordinary  loss in 1997 of $3.9  million.  The  portion  of this
extraordinary  loss that was recorded in the first quarter of 1997 was $1.0
million.

                                     10

<PAGE>



DISCONTINUED OPERATIONS

     During the second quarter of 1997, the  corporation  began  accounting
for the operations of both Ascent  Entertainment  Group,  Inc. (Ascent) and
substantially  all of COMSAT RSI, Inc. (CRSI) as  discontinued  operations.
The  consolidated  financial  statements have been restated for all periods
presented to reflect the results of operations and net assets of Ascent and
CRSI as discontinued operations.

     On June 27, 1997, the corporation  completed the spinoff of its 80.67%
ownership of Ascent as a tax-free dividend to COMSAT's shareholders. During
the first  quarter of 1997,  the loss from the  discontinued  operations of
Ascent totaled $13.9 million ($0.28 per fully diluted share). See Note 2 to
the financial statements.

     The corporation  signed a stock-purchase  agreement on March 16, 1998,
to  sell  substantially  all of  CRSI.  See  "Management's  Discussion  and
Analysis --  Outlook."  CRSI's  first  quarter  1997 income of $1.5 million
($0.03  per fully  diluted  share) is  reported  as a part of  discontinued
operations. See Note 2 to the financial statements.

CONSOLIDATED RESULTS

     On a consolidated  basis, the net income for the first quarter of 1998
was $3.9 million, compared to a net loss of $5.3 million in the same period
of 1997.

     Basic  earnings  per share for the first  quarter  of 1998 was  $0.08,
$0.19 better than the first quarter of 1997. Diluted earnings per share was
$0.07, $0.18 higher than the comparative period of last year.

SEGMENT OPERATING RESULTS

     The corporation  reports 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.


                                     11

<PAGE>


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

RESULTS BY SEGMENT:


                                                                                                Quarter Ended March 31,
                                                                                           -----------------------------
In millions                                                                                     1998               1997
------------------------------------------------------------------------------------------------------------------------

REVENUES
Satellite Services:
     World Systems                                                                         $    65.9          $    66.8
     Mobile Communications                                                                      40.8               38.6
                                                                                           ----------         ----------
     Total Satellite Services                                                                  106.7              105.4
                                                                                           ----------         ----------

Network Services:
     International                                                                              25.1               16.4
     Laboratories                                                                                9.0                8.1
     Government Programs                                                                        14.3               11.0
                                                                                           ----------         ----------
     Total Network Services                                                                     48.4               35.5
                                                                                           ----------         ----------

Eliminations and other                                                                         (10.4)              (7.4)
                                                                                           ----------         ----------
     Total revenues                                                                        $   144.7          $   133.5
                                                                                           ==========         ==========

OPERATING INCOME (LOSS)
Satellite Services:
     World Systems                                                                         $    24.8          $    28.1
     Mobile Communications                                                                       7.8                5.5
                                                                                           ----------         ----------
     Total Satellite Services                                                                   32.6               33.6
                                                                                           ----------         ----------

Network Services:
     International                                                                              (5.6)              (4.5)
     Laboratories                                                                               (0.6)              (0.1)
     Government Programs                                                                         0.9                0.3
                                                                                           ----------         ----------
     Total Network Services                                                                     (5.3)              (4.3)
                                                                                           ----------         ----------

     Total segment operating income                                                             27.3               29.3
General and administrative expense                                                              (5.8)              (5.8)
Other                                                                                           (1.8)              (0.3)
                                                                                           ----------         ----------
     Total operating income                                                                $    19.7          $    23.2
                                                                                           ==========         ==========
</TABLE>

SATELLITE SERVICES

     Revenues in the Satellite  Services  segment in the first quarter were
$106.7  million,  $1.3  million  higher  than the  first  quarter  of 1997.
Operating income in the first quarter was $32.6 million, $1.0 million below
the same period last year.

     CWS's  revenues  in the  first  quarter  of 1998 were  $65.9  million,
$900,000 below the comparative period of 1997. The decrease in revenues was
the result of declines in full-time  voice  revenues and lower  fiber-optic
cable  restoration  revenues,  partially  offset by increased  revenues for
International Business Service (IBS) traffic and wide-band mobile services.
The  improvement  in IBS was due primarily to increases in high-speed  data
and Internet  services.  CWS's  operating  income for the first quarter was
$24.8  million,  $3.3 million  lower than the same  quarter last year.  The
decline in operating income was the result of increased  depreciation  from
placing in service four INTELSAT  satellites since February 1997 as well as
from the lower revenues.


                                     12

<PAGE>



     Revenues  in CMC during the first  quarter  were $40.8  million,  $2.2
million higher than the same period last year.  The improved  revenues were
primarily from increased digital telephone traffic and services provided to
the Federal Aviation  Administration's  (FAA) Wide Area Augmentation System
(WAAS).  The  improvement  in  telephone  traffic  was,  in  part,  due  to
activities in the Persian Gulf.  CMC's  operating  income was $7.8 million,
$2.3 million  better that the first  quarter of 1997.  The  improvement  in
operating  income  was the  result  of the  increased  revenues  and  lower
operating  costs,  partially  offset  by  increased  depreciation  from new
Inmarsat satellites placed in service during the past year.

NETWORK SERVICES

     Network  Services  revenues for the first quarter were $48.4  million,
$12.9  million or 36%  higher  than the first  quarter  of last  year.  The
operating  loss in the first quarter was $5.3  million,  compared to a $4.3
million loss for the same period last year.

     Revenues  in CI during  the first  quarter  were $25.1  million,  $8.7
million or 53% higher  than the same period  last year.  The first  quarter
improvement  in  revenues  was driven  primarily  by  increases  in Brazil,
Argentina, Colombia and Venezuela. CI's operating loss in the first quarter
of 1998 was $5.6 million,  compared to an operating loss of $4.5 million in
the  comparative  quarter of 1997.  The increased  loss was primarily  from
costs in Brazil  associated  with two customer  contracts  completed in the
first  quarter  of 1998.  Revenue  commitments  under  long-term  contracts
increased to $327  million at March 31,  1998,  compared to $323 million at
December 31, 1997 and $241 million at March 31, 1997.

     COMSAT  Laboratories  revenues in the first  quarter of 1998 were $9.0
million,  $900,000  better than the same period last year because of higher
technical consulting and communication product revenues.  The Laboratories'
operating loss for the first quarter was $600,000, $500,000 higher than the
first quarter of 1997. The increased loss for the quarter was primarily due
to  higher  sales  and  marketing  expenses  to  expand  the  Laboratories'
commercial consulting and product businesses.  The Laboratories' backlog at
March 31,  1998,  was $25  million,  down from $28 million at December  31,
1997.

     Government  Programs revenues for the first quarter of 1998 were $14.3
million,  $3.3  million  higher  than the  first  quarter  last  year.  The
improvement  over last year was primarily the result of increased  revenues
from the Commercial  Satellite  Communications  Initiative (CSCI) contract.
Operating  income in  Government  Programs  during  the first  quarter  was
$900,000, $600,000 better than the comparative quarter of last year.

                                  OUTLOOK

     MANY OF THE STATEMENTS THAT FOLLOW ARE  FORWARD-LOOKING  AND RELATE TO
ANTICIPATED  FUTURE  EVENTS AND  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,
INCLUDING A BILL INTRODUCED IN CONGRESS WHICH CALLS FOR MAJOR AMENDMENTS TO
THE COMMUNICATIONS SATELLITE ACT ADVERSE TO COMSAT AND THE PRIVATIZATION OF

                                     13

<PAGE>



INTELSAT AND INMARSAT;  EFFORTS TO RESTRUCTURE  INTELSAT AND INMARSAT;  FCC
PROCEEDINGS;   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.

     During the first part of 1998,  significant  progress  was made in the
corporation's ongoing efforts to restructure INTELSAT and Inmarsat.

     The INTELSAT Assembly of Parties, at its March 1998 meeting,  approved
a restructuring plan to transfer six INTELSAT satellites (five currently in
orbit and one to be  launched  in 1999)  into a  separate,  new  commercial
company.  The new company,  which was previously  referred to as "INC", has
been temporarily named New Skies Satellites,  N.V. (New Skies) and has been
incorporated in the Netherlands. It is expected that the transfer of assets
from  INTELSAT  to New Skies will occur  during the third  quarter of 1998.
Additionally,  an initial  public  offering is  expected to occur  sometime
during 1999 to fund New Skies' future capital requirements.  New Skies will
operate  as  an  entirely  separate   company,   independent  of  INTELSAT.
INTELSAT's  direct  ownership  in New Skies will be set at 10 % and will be
held in a non-voting trust.  Individual ownership levels will be limited to
17% and it is expected that COMSAT's initial direct investment in New Skies
will be  approximately  16.6%.  Competitors  of New Skies are  expected  to
initiate  regulatory  proceedings at the FCC seeking actions adverse to New
Skies including challenges to U.S. market access.

     COMSAT  currently  consolidates  its share of the accounts of INTELSAT
and as such recognizes its portion of INTELSAT's results of operations each
reporting  period.  COMSAT  anticipates  it will  use the  cost  method  of
accounting for its investment in New Skies.  Under the cost method,  COMSAT
would  only  recognize  income  at the time  dividends  from New  Skies are
received.  COMSAT does not anticipate that New Skies will declare dividends
during its first year of operations.  As such, beginning at the time of the
transfer of assets to New Skies,  the  corporation's  pre-tax earnings from
its  investments in both INTELSAT and New Skies will be slightly lower each
quarter.

     In March 1998,  the Inmarsat  Council  approved a plan to transfer the
operating assets of the current Inmarsat intergovernmental  organization to
a new  company.  This plan was  presented  at the  April  1998  meeting  of
Inmarsat's Assembly of Parties.  During its meeting,  the Assembly endorsed
the Council's plan for full privatization.  At their next meeting, which is
slated to occur in  September  1998,  the  Assembly is expected to finalize
outstanding  issues.  According to current  plans,  Inmarsat will become an
independent  commercial company in the first quarter of 1999. While the new
company  initially  would not be publicly  traded,  it is expected that the
company  would  proceed with an initial  public  offering  within 24 months
after its creation. As currently proposed,  individual ownership in the new
company would be capped at 15%,  although COMSAT's current 22% ownership in
Inmarsat would be grandfathered.  COMSAT's voting rights, however, would be
capped  at  15%  with  respect  to  votes   against   certain   shareholder
resolutions.  Prior to the public offering,  owners are expected to be able
to trade shares, and strategic  investors are expected to invest up to $500
million in equity in the new company.

                                     14

<PAGE>


     Approval of the final Inmarsat restructuring proposal will require (i)
a vote of two-thirds of the member  governments that are present and voting
(up to 82, with each  having one vote) at the  Assembly of Parties at which
approval  is  sought  and (ii) a  further  decision  by  two-thirds  of the
Inmarsat Council that all conditions precedent to the transaction have been
satisfied  and  that  transaction  documents  are  approved.  The  Inmarsat
restructure timetable is contingent on Inmarsat member governments reaching
broad  consensus on  implementing  the proposed  amendments to the Inmarsat
Convention prior to formal ratification. If such consensus is not achieved,
the ratification process could take longer. The corporation,  as a minority
shareholder  and the U.S.  signatory  to  Inmarsat,  lacks the  ability  to
independently effect a restructuring of 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.  Morever,  the issue whether legislation
authorizing U.S. approval of Inmarsat  privatization is required has yet to
be resolved.

     As with INTELSAT,  COMSAT  consolidates  its shares of the accounts of
Inmarsat.  It is projected that COMSAT will own at least 20% of Inmarsat at
the time it is privatized. Assuming COMSAT continues to own at least 20% of
the  new  company  and  other  details  and  assumptions   related  to  the
restructuring  do not change,  the corporation  anticipates it will use the
equity method of accounting for this  investment.  Under the equity method,
the corporation  would continue to include its  proportionate  share of the
new  company's  operating  results as part of the  corporation's  operating
results.  As such,  the  equity  method of  accounting  for the  privatized
Inmarsat   should   not  impact  the   corporations's   net  incom.   Final
determination  of  the  accounting  method  for  this  investment  will  be
dependent   upon  the  terms   and   conditions   of  the  final   Inmarsat
restructuring.

     On April 24,  1998,  the FCC granted the  corporation's  petition  for
reclassification as a non-dominant common carrier in markets that represent
approximately 85-90% of CWS's revenues.  For those markets,  rate-of-return
regulation  has  been  lifted  effective  immediately.   In  the  remaining
"thin-route"  markets,   which  currently  constitute  10-15%  of  the  CWS
business, the FCC denied the corporation's request for non-dominant status,
but  indicated  that it  would  consider  on an  expedited  basis a form of
incentive-based  regulation  and  issued a Notice  of  Proposed  Rulemaking
seeking public comment. The FCC also granted COMSAT's request to be able to
file tariffs on one-day's notice with a presumption of lawfulness.  The FCC
also  granted  the  corporation's  request for the  elimination  of the CWS
structural separation requirement, and also gave CWS authority to enter the
earth station market on an unseparated and non-dominant basis. The FCC also
indicated  that it would  initiate  a  proceeding  to  explore  the  legal,
economic and policy implications of enabling users to have direct access to
the INTELSAT  system.  Finally,  the FCC concluded that COMSAT's  long-term
carrier contracts with AT&T, MCI and Sprint do not impede competition; thus
such contracts would not be subject to regulatory  abrogation  based on the
so called "fresh look" doctrine.

     On May 6,  1998,  the  U.S.  House  of  Representatives  passed a bill
entitled the "Communications Satellite Competition and Privatization Act of
1997"  (H.R.  1872).  To  become  law,  a  companion  bill  will have to be
considered and passed by the U.S.  Senate,  proceed  through a House-Senate
conference,  and be signed by the President. While the corporation supports
the bill's  stated  objective  of  privatizing  INTELSAT  and Inmarsat in a
pro-competitive manner, COMSAT is opposed to the bill in its current form.

                                     15

<PAGE>


     As passed by the House, if adequate  progress toward  privatization is
not made or  privatization  is not  completed  in a  prescribed  manner  by
prescribed deadlines, H.R. 1872 could restrict COMSAT from offering certain
important  existing  and future  services  via the  INTELSAT  and  Inmarsat
satellite  systems.  If privatization  meeting the bill's criteria does not
occur,  the bill could impair COMSAT's  investment in INTELSAT and Inmarsat
by, among other actions, possibly requiring the return of orbital positions
and  spectrum  needed in INTELSAT and  Inmarsat  operations.  The bill also
would  require  the FCC to  establish  direct  access to the  INTELSAT  and
Inmarsat  satellite  systems  in the U.S.,  thus  discontinuing  after 2000
COMSAT's  exclusive  provider  role,  subject  to  certain  conditions  and
safeguards.  Specifically,  the bill was  amended to ensure that any direct
access scheme  compensate COMSAT for its costs as signatory  operator,  and
that  the  corporation   otherwise  receive  full  fair  market  value  for
investment-based  access  arrangements.  The bill, however,  would link the
removal of the existing 10% ownership  limitation on COMSAT's  common stock
under the  Satellite  Act to the time when  direct  access is  granted.  In
addition,  the bill authorizes the FCC to relieve COMSAT customers of their
obligations under traffic agreements during a one-time  reevaluation period
in 2000. A petition for similar  regulatory  action has been pending before
the FCC for two  years.  Recently,  the FCC  rejected  arguments  that such
traffic agreements were  anti-competitive  and permitted such agreements to
stand. The bill also specifies  criteria for the proposed  restructuring of
INTELSAT that, if not implemented,  might restrict  INTELSAT's proposed new
commercial affiliate,  New Skies, from accessing the U.S. market.  However,
if INTELSAT  and  Inmarsat  are  privatized  in  accordance  with  criteria
specified  in  the  bill,  the  service   restrictions  and  market  access
exclusions  could be avoided.  Direct access to Inmarsat would be precluded
if Inmarsat  privatizes on its current schedule,  as would direct access to
the video services carried by New Skies.

     The corporation is, and will continue, opposing the bill, unless it is
modified  in a manner  that would not  adversely  affect the  corporation's
business and the value of its shareholders' investments in the INTELSAT and
Inmarsat  satellite  systems.  The corporation is unable to predict when or
whether the Senate will act on the bill.  However,  the corporation expects
any Senate bill will exclude many  provisions of H.R.  1872 which  possibly
could impair COMSAT's investments and operations.

     CI was awarded two licenses in its  operating  companies in Brazil and
Peru.  CI's license in Peru,  which was awarded  during the first  quarter,
allows  COMSAT  Peru  to  provide  advanced  voice,   data  and  multimedia
communications  networks for businesses  operating in Lima,  Peru. In April
1998,  COMSAT  Brasil was awarded a license  that permits the CI company to
provide   one-stop   shopping,   shared  hub  services  and   international
connectivity.  Both  licenses  facilitate  the  expansion  of CI's  service
offerings and geographic presence in Latin America.

     In March 1998, the  corporation  signed a stock purchase  agreement to
sell  substantially  all of CRSI for $116.5 million in cash. The sale price
is subject to adjustment based on inter-company  loans and advances between
COMSAT and CRSI at the time of the closing. Closing of the sale is expected
to occur on or before June 30, 1998,  and is dependent  upon  completion of
certain  conditions  agreed to by the  parties,  third party  consents  and
regulatory filings.


                                     16

<PAGE>


     Certain of CRSI's  assets  were  excluded  from the sale  transaction,
including  Electromechanical  Systems, Inc. (EMS), a long-term construction
contract for a radio astronomy  telescope and CRSI's 53% ownership interest
in Plexsys International Corporation (Plexsys). The corporation anticipates
disposing of EMS and has commenced  preliminary  discussions with potential
buyers.  The  corporation is unable to predict whether an agreement will be
concluded  on  acceptable  terms.  In the first  quarter  of 1998,  Plexsys
substantially  reduced its operations  and laid off most of its staff.  The
corporation  does not  anticipate  that it will recover its  investment  in
Plexsys or certain amounts owed to it by Plexsys. In addition,  in February
1998, the corporation sold substantially all of the assets of JEFA Wireless
Systems, a wholly owned subsidiary of CRSI, in a separate transaction.  See
Note 2 to the financial statements.

     The financial  impact of the  disposition  of CRSI was included in the
corporation's  1997  loss from  discontinued  operations.  The  corporation
believes that the reserves it has  established  for the disposition of CRSI
are adequate. There can be no assurance,  however, that additional reserves
will not be required.

YEAR 2000 ISSUE

     The year 2000 issue is the result of computer  programs  being written
using two digits  rather  than four  digits to define the  applicable  year
(i.e. "97" for 1997).  Certain of the corporation's  computer programs that
have  date-sensitive  software may not operate  properly  when the last two
digits  become "00",  as will occur on January 1, 2000.  To the extent that
this situation may exist,  there is a potential for computer system failure
or miscalculations, which could cause disruption of operations. The problem
is not limited to computer programs, as some of the corporation's equipment
that has  date-sensitive  processors may not be able to process dates after
December 31, 1999.

     In the second  half of 1996,  the  corporation  initiated a program to
identify and properly address issues  associated with the year 2000 problem
in order to avoid interruption to the corporation's  operations at the turn
of the century.  The corporation has made substantial progress in assessing
how it will be impacted by the year 2000 issue. Currently,  the corporation
is in the process of  modifying  or  replacing  computer  systems and other
date-sensitive  equipment,  so that the  corporation's  key systems will be
year 2000 compliant.  The corporation  presently believes that such changes
to the corporation's key systems and equipment will be completed and tested
by the end of the second quarter of 1999.

     The  corporation's  current  estimate is that it will cost  between $3
million  and $5 million  prior to January 1, 2000,  to modify its  in-house
management  information systems,  customer products,  and other systems and
equipment  impacted by the year 2000 issue. The corporation does not expect
the costs directly  attributable  to the year 2000 issue to have a material
effect on its  consolidated  results from  operations in a given year. Year
2000   modifications  and  replacements  are  based  on  management's  best
estimates, which were derived using assumptions of future events, including
the continued  availability of resources and the reliability of third party
modification plans.  Specific factors that might cause material differences
in the estimates include, but are not limited to, the availability and cost
of personnel with appropriate and necessary  skills,  the ability to locate
and correct all relevant computer code and similar uncertainties.



                                     17

<PAGE>



                      LIQUIDITY AND CAPITAL RESOURCES

     The  primary  sources of cash in the first  three  months of 1998 were
cash from  operations  and the proceeds from the exercise of stock options.
Cash was used  primarily  for the purchase of property and  equipment.  The
corporation's  working  capital at March 31, 1998 was $57.7 million,  $36.1
million higher than at December 31, 1997.  The increase in working  capital
during the first quarter of 1998 was primarily the result of an increase in
receivables and decreases in commercial paper, accounts payable and accrued
liabilities.

     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 $145
million in borrowings  outstanding at March 31, 1998. A $200 million credit
agreement,  expiring in 1999, backs up the  corporation's  commercial paper
program.  The corporation plans to reduce short-term debt with the proceeds
from the sale of  substantially  all of the assets and  operations of CRSI.
Consummation  of the sale of CRSI,  however,  remains  subject  to  certain
conditions. See "Management's Discussion and Analysis -- Outlook."

     The  corporation  had $36 million  remaining at March 31, 1998 under a
$100 million  medium-term  note program,  which is unchanged  from year-end
1997.  The  medium-term  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. The corporation plans
to submit its 1998  capitalization plan in May 1998. 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 March 31, 1998.

     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.



                                     18

<PAGE>



PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          See Note 7 of this Form 10-Q and Item 3 of the Corporation's 1997
          Form 10-K, which are incorporated herein by reference.

          In the third  quarter of 1997,  IDB Mobile  Communications,  Inc.
          (IDB) informed COMSAT that it was no longer  purchasing  Inmarsat
          satellite  capacity for its U.S. land earth stations from COMSAT,
          but was using  another  signatory.  COMSAT  believes  that IDB is
          required to purchase that capacity from COMSAT under the terms of
          IDB's  service  contract  with COMSAT,  U.S. law and the Inmarsat
          Operating Agreement. After attempts to resolve this issue failed,
          COMSAT filed a lawsuit  against IDB seeking damages for breach of
          contract in January 1998. In response, IDB filed a petition for a
          declaratory  ruling  asking  the FCC to rule  that  operators  of
          Inmarsat  land earth  stations  may purchase  Inmarsat  satellite
          capacity from foreign signatories and a motion to dismiss or stay
          the lawsuit until the FCC rules.  In May 1998,  the United States
          District  Court for the District of Maryland,  Southern  Division
          dismissed  the  corporation's  breach  of  contract  lawsuit  and
          indicated that, in its opinion, the FCC was the appropriate forum
          for the enforcement of COMSAT's claim.  The corporation  plans to
          seek  reconsideration  of the District Court's  decision.  If the
          District Court does not modify its ruling, COMSAT plans to file a
          complaint with the FCC to enforce IDB's payment obligation.

ITEM 2.   CHANGE IN SECURITIES
          None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None

ITEM 5.   OTHER INFORMATION
          None

ITEM 6.   (a)  EXHIBITS

               10.1 - Stock Purchase and Sale  Agreement  dated as of March
                      16, 1998 among COMSAT  Corporation,  TBG  Industries,
                      Inc. and Prodelin Holding  Corporation.  
               18 -   Letter regarding change in accounting principles
               27 -   Financial Data Schedule


                                     19

<PAGE>



          (b)  REPORTS ON FORM 8-K

               Report dated February 20, 1998,  reporting the corporation's
               1997 earnings and announcing that the  corporation's  Annual
               Meeting of Shareholders has been scheduled for May 15, 1998.

               Report   dated   March  12,   1998,   announcing   that  the
               corporation's first quarter 1998 results will include a $1.3
               million  non-cash  charge to reflect  the  write-off  of its
               investment in Superconducting Core Technologies, Inc.

               Report dated March 17, 1998, announcing that the corporation
               signed a stock purchase  agreement to sell substantially all
               of  COMSAT  RSI,   Inc.   (CRSI)  to  a  subsidiary  of  TBG
               Industries, Inc.

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<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:  May 14, 1998

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